Does South Carolina tax unemployment benefits?

DEW reports every dollar it paid you, and any tax it withheld, to both the IRS and the South Carolina Department of Revenue on Form 1099-G. If you chose no withholding when you filed, nothing was set aside toward that tax.

Federal income tax on your benefits

The IRS says you generally must include all the unemployment compensation you receive in your income, and DEW's weekly benefit amount page repeats that rule for South Carolina claimants. The figures come from the Form 1099-G that DEW sends you:

If DEW is not withholding federal tax, the IRS says you may need to make quarterly estimated tax payments. The IRS's own withholding request is Form W-4V, but DEW's pages have you make the choice inside your claim, as the section on DEW withholding below explains.

South Carolina income tax on your benefits

South Carolina follows the federal rule that counts unemployment compensation as gross income. The Department of Revenue's Information Letter #21-14, dated May 26, 2021, says benefits are taxable income for tax year 2021 and after, because the federal exclusion for some benefits applied to tax year 2020 only.

The same letter tells people collecting benefits to review their tax situation and decide whether to have South Carolina income tax withheld at 7% or to make estimated tax payments instead. DEW's Claimant Handbook also points you to the IRS and the Department of Revenue for how to report and figure the tax. You can read the Department of Revenue's letter on its site.

The Department of Revenue's 2025 SC1040 instructions, dated August 2025, start the South Carolina return from your federal taxable income on line 1, so finish your federal return first. For questions about state income tax, call the Department of Revenue at 1-844-898-8542 and choose option 1. Its phones are answered from 8:30 a.m. to 4:30 p.m. on Monday, Tuesday, Thursday, and Friday, and from 9:30 a.m. to 4:30 p.m. on Wednesday.

Having DEW withhold tax from your payments

DEW does not withhold any tax automatically. When you file your initial claim, you choose no withholding, federal only, state only, or both, and DEW takes nothing unless you pick it.

You can change your choice at any time in MyBenefits, DEW's claimant portal. The law guarantees you can change it at least once. If you would rather make estimated tax payments, DEW's weekly benefit amount page points you to IRS Publication 505, Tax Withholding and Estimated Tax and Form 1040-ES, both on the IRS site.

Withholding comes out only after DEW has taken any overpayment recovery and child support. If DEW later finds you were overpaid, the tax it withheld still counts toward the overpayment, because DEW paid that money to the tax agencies on your behalf.

An unpaid overpayment can also be taken from your federal or South Carolina tax refund. If the IRS takes your federal refund for the debt, it also keeps a fee from that refund. DEW's overpayments page gives that fee as $18.43 in one section and as $16.28 in another. For a state refund, the Department of Revenue charges $25. The appeals and overpayments guide covers repaying and asking for a waiver.

Your Form 1099-G from DEW

DEW mails your 1099-G to your address on record in the last week of January. It shows the benefits DEW paid you in the previous calendar year and any tax withheld. You can also download it from MyBenefits, using DEW's guide to finding your 1099-G.

• To see a form from any year, even after your benefits are used up, you must register for MyBenefits.
• To make sure it reaches you, update your address in MyBenefits whenever you move, even after your benefits stop.
• If the amount looks wrong, submit a dispute through MyBenefits. DEW's guide to disputing your 1099-G walks through the screens.

A DEW 1099-G for benefits you never claimed

DEW treats a 1099-G for benefits you never applied for as a sign that someone filed a claim in your name. Its handbook tells you to report it to all of these:

1. DEW, through the "Report Fraud" tab on DEW's fraud page, or by calling the DEW Fraud Hotline at 1-800-868-1488, Relay 711.
2. Your employer.
3. The IRS, by filing Form 14039, the identity theft affidavit.
4. Your local police. Keep a copy for creditors and credit agencies, and give DEW a signed copy of the victim report.
5. The National Center for Disaster Fraud, through its complaint form.
6. The Federal Trade Commission, at IdentityTheft.gov.

The IRS tells fraud victims whose Box 1 amount is wrong to notify the state agency and ask for a corrected 1099-G, so ask DEW for one when you report.

Once you report, DEW puts a hold on the claim to stop more payments and may contact you for details. If its investigation finds you were the victim of impostor fraud, you do not have to pay back what was paid to the impostor. You can still file your own claim later: DEW says it can tell your real claim from the fraudulent one, though it may ask you to prove your identity before paying you.