Is unemployment taxable in California? What California EDD doesn't tell you upfront

Wait seriously?? California doesn't tax it at the state level? That's actually a huge relief. So I only have to worry about federal taxes on the unemployment amount? Do I just add it to my regular W-2 income and calculate from there?

yes this is correct, california has always exempted UI benefits from state income tax. been that way for years. federal is a different story tho

This is really important info that more people need to know before they start collecting. California EDD should make this clearer during the initial claim filing process honestly.

10% withholding option, good to know for the future. Ugh I really wish I'd known about this when I first filed. Is there any way to set up a payment plan with the IRS if I can't pay the full amount I owe all at once?

yes IRS payment plans are definitely a thing, called an installment agreement. you can apply online at IRS.gov. as long as you file your return on time even if you cant pay you avoid the failure-to-file penalty which is worse than the failure-to-pay one

Same boat here from last year, ended up on an IRS payment plan and it wasn't as scary as I thought. Just make sure you actually FILE on time even if you can't pay in full, that's the critical part.

Oh god I hadn't even thought about the fraud angle. I did collect the benefits so the amount should be right, but I'll definitely log in and verify. How do I find the 1099-G in UI Online specifically?

In UI Online you go to the 'Payments' section and there should be a '1099G' tab or link. You can view and download the form directly from there. If you have trouble accessing your account or need to talk to someone at California EDD about it, I've heard people have had luck using Claimyr - it's a service at claimyr.com that helps you actually get through to a live EDD agent on the phone instead of getting stuck in the phone queue forever. There's a demo video at https://youtu.be/JmuwXR7HA10 if you want to see how it works. Might be helpful if you have specific questions about your 1099-G that need a real person.

seconding the claimyr suggestion, getting through to california edd on the phone is basically impossible otherwise lol

This is really helpful context, thank you. I did have some income from a part time gig I picked up during the last couple months of my claim - I reported all of it to California EDD on my weekly certifications. Does that part time income also stack on top of the unemployment for tax purposes?

Yes, all income sources get combined for federal tax purposes. Whatever you earned from the part time work plus the full amount on your 1099-G plus any other income equals your total taxable income. The California EDD unemployment portion is still only taxable federally, not at the state level, but the part time work wages would be taxable both federally and in California.

This is why having even a basic understanding of taxes before you file a UI claim would save so many people a lot of stress. The system really doesn't do a good job of explaining this upfront.

$2,100 is exactly the kind of number I'm scared of seeing. Did you end up having to pay it all at once or were you able to work something out?

I paid it in chunks through an IRS installment agreement. Applied online took like 10 minutes. Just don't ignore it, that's what makes it worse

THANK YOU for clarifying this. I've seen so many people in Facebook groups saying 'oh the first $10,200 isn't taxable' and that hasn't been true since the 2020 tax year. Really important distinction.

Good to know - I was actually wondering about that because I did see something like that mentioned somewhere but assumed it was old. So confirmed: 100% taxable federally now, 0% taxable in California.

Correct. No exclusions, no partial exemptions at the federal level currently. California state tax exemption still applies as it always has.

yeah the COVID stuff threw everyone off for years. back to normal rules now

For the login issues try clearing your browser cache completely or switching to a different browser - Chrome tends to work best with UI Online in my experience. For actually getting through to EDD by phone without the endless hold torture, I'd seriously recommend trying Claimyr (claimyr.com). It basically navigates the phone system and connects you to a live California EDD agent. They have a video walkthrough at https://youtu.be/JmuwXR7HA10 that shows exactly how it works. Way better than sitting on hold for hours.

Seriously thank you, I'm going to try that. The phone situation with California EDD is absolutely ridiculous. Three hours and nothing.

The UI Online logout issue is a known problem, it times out really fast due to inactivity. Keep moving your mouse or clicking around while you're navigating to the 1099G section. Sounds dumb but it helps.

How would I go about disputing it if the number is wrong? Is that something I can do through UI Online or does it require calling California EDD?

You'd need to call EDD directly and speak to an agent to get a corrected 1099-G issued. UI Online doesn't have a dispute function for tax forms unfortunately. This is one of those situations where actually getting through to a live person matters a lot.

also keep records of all your payment confirmations from your weekly certifications so you have documentation if the number on the 1099-G doesn't match your actual payments

Very rough rule of thumb: if your total annual income including the unemployment was under about $44,000 you're probably in the 12% federal bracket for that income. Above that you could be looking at 22% on the portion that falls in that bracket. But tax brackets work incrementally so it's not like your whole income gets taxed at one rate. A free tax calculator online can give you a much more precise estimate if you plug in your numbers.

okay 12% is less scary than I thought. thank you. I'll look up a calculator

Free File on the IRS website is also an option if your income was under a certain threshold - might save you money on tax prep software

Yes, the 1099-G shows the total amount actually paid to you regardless of when the benefits were technically earned. So if you received back payments in the same calendar year, they'd be included in that year's 1099-G. If the back payments crossed into a new calendar year, they'd show up on that year's form.

Makes sense, all of mine came through in the same year so I guess it's all on one 1099-G. Good to know it wasn't split somehow.

Oh this is actually a good question because my claim had a brief adjudication period too. Sounds like it all just ends up on the 1099-G for the year you actually received payment.

I don't have an overpayment situation thankfully, but this is good to know. My claim was pretty straightforward, just a regular layoff with no complications.

Straightforward layoff is the best case scenario honestly. You'll probably just plug the 1099-G amount into your tax software, it'll add it to your federal income, and you'll either owe or get a reduced refund. Not as catastrophic as it feels right now I promise.

100% agree with this. The withholding option is buried in the UI Online settings and EDD doesn't really highlight it during the initial claim process. It should be front and center.

I've seen some states that actually require claimants to make an active choice about withholding rather than making it opt-in. California should look into doing something similar.

exactly. make it the default to withhold, not opt-in. most people don't know enough about taxes when they first file to make an informed choice about withholding

is it too late to turn it on mid-claim? like if I've been collecting for 3 months already without withholding can I change it now for future payments?

Yes! You can change your withholding election at any time during an active claim. It'll only apply to payments going forward but better late than never. Log into UI Online to update it.

Changing it right now, thank you so much

Good point. All the pandemic-era supplements are gone. Regular UI benefits are the only thing California EDD is paying out now and all of it shows on the 1099-G and all of it is federally taxable.

Helps to have all this confirmed clearly. This thread has genuinely taught me more about this than anything on the official California EDD website.

Unemployment benefits do NOT count as earned income for the EITC unfortunately. Only wages, salaries, and self-employment income count as earned income for that purpose. So if your only income for a stretch was unemployment, that period doesn't help you qualify for EITC. If you had any W-2 income during the year though that portion does count.

Ah that's disappointing but good to know before I tell my tax preparer the wrong thing. I had W-2 income for part of the year so at least that portion counts.

Right, any W-2 income you had qualifies you to at least calculate whether you'd get EITC based on that amount. Just don't add the unemployment to it when making that calculation.

Yes you can access your 1099-G digitally through UI Online regardless of your address. Log in, go to the tax section, and download it directly. That's the cleanest way to get it. You should also update your mailing address in UI Online so future correspondence reaches you. If you have trouble getting into your account or need to update your info with an agent, Claimyr at claimyr.com is a good way to actually get through to someone at California EDD - check out https://youtu.be/JmuwXR7HA10 to see how it works.

I didn't even realize it was available online, logging in now. And good call on updating the address, I totally forgot EDD still has the old one.

This was actually helpful for me too - I hadn't thought to check UI Online for the form and was just working off the paper version. Good to know there's a digital backup.

This is reassuring to hear. I was wondering if I'd need a special accountant or something but it sounds like normal tax software handles this fine.

For a straightforward situation like yours - regular layoff, no overpayments, no complications - tax software should handle it completely fine. If you had overpayments, fraud issues, or repayments involved then an actual CPA would be worth it.

H&R Block also handles it the same way fyi, similar process. Just enter the 1099-G info when prompted.

This is exactly what I needed to hear. $1,400 spread over monthly payments is something I can actually deal with. Thank you for coming back to share this.

Really appreciate this update. I've been spiraling with anxiety about this and knowing someone went through it and came out okay is genuinely calming.

The anticipation is always worse than the reality with this stuff. File on time, set up a payment plan if needed, move on. You've got it.

This is a good outcome update. Same experience here, the IRS installment process is surprisingly straightforward compared to dealing with California EDD lol