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Unemployment benefits aren't free — here's how to avoid a big tax bill next year

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How unemployment benefits are taxed

Like most things in life, your unemployment benefits aren't exactly free. You are still expected to pay taxes on any money you receive. 

The good news is you don't have to pay Social Security or Medicare taxes, which saves you more than 7% compared with your regular paycheck. 

To pay the taxes you do owe, you have three options. Most risky, you can gamble by taking your full check and setting money aside for when you do file your taxes. 

Another way, used mainly by small business owners and the self-employed, would be to estimate and pay your taxes quarterly.   

Check out this video to see a third option to stay in the good graces of the IRS and to see a full breakdown of how your benefits will be taxed. 

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Disclosure: NBCUniversal and Comcast Ventures are investors in Acorns.