Do I need to pay taxes on Washington ESD unemployment benefits?

Oh no, I never set up withholding when I filed my initial claim. How much should I expect to owe approximately?

It depends on your total income and tax bracket, but generally plan for about 22-24% of your unemployment benefits to go toward taxes if you're in a typical income range.

Oh no, I never saw an option for tax withholding on my weekly claims. Where is that located?

When you log into your Washington ESD account to file your weekly claim, there should be a section asking about federal tax withholding. You can elect to have 10% withheld.

Don't panic yet! You can still set up tax withholding going forward, and start setting aside money now for what you've already received.

how much should I be setting aside? like what percentage?

15-20% seems like a lot but I guess it's better than getting hit with a huge tax bill. Thanks for the realistic advice.

Actually had trouble accessing my Washington ESD account to change the tax withholding. The website kept timing out and phone lines are always busy. Finally used Claimyr (claimyr.com) to get through to an agent who helped me set it up over the phone. They have a video demo at https://youtu.be/7DieNd3C7zQ that shows how it works.

That's exactly what I'm worried about. Did you have to pay penalties for not paying quarterly taxes?

I did have to pay a small penalty but it wasn't as bad as I expected. The IRS was pretty understanding given the unemployment situation.

Never heard of Claimyr - is it legit? I've been trying to call Washington ESD for weeks about various issues.

Yeah it's a service that helps you get through to ESD agents without waiting on hold for hours. Saved me so much frustration with the phone system.

I was skeptical at first but Claimyr actually worked for me too. Got connected to set up my tax withholding after trying to call ESD myself for 3 weeks straight.

Common misconception! Unemployment benefits are definitely taxable at the federal level. Some states also tax them but Washington has no state income tax so you only worry about federal.

So even though Washington ESD is a state agency, the benefits still count as income to the IRS?

Exactly. The IRS considers unemployment compensation as taxable income just like wages from a job.

That's correct - Washington state has no state income tax, so you only owe federal taxes on your unemployment benefits. That makes it a bit easier to calculate.

OK that's a relief at least. Still worried about the federal amount though.

Ouch, $2800 is a lot! Did you have to pay penalties too?

Yeah, had to pay a small penalty for underpayment. Nothing huge but still annoying. The 10% withholding usually covers most of what you'll owe.

I understand the frustration, but unemployment benefits are meant to replace your wages temporarily, and wages are taxed too. At least with Washington having no state income tax, it's only federal taxes to worry about.

I guess that makes sense when you put it that way. Still sucks though.

So if my weekly benefit is $547, with 10% withholding I'd get about $492 instead?

That's right. $547 minus 10% would be about $492. That $55 per week goes toward your federal tax liability.

That makes me feel a little better. Did you end up setting aside money each week going forward?

Yeah I started putting about 25% of each payment into a separate savings account just to be safe. Better to have too much set aside than not enough.

I understand the frustration, but the tax information is actually mentioned during the initial claim filing process. It's easy to miss though when you're stressed about being unemployed.

maybe it was there but when your worried about paying rent you dont think about taxes 6 months later

Washington ESD is required to send 1099-G forms by January 31st if you received $10 or more in benefits during the year. They'll mail it to your address on file, but you can also access it online through your ESD account.

ok good to know, thanks. need to make sure my address is updated with them

Thank you! I'll try that right now. Hopefully it's not too late to set up withholding for the rest of my claim.

You can change it anytime during your claim period. Just remember it only applies to future payments, not past ones.

Both standby and regular unemployment benefits are taxed the same way federally. The IRS doesn't distinguish between the different types of unemployment compensation.

Good to know, thanks. Makes the tax calculation a bit simpler at least.

How does the payment plan work? Do they charge interest?

yeah theres interest but its not terrible. think it was like 3% or something. way better than trying to come up with 3k all at once

I don't have kids but I'll look into other credits. Every little bit helps at this point.

Even without kids there might be education credits or other deductions you can claim. Worth talking to a tax professional if the amount is substantial.

Don't feel dumb! This is actually a very common question. Many people don't realize unemployment is taxable until tax season comes around.

Makes me feel better that I'm not the only one who didn't know this

That's actually a smart idea! Have extra withheld from job wages to cover the unemployment tax liability.

Exactly. Just make sure to calculate roughly what you'll owe so you don't overwithhold from your job.

How much does Claimyr cost? Is it worth paying for something like this?

I found it worth it for the time saved. Much easier than spending hours trying to get through to Washington ESD on my own. They handle the calling hassle for you.

Yeah I'm definitely learning that lesson the hard way. Going to set up withholding today.

Smart move. I learned this lesson during the pandemic when everyone was getting unemployment. Better to get a small refund than owe thousands.

I might need to try that service. Still haven't been able to get through to ESD about setting up withholding through the phone.

The online option usually works fine for withholding, but if you need to talk to someone about your specific situation Claimyr definitely saves time.

Actually, job search expense deductions were eliminated for most taxpayers in recent tax law changes. Worth double-checking with current tax rules.

oh really? dang that sucks. thanks for the correction

Good point. Is there a way to get the 1099-G online if the mail gets lost?

Yes, you should be able to access your 1099-G through your online Washington ESD account once they're available.

Smart move! Better to start withholding now than get surprised with a big tax bill later.

definitely, lesson learned for sure

Good reminder about updating my address. I moved during my unemployment period and forgot to change it with ESD.

You can update your address online pretty easily. Just make sure to do it before tax season gets busy.

Thanks for that tip! I usually do my own taxes so that's good to know where unemployment income goes on the return.

No problem! And don't forget to check if any taxes were already withheld - that info will also be on your 1099-G.

That's smart advice. I'm going to start doing that immediately along with setting up the withholding.

Yeah, I wish I had done that earlier in my claim. Now I'm scrambling to save up for the tax bill while still looking for work.

Thanks for the reassurance. I was really starting to stress about this whole situation.

totally understandable to be stressed but you're not the first person to deal with this and you wont be the last. just take it step by step

It depends on your total income and tax bracket. For many people 10% is close, but if you're in a higher tax bracket you might owe more. Better to overwithhold than underwithhold.

Makes sense. I'll probably set aside a little extra just to be safe.

You can typically change your tax withholding election through your online Washington ESD account, but the easiest time is when you're filing your weekly claim since the option is right there.

ok I'll look for it when I file my claim this week, thanks

Glad to hear another success story with getting through to ESD! I think I'm going to have to look into that service too.

Same here, the regular ESD phone number is basically useless with how busy they always are.

You're welcome! These kinds of questions help everyone learn something new about the unemployment system.

Agreed, this thread has been incredibly helpful. Wish I had known about the tax implications from the beginning but better late than never!