Unemployment compensation is subject to federal income tax and exempt from Montana income tax. This includes benefits received under regular Unemployment Insurance, any special unemployment compensations authorized under the Coronavirus Aid, Relief, and Economic Security (CARES) Act, and the Lost Wages Assistance program.
The Department of Labor & Industry is unable to provide tax advice. If you have additional questions concerning your tax situation, we recommend that you consult a tax advisor.
For recipients of regular Unemployment Insurance, claimants can opt to have 10% withheld for their federal tax liability. Regular UI claimants can select or change their withholding preference in their MontanaWorks by accessing the “Tax Withholding” tile on their MontanaWorks dashboard.
PUA and LWA
The option to have taxes withheld was not available for Pandemic Unemployment Assistance (PUA) and Lost Wages Assistance (LWA) benefits.
Income Tax Reporting
In January 2021, claimants will receive an IRS 1099-G form from the Montana Department of Labor & Industry. It will show the amount of unemployment compensation received during 2020 and, if applicable, any federal income tax withheld. Please verify your address on file is correct, so you receive your 1099-G promptly.
For regular UI, a claimant will have the option of downloading the 1099-G in your MontanaWorks account. 1099-Gs from 2019 or before are not available. PUA claimants who have opted for electronic responses will receive their 1099-G by email along with downloading instructions.
Recipients who return to work before the end of the year can use the IRS Tax Withholding Estimator to ensure they are having enough tax taken out of their pay. https://www.irs.gov/individuals/tax-withholding-estimator This can help workers avoid or lessen their year-end tax bill or estimate the refund they want. If you receive a bill for an overpayment of UI or PUA benefits, you will need to report that information on your taxes. Please watch your mail for direction on how overpayments and repayments should be reported. For additional questions, please contact the Overpayment Unit at (406) 444-5434.