How to calculate federal unemployment tax while filing California EDD claim

Wait so California doesn't tax unemployment at all?? That's actually really good news. So I only need to worry about the federal income tax withholding piece. And that 10% option through UI Online, is that something I can set up retroactively or only before my first payment?

You can set it up at any point during your claim — it won't be retroactive for payments already issued but it'll apply going forward. Log into your UI Online account, go to the payment preferences section, and look for the tax withholding option. Definitely worth doing now so you don't get hit with a big bill in April.

I had no idea employers pay FUTA and not us. My coworker told me we owed like 15% federal unemployment tax on our benefits and I've been panicking for two months lol. Thank you for this explanation.

Good point about the part-time work. I've been doing some occasional gig stuff and reporting it to EDD like I'm supposed to. So all of that goes on my taxes too, not just the unemployment payments.

yes everything counts, gig income especially because you gotta pay self employment tax on top of regular income tax for that stuff. at least unemployment you only owe income tax not self employment tax

This is correct. Gig/freelance income is subject to self-employment tax (15.3% on net earnings) in addition to regular income tax. Unemployment benefits are NOT subject to self-employment tax, only regular federal income tax. So they're actually taxed more favorably than gig work from a total tax burden perspective.

Oh interesting, I've been trying to call EDD to ask about the withholding setup and keep getting the 'high call volume' message and getting disconnected. I'll check out that video.

does claimyr actually work? seems too good to be true honestly

I was skeptical too but it worked for me. Got connected to an actual EDD rep within a reasonable time. Way better than calling directly and getting nowhere.

I've heard a few people mention this service on here. Might be worth trying if you're stuck trying to reach EDD about tax stuff.

Not double taxation — two completely separate things. FUTA is a tax that YOUR EMPLOYER paid to fund the unemployment insurance system in the first place. The 1099-G is reporting the BENEFITS you received from that system as income, which the IRS requires you to report. Think of it like how employers pay into Social Security but employees also pay Social Security taxes — they're related but they're separate obligations.

ohhhh okay that actually makes sense. so the employer funded the pool and now the IRS wants a cut of what i drew from that pool. got it

this was confusing me too, glad someone asked

Good heads up. My claim started in late November so some payments will definitely be in one tax year and some in the next. So I'll get two separate 1099-Gs? One for each year?

Exactly — one 1099-G for each calendar year you received payments. So you'd get one for the current year and one for next year, each showing only the benefits paid within that calendar year. Report each one on the corresponding year's tax return.

Same thing happened to me when my claim crossed over December-January. Two separate forms, had to remember to include both. California EDD's UI Online actually shows a history by year which helped me verify the amounts.

I didn't even know quarterly estimated payments were an option for unemployment income. I thought that was only for self-employed people. Is this something you need a CPA for or can regular people figure it out?

Regular people can absolutely do it — the IRS has a withholding estimator tool on their website that walks you through it. You input your expected income from all sources (unemployment, any gig work, any part-time wages) and it tells you roughly what you'll owe and whether you should pay estimates. It's less intimidating than it sounds.

I did the estimated payments last year when I was on unemployment for 8 months. Honestly the IRS tool is pretty straightforward. Saved me from a huge April bill.

The people on this thread are correct — California does NOT tax unemployment benefits at the state level. Your cousin may be thinking of a different state (many states do tax UI benefits) or may have received outdated information. California has specifically excluded unemployment compensation from state income tax. You will only owe federal income tax on your California EDD benefits.

okay thank you. she probably was thinking of when she lived in a different state. ill stop worrying about the CA state tax portion then

This is one of the most common misconceptions I see on this forum. California is actually one of the more claimant-friendly states on this particular issue. No state income tax on UI benefits is a real advantage compared to a lot of other places.

Yeah I think 10% is probably fine for my situation since I won't have much other income this year besides the EDD payments and a little bit of gig work. But good point that it's not always enough.

I learned this the hard way. Had 10% withheld the whole time I was on EDD, thought I was covered, still owed $800 at the end of the year because I picked up contract work in Q4. Lesson learned.

Yep. 10% covers the 10% federal tax bracket but if your combined income lands you in the 12% or 22% bracket, you'll have a gap. Running the numbers mid-year is smart especially if your employment situation changes.

This is exactly what I needed. Going to do this today. Thank you for laying it out step by step.

bookmarking this comment. always looking for this info and never finding it clearly spelled out

does this also apply to people on partial unemployment benefits? like if you're working part time and getting reduced EDD payments?

Yes, the 10% withholding applies regardless of whether you're on full or partial unemployment. The withholding comes out of whatever EDD payment you receive that week.

Oh wow that's a really important detail. So on the 1099-G there's actually two boxes — one for the total benefits and one for the taxes withheld — and both matter when you file?

Exactly. Box 1 is your total unemployment compensation (gross) and Box 4 is federal income tax withheld. You enter both on your 1040. The IRS will match the 1099-G they received from EDD against what you report, so make sure you're reporting the full gross amount.

This is a really important point and I'm glad you brought it up. So many people make this mistake and then get a letter from the IRS asking about the discrepancy. Always report the full gross amount from Box 1.

okay i tried it after seeing it mentioned earlier in this thread and I actually got through to EDD. was not expecting that to work but it did. asked about my withholding status and the agent confirmed everything was set up correctly.

might try this. i have an unrelated adjudication issue on my claim that i've been trying to get someone at EDD to explain for like 3 weeks.

adjudication issues are exactly the kind of thing you need a live agent for, not the automated system. hope you get it resolved

Severance is treated as regular wages for federal income tax purposes — it goes on your W-2 and your employer should have withheld taxes from it. It does NOT affect the taxability of your unemployment benefits. However, for California EDD eligibility purposes, severance can affect when your benefit year starts depending on how it's structured. But from a pure tax calculation standpoint, your unemployment benefits are taxed the same regardless of whether you received severance.

okay good, my taxes should be pretty straightforward then. employer already withheld on the severance. just need to handle the EDD piece.

One nuance — if your severance was paid out as salary continuation (like they kept you on payroll for a few weeks after your last day), California EDD may have counted those weeks as 'employed' for benefit eligibility purposes. Doesn't change how your severance is taxed but worth knowing for your records.

You can't retroactively withhold from past EDD payments — those are already gone. But you have two options going forward: 1) Turn on the 10% withholding for remaining payments (set it up through UI Online), and 2) Make a voluntary quarterly estimated tax payment directly to the IRS to cover the liability from the months you didn't withhold. The IRS estimated payment form is 1040-ES and you can pay online through IRS.gov. This is actually the recommended approach if you've had a significant gap in withholding.

okay so i can just pay the irs directly to make up the difference without going through edd at all? that actually sounds way simpler than i thought

Exactly. The IRS doesn't care how the tax gets to them — whether through employer withholding, EDD withholding, or estimated payments you send directly. As long as you've paid enough by year end (or meet the safe harbor rules) you avoid penalties. Direct estimated payments are a totally normal way to handle this.

I did this exact thing. Forgot to turn on withholding for the first 4 months, then made an estimated payment to the IRS to cover it and turned on withholding for the rest of the claim. Zero issues at tax time.

This whole thread has genuinely been so helpful. Started reading it completely panicked and now I feel like I actually understand what I'm dealing with. Turning on withholding today.

same, came here super confused and now it makes sense. california edd forum comes through again

still dealing with my adjudication situation separately but at least now i understand the tax piece. one thing at a time lol

Great question and the answer depends on timing. If you repay an overpayment in the SAME tax year it was paid, EDD should issue a corrected 1099-G showing the lower net amount. If you repay in a DIFFERENT tax year than when you received the benefits, it's more complicated — you originally reported and paid tax on the full amount, so you may be able to deduct the repayment or claim a credit under IRS Revenue Ruling 68-153 depending on the amount. Talk to a tax professional if this applies to you because the rules are genuinely complex.

my overpayment is from last year and i'm paying it back this year so it sounds like the complicated scenario applies to me. gonna have to look into that credit/deduction thing. thank you

This is also a good reason to contact California EDD directly if you have an overpayment that crosses tax years. Sometimes EDD can issue a corrected 1099-G depending on the circumstances. Worth asking an EDD agent about rather than just assuming you have to go the IRS route.

Good point. I've been using TurboTax for years so I'm not worried about the actual filing part, just wanted to understand the underlying mechanics so I wasn't caught off guard. This thread has answered basically all of my questions.

TurboTax and FreeTaxUSA both handle the 1099-G really well. FreeTaxUSA is also free for federal filing which is nice when you're on unemployment and every dollar counts.

seconding FreeTaxUSA. used it last year during my unemployment stretch and it was totally fine for my situation

This is actually a known thing with California EDD — the 1099-G reflects when payments were ISSUED (paid out) not necessarily the week they cover. So a payment issued on December 31st counts for that tax year even if it was for a certification week ending in January. If you have a claim that spans year end, always verify by looking at your payment history by payment date, not by benefit week.

YES that was exactly the issue. The payment was for a certification week that I thought of as January but it was issued in late December so it hit the prior year's 1099-G. Made sense once someone explained it but was super confusing to figure out on my own.

I had the same confusion. The lesson I learned is to track payments by the date deposited in your bank account, which matches when EDD counts them for 1099-G purposes. Not by the week you certified for.

Perfect summary. This is what I needed from the start honestly. My brother-in-law definitely had FUTA and the claimant income tax reporting confused in his head. I feel a lot better now.

wish i'd found this thread months ago. bookmarking for future reference

good summary. and for anyone still stuck trying to reach edd about something specific - that claimyr service mentioned above is legit, just confirmed it works, adjudication questions and all. claimyr.com for anyone who missed it