Do I need to report ESD COVID waiver refunds on 2025 taxes?

Yes, you'll need to report it as income. Since you took a deduction for the repayment previously, the IRS considers this a "recovery of an amount you deducted in an earlier year." It's a concept called "tax benefit rule" - basically if you got a tax benefit from deducting something and then later get that money back, you have to report it. For most people, you'll report it as "Other Income" on Schedule 1 of your 1040. I worked with an accountant on this exact situation last year. She recommended keeping the ESD letter explaining the refund with your tax records in case of audit.

i got a check for $1400 in december but mine was different i think. it was from an appeal i won but took them forever to process. not sure if thats the same as your waiver thing

WOW seriously?? They're actually refunding people for the COVID overpayments?? I had to pay back almost $4000 in 2021 and haven't heard ANYTHING about this. How did you find out about it? Did they just randomly send you a check or did you have to apply for the waiver?

This is EXACTLY why the unemployment system is such a mess! First they demand money back from people who were legitimately unemployed during a PANDEMIC, forcing many to drain savings or take out loans to repay. Then YEARS later they say "oops our bad" and refund it, creating tax headaches and more confusion. Meanwhile their systems are still stuck in the 1990s and you can't get anyone on the phone! I spent 8 WEEKS trying to reach someone at ESD about my overpayment dispute last month. EIGHT WEEKS!!! And they wonder why people get frustrated!!

Im in the exact same boat! got $3245 back from a 2020 overpayment that i had to pay with a payment plan for like a year lol. im just gonna ask my tax guy when i file next year but yeah seems weird they dont send any tax forms with it???

My brother-in-law works for a tax preparation company and he was just telling me about this issue coming up a lot this year! Apparently if you itemized deductions the year you repaid the overpayment AND the deduction actually reduced your tax liability, then yes you need to report the refund as income. But if you took the standard deduction or if the itemized deduction didn't actually save you any tax money, then you might not need to report it. It gets complicated fast!

To clarify for everyone: These refunds are part of ESD's implementation of the blanket waiver program that was authorized during COVID. ESD is still processing these even in 2025 due to the massive backlog. Regarding taxes: 1. If you deducted the original repayment on your taxes as an itemized deduction → You likely need to report the refund as income (tax benefit rule) 2. If you used the standard deduction → You generally DON'T need to report the refund as income 3. If your itemized deductions that year didn't actually reduce your tax liability → You might not need to report it as income ESD should have included Publication 525 information with your refund check. It specifically addresses the tax implications of benefit repayments and subsequent refunds. If you're unsure, consult a tax professional with your specific situation.

wait so are they doing this automatically for everyone or do we need to apply somewhere? i paid back like $5k in 2021 and nobody told me anything about waivers