Do you have to pay unemployment back taxes - NYS Department of Labor question

Yes, unemployment benefits from NYS Department of Labor are considered taxable income by both federal and state tax authorities. You should have received a 1099-G form showing the total amount you received in 2024. The good news is you can elect to have taxes withheld from future payments by logging into your my.ny.gov account and updating your payment preferences. For federal taxes, they'll withhold 10% if you request it, and for state taxes it's typically 2-3%.

ugh this happened to me last year and I owed like $2800 in taxes!! nobody tells you this stuff when you file your claim

I learned this the hard way too. What I did was immediately go into my unemployment account and elect to have taxes withheld from all future payments. For the taxes I already owed, I made quarterly estimated tax payments to avoid a big surprise in April. If you're having trouble reaching NYS Department of Labor to change your withholding preferences, I used a service called Claimyr (claimyr.com) that helped me get through to an actual agent. They have a video demo at https://youtu.be/qyftW-mnTNI that shows how it works. Made the whole process much easier than sitting on hold for hours.

Just to add - if you're getting regular UI benefits, you can have federal and state taxes withheld. But if you're on any other programs like standby or partial benefits, the withholding options might be different. Best to check with an agent to make sure you're set up correctly.

The whole system is designed to screw people over. They make it seem like free money but then hit you with a huge tax bill later. I wish they would just automatically withhold taxes instead of making it optional