ESD lump sum payment in January 2025 - which tax year does it count for?
Hi everyone, I've got a tax question that's making my head spin. I applied for unemployment benefits in late November and had all my weekly claims sitting in 'pending' status during the adjudication process. Finally got everything sorted in early January 2025, and ESD deposited a lump sum payment for all those weeks I claimed in December. I'm trying to figure out if this lump sum payment counts for the 2024 tax year (since that's when I did the weekly claims) or the 2025 tax year (since that's when I actually received the money). Does anyone know how this works for tax reporting purposes? I'm trying to plan ahead since this is a significant amount ($4,780) and I don't want to mess up my taxes. Thanks for any guidance!
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Javier Cruz
The tax year is based on when you actually received the payment, not when you submitted the claims. So if the money hit your account in January 2025, it counts for the 2025 tax year, and you'll report it when you file taxes in 2026. ESD will send you a 1099-G form by January 31, 2026 showing all benefits paid during the 2025 calendar year. This is why some people who receive payments in early January for the last week of December are sometimes confused - those payments count for the new tax year even though they were for the previous calendar year.
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Natasha Orlova
•Thank you! That's super helpful. So even though the benefits were for weeks in December 2024, since I physically got the money in 2025, I'll report it next year. That actually works better for my situation anyway since I had higher income in 2024.
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Emma Thompson
its all about when u got the $$$ not when u claimed. i had same thing happen to me last year and accountant said it goes on the taxes for year when the money was in my account
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Malik Jackson
•YES THIS!! I got confused about this too with my benefits. The IRS only cares when the money was actually paid to you, not when you earned it or filed for it. It's all about that deposit date!
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Isabella Costa
I thikn ur overthinking it. ESD will send u a tax form that tells u the exact amount to report & which year. Just wait for that & follow what it says. It comes in late January usually.
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Natasha Orlova
•That's a good point! I'll definitely wait for the 1099-G. I was just trying to plan ahead since I'm not sure if I should be setting aside money for taxes on this amount for this year's return or not. Sounds like I'll have another year before I need to report it.
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StarSurfer
Tax professional here. For unemployment benefits, the IRS uses a "constructive receipt" rule - if you had no restrictions on accessing the money in 2024, it would count for 2024 taxes. Since your payment wasn't issued until January 2025, it counts for 2025 taxes (to be filed in 2026). This is different from wages, where employers report income in the year it was earned regardless of when it was paid (within certain limits). Your 1099-G from ESD will properly reflect this in the correct tax year. Make sure your ESD account has your current address to ensure you receive this form.
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Ravi Malhotra
•So annoying how unemployment has different tax rules than regular paychecks! When I switched from employment to unemployment it totally messed up my tax planning. Wish they'd just make everything follow the same rules.
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Freya Christensen
Been trying to reach ESD to ask about this exact issue but can't get through to anyone! Been calling every day for three days straight and either get hung up on or stuck on hold forever. Anyone know a better way to reach a real person there? Their website FAQ doesn't answer this specific question about delayed payments.
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Javier Cruz
•I had the same issue last month and finally had success with a service called Claimyr. It helps you get through to ESD agents without the endless hold times. I was skeptical at first but it worked - got through to an agent in about 20 minutes instead of spending days trying. Their website is claimyr.com and they have a video showing how it works: https://youtu.be/7DieNd3C7zQ?si=26TzE_zGms-DODN3. Definitely worth it when you need answers on time-sensitive issues!
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Malik Jackson
LISTEN UP EVERYONE! This is VITAL information!! I made this EXACT mistake last year! I reported my January lump sum on the wrong year's taxes because I thought it counted for when I FILED the claims not when I GOT PAID. Had to file an amended return and wait FOREVER to get it fixed. DON'T BE ME!!!!!
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Natasha Orlova
•Oh wow, thanks for the warning! Filing an amended return sounds like a nightmare. I'll definitely make sure to report it in the correct year. Did you end up owing penalties when you fixed your return?
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Malik Jackson
•Luckily no penalties because I actually overpaid (reported extra income I didn't need to for that year). But the amended return took SEVEN MONTHS to process!!! Almost missed out on buying a house because my tax transcripts showed incorrect info during the mortgage process. Nightmare situation!
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Isabella Costa
Off topic but did anyone else notice ESD's system was down this weekend? Tried to file my weekly claim and kept getting error messages.
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Emma Thompson
•ya it was down for "maintenance" according to their twitter. always seems to happen on weekends when people r trying to file 🙄
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Ravi Malhotra
I'm in almost the exact same situation but my adjudication is still going on from December. Been waiting 6 weeks now with no update! How did you get your adjudication resolved so quickly? Did you do anything special? I'm desperate at this point.
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Natasha Orlova
•In my case, I called repeatedly and finally got through to someone who could help. I think what made a difference was that I had all my employment documents already uploaded to my account - termination letter, final paystub, everything they might ask for. When I finally spoke to someone, they were able to review everything on the spot. Hope your situation gets resolved soon!
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Javier Cruz
Just to add more clarity, here's how it works officially: 1. Your 1099-G for 2024 will only include payments you physically received between Jan 1 - Dec 31, 2024 2. Your 1099-G for 2025 will include all payments received between Jan 1 - Dec 31, 2025 (including your lump sum) 3. ESD should mail your 1099-G forms by January 31st following each tax year 4. You can also access your 1099-G forms electronically through your ESD account Don't forget that you can choose to have federal taxes withheld from future unemployment payments (10%) which might help you avoid owing a large sum at tax time.
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Natasha Orlova
•Thanks for the additional info! I did opt for the 10% withholding, but I'm still concerned it might not be enough. Do most people find the 10% withholding covers their tax liability on unemployment income or should I be setting aside more?
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Javier Cruz
•The 10% withholding is often not enough, especially if you have other income sources during the year. Most financial advisors recommend setting aside an additional 5-10% of your benefits for potential tax obligations, depending on your total annual income and tax bracket. Better to have extra saved than come up short!
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