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If your employer was the only one who contributed to the pension, 100% of the prorated, weekly pension amount is deductible. If you contributed in any amount to the pension, 50% of the prorated, weekly pension amount is deductible. The following payments are NOT deductible, however: • Social Security and Railroad Retirement pensions. • A lump-sum pension payment, if you did not have the option of receiving monthly or periodic payments. • A lump-sum pension payment that is deposited or rolled over into an approved retirement plan, such as an IRA, within 60 days after you received the payment. Separation Pay A severance package, pay in lieu of notice (which is payment made to you because the employer furloughed you without required notice by law), or a continuation of pay with full benefits from an employer even after you are no longer working for them may affect UC benefits. Severance pay that exceeds 40% of Pennsylvania’s average annual wage is deducted from your benefits. Be sure to report any separation payments when you apply for UC benefits. You may be contacted by the agency for additional details to help de­ termine if your separation pay is deductible. Self-Employment You are not eligible for UC if you are self-employed. However, there is an exception for “sideline” activity. Earnings from self-employment that is determined to meet the sideline business criteria can be automatically deducted from your weekly UC payments. A determination will be issued accordingly. For more information on sideline employment, please visit www.uc.pa.gov/Self-Employment. Taxes Your UC benefits are taxable by the federal government. You may choose if you want to have federal income tax withheld from your benefits (at the rate of 10%) or not. If you elect not to have taxes withheld, you will be responsible for the full taxable amount at the end of the year. You can make the choice to have taxes withheld when you file your application for benefits. To change your withholding selection, log on to the Pennsylvania UC System (www.benefits.uc.pa.gov) and access your dashboard. Taxes withheld can be refunded to you only by the IRS. Questions about taxes on UC payments should be directed to the Internal Revenue Service (IRS) (www.irs.gov) or your tax professional. By the end of January each year, L&I will provide you with a Statement for Recipients of Pennsylvania Unemployment Compensation (Form UC-1099G). This form shows the amount of benefits you were paid during the previous year and the amount of income tax withheld if you selected that option. Pennsylvania Unemployment Compensation Handbook 7