Does tax unemployment benefits from California EDD? Breaking down what you owe

This is exactly what I needed. So California doesn't tax it at all? I was so stressed about owing state taxes on top of everything else. Did the agent say anything about whether the 10 percent withholding is usually enough to cover the federal side?

He didn't give me a number to aim for, just said 10 percent is the one option EDD offers and that if I want to pay more I'd have to do quarterly estimated payments on my own through the IRS. He didn't go further than that since it depends on each person's situation.

Good to know about the state side. The 1099G thing is important too - I forgot about mine last year and had to scramble in April.

Wait so if I haven't turned on withholding yet, all those weeks I already certified - that money already came out with no taxes taken? Can I still turn it on going forward?

You can switch it on going forward at any certification, yes. The weeks already paid out are done - no way to retroactively withhold on those. Best you can do now is set aside something from what you've already received and turn withholding on for the rest of your claim.

Same thing happened to me, didn't realize I had to opt in. Ended up owing about $400 in federal in April, was not fun but it wasn't catastrophic either.

Does EDD send the 1099G to your current address or the one on file when you filed the claim? I moved in October and I'm worried about it going to the wrong place.

Update your address in myEDD at https://myedd.edd.ca.gov/ as soon as you can. The 1099G is also viewable in UI Online under Payments then Form 1099G, so even if the paper one goes somewhere wrong you can pull it from there.

Just updated my address, thank you. Didn't even know you could do that in myEDD.

Does that mean if I live in California but worked briefly in another state before getting laid off, it's still just federal I owe on the EDD benefits?

The UI benefits themselves from EDD are still state-exempt regardless. The wages from wherever you worked are a separate matter for your return. For the EDD benefits specifically, California doesn't tax them.

Good clarification because I was wondering something similar. The benefits themselves are the exempt part, got it.

Same, I stumbled on it like three certifications in. By then I'd already gotten several weeks with nothing withheld.

Exactly. And then you're sitting there in April trying to figure out where the money is going to come from. The certification question is easy to miss if you're just clicking through fast.

EDD does include a note about taxes in the initial paperwork but it's buried. The withholding opt-in at certification is genuinely the easiest way to handle it.

Yeah I wasn't asking about that but good to know it's a separate question. Right now I'm just focused on making sure I don't get wrecked on my federal return.

Totally fair. The federal 1099G is what matters for your return. Box 1 is total benefits paid, and that's what goes on your 1040. If you had withholding taken out, box 4 shows that and it offsets what you owe.

That's actually a helpful way to think about it. I do have a little bit of freelance income on top of the $380 so I might owe a bit extra. Probably should look into quarterly estimated payments like someone mentioned above.

Freelance income plus unemployment benefits is a combination where quarterly estimates make a lot of sense. The IRS wants its cut during the year, not all at once in April.

Quarterly estimated payments are annoying but way less painful than a big April surprise.

Wait so the UI deduction on my old pay stubs wasn't a thing? I always assumed I was contributing.

Nope, that's not how it works. Employers pay the unemployment insurance tax. The CASDI line on your stub was for disability and PFL. You funded your own disability coverage, essentially, but not unemployment directly.

Honestly never knew that. So the employer is the one who actually funded my ability to collect EDD benefits.

How often do estimated payments have to go in? I've never done them before.

Quarterly - there are four due dates spread through the year. The IRS website has the exact dates and Form 1040-ES walks you through calculating what to send.

Estimated payments felt intimidating to me the first time but it's really just sending money in four times a year with a form. Not as complicated as it sounds.

Someone mentioned the DE 429Z earlier so good to know the difference between that and the 1099G. The 429Z is just showing what I could potentially get per week, not a tax document.

Exactly right. 429Z is basically your award notice - here's your weekly amount, here's your maximum. 1099G is the actual year-end accounting of what landed in your pocket.

This is important and I feel like it needs repeating. EDD sends that 1099G to the IRS directly. It's not optional income to report.

Exactly. And the notice you get from the IRS months later asking about it is way more stressful than just filing it correctly the first time.

Had a coworker years ago who tried to leave off some income and it took about eight months for the IRS to catch up. The notice was not a friendly letter.

Not my situation but I appreciate the clarification because I saw someone else ask about this in another thread and was confused.

It comes up a lot. People assume all government benefit income is taxed the same way and it really isn't.

That math is actually really helpful. $38 a week seems manageable to have taken out if it keeps me from a nasty April surprise. I'm going to turn it on at my next certification.

Good call. Even if it's slightly more than you end up needing you'll just get it back as a refund. Better to over-withhold a little than owe.

Same logic I use. I'd rather a small refund than scrambling in April.

Not currently applying for those but good to know it's a separate determination. I've seen people mix up taxable income with program income limits.

They're completely different calculations. Good you asked the tax question separately - it's cleaner to understand one piece at a time.

Didn't know you could certify by mail. Is that slower for getting paid?

Significantly slower, yes. UI Online certifications process fastest and payments usually post to the Money Network card within 24 hours of certifying online. Mail takes longer for obvious reasons. Phone option is EDD Tele-Cert at 1-866-333-4606.

UI Online it is then. I'll stick with what I've been doing.

Just checked mine - I did go paperless and completely forgot. The 1099G is there in UI Online. Thanks for the reminder or I'd have been waiting for a letter.

Exactly why I mentioned it. The digital copy is the same form, same box numbers, works the same for filing.

Does Social Security count as a pension for EDD purposes? Or is that separate?

Social Security benefits are not deducted from your EDD benefit and are not reported when you certify - that comes from EDD's own guidance. Whether they interact on your federal return is an IRS question, not an EDD one.

Okay good, my situation doesn't have a pension, just Social Security, so sounds like EDD won't touch my weekly benefit because of it.

Not my situation but I could see that being super confusing for someone trying to track why their payment amount keeps varying.

It confused me for three weeks before I figured out what the deductions were. The Money Network card statement helps you see the breakdown.

That's exactly the kind of specific answer I needed too. Good to know turning it on now means next certification it's already active.

That's what the agent confirmed for my account specifically. Made me feel better about not having done it from day one - at least going forward it's covered.

Useful to know there's no weird delay when you switch it on. I always assumed there might be a waiting period.

I'm actually on COBRA right now so this was helpful to see confirmed. Was worried that my EDD income might somehow affect my coverage costs.

No effect on COBRA costs from EDD income. Those premiums are set by the plan and what your employer was covering before. EDD and COBRA just run in parallel.

This is gold. I always relied on my W-2 boxes to know where things went. Having the equivalent for 1099G makes this way less scary.

You'll be fine. The tax software most people use will ask you to enter box 1 and box 4 from your 1099G and it handles the placement automatically. Manual filers just need Schedule 1.

Tax software really does make this painless. I entered my 1099G in about 90 seconds last year.