labor lawAdivision of labor law center

Many people seem to have questions regarding Pennsylvania unemployment payments, 1099 forms and tax this time of year. Here are the answers to some of the most common questions.

Q: Are all Pennsylvania unemployment benefit recipients required to pay taxes?

A: Yes. Pennsylvania unemployment benefits are subject to federal and state taxes, just like any other income. You’re still required to file a tax return, as always.

Q: I didn’t keep track of my unemployment benefit income for 2006. How do I find out much I earned?

A: In January 2007, the Pennsylvania unemployment office mailed out 1099 forms to everyone who collected benefits last year. You should have received your statement. However, if you did not receive your statement, or your need a duplicate, contact your nearest Pennsylvania Dept. of Labor.

Q: What exactly is a 1099 statement?

A: A 1099 statement is a record of all the benefits or unearned compensation you received the previous year. In this case, it would show your unemployment benefits or unearned income from 2006.

A 1099 statement also includes any deductions to your unemployment benefits. Examples of deductions include court order child support or restitution. Some people elect to have taxes withheld from their unemployment benefits. These deductions are also on the 1099 form.

Q: What is the process to being re-issued a 1099 statement?

A: The Pennsylvania Dept. of Labor will verify your current address and re-issue your statement. You should receive your statements within a week.

Q: What if I need copies of 1099 statements from previous years?

A: To get copies of 1099s from previous years, contact your local Pennsylvania Dept. of Labor. Your address will be verified and you’ll receive the copies in approximately a week.

Q: Are people who receive unemployment benefits the only ones that need a 1099 statement at tax time?

A: No. Independent contractors are also issued 1099 forms. As self-employed individuals, independent contractors often don’t pay tax on their income when it’s earned. The law says everyone needs to pay state and federal taxes. So independent contractors need to show the taxman what they’ve earned so they can pay their tax bills.

On January 5 2007, Governor Edward G. Rendell announced a total of 24 grants in 47 counties to increase workforce development opportunities and avoid unemployment. Workers in key industries will be able to improve their skills and find good jobs with Pennsylvania’s $5 million investment in training and industry partnerships.

“As our economy grows in size and strength, there will be continued demand for a highly skilled, well-trained workforce as employers compete to lead the 21st century global marketplace,” Governor Rendell said. “This latest investment in our workers means more of them will be better able to tell new employers that they can do the job.”

The strategic investments announced provide $2.8 million for workforce training in key industries and $2.1 million to develop industry partnerships in which employers, workers and workers’ representatives from vital industries cooperate to improve their collective competitive position in the marketplace.

“Pennsylvania is building the kind of workforce necessary to compete and succeed in our growing, knowledge-based economy,” Governor Rendell said. “Advanced training for working men and women, career-focused education for young people, and business collaboration are paying off for Pennsylvania. We are working harder and smarter to position the commonwealth as an economic leader on the world stage.”

Industry partnerships can identify specific training needs and skill gaps, help connect young people to careers, help educational and training institutions arrange curriculum to meet business demands, address worker recruitment and retention, develop career ladders within companies, highlight best practices, and promote communication among companies.

Many of the grants represent partnerships, where companies donate funds to train workers, as well. Combined with at least $4.6 million in private-sector funds, the total investment for these projects is more than $9.5 million. The grants and partnerships cover a variety of counties in Pennsylvania, including Adams, Cumberland, Dauphin, Franklin, Juniata, Lebanon, Perry and York counties. A variety of industries from construction to transportation, mining and healthcare are represented.

With an expected seasonal increase in unemployment insurance claims in January and February, Governor Edward G. Rendell recently reminded Pennsylvanians seeking unemployment insurance compensation (UIC) benefits to file their claims online. Workers can use the state’s bilingual site for efficient and secure access to services.

“When Pennsylvanians are faced with the uncertainty of unemployment, we should do everything in our power to grant them peace of mind and address their needs,” Governor Rendell said. “That’s why we’ve worked to provide an online system that allows claims to be filed quickly and securely.”

The Governor added that because seasonal and weather-related claims typically increase in January and February, the online filing resource is a convenient alternative to filing via phone. Services are available in English and Spanish.

Pennsylvania unemployment compensation customers may use the Department of Labor & Industry’s secure site to file for initial benefits, make biweekly claims for benefits, change an address, determine the status of a benefit payment, or sign up for direct deposit. New security features detect and deter benefit fraud by verifying that claimants’ social security numbers match other identifying information.

For customers without internet access, the department continues to provide Pennsylvania unemployment compensation services in English and Spanish by telephone between 7 a.m. and 4:45 p.m on weekdays. Due to high call volumes, customers calling on Monday and Tuesday may experience delays and should instead consider calling later in the week. Don’t worry that calling later in the week will delay the processing of your claim. Applications filed Wednesday, Thursday and Friday are handled the same as those filed Monday and Tuesday.

Much of the increase in unemployment in January and February is due to layoffs in industries most affected by the holidays and inclement weather, including retail, construction and landscaping. These fluctuations in employment data usually do not affect the seasonally adjusted unemployment rates.

It works both ways, too, PA employers, so be thankful for this rule change. The state will also reduce the unemployment compensation taxes in the state for 2007 by as much as $158 million. That will make the average tax rate per employer in the state to be around 5 percent, which is down a whole half of percent from the previous year. In 2006, the average tax rate for PA employers was at 5.4 percent.

In the state of PA, generally speaking, unemployment compensation payments typically equal about one half of the worker’s former salary, as long as we remember that the unemployment situation happened through no fault of the employee. The new law will increase the maximum amount of money that unemployed workers can get per week to as much as $520, for all new claimants making their claims after January 2007. In 2006, the maximum weekly amount had been $497.

As we all know by now after my extensive review of unemployment systems in the various states in the Union, typically employers have to pay a quarterly tax on how much wages they are paying employees. It would stand to reason that if an employer’s taxes are going down, that then the benefits paid out to unemployed workers work go down too. But that direct relationship does not have to be true in Pennsylvania, where state officials are claiming that unemployment is down and economic success is up in the Keystone State.

Instead, workers and employers can expect the best of both worlds—have their cake and eat it too. The new PA law makes it that taxes will go down relatively significantly in the state in 2007, and employees can expect almost a 4 percent gain in the maximum amount of money that they can get on unemployment in a week—about a $20 gain.