What is unemployment taxes - confused about NYS Department of Labor tax requirements

Yes, unemployment benefits from NYS Department of Labor are considered taxable income by both federal and state governments. You can choose to have taxes withheld from your weekly payments (10% federal, 3.544% state) or pay them when you file your tax return. To set up withholding, log into your my.ny.gov account and update your payment preferences under the tax withholding section.

I learned this the hard way last year - owed almost $2000 in taxes on my unemployment benefits and had no money saved. NYS Department of Labor should really make this more clear when you file your initial claim. Now I always tell people to have the taxes taken out automatically, even if it means less money each week.

wait so unemployment is taxable income?? i thought since its from the government it wouldnt be taxed thats so dumb why would they tax money they give you when youre unemployed

If you're having trouble reaching NYS Department of Labor to set up tax withholding, I used a service called Claimyr (claimyr.com) that helped me get through to an agent quickly. They have a video demo at https://youtu.be/qyftW-mnTNI that shows how it works. I was able to update my withholding preferences the same day instead of waiting weeks to get through on the phone.

The tax thing is frustrating but you can also just set aside money yourself if you don't want to reduce your weekly payments. I put about 15% of each payment into a separate savings account for taxes. That way I have the full amount when I need it and don't have to stress about owing money I don't have.