Supplemental
unemployment benefits received from a company-financed fund to which
the employees did not contribute are not unemployment compensation
but rather taxable wages subject to income tax withholding but not
subject to social security tax, Medicare tax or federal unemployment
tax. These supplemental unemployment benefits are usually paid under
guaranteed annual wage plans and must be reported on your tax
return.
You may have to repay
some of your supplemental unemployment benefits to qualify for trade
readjustment allowances under the Trade Act of 1974. If you repay
supplemental unemployment benefits in the same tax year you receive
them, reduce the total supplemental unemployment benefits on your tax return by the amount you repay.
However, if you repay
the supplemental unemployment benefits in a later tax year, you must
include the full amount of the supplemental unemployment benefits
you received in taxable income for the tax year you received them on
your tax return.
If the supplemental
unemployment benefits repayment is $3,000 or less claim a tax
deduction on Line 36 of Form 1040 and to the left write
"subpay TRA". If the supplemental unemployment benefits
repayment is greater than $3,000 you can take a tax deduction on
Line 27 of Form 1040, Schedule A or claim a tax credit on
your tax return. The tax deduction on your tax return is not subject to the 2% AGI
floor.
Under Internal
Revenue Code Section 1341 you can re-compute your tax for the prior
tax year as if you had not received the repaid supplemental
unemployment benefits. You can claim a tax credit for the difference
between the actual tax you paid and the tax you would have paid had
you not received the repaid supplemental unemployment benefits.
Claim the tax credit on Line 64 of Form 1040. Next to the
line write "IRC 1341".
Taxable and
Nontaxable Income. Also see
IRS 
