How Idaho and the IRS tax your unemployment benefits

Idaho unemployment benefits are paid for by a payroll tax on employers, but the benefits themselves are taxable income to you. The Department of Labor's payment page calls them fully taxable, the Employment Security Law has the Department tell every new claimant that benefits are subject to federal and state tax, and the Idaho State Tax Commission counts them in your Idaho income. The Department cannot tell you how benefits affect your own taxes; it sends those questions to the Tax Commission and the IRS.

Federal income tax and the 10% withholding option

You can have 10% of each payment withheld for federal income tax. That is the only withholding the Department offers.

• Turning it on or off: sign in to the Claimant Portal, open the Account section, and choose Change Tax Withholding. The law lets you change your choice at least once in each benefit year.
• What comes out first: withholding is taken after any overpayment recovery and any child support, so a week with those deductions may leave less to withhold from. The benefit amounts page lists every deduction.
• The IRS route: the IRS says Form W-4V asks a payer of unemployment compensation to withhold federal income tax; its Form W-4V page has the form. The Department's own route is the portal setting above.
• If you withhold nothing: the IRS says you may be required to make quarterly estimated tax payments instead. The law also has the Department warn new claimants that estimated tax rules exist.

The IRS explains what counts as unemployment compensation in its guide to taxes on unemployment. On your federal return, Box 1 of the 1099-G goes on Schedule 1, line 7, and any federal tax withheld, in Box 4, goes on Form 1040, line 25b.

Idaho income tax on your benefits

The Department cannot withhold Idaho income tax, so nothing set aside during your claim covers it. The Tax Commission's tax-year 2025 instructions list unemployment compensation both as gross income and as unearned income, and they give Idaho's individual income tax rate as 5.3%, effective January 1, 2025. Those instructions have a line 18 for unemployment compensation, filled in from federal Schedule 1, line 7: all of it received while an Idaho resident or part-year resident, plus whatever the Idaho Department of Labor paid you while a nonresident.

Where the benefits come from decides whether Idaho taxes a nonresident on them. Under a Tax Commission rule, benefits paid by Idaho are Idaho-source income even when part of the claim rests on wages earned in another state, and benefits paid by another state are not Idaho-source income even when part of that claim rests on Idaho wages.

Railroad workers are the exception. The IRS counts railroad unemployment compensation as income, but the Tax Commission lists Railroad Retirement Board unemployment and sickness benefits among the exempt payments that can be deducted on the Idaho return.

Do you have to file a return?

The Department's FAQ says anyone who collected or repaid unemployment benefits is required to file a tax return. The Tax Commission sets the Idaho rule more narrowly. In general an Idaho return is due from every Idaho resident who must file a federal return, every part-year resident with more than $2,500 of gross income (from all sources while a resident and from Idaho sources while a nonresident), and every nonresident with more than $2,500 of gross income from Idaho sources. For tax year 2025 the Tax Commission's table puts a resident's filing line at these gross incomes:

A resident who files a federal return only to pay self-employment tax, and whom the IRS does not otherwise require to file, need not file in Idaho. If you are unsure, the Tax Commission answers at 208-334-7660 or 800-972-7660.

Your Form 1099-G

The 1099-G totals the benefits the Department paid you in the previous calendar year. It is mailed to you, with a copy to the IRS, by the end of January, and it goes to anyone who collected or repaid benefits that year.

• Online copy: the form is on the Claimant Portal by January 31. The payment page says to open the History tab and choose 1099-G Reporting; the Department's taxes flyer says History, then Details, and that the last 2 years of forms are there.
• Missing form: check the mailing address on your portal account. The Idaho 1099-G shows your entire Social Security number, so an out-of-date address puts your identity at risk, and keeping it current is your job.
• Repayments: overpayment money you repaid is included on the form. Penalties and interest are not, because they are not benefits.
• Refunds: an unpaid overpayment can take part or all of your state and federal tax refunds. The Collections Enforcement Unit answers at 208-332-3573, and the appeals and overpayments page covers repaying.
• Keep it: the Department's glossary says to check the form for accuracy and keep it for filling out your return.

The Department's 1099-G page has the same instructions.

If your 1099-G looks wrong

The form counts each payment by the date the payment was released, not by the week it paid for. A certification for a late-December week paid in January lands on the next year's form. Compare the form with the payment dates in the Manage Claims tab on the portal first. If you still disagree, call 208-332-8942.

Benefits paid by another state are not on the Idaho form. That state reports them on its own 1099-G.

A 1099-G arrived, but you never applied for benefits

A 1099-G you did not expect is one of the Department's signs that someone filed a claim in your name. Do not click any identity verification link in the mail or register with ID.me for that claim.

1. Report the theft to the Department online. The Department stops further payments, makes sure benefits already paid are not treated as paid to you, and contacts you with any questions; its identity theft page says there is no need to call. The taxes flyer, by contrast, says to call 208-332-8942 if you never applied. Either route reaches the Department.
2. Ask for a corrected 1099-G. The IRS tells identity theft victims whose form shows wrong amounts to contact the state agency for one.
3. File a report with the U.S. Department of Justice's National Center for Disaster Fraud and check the Unemployment Insurance-Related Identity Theft box, as the Department advises.

What the law does to the thief is on the fraud and identity theft section of the appeals page. For questions on your federal return, the IRS answers at 800-829-1040.