NYS Department of Labor unemployment taxes - confused about what are the two types of unemployment taxes I might owe
I just got my tax documents for 2024 and I'm seeing unemployment benefits listed as taxable income. My friend mentioned there are actually two different types of unemployment taxes but I'm really confused about what she meant. I received regular UI benefits for about 6 months last year totaling around $8,200. Do I owe federal taxes AND state taxes on this? Or is she talking about something else entirely? I never had taxes withheld from my weekly payments because I didn't know I was supposed to. Now I'm worried I'm going to owe a huge amount when I file. Can someone explain what the two types of unemployment taxes are so I know what I'm dealing with?
11 comments
Join the conversation
Diego Vargas
Your friend is right - there are two main types of unemployment taxes to be aware of. First, there's the tax you pay ON unemployment benefits you receive (federal and potentially state income tax). Second, there are the unemployment taxes that employers pay INTO the system (FUTA and SUTA). As a claimant, you only deal with the first type - paying income tax on benefits received. NYS doesn't tax unemployment benefits at the state level, but you'll owe federal income tax on the full $8,200 unless you had taxes withheld.
0 coins
Chloe Anderson
•Oh wow, so I only have to worry about federal taxes? That's actually a relief. Do you know roughly what percentage I should expect to pay?
0 coins
CosmicCruiser
same situation here last year - didn't withhold anything and ended up owing about $1,200 on $9k in benefits. definitely caught me off guard at tax time
0 coins
Anastasia Fedorov
•You can request tax withholding when you file your weekly claims through the NYS Department of Labor system. It's under the tax withholding section when you certify. I always do 10% federal withholding to avoid surprises.
0 coins
Sean Doyle
Wait I'm so confused about this whole thing! I thought unemployment was supposed to help people who lost their jobs, why do we have to pay taxes on money we get when we're already struggling?? This seems totally backwards to me. And what's this about employer taxes - how does that work exactly?
0 coins
Diego Vargas
•I understand the frustration! The reason unemployment is taxable is because it's considered replacement income, just like wages. As for employer taxes, businesses pay into the unemployment insurance fund through FUTA (federal) and SUTA (state) taxes - that's what funds the benefits we receive. Employers pay these based on their payroll and claims history.
0 coins
Zara Rashid
If you're having trouble reaching someone at NYS Department of Labor to set up withholding for future claims, I had good luck using Claimyr (claimyr.com) to actually get through to an agent. They have a video demo at https://youtu.be/qyftW-mnTNI showing how it works. Saved me hours of calling and getting busy signals when I needed to update my tax preferences.
0 coins
Chloe Anderson
•Thanks for the tip! I'll definitely check that out if I need to file again in the future.
0 coins
Luca Romano
yeah taxes suck but at least NY doesn't double-dip you like some states do. just make sure you report it correctly on your 1040
0 coins
Amara Eze
Just to add some practical advice for tax planning - if you end up owing on your 2024 return, you might want to make quarterly estimated payments for 2025 if you're still receiving benefits. The IRS generally expects you to pay as you go, and you could face underpayment penalties if you owe more than $1,000 at filing time. Also, keep all your 1099-G forms from NYS DOL - you'll need them to report the income accurately. The tax rate depends on your total income and filing status, but unemployment is taxed as ordinary income at your marginal rate.
0 coins
Raul Neal
•This is really helpful advice about quarterly payments! I had no idea about the $1,000 threshold for penalties. Since I owed nothing last year (this was my first time being unemployed), would I still need to worry about underpayment penalties if I end up owing around $1,200 like some others mentioned? Also, when you say "marginal rate" - is that the same as my tax bracket?
0 coins