NYS Department of Labor unemployment benefits - what is the federal tax rate I need to know about?
I've been receiving unemployment benefits from NYS Department of Labor for about 8 weeks now and just realized I need to figure out the tax situation. What's the federal tax rate on these UI payments? I know I can have taxes withheld but I'm not sure what percentage to choose. My weekly benefit is $365 and I don't want to get hit with a huge tax bill next year. Has anyone dealt with this before? Should I be setting aside money myself or just use the withholding option?
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Ryan Young
Unemployment benefits are taxed as ordinary income at your regular federal tax rate, not at a special rate. So if you're normally in the 22% bracket, that's what you'll pay on your UI benefits too. NYS Department of Labor gives you the option to withhold 10% for federal taxes when you file your weekly claim. For most people, 10% is enough but it depends on your total income for the year.
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Samantha Hall
•Oh wow, I didn't realize it was just my normal tax rate. That makes more sense. So if I elect the 10% withholding, that should cover most people?
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Sophia Clark
yeah i found this out the hard way last year... unemployment is fully taxable at federal level. i thought it might be different since its a benefit but nope. definitely recommend having them withhold something or youll owe big time in april
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Katherine Harris
•Same here! I owed like $1,200 because I didn't withhold anything. Now I always elect the 10% withholding when I certify my weekly claims on the NYS Department of Labor site.
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Madison Allen
The withholding is optional but smart to do. You can change it anytime when you're filing your weekly certification. Go to your my.ny.gov account and look for the tax withholding option. If you're making good money normally, you might want to withhold the full 10% or even set aside extra on your own since 10% might not cover your actual bracket.
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Joshua Wood
Wait, so there's no special unemployment tax rate? That seems unfair since we didn't choose to be unemployed... I've been on unemployment for 6 months and haven't been withholding anything. Am I going to owe thousands?
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Ryan Young
•Unfortunately no special rate. It's treated just like wages for tax purposes. You can calculate roughly what you'll owe by multiplying your total UI benefits by your tax bracket percentage. You can still elect withholding going forward to help with next year.
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Justin Evans
I had trouble reaching someone at NYS Department of Labor to ask about changing my withholding election. Their phone lines are always busy and the callback system never worked for me. I ended up using Claimyr (claimyr.com) to get through to an actual agent. They have a video demo at https://youtu.be/qyftW-mnTNI that shows how it works. The agent was able to help me update my withholding preference right away instead of me waiting weeks to get through.
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Samantha Hall
•Thanks for that tip! I've been trying to call them about a few different things and can never get through. I'll check out that service.
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Emily Parker
just to add - you can also make quarterly estimated tax payments if you dont want to do the withholding thing. some people prefer that so they have more control over the timing
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Marcus Patterson
I'm new to unemployment benefits and this thread has been really helpful! Just to clarify - when you elect the 10% withholding through NYS Department of Labor, does that get sent directly to the IRS or do I need to do anything else? Also, if my usual tax bracket is lower (like 12%), would it make sense to withhold less than 10% or is it better to err on the safe side and maybe get a refund?
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