what do the feds tax state unemployment?
Believe it or not, unemployment compensation is taxable income. Too few people seem to know this (or want to know this). And this oversight could leave taxpayers owing on their federal and state income tax returns. The states regulate unemployment, but they do not always succeed in making sure people understand their tax obligations. On top of this, the tax withholding process for unemployment is structured in a way that encourages behaviors that make things worse. Simply put, your local unemployment office does not automatically withhold federal and state taxes once you start collecting unemployment.