Ever wondered how unemployment benefits work in Pennsylvania. If you look at your paycheck, you probably did not see any deduction toward unemployment insurance, so who pays for your benefits when you are unemployed? Many workers think this is paid through our federal and state taxes. However, state unemployment insurance benefits are not paid by either federal or state taxes. Federal unemployment benefit programs, such as the Emergency Unemployment Compensation program and the Extended Benefits are. So what about Pennsylvania’s state unemployment insurance benefits, who pays the bill?

Employers do, and in extreme cases employees contribute a little too. However, in most cases the entire cost of the unemployment insurance program in Pennsylvania is paid by employers.  All employers in Pennsylvania are required by Pennsylvania Unemployment Compensation law to withhold employee contributions toward unemployment insurance based on a trigger mechanism which only requires workers to pay unemployment insurance tax if the funds in the program drops to certain levels.

Note that in principle the program is designed to be funded entirely by employers. The employee contribution amendment was designed to ensure the Unemployment Compensation fund never dropped to dangerously low levels due to unpredictable economic changes.

How does the trigger mechanism work?

According to the 1988 amendments to the Pennsylvania Unemployment Compensation law, the trigger mechanism is based on the fund levels of the program. These are calculated every July based on the average benefit costs of the last three fiscal years. As of 2008 to 2012 these are the trigger levels.

If the fund has 150% or more of the average benefits cost for the last three years, employers will pay 0.0% of their wages. If 125% but less than 150%, 0.0%. If 110% but less than 125%, they will pay 0.02% of their wages, and so on, following the data below.

95% but less than 110% = 0.03%

75% but less than 95% =  0.06%

50% but less than 75% = 0.08%

Less than 50% = 0.08%

Note that as the unemployment insurance withholding tax for employees rises so does the unemployment compensation tax for employers. For instance, according to the trigger mechanism, if the fund drops to 75 percent of the average benefits cost, employers must increase their contribution by 0.25 percent, if less than 50 percent, they must increase it by 0.45 percent  and if less than 50 percent, they must increase it by 0.65 percent.

Paying taxes is forever, even when you are unemployed. If you thought the only silver lining on unemployment is not to have to worry about preparing your tax return, think again. All unemployment benefits are taxable and must be declared in your tax return to your state and the Internal Revenue Service.

This is not news to most of our readers. However, some have asked about how to go about requesting forms and the documents they need to fill in their tax returns. Take for instance this question from Daniel Thomas: “How would I go about getting a copy of a form 1099-G from PA Unemployment?”. Excellent question Daniel. In fact there are many tax-related questions we have received from our readers lately so we have prepared a special article on unemployment and taxes. I know, combining taxes with unemployment regulations is probably the most dull theme on the web, but when you are on unemployment benefits and every dollar counts it is important to know where you stand with the taxman. Click here for a direct link to the Pennsylvania Department of Labor and Industry or read below for a summary of the subject of taxes and your Pennsylvania benefits.

1. How do I obtain a Form UC-1099G?

Click to access the Taxation of UC Benefits page and follow instructions.

2. What if I receive a Form UC-1099G with an incorrect amount in "Total Payment" or "Tax Withheld" areas of the form?

For income tax purposes, UC benefits are reported in the calendar year in which they are paid, regardless of when the application or claim for benefits was filed.

If you believe the "Total Payment" or "Tax Withheld" on Form UC-1099G is incorrect, please contact a UC Service Center 7 a.m. to 8:30 p.m. Monday through Friday and Sundays 7 a.m. to 2:30 p.m. or the Claims Information Center at (717) 783-3140, Monday through Friday, 7:30 a.m. to 4:30 p.m. All payments made to you and amounts withheld will be recalculated and compared to the amount on your Form UC-1099G. If the amount is incorrect, an amended Form UC-1099G will be issued.

3. What happens if UC benefit checks were returned and re-deposited into my account after the original Form UC-1099G was mailed to me?

An amended Form UC-1099G must be issued. You may contact a UC Service Center 7 a.m. to 8:30 p.m. Monday through Friday and Sundays 7 a.m. to 2:30 p.m., or the Claims Information Center at (717) 783-3140, Monday through Friday, 7:30 a.m. to 4:30 p.m. Your social security number and mailing address will be verified before an amended Form UC-1099G will be issued.

4. What if I receive a Form UC-1099G after I have filed my federal income tax return with the IRS?

Any questions concerning any adjustments that need to be made on your federal income tax return should be directed to the IRS at 1-800-829-1040.

5. What if I received an overpayment of benefits in one year and I repaid any of it in the same or subsequent calendar year?

Note: The "total payment" section on your UC-1099G form includes all benefits paid to you during the calendar year, including benefits that were applied to an overpayment.

For more information on how to report your repayment of UC benefits on your tax return, see Unemployment Benefits and Repayments in IRS Pub. 525 or contact the IRS directly at 1-800-829-1040.

6. What do I do if I believe the UC benefit check(s) were not cashed by me, or were cashed without my permission?

To start an investigation, contact a UC Service Center 7 a.m. to 8:30 p.m. Monday through Friday and Sundays 7 a.m. to 2:30 p.m., or the Claims Information Center at (717) 783-3140, Monday through Friday, 7:30 a.m. to 4:30 p.m.

With unemployment rates at record-high levels many workers are facing the prospect of running out of unemployment benefits. Currently the state of Pennsylvania offers a maximum of 99 weeks of unemployment benefits: 26 weeks from the regular state unemployment insurance agency, 53 weeks from the emergency unemployment compensation program and 20 weeks from the extended benefits program.

However, as our reader D. Wood asked recently: “Are there any unemployment benefits after 99 weeks?”

At this moment there are no additional unemployment benefits nor are there any plans for them. What is more, the current extension program which allows for the extended benefits and emergency unemployment compensation benefits will expire at the end of this year. So, it is likely unemployment benefits will be reduced next year to pre-2008 levels.

However, this does not mean there are no additional options to workers who run out of unemployment benefit weeks and still need financial assistance. For instance, Pennsylvania unemployed workers may apply for Temporary Assistance for Needy Families, or TANF, and for General Assistance, GA. Would you like to find more information on these two programs. Click here to visit Pennsylvania’s website on human services or read below for a summary of the most frequently asked questions about these programs.

What Health and Human Services should I apply for?

You should apply for every benefit that you think you may need.

When your application arrives the County Assistance Office will look at your income and tell you what Health and Human Services you can receive.

If I want Cash Assistance, for whom should I apply?

You must apply for

• yourself,
• your spouse (if married),
• any children under age 19 who live with you, and
• any other parents of your children who are living in the household.

If you are a parent under the age of 18, you must include your parents.

You may apply for children related to you who are not your own. If you apply for any such child you must apply for that child’s siblings. You may also apply for yourself, but it is not required.

You may apply for children not related to you under emergency circumstances. At your interview, the caseworker will discuss plans for the children with you. You may also apply for yourself, but it is not required.

You may apply for General Assistance (GA) for yourself, but you must provide information about your spouse if you are married.

You do not need to apply for anyone who is not your dependent or who is not helping to support you or your children. These individuals should apply separately.

If eligible for Cash Assistance benefits, what other benefits will I receive?

If you receive Cash Assistance you also receive Medical Assistance.

You will also be eligible for programs related to The Road to Economic Self-Sufficiency through Employment and Training (RESET)

You will be asked if you want to apply for Food Stamps. If you receive Cash Assistance, you may also be able to receive Food Stamps.

Are there any time limits on Cash Assistance?

A person can receive TANF (Temporary Assistance for Needy Families) for a total of 60 months in a lifetime. This is true if a person is:

1. An adult;
2. A minor child who is the head of household or married to the head of household;
3. A minor child of an adult who has reached the 5-year limit.

Period(s) of TANF receipt need not be consecutive to count toward the 60-month limit.

You may receive Cash Assistance that does not count against your 60-month limit. At your interview, talk to your caseworker.

Single adults, married adults, or children not related to their caretaker, may be able to receive General Assistance (GA). GA has some time limits. These are:

1. Victims of domestic violence (DV) can have a lifetime total of 9 months of GA;
2. A person who is drug and/or alcohol dependent can receive GA for only 9 months in his lifetime;
3. An adult with a temporary disability can get GA while he recovers. A doctor or Psychologist will estimate the recovery time;
4. An adult with a permanent disability, certified by a doctor or Psychologist, has no time limit;
5. An adult, who cares for a disabled individual, has no time limit. A doctor or Psychologist must certify the disability;
6. A child age 18 or under, who is not related to his caretaker, has no time limit.

How much money will I get?

Match the county where you live with the number of people you are applying for to see how much money you could receive. Household income may reduce the amount of money you could receive. Money amounts also vary depending on the county you apply from. Counties are divided into four groups. Click here to see where your county lies and how much you can receive.

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