You can and should file taxes if you are on unemployment. The unemployment insurance department will send you a tax document in the mail with the amount that was paid to you and any taxes that you may have elected to have taken out. You have the option when filing for unemployment to have federal taxes taken out. You may receive the earned income credit on your children if you had other earned income throughout the year. Let's say you worked until June and started collecting unemployment in July. You could possibly receive a return on the taxable income through June. I hope this makes sense, and good luck!