Why is NYS Department of Labor unemployment taxed - confused about getting 1099-G
Just got my 1099-G from NYS Department of Labor for last year's unemployment benefits and I'm honestly confused. Why do they tax unemployment money? I thought this was supposed to help people who lost their jobs, not create more financial burden. I received about $8,200 in UI benefits and now I have to pay taxes on all of it? This seems backwards to me. Can someone explain why unemployment is considered taxable income? Is there any way to avoid owing money when I file my taxes?
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Sebastian Scott
Unemployment benefits are considered taxable income by both federal and state governments because they're classified as replacement income, not welfare assistance. The IRS treats UI benefits the same as wages since they're meant to replace your regular paycheck. NYS Department of Labor is required to send you a 1099-G showing the total amount you received. You should have had the option to have taxes withheld when you were filing your weekly claims.
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Sarah Jones
•I don't remember seeing an option for tax withholding when I was filing my weekly claims. Where would that have been?
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Emily Sanjay
yeah this happened to me too last year, owed like $900 in taxes on my unemployment. really sucked because i was already broke from being out of work
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Jordan Walker
When you file your weekly claims on the NYS Department of Labor website, there's a section that asks if you want federal taxes withheld. It's usually 10% if you elect it. You can also make quarterly estimated tax payments if you're currently receiving benefits. The reason it's taxed is because unemployment insurance is considered earned income replacement - it's not a gift or charity, it's an insurance benefit you paid into through payroll taxes when you were working.
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Natalie Adams
•Wait, so if I'm getting unemployment now, I should probably elect to have taxes taken out? I've been getting benefits for 6 weeks and didn't know about this option.
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Jordan Walker
•Yes, you can change your withholding election when you file your next weekly claim. Look for the tax withholding question - it's better to have it taken out now than owe a big chunk at tax time.
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Elijah O'Reilly
The whole system is ridiculous if you ask me. You lose your job through no fault of your own, struggle to make ends meet on unemployment which is already less than what you were earning, and then the government wants to tax you on that too. It's like kicking someone when they're already down.
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Amara Torres
I had trouble getting through to NYS Department of Labor to ask about this exact question. Kept getting busy signals and when I finally got through, they hung up on me after 30 minutes on hold. Found this service called Claimyr (claimyr.com) that actually got me connected to a real person at NYS Department of Labor in like 10 minutes. They have a video demo showing how it works: https://youtu.be/qyftW-mnTNI. The agent explained the whole tax situation and helped me set up withholding for future claims.
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Sarah Jones
•That's interesting, never heard of that service. Did they charge you a lot to get through?
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Amara Torres
•It was worth it to actually talk to someone who could explain my options instead of trying to figure it out myself. Much better than sitting on hold for hours.
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Olivia Van-Cleve
just to add my experience - i received unemployment in 2023 and forgot about the taxes until i went to file. ended up owing $1,200 which i definitely didnt have. had to set up a payment plan with the irs. definitely elect withholding if youre currently getting benefits
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