How much tax do you pay on unemployment benefits - Washington ESD withholding questions

So if I'm getting $650/week that would be $65 withheld each week? That seems like a lot but probably better than owing it all later.

Yeah definitely better to withhold. I didn't my first time on unemployment and ended up owing like $3000 at tax time.

I did work January through March before getting laid off. So the unemployment plus my work income will definitely be taxable.

Exactly, that's why withholding is smart. The IRS treats unemployment just like W-2 wages for tax purposes.

I had the same problem until I found Claimyr. It's a service that calls Washington ESD for you and gets you connected to an actual agent. Check out claimyr.com - they have a demo video at https://youtu.be/7DieNd3C7zQ that shows exactly how it works.

Is that legit? Sounds too good to be true with how hard it is to reach Washington ESD.

Yeah it's real. They basically keep calling until they get through and then conference you in. Way better than spending hours on hold yourself.

Unfortunately yes, unemployment is fully taxable. It's not considered welfare or assistance - it's insurance that you and your employer paid into.

Ugh this is terrible news. I need to figure out how much I'm going to owe. Is there a calculator somewhere?

You can use any tax calculator online. Just add your unemployment to your other income and it will estimate your total tax liability.

So I might need to set aside additional money beyond the 10% withholding?

Possibly. I always put aside an extra 5% just to be safe. Better to get a refund than owe money.

Yes, Washington ESD sends form 1099-G in January showing your total benefits received. You'll need this for your tax return.

Perfect, thanks. I'll watch for that in the mail.

That's a great idea about the extra savings. I think I'll do the 10% withholding and save a little extra too.

I wish I had known this earlier. Going to start the withholding immediately.

I'm definitely going to try this. I've wasted so much time trying to call them directly.

Same here. The regular Washington ESD phone system is completely broken.

It reduces your weekly payment. So if your benefit is $650 and you elect 10% withholding, you'll receive $585 and $65 goes to the IRS.

Got it, that makes sense. Better to get less each week than owe it all later.

Yes, unemployment is taxed the same regardless of whether you were employed or self-employed. The source doesn't matter - it's all taxable income to the IRS.

Thanks. I'll definitely elect the withholding then since I'm used to paying quarterly taxes anyway.

Child tax credit yes if you qualify based on income. But earned income credit is tricky - unemployment doesn't count as 'earned income' for EIC purposes in most cases.

Good to know. I'll check with a tax preparer to be sure.

You'll still get the 1099-G from Washington ESD since that's where the benefits originated. But you might owe state taxes in your new state depending on their rules.

That's helpful. I might be moving to Oregon so I'll need to research their state tax rules.

There's no special exemption for unemployment benefits. But if your total income for the year is below the standard deduction ($13,850 for single filers in 2023), you won't owe federal income tax.

Ok that makes sense. So it's really about your total income, not just the unemployment part.

That's great to know. I'm going to set up the 10% withholding when I file my claim this week.

How much did the Claimyr service cost? Might be worth it to get my questions answered.

They don't publish the price but it was reasonable for getting through immediately instead of wasting hours trying to call.

Good advice. I'm worried I'm going to owe a lot since I didn't withhold anything.

Yeah definitely look into it if needed. The penalties for not paying are worse than setting up a payment plan.

Most tax preparers deal with unemployment regularly. It's pretty common. H&R Block, Liberty Tax, local CPAs - they all handle it.

Thanks, I'll probably go with a professional this year just to be safe.

I get the frustration but unemployment insurance is meant to replace wages, and wages are taxed. It would be weird if unemployment wasn't.

I guess that makes sense when you put it that way. Still sucks though.

Yep, that's what I'm going to do. Thanks everyone for the advice!

Agreed. I learned this the hard way my first time on unemployment.

I'm convinced. Going to try them this week.

Same here. The regular phone system is completely useless.

Good point. I'll start tracking this in a spreadsheet.

The Washington ESD website shows your payment history too if you log into your account.

That's really helpful to know! I didn't realize Washington ESD kept a payment history online. That will make tax prep so much easier than trying to track everything manually.