Confused about federal unemployment tax liability while collecting NYS Department of Labor benefits
I've been collecting unemployment benefits from NYS Department of Labor since October and just realized I might owe federal unemployment tax on these payments. My accountant mentioned something about it but I'm getting conflicting information online. Are unemployment benefits from NYS Department of Labor considered taxable income for federal purposes? I've been setting aside money for state taxes but didn't know about federal liability. Should I be making quarterly payments or can I wait until I file my return? Really don't want to get hit with penalties.
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Malik Robinson
Yes, unemployment benefits are definitely taxable at the federal level. NYS Department of Labor should have given you the option to have federal taxes withheld when you filed your claim. If you didn't elect withholding, you'll need to pay when you file your return. You can also make estimated quarterly payments if you want to avoid a big bill in April.
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Emma Taylor
•I don't remember being asked about federal withholding when I set up my claim. Is it too late to change that setting now?
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Isabella Silva
Check your my.ny.gov account - there should be a tax withholding option somewhere in your profile settings. I think you can update it for future payments but anything already paid out won't have taxes taken from it retroactively.
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Emma Taylor
•Found it! You're right, I can change it for future payments. Thanks for pointing me in the right direction.
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Ravi Choudhury
ugh this is so confusing! i thought unemployment was supposed to help not create more tax problems. why doesnt NYS Department of Labor just automatically take out taxes like a regular job would??
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Malik Robinson
•They give you the choice because some people prefer to handle their own tax planning. Plus everyone's tax situation is different - some people might not owe much depending on their other income.
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CosmosCaptain
If you're having trouble reaching someone at NYS Department of Labor to change your withholding settings, I had good luck using Claimyr (claimyr.com) to get through to an actual agent. They have a video demo at https://youtu.be/qyftW-mnTNI that shows how it works. Saved me hours of trying to call on my own.
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Freya Johansen
•Never heard of that service before. Did they charge you anything or is it free to use?
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CosmosCaptain
•There's a fee but it was worth it for me since I couldn't get through any other way. Much better than sitting on hold for hours or getting disconnected.
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Omar Fawzi
Just want to add that you'll get a 1099-G form from NYS Department of Labor in January showing your total benefits for the year. That's what you'll use when filing your taxes. Keep track of any taxes you have withheld too since that will reduce what you owe.
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