Legal Information Institute LII OPEN ACCESS TO LAW SINCE 1992 ABOUT LIV GET THE

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Legal Information Institute LII OPEN ACCESS TO LAW SINCE 1992 ABOUT LIV GET THE LAW LAWYER DIRECTORY LEGAL ENCYCLOPEDIA > HELP OUT S 1.85-1 Unemployment compensation. (a) Introduction. compensation (as defined in paragraph (b)(1) of this section) paid in taxable years beginning after December 31, 1978, pursuant to governmental programs. In general, these rules pr unemployment compensation paid pursuant to governmental programs is includible in the gross income of a taxpayer if the taxpayer's modified adjusted gross income (as defined in paragraph (b)(2) of this section) exceeds a statutory base amount (as defined in paragraph (b)(3) of this section). If there is such an excess however, the amount included in gross income is limited under paragraph (c)(1) of this section to the lesser of one-half of such excess or the amount of the unemployment compensation. If such taxpayer's modified adjusted gross income does not exceed the applicable statutory base amount, none of the unemployment compensation is included in the taxpayer's gross income (b) Definitions Section 85 prescribes rules relating to the inclusion in gross income of unemployment ovide that (1) Unemployment compensation (i) General rule. Except as provided in paragraph (b)(1)(ii) of this section, the term "unemployment

Explanation / Answer

(b) Definition : Unemployment compensation

Unemployment compensation is paid by the state to unemployed workers who have lost their jobs due to layoffs or retrenchment. Unemployment compensation is meant to provide a source of income for jobless workers until they can find employment. In order to be eligible for it, certain criteria must be satisfied by an unemployed worker, such as having worked for a minimum stipulated period and actively looking for employment.

Workers in most states are eligible for up to 26 weeks of benefits from the regular state-funded unemployment compensation program, although nine states provide fewer weeks and two provide more.

Unemployment compensation is paid by many developed nations and some developing economies. In the United States, unemployment compensation was ushered in by the Social Security Act of 1935, when the economy was struggling through the Depression. The American unemployment compensation system is jointly managed by the federal and state governments and financed through payroll taxes on employers in most states. In the United States, policies vary by state, but unemployment benefits will usually pay eligible workers up to $450 per week. Benefits are generally paid by state governments, funded in large part by state and federal payroll taxes levied against employers. In Canada, the system is called Employment Insurance and is funded by premiums paid by both employers and employees.

Reference: Investopedia, Wikipedia, Fedral rules of states

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