How much are taxes on unemployment benefits in Washington?

Wait, I thought Washington doesn't have state income tax? So I only need to worry about federal taxes on my UI benefits?

Exactly! Washington has no state income tax, so you only owe federal taxes on your unemployment compensation. Much simpler than other states.

Ouch! So if I'm getting $520 a week, I should definitely elect the 10% withholding option?

Yeah definitely. It's better to get a small refund than owe a big payment. You can change the withholding option anytime through your Washington ESD account.

Is that legit? I've been trying to call Washington ESD for days to ask about my adjudication status and tax questions.

Yeah it's real. They basically call on your behalf and get you connected to an ESD agent. Worked for me when I needed to update my banking info and tax preferences.

Might try this if I can't get through on the phone. The Washington ESD customer service line is always jammed.

So should I have more than 10% withheld? How do I figure out what's right for my situation?

You can use the IRS withholding calculator online or talk to a tax professional. It depends on your total annual income including both wages and unemployment benefits.

Because everyone's tax situation is different. Some people might be in a lower bracket if they were unemployed most of the year, others might have spouse income that affects their taxes.

i guess that makes sense but its still annoying to figure out

Wow that's a lot! Did you have to pay penalties too for underpaying during the year?

Yeah I got hit with an underpayment penalty of about $150. Not huge but still annoying on top of the tax bill.

Yes, you still need to report all unemployment income on your tax return. The 1099-G shows both your total benefits and any federal taxes that were withheld.

Got it, thanks. I was confused because my employer W-2 already has taxes withheld but I still have to report that income too.

I'll check that out. Do you know if there's a difference between regular UI benefits and other types like standby or partial unemployment?

All unemployment compensation from Washington ESD is taxable the same way - regular UI, partial benefits, standby, etc. The tax treatment doesn't change based on the type of claim.

That's a good point. I was only unemployed for about 6 weeks last year and got a small refund even with taxes withheld from my UI benefits.

I'm definitely going to try this. Been calling ESD for three days straight trying to update my withholding election and can't get through.

How much does Claimyr cost? Is it worth it just to change tax settings?

It's worth it if you need to reach an agent quickly. Check out their demo video to see if it makes sense for your situation.

Do you recommend having taxes withheld or just paying quarterly estimated taxes?

For most people, having it withheld is easier. Quarterly payments require you to calculate and remember to pay four times a year. Withholding is automatic.

I understand the frustration, but unemployment benefits are meant to replace lost wages, so they're taxed like wages would be. It's been this way for decades.

still sucks when youre already struggling financially

That's why having taxes withheld helps - at least you don't get surprised with a big bill later when you might still be unemployed.

That was only for 2020 tax returns. Starting with 2021 and beyond, all unemployment compensation is fully taxable again with no exclusion.

Thanks for clarifying. I wasn't sure if that provision continued past 2020.

That makes sense. So if I was in the 12% tax bracket while working, my unemployment gets taxed at 12% too?

Exactly, assuming your total income for the year keeps you in that bracket. The unemployment just adds to your total taxable income.

I was skeptical at first but ended up using them to resolve an overpayment issue. Got connected to an ESD agent in minutes instead of hours of calling.

Thanks everyone for all the tax advice. I'm going to elect the 10% withholding and see how it works out at tax time.

Good reminder. I've been downloading my payment history from the ESD website every month just to keep track.

thats actually helpful to know, didnt realize the irs would do payment plans

Yeah they're pretty reasonable about it, especially if you can show financial hardship from unemployment.

That's definitely a relief. Thanks everyone for all the help understanding the tax situation!