Are taxes taken out of unemployment benefits with California EDD?

Thank you! So California doesn't tax it at all but the feds do? That's actually really helpful. I'll go look for that DE 4S form in my UI Online account right now.

wait california doesnt tax unemployment?? i've been doing it wrong for years lol

Confirmed - California is one of the few states that exempts UI benefits from state income tax. The 10% federal withholding option is definitely the easiest route for most people.

Oh I hadn't thought about that. I'm single with no other income so hopefully 10% is enough for me but that's a good point for people in different situations.

this is why i hate tax stuff its so complicated, why cant edd just handle it automatically like employers do

The reason California EDD only offers 10% is because that's what federal law allows as the standard voluntary withholding rate for unemployment. They can't customize it per person the way payroll departments can. It's a known limitation of the system.

That tax bill sounds awful, I definitely don't want that to happen to me. Thanks for the heads up about Claimyr too, I'll keep that in mind if I can't figure out how to change things in my UI Online account.

same thing happened to me with the surprise tax bill. edd really should make this more obvious when you first sign up

claimyr actually works? i've been trying to reach edd for two weeks about a completely different issue and getting nowhere

Perfect, this is exactly what I needed. So the 1099-G is basically my end of year statement from EDD. Got it.

can you get the 1099-G online instead of waiting for mail? i never get mail in time

Yes! You can access your 1099-G through your UI Online account. Log in and look under the tax documents section. California EDD makes them available electronically usually around the same time they mail them out.

Not a dumb question at all. If you don't have withholding set up, you technically should be making estimated quarterly tax payments to the IRS. The due dates are usually in April, June, September, and January. However, if your unemployment spell is short (a few months) and you had taxes withheld from your job income earlier in the year, you might be fine just paying when you file in April. The IRS generally won't penalize you if you owe less than $1,000 or if you paid at least 90% of what you owe. But if you're unemployed for a longer stretch, quarterly payments are smarter.

ok that makes sense. i've only been on unemployment for 6 weeks so far so maybe i'll just wait and see what i owe in april rather than dealing with quarterly stuff

Just keep the money set aside if you go that route. The biggest mistake people make is spending their full benefit amount assuming it's tax-free money.

No difference for taxes - standby UI benefits are taxed exactly the same as regular unemployment benefits. California still doesn't tax them at the state level and federal taxes still apply. The standby status just affects your job search requirements, not the tax treatment of your payments.

Thank god, was worried it might complicate things. Makes sense that it wouldn't change since it's still just unemployment compensation either way.

i didnt even know standby was a thing lol, edd is so complicated

Partial benefits and taxes sounds even more complicated. Good to know there's a way to actually get through to someone if needed.

I finally tried Claimyr after seeing it mentioned here and it actually connected me within a reasonable time. Was skeptical but it worked for me.

how do partial week benefits work on the 1099? do they just add it all up regardless?

That's exactly right. You nailed it. Only thing I'd add - even if you have 10% withheld, you'll still get a 1099-G showing the total benefits and the amount withheld. You still have to report it on your federal return either way.

ok cool thanks. gonna set up the withholding today so i dont have to think about it

Smart move. Future you will be grateful.

This is exactly what I was afraid of, glad I asked before I got myself into that situation!

the state vs federal thing confuses so many people, makes sense your mom would mix it up

Oh that's a really good point. I'm so focused on avoiding owing money that I didn't think about it from that angle.

Exactly right. And particularly for people who were only employed for part of the year before filing UI, your overall annual income might put you in a lower bracket than expected, potentially resulting in a refund of some of the withheld amount.

this happened to me! had 10% withheld all year and ended up getting like $400 back because my total income was low. felt like a bonus lol

Yes you can change it. Log into UI Online and update your withholding preference. Changes should take effect for future payments after you make the change. You won't be able to retroactively withhold from payments already made but going forward you can add or remove the withholding election at any time during your claim.

perfect thats what i needed to know, was afraid i was locked into my original choice

If you have trouble making the change online, calling EDD directly can also get it updated. Though getting through is the challenge - that's actually part of why I used Claimyr when I needed to make account changes. Saved me a ton of time vs just calling the main number and waiting.

This is super helpful, I've used TurboTax before and I'll make sure I look for that specific section. Thank you!

oh god i definitely would have put it in the wrong place without this tip

Also worth noting - if you had any taxes withheld by EDD, that shows up in Box 4 of the 1099-G and gets credited against what you owe, same as employer withholding on a W-2.

It's 10% of the gross benefit payment amount. So if your weekly benefit amount is $450 and you have withholding set up, you'd receive $405 and $45 would go to the IRS. For partial weeks where your benefit is reduced, it would be 10% of whatever the reduced amount is.

ok that makes sense, simpler than i thought

Yeah California EDD keeps it pretty simple - straight 10% off the top before you receive anything. No complicated calculations on your end.

That's actually a really smart habit. I'll start doing that since I have a tendency to forget about financial stuff if I don't keep notes.

Good idea. You can also check your payment history in UI Online to verify against your 1099-G. EDD keeps records of all your payments in the system.

yes the UI Online payment history is great for this! i ended up calling EDD about my discrepancy and the agent was able to walk me through exactly what happened - some payment had been issued in late December but wasn't counted until the next year or something like that. worth knowing about

You'd receive two separate 1099-G forms, one for each tax year. California EDD issues the form based on when payments were actually made to you, not when the claim started. So benefits paid in November and December would be on one year's 1099-G and benefits paid in January and beyond would be on the following year's form. Each gets reported on the respective year's federal tax return.

That's what I figured but wasn't 100% sure. Thanks for confirming. My claim just crossed into the new year so I'll be watching for two separate forms.

And make sure to update your address with EDD if you've moved, so both 1099-G forms reach you. Or just check UI Online where they're available electronically.

Not a dumb question but your friend is making a big mistake. The IRS receives a copy of your 1099-G directly from California EDD. They already know you received those benefits. If you don't report it, the IRS will catch the discrepancy and send you a notice, potentially with penalties and interest on top of the taxes owed. It's not worth the risk.

yeah thats what i thought, gonna tell him that. he seems to think edd doesnt report to the irs which is definitely not true

The IRS data matching is very thorough. They cross-reference 1099-G filings automatically. Your friend will likely hear from the IRS if he skips reporting it.

Your 1099-G will show the actual amounts paid to you, which would be the reduced partial benefit amounts after your earnings were taken into account. Not the full WBA. So the 1099-G reflects what you actually received, which is what you owe tax on.

Oh great, that makes sense and is actually reassuring. I was worried the 1099-G might show the full WBA and then I'd have to explain the discrepancy somehow.

Nope - it's always actual payments received. You'll report what's on the 1099-G and that's the correct taxable amount.

Good call on the address thing, I actually did move recently so I should go check that my address is updated in UI Online. Thanks for the reminder!

january is the WORST time to try calling edd, everyone is dealing with tax forms and w2s and whatever. good tip about updating address early

Also remember you can get the 1099-G directly from UI Online so even if your mailed copy gets lost you're not totally stuck.

100% agree. I came in here with a pretty basic question and got way more useful information than I expected. Really appreciate everyone who took the time to explain this stuff.

Agreed. The state vs federal tax treatment difference is the thing that trips up the most people. Glad this thread exists.

Happy to help. Tax time is stressful enough without unemployment benefit surprises. The short version for anyone skimming: elect the 10% federal withholding in UI Online, California won't tax you anyway, and save your 1099-G when it arrives in late January. That covers the basics for most people.