Do they take taxes out of unemployment benefits in NYS?
I'm about to start receiving my weekly unemployment payments from NYS Department of Labor and I'm confused about taxes. Do they automatically take federal and state taxes out of my UI benefits, or do I need to handle that myself? I don't want to get hit with a huge tax bill next year. Has anyone dealt with this before?
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Riya Sharma
Yes, you can choose to have taxes withheld from your unemployment benefits. When you file your weekly claim, there's an option to withhold 10% for federal taxes and I believe around 3.5% for NY state taxes. It's voluntary though - they don't automatically take it out unless you request it.
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Nathaniel Stewart
•Thanks! So if I don't elect to have taxes taken out, I'll owe it all when I file my return?
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Santiago Diaz
I learned this the hard way last year. Unemployment benefits are considered taxable income by both federal and NY state. If you don't have taxes withheld, you'll need to make quarterly estimated tax payments or you could owe a lot come tax time. The withholding percentages might not cover everything you owe either, depending on your other income.
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Millie Long
•This is so confusing! I thought unemployment was supposed to help people, not create more problems with taxes.
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KaiEsmeralda
When I was on unemployment last year I had constant issues with NYS Department of Labor phone lines being jammed whenever I needed to change my tax withholding election. Took me weeks to get through. Finally used a service called Claimyr (claimyr.com) that helped me reach an actual agent. They have a video demo at https://youtu.be/qyftW-mnTNI that shows how it works. Made the whole process so much easier than sitting on hold for hours.
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Debra Bai
•How much does that cost though? I'm already broke from being unemployed.
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KaiEsmeralda
•It's way cheaper than the headache of trying to reach NYS Department of Labor on your own, trust me. Plus you actually get through to someone who can help.
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Gabriel Freeman
ugh this whole system is so complicated. why can't they just make it simple like regular payroll taxes?? now i have to worry about quarterly payments too?
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Riya Sharma
•I know it's frustrating, but it's actually pretty straightforward once you set it up. Just elect the withholding when you do your weekly claims and you shouldn't have any surprises.
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Laura Lopez
Yeah they definitely don't automatically withhold. I forgot to elect it my first few weeks and had to call to change it. The tax withholding election stays in place for all your future weekly claims once you set it up, so you don't have to keep selecting it every week.
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Ethan Brown
Just to add some perspective as someone who's been through this - I'd strongly recommend electing the tax withholding right from the start. I made the mistake of not doing it initially thinking I'd handle it myself, and it was a nightmare trying to calculate and make quarterly payments while already stressed about being unemployed. The 10% federal and ~3.5% NY state withholding won't cover everything if you have other income, but it's a good safety net and way less stressful than owing a lump sum at tax time.
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Jamal Wilson
•This is really helpful advice! I'm new to unemployment and had no idea about the tax implications. So when you say the withholding won't cover everything if you have other income - are you talking about like part-time work while on unemployment, or other sources like investment income? Trying to figure out if I need to worry about quarterly payments too.
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