It really depends on the amount of taxes you owe. Also, tax law changes in 1996 actually enhanced taxpayer rights in this area. The new law provides that the burden of proof rests with the IRS in certain actions and for increased attorney's fees. What's more, if the court agrees with you and finds the IRS position to be largely unjustified, you may be able to recover litigation costs, and, in certain instances, costs incurred for administrative proceedings, such as fees for expert witnesses and special studies and analyses. Unemployment compensation is not taxable.
All unemployment compensation is subject to income tax.
You can choose to have income tax withheld from your unemployment tax payments by completing Form W-4V, Voluntary Withholding Request, or by making estimated tax payments. You can rent your vacation home for up to 14 days a year without paying income tax on that income. Redeeming U.S. Series EE Savings Bonds to pay for the costs of certain higher education expenses are free from federal income tax only if they are issued in one or both parents' name. Certain income restrictions also apply. But purchase the bonds in your child's name and the proceeds will be subject to tax, even if they are used for qualified educational expenses.