NY unemployment tax refund interest forms - they're making us pay taxes on THEIR delay?!
Just got the most ridiculous form in the mail about my NY unemployment taxes from last year. So remember when they passed that law that made the first $11,400 of UI benefits tax-free? Well, I had already filed my taxes BEFORE that law passed, like many of us did. So I waited FIVE MONTHS for my refund from the state. Five. Entire. Months. Now guess what? They're sending out forms for the interest they paid on that refund because they took so long, and apparently I have to claim THAT interest on my taxes this year!! So let me get this straight - they hold onto MY money for nearly half a year, finally pay me a tiny bit of interest for the inconvenience, and then want me to PAY TAXES on that interest?? Am I understanding this correctly? Is everyone who got unemployment in NY getting these forms? This feels like such a slap in the face after everything we went through. 🤦♂️
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Donna Cline
Yes, unfortunately you're understanding correctly. The IRS treats any interest paid to you as taxable income, even if it's interest they paid because they were late with your refund. It's not just a NY unemployment thing - it applies to all tax refund interest. This is because under tax law, interest is considered income regardless of the source. It's frustrating, but legally they're required to send you a 1099-INT form if they paid you more than $10 in interest, and you're required to report it. Most people getting these forms will only owe a very small amount of additional tax on the interest - usually just a few dollars unless your refund was enormous.
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Lucas Parker
•Thanks for confirming. I guess I shouldn't be surprised, but it's just so... TYPICAL of how the whole unemployment system works. 🙄 Take forever to process something, then make us jump through more hoops.
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Harper Collins
YESSSS!!! I got this form too and almost threw it away thinking it was junk mail! The whole thing is RIDICULOUS! They owed us that money for MONTHS while people were struggling to pay bills! The interest they paid me was like $23 and now they want me to pay taxes on THAT?? The government gets you coming and going. Always looking for ways to nickel and dime people who are already struggling!!!
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Kelsey Hawkins
•its just how taxes work tho interest is always taxable no matter where it comes from even if its from the govt's mistake
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Dylan Fisher
I work as a tax preparer, and yes, this is standard procedure. Interest received from any source (banks, investments, government refunds) is considered taxable income. For those wondering about the practical side of this: 1. You should receive a 1099-INT form showing the interest amount 2. This goes on Schedule B of your federal return if the total interest you received from all sources is over $1,500 3. Otherwise, it just goes directly on your 1040 form 4. For NY state taxes, you'll report it on your IT-201 form If you file with software like TurboTax or have a tax preparer, they'll know exactly where to put this information. It's annoying but fairly simple to handle.
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Edwards Hugo
•I'm a bit confused. So I got about $40 in interest from my NY unemployment tax refund delay. Is that all I need to report, or is there other stuff I need to gather? I usually do my own taxes with FreeTaxUSA.
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Gianna Scott
Got the same form yesterday! Honestly i just laughed. The system is so broken. They made me wait 4 months for MY MONEY and now they want me to pay them for giving me a few bucks interest? Typical NY unemployment nonsense.
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Alfredo Lugo
This is why I'm still waiting to file my taxes from last year even tho I had unemployment. Heard too many horror stories of people having to file amended returns and waiting forever for their money. The whole NY unemployment department is a mess.
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Donna Cline
•Just a friendly heads-up - waiting to file isn't a great strategy if you're expecting a refund. The tax-free unemployment benefit change happened for tax year 2023 - it's already built into all the tax forms and software now. There's no need to delay filing your 2024 taxes because of this issue. And if you meant you still haven't filed your 2023 taxes, you should do that ASAP as you're already past the deadline and could face penalties if you owe anything.
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Edwards Hugo
I spent THREE WEEKS trying to reach someone at NY unemployment about a payment issue, and finally gave up and used a service called Claimyr (claimyr.com) to connect with an agent. They got me through in about 20 minutes when I'd been trying for weeks. There's a video showing how it works at https://youtu.be/Rdqa1gKtxuE if anyone's interested. Totally worth it because the agent was able to solve my issue immediately. I wonder if they could help with tax questions too? Either way, dealing with the unemployment department is always a headache.
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Lucas Parker
•I've heard about that service but wasn't sure if it was legit. Did you have to give them a bunch of personal info? The video looks pretty straightforward.
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Edwards Hugo
•No personal info needed except your phone number so they can call you when you're connected. It worked exactly like in the demo video. For tax questions though, you'd probably need to contact the IRS or a tax professional instead of unemployment.
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Gianna Scott
wait does anyone know if we can deduct the original tax we paid on that unemployment that wasn't supposed to be taxed??? would save me way more than the few dollars of interest tax!!
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Dylan Fisher
•That adjustment should have already been made when you received your refund last year. The IRS automatically recalculated your taxes to account for the tax-free unemployment benefits up to $11,400. The refund you received included the overpaid taxes on those benefits. There's no additional deduction to claim now - it was already processed.
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Kelsey Hawkins
my form says i got $8.12 in interest lol are they really gona care if i just dont report that??
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Donna Cline
•Technically, all interest income should be reported regardless of the amount. However, the IRS only requires financial institutions to issue 1099-INT forms for interest payments of $10 or more. Since your amount is below that threshold, you likely didn't receive an official form, but it's still legally required to be reported. That said, the tax impact on $8.12 would be extremely minimal - probably less than $2 depending on your tax bracket. The IRS typically has bigger concerns than chasing down a few dollars in tax revenue.
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Lucas Parker
After reading all these comments, I'm gonna just report it and be done with it. Not worth the stress over a few bucks. But I'm definitely remembering this the next time I hear the NY unemployment department talk about how they're "improving services." 🙄 Thanks everyone for the information and commiseration!
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