Oregon Tax Consultants Practice Exam

Are union unemployment benefits generally included in your taxable income?

1. No, they are always tax-exempt

2. Yes, if from union dues

3. Yes, but only under certain conditions

4. No, if paid from a special fund

The correct answer is: Yes, if from union dues

Union unemployment benefits are generally included in taxable income because they are treated as regular unemployment compensation by the IRS. This classification means that the benefits received are subject to federal income tax. The reasoning behind this is that unemployment benefits are designed to replace lost wages and function similarly to wages, both of which are taxable. When it comes to union-related benefits, while the source of the funds—such as union dues—may not inherently change the tax status of the benefits, it is crucial to recognize that these benefits, whenever derived, typically fall under the same tax obligations as standard unemployment benefits. Unemployment benefits are usually taxable in the year received, and the payer may not directly account for taxes when disbursing these funds. Consequently, it’s essential for individuals receiving such benefits to report them as part of their taxable income on their tax returns to stay compliant with federal tax laws.