Can unemployment take your taxes? What California EDD claimants need to know

Wait so it goes through the Franchise Tax Board? Not directly through EDD? That's confusing. So my federal refund is safe?

Your federal refund works differently. For federal tax intercepts they'd have to go through a separate Treasury Offset Program and that typically applies more to federal debts. For California EDD overpayments the most common route is through the FTB intercepting your state refund. But if the debt is large enough and goes unresolved long enough, federal options can come into play too. Best to get clarity on your specific situation.

This is accurate. I went through something similar two years ago. Got a letter from EDD about an overpayment, ignored it because I thought I could dispute it later, and then my state refund just vanished. It was a whole nightmare to sort out. Don't ignore overpayment notices.

I have some old emails from like a year and a half ago but I never got a final confirmation letter saying it was fully resolved. That's why I'm nervous.

Log into your UI Online account and check your payment history and any outstanding balance. If there's a zero balance showing for that overpayment period you're probably good. If it shows anything still owed, that's when you need to take action fast.

yeah definitely check UI Online first before panicking. half the time people think they owe money and they actually don't

Wait this actually works? I've literally been trying to call for weeks and getting nowhere. How long did it take for you?

For me it was same day. I submitted in the morning and had a callback from an EDD agent that afternoon. The agent was actually really helpful once I got through, it was just getting to that point that was impossible on my own.

I've seen Claimyr mentioned on here a few times. Seems like a lot of people have had success with it when EDD phone lines are impossible. Might be worth trying OP if you need a definitive answer about your overpayment status.

the edd phone system is genuinely one of the worst things I have ever dealt with in my life so anything that helps is worth knowing about

Oh wow I didn't realize unemployment was taxable income at the federal level. I did NOT do any withholding. Is that going to be a big problem?

Depends on how much you received and your overall income situation. If UI was your only income for a stretch, the impact might be manageable. But yes if you collected for several months without withholding you could end up owing federal taxes on those benefits. Definitely factor that in when you file.

wait California doesn't tax unemployment?? I've been worried about state taxes this whole time. that's actually a relief

Correct - California does not tax unemployment insurance benefits at the state level. Only federal income tax applies to UI payments.

Yeah EDD doesn't exactly make it obvious when you're filing those weekly certifications. I had no idea.

Exactly. They do give you the OPTION to withhold 10% but it's easy to skip past that when you're stressed about just getting approved and receiving money.

How much interest are we talking? Is it a lot?

I believe overpayment debt can accrue interest at around 1% per month but I'd verify that with EDD directly since rates can change. The point is it grows. Dealing with it proactively is always better than waiting.

Also there's a difference between a non-fraud overpayment and a fraud overpayment. Non-fraud ones are generally more manageable and you can set up a repayment plan. Fraud overpayments are much more serious and can have additional penalties.

Oh no that's exactly what I'm scared of. Did you at least get the money back eventually or is it just gone?

No it was legitimately applied to my outstanding debt so it's gone but at least now my account is clear. The frustrating part was not having any warning because of the old address. My own fault for not updating it I guess but still.

Address updates are so important and EDD is not great about flagging when mail is returned. Always update your address in UI Online the second you move.

Yes this is actually something you can do. You have the right to appeal an overpayment determination. You typically have 30 days from the notice date to file an appeal. You'd request an Administrative Law Judge hearing where you can present your case. If you have documentation showing you reported correctly, that's your best evidence.

okay yeah the friend in question definitely reported their work hours correctly every week and still got hit with an overpayment notice so this is good to know

Tell your 'friend' to gather all their weekly certification records, any pay stubs from that period, and the original overpayment notice. The appeal form is on the EDD website and needs to be submitted within the deadline, that part is critical.

RIGHT. That's the core issue here. I know exactly what I need, I just need someone at EDD to look at my account.

Yeah the phone situation there is genuinely terrible. I spent four hours one day just trying to get a human on the line. Called at 8am and still couldn't get through.

I looked at their site and the demo video. Going to try it this week. I really just need someone to look at my actual account and tell me I'm good.

That's the right move. An EDD agent can pull up your full account history and overpayment status in real time. That kind of definitive answer is way better than guessing based on old emails.

This is incredibly helpful, bookmarking this entire thread. Thank you.

should be pinned honestly

agreed this covers basically everything someone would need to know about this topic

Can you set up a repayment plan online or do you have to call?

You can initiate it through UI Online in some cases, but calling EDD directly is more reliable to make sure the plan is properly set up and documented. They can process it faster on the phone and you get immediate confirmation.

Yes calling is always better for anything involving repayment arrangements. You want to be able to document who you spoke to and when.

No, unemployment benefits themselves are not reported to credit bureaus - they're not credit accounts. However, if an overpayment debt goes to collections (a more extreme scenario), that could potentially affect credit. But standard unemployment collection through FTB tax intercept does not show on credit reports.

okay that's one less thing to worry about thank you

yeah EDD can mess up your life in many ways but at least not that particular way lol

Will do. Going to try Claimyr this week to get through to EDD and then I'll report back what I find out.

Good luck! Hopefully it's already cleared and you can stop stressing about it.

Good to know there's a backup option. Hopefully I never need it but filing that away.

Yes FTB disputes are a real option. You'd basically have to show that the underlying EDD debt was resolved or invalid. It helps enormously to have documentation of any payments you made to EDD or of an appeal outcome in your favor.

That sounds like a nightmare. Did it take long to sort out the aftermath?

Few months of back and forth. The debt was legitimate so there wasn't much I could do except accept it but the lack of communication from EDD was infuriating. They had an old phone number on file too so nobody could even reach me to warn me.

This is such a common thread in all EDD complaints - outdated contact info. Everyone reading this, go update your phone, email AND address in UI Online today even if you think it's current.

Not a dumb question at all. Your prior wages determine your benefit amount (weekly benefit amount or WBA). For taxes, your unemployment benefits are separate from your wages. You'd receive a W-2 for wages from your employer and a 1099-G from EDD for unemployment benefits. Both get reported on your federal return but only the wages get reported on the state return since CA doesn't tax UI.

oh so I'll get a separate 1099-G form from EDD? I didn't know that. Does EDD send that automatically?

Yes EDD issues 1099-G forms for benefit payments. They should be available in your UI Online account and also mailed to your address on file. Another reason to keep your address current! The 1099-G shows your total UI benefits for the year and is what you use to report on your federal taxes.

So glad it worked out!! And good that you got official confirmation directly from an agent instead of just hoping.

Great news. This is the ideal outcome - you now have a verified clear account and you know what to watch for going forward. Thanks for updating the thread.

This thread has been genuinely useful, appreciate OP coming back with the resolution

nice outcome! and now everyone who finds this thread searching 'can unemployment take your taxes' will have a complete story to follow. good stuff