The Obama administration says that the unemployment rate in America is down to 8.3%, the real number is over 10%. That means that for the 2011 tax year, millions will have to consider their unemployment benefits when filing their income tax.

While unemployment benefits are paid by individual states, you must include them on your federal income tax income tax return. This will undoubtedly end up having tax implications that will determine whether you are entitled to a tax refund or must pay income tax. Either way, the amount of unemployment benefits you receive must be reported on line 19 of Form 1040, line 13 of Form 1040A, or line 3 of Form 1040EZ.

Here are four tips from the IRS about unemployment benefits.

1. You must include all unemployment compensation you receive in your total income for the year. You should receive a Form 1099-G, with the total unemployment compensation paid to you shown in box
2. Be certain to include these other types of unemployment benefits on your tax return:
   • Unemployment paid by a state or the District of Columbia from the Federal Unemployment Trust Fund
   • Railroad unemployment compensation benefits
   • Disability payments from a government program paid as a substitute for unemployment compensation
   • Trade readjustment allowances under the Trade Act of 1974
   • Unemployment assistance under the Disaster Relief and Emergency Assistance Act

   For complete information on each of the benefits listed, see chapter 12 in IRS Publication 17, Your Federal Income Tax, or Publication 525, Taxable and Nontaxable Income.

3. You must report benefits paid to you as an unemployed member of a union from regular union dues. However, if you contribute to a special union fund and your payments to the fund are not deductible, you only need to include in your income the unemployment benefits that exceed the amount of your contributions.
4. You can choose to have federal income tax withheld from your unemployment compensation. To make this choice, complete Form W-4V, Voluntary Withholding Request, and give it to the paying office. Tax will be withheld at 10 percent of your payment. If you choose not to have tax withheld, you may have to make estimated tax payments throughout the year.

For more information on income tax tips visit the IRS Website.