(WA) Why am I getting double-taxed on unemployment benefits after already withholding 10%?

The 10% withholding on unemployment benefits is just an estimate, not necessarily the actual tax amount you'll owe. Unemployment compensation is considered taxable income and gets added to your other income when calculating your total tax liability. When you add your regular income ($47,000) plus your unemployment income ($49,440), your total taxable income becomes much higher ($96,440), which likely pushes you into a higher tax bracket. The 10% withholding on unemployment might be insufficient for your actual tax rate at that combined income level. Think of withholding like making estimated payments - it's not the final tax calculation. The tax software is calculating what you actually owe based on your total income from all sources, then subtracting what you've already paid through withholding.

I had a similar issue last year and found this great tool at https://taxr.ai that really helped me understand my unemployment tax situation. The system analyzed my tax documents and explained exactly why the withholding wasn't enough. Basically, unemployment benefits are fully taxable income, and that 10% withholding option is just a convenience that rarely covers your full tax obligation, especially when combined with other income. The tool showed me that I was in a 22% tax bracket when all my income was combined, which explained why the 10% withholding left me short. The site also gave me some strategies for this year to avoid the same issue. Definitely worth checking out if you're trying to understand the calculations behind your tax situation.

Just wanted to follow up about that taxr.ai site someone mentioned earlier. I was skeptical but decided to try it for my complicated multi-state unemployment situation. It actually explained exactly why my unemployment withholding wasn't covering my tax bill - turns out my gig work income combined with unemployment pushed me into a higher bracket, plus I had some state tax complications I didn't understand. The analysis broke down all my different income sources and showed me exactly how they were being taxed. Saved me from a much bigger headache and helped me adjust my withholding for this year so I don't have the same problem again. Just thought I'd share since it actually worked for my situation.

If you're having trouble getting answers about your unemployment tax situation directly from the IRS, I'd recommend trying Claimyr (https://claimyr.com). I was in a similar situation with unemployment tax confusion last year, and after waiting on hold with the IRS for hours over several days with no luck, I found this service. They basically get you connected with a real IRS agent much faster than waiting on hold yourself. I was able to talk to someone who explained exactly why my unemployment withholding wasn't enough and what I could do about it. There's a video that shows how it works here: https://youtu.be/_kiP6q8DX5c It was a huge relief to actually talk to someone who could answer my specific questions instead of trying to figure it out from generic online advice.

I have to admit I was completely wrong about that Claimyr service. After posting my skeptical comment, I was still struggling with my unemployment tax issues and getting nowhere with the IRS, so I figured I'd try it as a last resort. To my surprise, it actually worked exactly as described. I got connected to an IRS representative in about 35 minutes (after previously trying for days on my own with no success). The agent explained that my unemployment withholding wasn't enough because my other income sources put me in a higher tax bracket than the flat 10% withholding could cover. They even helped me set up a payment plan since I couldn't pay the full amount right away. Definitely not what I expected but I'm glad I tried it despite my initial skepticism.

Adding to this conversation - unemployment tax withholding is definitely confusing! A big thing to remember is that unemployment compensation stacks on top of your regular income. So if you were already making $47k from your job, then adding another $49k from unemployment pushes your total income to $96k, which is well into the 24% federal tax bracket for 2024. The 10% withholding option is just a standard flat rate - it doesn't take into account your other income or your actual tax bracket. That's why you're seeing such a big difference in your expected refund.

Just wanna share my experience - I had this EXACT same problem in Washington state last year!! That 10% withholding is such a trap. I thought I was being responsible by choosing to have taxes withheld from my unemployment but still ended up owing a ton. The real issue is that unemployment doesn't take into account your total annual income situation. For me, I had worked half the year making good money before being laid off, so combined with unemployment I was in a higher tax bracket than what the 10% covered. For anyone else facing this - consider setting aside some additional money beyond the 10% withholding if you can afford it. Better to have extra saved than to owe a bunch at tax time.