Do employees pay federal unemployment tax on Washington ESD claims?
I'm confused about taxes on my unemployment benefits. I know I have to pay income tax on my Washington ESD payments, but someone told me there's also a federal unemployment tax that employees pay? I can't find anything about this on the ESD website. Does anyone know if this is true? I'm worried I'm missing something important for my taxes this year.
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Elijah Knight
No, employees don't pay federal unemployment tax (FUTA). That's paid by employers only. You're thinking of income tax on your unemployment benefits, which is different.
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Sophia Carson
•Oh thank goodness! I was panicking thinking I owed more money. So I just pay regular income tax on what Washington ESD paid me?
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Elijah Knight
•Exactly. Unemployment benefits are taxable income, but there's no separate unemployment tax for employees.
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Brooklyn Foley
Yeah the person who told you that was wrong. FUTA is an employer tax, not employee. I learned this when I was doing payroll at my old job.
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Sophia Carson
•That makes sense. I should have known better than to trust random advice from my neighbor lol
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Jay Lincoln
Just to clarify for anyone reading this - employers pay FUTA (Federal Unemployment Tax Act) and SUTA (State Unemployment Tax Act) on behalf of their employees. This is what funds unemployment insurance programs like Washington ESD. Employees never pay these taxes directly.
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Jessica Suarez
•This is super helpful! I always wondered how unemployment benefits were funded. So it comes from taxes that employers pay on our wages?
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Jay Lincoln
•Correct! In Washington, employers pay both federal and state unemployment taxes based on their payroll. The rates vary depending on the employer's experience with layoffs and claims.
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Marcus Williams
The only tax you need to worry about as someone receiving unemployment is income tax. Washington ESD should have given you the option to have federal taxes withheld from your weekly benefits. If you didn't do that, you'll owe when you file your return.
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Sophia Carson
•I did have them withhold 10% for federal taxes. Was that enough or should I have done more?
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Marcus Williams
•10% is usually sufficient for most people, but it depends on your total income for the year and tax bracket. You might want to check with a tax professional if you received a large amount in benefits.
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Lily Young
wait so if employers pay unemployment tax why do they fight unemployment claims so hard??? seems like they already paid for it
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Jay Lincoln
•Because their future tax rates are partially based on how many claims are filed against them. More claims = higher rates for that employer.
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Lily Young
•ohhh that makes sense. so they have incentive to contest claims even if they're valid
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Brooklyn Foley
•Exactly. It's called 'experience rating' - employers with more layoffs and claims pay higher unemployment tax rates.
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Sophia Carson
Thanks everyone! This really cleared things up. I was stressing about owing some mysterious unemployment tax that doesn't exist. Just regular income tax on the benefits.
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Elijah Knight
•Glad we could help! Tax season is stressful enough without worrying about taxes that don't exist.
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Kennedy Morrison
Just wanted to add that Washington state has no state income tax, so you only need to worry about federal income tax on your unemployment benefits. Some states tax unemployment benefits at the state level too.
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Sophia Carson
•Good point! I forgot about that advantage of living in Washington. No state income tax makes things simpler.
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Wesley Hallow
•Yeah my sister in Oregon has to pay state tax on her unemployment too. We're lucky here in Washington.
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Justin Chang
For anyone who didn't have taxes withheld from their Washington ESD benefits, you might want to make quarterly estimated tax payments to avoid penalties. The IRS doesn't like waiting until April for their money.
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Jessica Suarez
•How do you calculate quarterly payments? I received about $8000 in unemployment last year but didn't have anything withheld.
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Justin Chang
•You can use IRS Form 1040ES to calculate estimated payments. Or just pay 25% of what you owe each quarter. Definitely consult a tax pro though.
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Grace Thomas
The confusion might come from the fact that some states have small employee contributions to disability insurance or family leave programs. But unemployment insurance is always employer-funded.
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Hunter Brighton
•Right, in Washington we have the WA Cares Act where employees pay a small amount for long-term care insurance. But that's completely separate from unemployment.
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Brooklyn Foley
OP you should double check your W-2 or pay stubs to see what taxes were actually taken out. You'll see Social Security, Medicare, federal income tax, but no unemployment tax deduction for employees.
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Sophia Carson
•Good idea! I'll look at my last pay stub from before I got laid off. Thanks for all the help everyone.
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