Does unemployment get taxed in California? EDD benefits tax question explained

Wait so California actually doesn't tax it at the state level? That's kind of a relief honestly. I'll definitely look into that 10% withholding option so I'm not scrambling in April. Where exactly in UI Online is that setting?

Good info. I wish someone had told me this when I first filed. I ended up owing like $900 in federal taxes the first time I collected unemployment because I had no idea.

just to add — the 10% withholding option for federal taxes is found under the Payment Elections section in your UI Online account. Takes like 2 minutes to set up and saves you the stress of a big tax bill.

Good point about the address. I moved about 6 months before I was laid off and I actually need to double check that my address is updated in the system.

Also you can access your 1099-G digitally through UI Online if you don't want to wait for the paper version. Just log in and it's under the Tax Information section. Way faster than waiting for mail.

I'll keep that in mind if I can't figure out the withholding setup online. I'd rather get it sorted now than deal with a tax headache later.

does claimyr actually work? I've been trying to reach edd for two weeks about a different issue and can't get anyone on the line

Yeah it worked for me. I was skeptical too honestly but I got through to someone and had my question answered same day. Worth trying if you've been stuck.

Most withholding changes can be done fully online through UI Online without needing to call, but if you have a more complicated situation or other pending questions, having a way to reach a live agent is definitely useful.

Exactly right. If you elect federal tax withholding, EDD withholds 10% from each weekly benefit payment before depositing it to your debit card or bank account. So yes, $450 becomes $405. Whether that's the right move depends on your overall tax situation for the year — if you had wages earlier in the year before being laid off, you might want to withhold. If unemployment is your only income for most of the year, you might owe less than 10% anyway.

And you can change the withholding election at any time through UI Online, so you're not locked in forever if you change your mind.

This is exactly the kind of thing I was worried about. I worked from January through mid-March before the layoff so I had several months of wages. I'll definitely run the numbers.

yeah this is so important. I thought I was fine because I set up withholding on my EDD payments but my wages from earlier in the year pushed me into a higher bracket and I still owed a chunk. Do the math early.

free tax calculators like the ones on H&R Block or TurboTax websites are actually pretty decent for estimating this stuff mid-year. You don't have to pay anything just to get a ballpark.

Ha, I probably would have had the same reaction if I hadn't looked into it now. Better to know upfront.

same honestly. nobody tells you this stuff when you file. EDD just approves you and you start getting money and then a year later surprise

The EDD website does have a section explaining the tax situation but it's buried pretty deep. Not exactly front-page information.

Take a breath — it's manageable. Log into UI Online and set up the 10% federal withholding going forward so at least your remaining payments are covered. For what you've already received, you'll just need to make sure you have enough set aside by April. Depending on your total income and filing status, the amount owed varies. A free tax estimator can help you figure out roughly what you're looking at.

You can still set up withholding now and it'll apply to future payments. For the past payments, yes you may owe some federal tax, but depending on how much you received and your tax bracket it might not be catastrophic. Definitely worth running the numbers soon rather than waiting until April.

Also check if you qualify for any other deductions or credits that might offset some of the tax owed. First-timers to unemployment often don't realize there are other pieces to the puzzle.

10% is a flat option EDD offers — it doesn't automatically adjust to your actual tax bracket. For someone in the 12% federal bracket it might actually cover most of it, but for someone with significant other income who's in the 22% bracket, 10% wouldn't be enough. The safest bet is to estimate your total annual taxable income and see what bracket you fall in, then decide if you need to set aside extra money on your own on top of the 10%.

Unfortunately EDD doesn't offer a 12% or 22% withholding option — it's either 0% or 10%. If 10% isn't enough based on your situation, you'd just need to save the difference yourself in a separate account.

this is why I just throw 15% of every EDD payment into a savings account whether or not I have withholding set up. I'd rather have extra and get a refund than owe money.

I've been trying to reach EDD for two weeks now about a separate adjudication issue. Might try this.

ugh I might need this. I have questions about my withholding AND my payment schedule and I just can't get anyone on the phone

Yeah the combo of having multiple questions is exactly when it makes sense to just talk to someone directly rather than trying to figure everything out through the website.

oh ok that makes more sense. I was confused about why there was only one option in UI Online. thanks for explaining

Good to know. I was going to ask about that actually — I assumed there'd be both options.

I didn't even know that was an option. So you can basically pay federal taxes in chunks throughout the year without waiting for April?

Exactly. Quarterly estimated payments are due in April, June, September, and January. The IRS Direct Pay site makes it pretty straightforward. If you end up not owing as much as you paid, you get a refund.

This is a good point especially for people who were higher earners before the layoff and have significant federal liability even on the unemployment income alone.

this is genuinely news to me and I've been on unemployment twice. learned something new today

100% agree. I've thought the same thing. Most people getting unemployment are already financially stressed, the last thing they need is a surprise federal tax bill.

There are some arguments for keeping it optional since some people have very low total income and wouldn't owe taxes anyway — mandatory withholding would reduce their weekly payment unnecessarily. But I do agree the default should probably be withholding rather than no withholding, at minimum.

The opt-in setup has been around forever and keeps getting talked about but nothing changes. Classic government bureaucracy honestly.

Yes, unfortunately your friend is mistaken. Federal unemployment benefits including what you receive from California EDD are absolutely taxable income at the federal level and must be reported on your federal tax return. You'll get a 1099-G from EDD showing the total. The only correct part is that California doesn't add state income tax on top of it.

This is one of the most persistent myths about unemployment — and it gets people in real trouble come tax season. Please do not go off that advice, OP or anyone else reading this.

people spread this 'unemployment isn't taxed' thing constantly and it causes so much unnecessary stress when people find out the truth in April. the misinformation is everywhere

Oh interesting. My claim wasn't delayed thankfully but good to know for the future or for others in adjudication limbo.

wait does this mean if I've been in adjudication for 2 months and then get approved for all back weeks at once, it all shows up on THIS year's taxes even if the weeks were from last year?

Yep. The 1099-G is based on when payments were actually released to you, not the benefit year weeks they correspond to. So if you receive 10 weeks of back pay in December it all counts as this year's income.

This is accurate from an accounting perspective. Income is generally recognized when received for cash-basis taxpayers, which is how individual filers work. Important detail for anyone in a lengthy adjudication situation.

The onboarding process is basically nonexistent. You file, you get approved, and then you're supposed to magically know all the rules.

This thread has been more helpful than anything EDD gave me when I was approved honestly.

Their website has information on all of this but good luck finding it when you don't know what you're looking for. Not exactly user-friendly.

This is actually really helpful context. I had about 2.5 months of wages this year before the layoff so depending on how long I collect unemployment my bracket could go either way.

wait those are really the brackets? i thought it would be higher. maybe i don't actually owe as much as i was worrying about

Yeah a lot of people assume a higher percentage than they actually owe, especially if their total annual income is moderate. Run the actual numbers before stressing too much.

This is really reassuring. I'm going to set up the withholding today and start tracking my payments. Sounds like being organized about it makes a big difference.

I'm kicking myself for not asking these questions at the start. Better late than never I guess.

Honestly just go set it up now. Even if you've been collecting for a few months, getting withholding going on future payments reduces what you'll owe. And you can estimate roughly what you owe on past payments and set that aside separately.

This is genuinely good advice. The 1099-G should match your total payment record in UI Online. If it doesn't, you want to catch that before filing, not after.

There's also a process for requesting a corrected 1099-G from EDD if you find a discrepancy. It's a pain but it's doable and way better than filing with wrong numbers.

I hadn't thought about cross-checking. Will definitely do this. Good call.

I need to reach them about my withholding AND an adjudication question. Sounds like this would cover both in one call.

I finally tried Claimyr after seeing it mentioned earlier in this thread. Got connected. Wish I'd done it sooner instead of spending two weeks redialing.

Exactly, one call can cover multiple questions. That's honestly the best way to use it — batch everything you need answered so you're not trying to reach them multiple times.

Great outcome. You did exactly what you should do — figured it out early, set up withholding, ran an estimate. You're in a much better position than most first-time claimants. Good luck with the job search.

Glad it helped. The more people ask these questions upfront the fewer people end up blindsided in April. Good luck out there.

Nice update. This thread is going to help a lot of people who search 'does unemployment get taxed' and land here. Good luck!