NY unemployment tax withholding confusion - do we still need to claim benefits on taxes?
I'm really confused about the NY unemployment tax situation. I noticed they're still taking taxes out of my weekly benefits, but I thought I read somewhere that we don't have to claim unemployment on our taxes at the end of the year anymore? Why are they still withholding taxes if that's the case? I'm trying to decide if I should stop the withholding to get more money now, but I don't want to get hit with a surprise tax bill next year. Anyone know what the current rules are for 2025?
16 comments
Join the conversation
Nathan Dell
There seems to be some confusion here. For 2025, NY unemployment benefits ARE taxable income at the federal level. The temporary tax break that existed during the pandemic years ended long ago. The state of New York also taxes unemployment benefits. So they are correctly withholding taxes from your payments if you opted for that.
0 coins
Rebecca Johnston
•Oh no, I must have misunderstood something I read online! So I definitely need to keep the tax withholding then? How much are they supposed to be taking out?
0 coins
Maya Jackson
ya i heard the same thing from my cousin but turns out its wrong. they ABSOLUTELY tax unemployment and if u dont have them take it out now you'll owe big next april
0 coins
Tristan Carpenter
•Yes, I learned this the hard way last year when I opted out of withholding to maximize my weekly payments. Ended up owing over $1,200 at tax time! The federal withholding is typically 10% if you opt in, but remember that doesn't account for state taxes too, which is why many people still end up owing something.
0 coins
Amaya Watson
I think ur getting confused with the tax break from like 5 years ago during covid. That was temporary. Now its 100% taxable again both federal and NYS. I always have them withhold the fed tax (10%) but they dont give option for state tax so I put aside extra
0 coins
Rebecca Johnston
•You're right, I was thinking of something from the pandemic! Thanks for clarifying. I'm going to keep the withholding and maybe put a little extra aside for state taxes too.
0 coins
Grant Vikers
The Federal government temporarily made a portion of unemployment benefits non-taxable during the pandemic years, but that provision expired years ago. For 2025, ALL unemployment compensation is fully taxable at both federal and state levels. The default federal withholding is 10% if you opted in on Form 1099-G, which many financial advisors recommend. However, NY State taxes aren't automatically withheld, so you might want to set aside additional money (roughly 4-8% depending on your tax bracket) or make quarterly estimated payments to avoid penalties.
0 coins
Giovanni Martello
•EXACTLY RIGHT! And let me tell you, the state will ABSOLUTELY come after you if you don't pay those taxes! I learned this lesson when they slapped me with a $320 penalty for underpayment two years ago. The system is DESIGNED to trip you up!!!
0 coins
Savannah Weiner
Has anyone else been trying to call the NY tax department to ask questions about this? I've been trying for THREE DAYS to get someone on the phone to explain my unemployment tax situation (I had multiple employers last year plus unemployment). I keep getting disconnected after waiting on hold forever.
0 coins
Amaya Watson
•try claimyr.com - it helped me get thru to an actual person at nysdol when i needed to fix my claim. they have this system that calls for u and holds ur place in line. saved me hours of frustration. they have a video showing how it works at https://youtu.be/Rdqa1gKtxuE
0 coins
Rebecca Johnston
Thanks everyone for the clarification! I definitely got confused with the old pandemic rules. I'll keep the federal withholding and put some money aside for state taxes too. It stinks to get less money now, but better than a huge tax bill later!
0 coins
Nathan Dell
•That's a wise decision. For anyone else reading this thread, the form to change your withholding status is Form NYC-1099G, which you can access through your NY.gov account under the unemployment services section. The system will ask you to confirm your choice about federal tax withholding.
0 coins
Maya Jackson
wait i just realized somthing. do we have to pay taxes on the extra $150 weekly supplement that NY is giving this year too? or just on the regular benefit amount?
0 coins
Grant Vikers
•Yes, the additional $150 weekly supplement is also considered taxable income for both federal and NY state purposes. All unemployment compensation, including any supplements or additional payments, must be reported on your tax return as income.
0 coins
Tristan Carpenter
Just to add some helpful information: You can check what you've already had withheld by logging into your NY.gov account, going to Unemployment Services, and selecting 'Payment History.' This will show each payment with tax withholding amounts. If you're concerned about whether you've withheld enough, speaking with a tax professional now rather than waiting until tax season might be worthwhile.
0 coins
Rebecca Johnston
•That's super helpful! I just checked my payment history and see they're taking out about $37 each week for federal taxes. I guess I need to put aside another $15-20 for state taxes. Better start a separate savings account for this...
0 coins