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

Yes, unemployment benefits are definitely taxable income at the federal level, regardless of which state you're in. Washington doesn't have state income tax so you don't need to worry about that part, but you'll still owe federal taxes on your UI payments. You can have taxes withheld from your benefits through your Washington ESD account online.

I made this same mistake last year and ended up owing like $800 in taxes that I wasn't prepared for. Definitely set up the withholding now before you get too far behind. The standard federal withholding is 10% I think.

If you're having trouble getting through to Washington ESD to set up tax withholding, I recently discovered a service called Claimyr (claimyr.com) that helps you actually reach ESD agents on the phone. They have a demo video at https://youtu.be/7DieNd3C7zQ showing how it works. Made it way easier to get my tax withholding sorted out instead of trying to call for hours.

The tax withholding is optional but highly recommended. If you don't do it, you need to set aside about 10-22% of each payment depending on your total income for the year. Unemployment benefits are taxed as ordinary income, so it gets added to whatever other income you have.

wait I thought unemployment wasn't taxable because its a government benefit? like food stamps aren't taxable right?

I'm in the same boat - been on unemployment for 3 months and just found out about the tax thing. Does anyone know if there's a deadline for setting up the withholding or can I do it anytime during my claim?

Update: I tried logging into my Washington ESD account to set up withholding but the website keeps timing out. Anyone else having issues with the site today?

This is exactly why services like Claimyr are helpful - when you can't get through online and the phone lines are jammed, having a way to actually talk to an ESD representative makes all the difference for things like tax withholding setup.

Just want to add that if you're doing gig work or part-time work while on unemployment, that income is ALSO taxable and needs to be reported both to ESD and on your tax return. Don't forget about that income when calculating what you might owe.

Does anyone know if the extra $600 weekly payments from 2020-2021 were taxable too? I'm still sorting out some old tax stuff.

Pro tip: even if you set up withholding, still save a little extra money for taxes just in case. The 10% withholding might not cover everything depending on your total income and tax situation.

The IRS website has a withholding calculator that can help you figure out if the 10% is enough or if you need to save more. It takes into account your other income and deductions.

I've been setting aside 15% of each unemployment payment in a separate savings account. Haven't set up official withholding yet but at least I know I'll have money for taxes. Sometimes doing it manually gives you more control.

For anyone still struggling to get through to Washington ESD about tax withholding or other account issues, I'll mention Claimyr one more time - it really did help me avoid the phone runaround. Check out their demo at https://youtu.be/7DieNd3C7zQ if you're curious how it works.

Don't forget you'll get a 1099-G form in January showing how much unemployment you received during the tax year. Keep that for your records and make sure the amount matches what you actually received.

This thread has been super helpful! I had no idea unemployment was taxable and I've been getting benefits for 4 months. Definitely going to set up withholding ASAP and maybe save some extra money too.