Does filing for unemployment hurt your taxes - NYS Department of Labor benefits tax implications?
I'm thinking about filing for unemployment benefits through NYS Department of Labor but I'm worried about how it will affect my taxes next year. My friend told me unemployment is taxable income and it could push me into a higher tax bracket. Is this true? Will filing for unemployment hurt my taxes or cause me to owe more money to the IRS? I've never been on unemployment before so I don't know what to expect. Should I have taxes withheld from my weekly benefits or just pay at the end of the year?
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Ava Martinez
Yes, unemployment benefits from NYS Department of Labor are considered taxable income at both federal and state levels. However, it won't necessarily 'hurt' your taxes - it's just income that gets added to your total for the year. You can choose to have 10% federal taxes withheld from your weekly payments when you file your initial claim or during your weekly certification. This is usually the smartest approach to avoid a big tax bill later.
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Dmitry Sokolov
•Thanks! So if I elect to have the 10% withheld, I probably won't owe much extra at tax time?
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Miguel Ramos
I didn't have taxes withheld from my UI benefits last year and ended up owing about $2,800 when I filed my taxes. Definitely recommend having the withholding done automatically. The NYS Department of Labor makes it pretty easy to set up during your weekly claim certification process.
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QuantumQuasar
•Ouch, that's a big hit! I always have them withhold the maximum just to be safe.
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Zainab Omar
wait so unemployment counts as regular income?? i thought it was like welfare or something that doesn't get taxed
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Ava Martinez
•No, unemployment insurance is definitely taxable income. You'll get a 1099-G form from NYS Department of Labor showing how much you received during the tax year. It's not the same as welfare programs which are typically not taxable.
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Connor Gallagher
The tax bracket thing your friend mentioned isn't really how it works. Tax brackets are marginal, so only the income above each threshold gets taxed at the higher rate. Your unemployment benefits will just be added to whatever other income you have for the year. If you're worried about contacting NYS Department of Labor to set up withholding, I used a service called Claimyr (claimyr.com) that helped me get through to an actual agent quickly. They have a video demo at https://youtu.be/qyftW-mnTNI that shows how it works.
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Yara Sayegh
•How much does that service cost? I've been trying to call NYS Department of Labor for weeks about my withholding election.
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Connor Gallagher
•They focus on getting you connected rather than the cost - much better than sitting on hold for hours or getting disconnected. Really helped when I needed to update my tax withholding mid-claim.
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Keisha Johnson
Just remember you can also make quarterly estimated tax payments if you don't want to have taxes withheld from your benefits. Some people prefer to manage it themselves rather than having less money in their weekly payments.
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