IRS taxing unemployment benefits for 2021 - Washington ESD tax questions

Yes, unemployment benefits are generally taxable by the IRS. However, there was a special provision for 2020 tax year where the first $10,200 of unemployment benefits were tax-free for people with adjusted gross income under $150,000. But that exemption didn't carry over to 2021. You'll need to report your Washington ESD benefits as income on your 2021 tax return.

i didnt have taxes taken out either and now i owe like $2000 to the irs. shouldve elected to have washington esd withhold taxes when i was filing my weekly claims

This is why I always recommend having 10% withheld for federal taxes when you're setting up your unemployment claim. You can change this election when filing your weekly claims through the Washington ESD website. The 1099-G will show both your total benefits and any taxes that were withheld.

If you're having trouble getting through to Washington ESD to ask about your 1099-G or tax withholding, I found this service called Claimyr that helps you get connected to an actual agent. Check out claimyr.com - they have a demo video at https://youtu.be/7DieNd3C7zQ that shows how it works. Saved me hours of calling and getting busy signals.

THE IRS IS SCREWING UNEMPLOYED PEOPLE AGAIN! First they make it impossible to find work during the pandemic then they tax us on the benefits we needed to survive. This whole system is rigged against working people.

Thanks everyone for the info. Sounds like I need to prepare for a tax bill. Does anyone know if there are any deductions I can take related to job searching while I was unemployed?

just a heads up that if you moved states while collecting unemployment, you might need to file returns in multiple states. i collected from washington esd but moved to oregon and had to deal with both state tax systems

One more thing to consider - if you received any overpayment notices from Washington ESD and had to pay money back, that can affect your taxes too. The amount you actually kept after repayments is what gets reported on your 1099-G.

Does anyone know if the state of Washington taxes unemployment benefits too? Or is it just federal?

my tax preparer told me that even though unemployment is taxable, its still better than not having any income at all. the tax burden is usually manageable compared to being completely broke

Another Claimyr update - I used them again this week to ask Washington ESD about getting a corrected 1099-G because mine had the wrong address. The agent was able to send me a new one electronically within a few days. Super helpful when you need to actually talk to someone instead of just using the website.

i made the mistake of not saving any money for taxes while i was collecting. spent every penny just trying to get by. now i owe money i dont have

For anyone still confused about this, the key thing to remember is that unemployment benefits are treated just like wages for tax purposes. If you received a W-2 showing $30,000 in wages, you'd expect to pay taxes on that. Same principle applies to your 1099-G from Washington ESD.

quick question - does anyone know if the extra $300 weekly payments from federal programs are also taxable? or just the regular state unemployment benefits?

this whole thread is making me realize i need to be more proactive about financial planning. never thought about tax implications when i was just trying to pay rent

I used Claimyr last month when I couldn't figure out why my 1099-G showed a different amount than what I thought I received. Turns out there was an overpayment from 2020 that got deducted from my 2021 benefits. The Washington ESD agent was able to explain the whole situation and send me a breakdown. Worth using when you need actual answers instead of generic website info.

does turbotax or other tax software handle unemployment benefits automatically if you import your 1099-g? or do you have to enter it manually?

Bottom line for anyone still reading this thread: unemployment benefits from 2021 are fully taxable, there's no exemption like there was for 2020, and you'll need to report everything on your 1099-G as income. If you didn't have taxes withheld, set aside money or set up a payment plan with the IRS. And next time, elect to have taxes withheld from your weekly claims to avoid this situation.