Question

Steve worked as a tech supervisor for a computer company. In September of 2016, he was laid off. He was paid unemployment compensation for the rest of the year totaling $7,000. Which of the following is true?

a. Steve will have to report all $7,000 of the unemployment compensation as income.
b. Steve will have to report $4,600 of the unemployment compensation as income.
c. Unemployment compensation is never taxable.
d. As long as the unemployment compensation payments are less than the taxpayer's previous salary, they are not taxable.

Answer 1

The answer is A.

Step-by-step explanation:

Unemployment compensation is a benefit paid to people who lost their job via laid off, recession etc

Unemployment compensation is being reported or treated as income and it will be taxed at prevailing income tax rate.

So in the light of the above, option A is correct. The $7,000 unemployment compensation will be reported as income.