Unemployment income is compensation provided to individuals who do not have a job. These benefits are available from several sources, such as state programs and private unemployment insurance coverage. Each of these is generally limited to people who were working but lost their jobs. People who receive unemployment income should be aware that these funds are subject to federal income taxes and are usually only available for a limited amount of time.
Government programs are one of the most popular sources of unemployment income. State and federal programs exist because of the Social Security Act of 1935. The purpose of creating this type of coverage is said to be twofold. First, it provides some relief for the qualified individuals who lose their jobs. Second, it helps support the economy during times of national economic hardship.
Government provided unemployment income is not available to everyone and it is not unlimited. Programs vary throughout the states and territories, but generally to receive the benefits a person must have had a job with an employer that is a participant in the program. She generally needs to have worked with that employer for a certain amount of time and the reason that she is no longer working cannot be her fault. Those who do qualify will only receive a fraction of their previous wages for a limited time, thereby motivating them to be active in their search for another job.
Unemployment income can be in the form of payments from a protection plan, which is private coverage. These insurance plans provide compensation for people who stop working. Generally, individuals enroll in a plan and pay monthly fees for at least a certain amount of time.
Like state and federal programs, these funds will only be paid out for job losses that are not voluntarily and coverage is also only available for a limited amount of time. The policy holder is often given the opportunity to decide how long after losing her job she would like to wait before receiving such payments. The minimum waiting period is usually 30 days.
Tax incentives may apply for this type of arrangement. The Internal Revenue Service (IRS) does not tax unemployment income that comes from a fund that an individual contributes to. An exception applies if the individual receives more than he has paid in. Then, the coverage may be subject to federal tax liability.