Will I get flagged by the IRS if I collect unemployment and work a 1099 job?

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Will I get flagged by the IRS if I collect unemployment and work a 1099 job?

I have been collecting unemployment all year but a couple of months ago I got a contract 1099 job. I was told that they would file a 1099G at the end of the year and I would also get a 1099 for tax filing. If I close my unemployment claim 2 weeks before the end of the year and then claim the 1099 and unemployment benefits on my tax return will they red flag me?

Asked on November 22, 2011 under Employment Labor Law, Georgia

Answers:

SJZ, Member, New York Bar / FreeAdvice Contributing Attorney

Answered 10 years ago | Contributor

As a practical matter, the likelihood of the IRS noticing is slight--they have millions of tax returns and millions of 1099s and W-2s, each year and only check a very small percentage of them (assuming, that is, no one "blows the whistle" on you). I do not believe there is a systematic process for checking 1099s vs. employment compensation.

If it is discovered, however, by the IRS, by state taxing authorities, and/or the state unemployment office that you worked and earned money (including on a 1099 basis) while collecting unemployment, you will face the repayment of the unemployment compensation, with interest and penalties, as well as potentially tax consequences.


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