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

That makes more sense now. So basically the 10% withholding option on unemployment is just a flat rate regardless of what tax bracket I might actually fall into when everything is combined? If I had known that, I probably would have set aside additional money. Is there anything I can do now to reduce this tax hit, or am I just stuck paying the difference?

Yes, exactly! The 10% withholding is just a standard flat rate option regardless of your actual tax bracket. When all your income sources are combined, you're being taxed based on your total income for the year. Unfortunately, at this point your options for reducing the 2024 tax bill are limited since the tax year is over. You might check if you qualify for any deductions or credits you haven't claimed yet. For example, if you paid for job search expenses, education to improve your skills, or had other deductible expenses, those might help reduce your taxable income.

How accurate is this service? I'm having a similar issue with my unemployment taxes being way higher than expected. Does it work if I've already started filing with TurboTax? I'm nervous about switching systems mid-filing.

Sounds interesting but skeptical. Is it just analyzing what you already entered or does it actually find new deductions? I've tried "tax help" sites before that just repeated what I already knew.

The accuracy was surprisingly good. It found several deductions I missed, especially related to job transition expenses. I had spent money on certifications while unemployed that qualified as deductible job search expenses. You don't need to switch from TurboTax - you can use it alongside your current tax software to identify potential deductions or credits, then enter those into TurboTax yourself. It's more of an analysis tool that reviews your specific situation and documents. It goes beyond what you've already entered by asking targeted questions based on your specific situation. For me, it specifically looked at the pattern of W-2 income followed by unemployment and suggested deductions commonly missed in job transition situations. It's not just repeating information - it identified several hundred dollars in deductions I hadn't considered.

Wait, how does this even work? The IRS phone system is notorious for disconnecting people. Are you saying this actually gets you through the phone tree and past the hold times?

Sounds like BS honestly. No way some third party service can magically get through to the IRS when millions of people can't. They probably just keep redialing and charge you for something you could do yourself for free.

It works by using their system to navigate the IRS phone tree and wait on hold for you. When an agent finally picks up, you get a call connecting you directly to that agent. Instead of you spending hours listening to hold music, their system does it for you. It's not magic - they're essentially waiting in the phone queue on your behalf. Think of it like hiring someone to stand in a physical line for you. You're right that it's something you could theoretically do yourself, but the value is in not having to waste hours of your time repeatedly calling and waiting on hold. For my unemployment tax questions, it saved me an entire afternoon of frustration.

Does this mean I should be withholding more than 10% from my current unemployment checks? The system only gives me option for 10% or nothing, no way to withhold 22% or whatever my actual bracket is.

You're right that the unemployment system typically only allows for the 10% withholding option, which is frustrating. Since you can't increase the withholding percentage through the unemployment system, you have two main options: You can set aside additional money yourself with each unemployment payment - essentially creating your own additional withholding. For someone in the 22% bracket, you might want to save an extra 12% of each payment. Alternatively, you can make quarterly estimated tax payments to the IRS using Form 1040-ES. This allows you to send in additional tax payments throughout the year to cover the gap between the 10% being withheld and what you'll actually owe.

I use the tax calculator on smartasset.com instead. It lets you input both regular income and unemployment separately and gives a pretty accurate estimate of what you'll actually owe. Way better than the IRS one for people with mixed income sources.