ESD tax confusion: Were COVID unemployment benefits fully taxed or partially exempt in WA?

The $10,200 unemployment tax exemption was ONLY for the 2020 tax year (filed in 2021). It was part of the American Rescue Plan Act passed in March 2021, which made the first $10,200 of 2020 unemployment benefits tax-free for people with adjusted gross incomes under $150,000. This exemption did NOT apply to 2021 benefits or any year after. If you received unemployment in 2021, 2022, etc., all of those benefits were fully taxable at the federal level. Your accountant is likely correct if they're talking about unemployment benefits from any year other than 2020.

i remember this! got unemployment in both 2020 and 2021. the 2020 money had that $10,200 thing where u didnt pay taxes but 2021 was normal and i had to pay full taxes. sucked cuz i didnt have them withhold enough and got hit with a huge bill lol

Your accountant is right. Here's the clear breakdown: - 2020 unemployment benefits: First $10,200 was tax-exempt (if your AGI was under $150k) - 2021 and later: ALL unemployment benefits fully taxable The confusion happened because the exemption was passed retroactively in March 2021 (affecting 2020 benefits), making many people think it applied to 2021 benefits too. It didn't. If you didn't have taxes withheld during your claim and didn't make estimated tax payments, you probably do owe back taxes. You might be able to request a payment plan with the IRS if the amount is large.

I went through the same thing! Had to reach ESD several times to sort out my tax documents from that period. I was on hold forever until I discovered Claimyr (claimyr.com). They got me through to an ESD agent in under 30 minutes who confirmed the tax situation - only 2020 had the partial exemption. Check out their demo at https://youtu.be/7DieNd3C7zQ?si=26TzE_zGms-DODN3 - saved me hours of waiting. The agent verified exactly what everyone's saying - 2020 had the $10,200 exemption, but 2021 and after were fully taxable.

wait did anyone get a corrected tax form from ESD for 2020? I never did and I think i paid taxes on all of my 2020 benefits because my tax person didnt know about the exemption! can i still fix this??

The whole COVID unemployment tax situation was a MESS! Not only did they change rules midway, but then some states followed the federal exemption and others didn't! Washington eventually conformed to the federal exemption for 2020, but I had friends in other states who had to pay state tax even when they got the federal exemption. And don't even get me started on how ESD handled the tax documents - I got THREE different 1099-Gs for 2020 with different amounts!

Here's another important point: if you did have the $10,200 exemption in 2020 but didn't claim it (many people filed before the law passed in March 2021), the IRS was supposed to automatically adjust your return and issue refunds. Many people got these refunds in summer/fall 2021. If you were eligible but never received an adjustment for your 2020 return, you might want to check on that. The IRS had a huge backlog, so some adjustments may have fallen through the cracks.