Is unemployment benefits considered earned income in Washington - confused about tax implications
Got my first unemployment check last week from Washington ESD and I'm totally confused about whether this counts as earned income or not. My tax preparer from last year said something about it being taxable but not earned income? I'm trying to figure out if I need to report it differently on forms for other benefits I'm applying for. Some places ask specifically about earned income vs unearned income and I don't want to mess anything up. Has anyone dealt with this before?
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Freya Christensen
Unemployment benefits are taxable income but they're NOT considered earned income. Earned income is money you get from working - wages, salary, tips, self-employment. UI benefits are unearned income since you're not working for them.
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Ravi Malhotra
•That makes sense! So when forms ask about earned income I should leave unemployment benefits off that section?
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Freya Christensen
•Exactly. But you still need to report it as taxable income on your tax return. Washington ESD will send you a 1099-G form.
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Omar Hassan
this is confusing me too, does this mean food stamps applications treat UI differently than work income?
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Chloe Robinson
•Yes, for SNAP and other benefit programs, unemployment is usually counted differently than wages. Each program has its own rules though, so check with the specific agency.
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Omar Hassan
•ok good to know, i was worried my UI would mess up my food benefits
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Diego Chavez
I had a nightmare trying to get through to Washington ESD when I had questions about my 1099-G form last year. Spent hours on hold every day for a week. Finally found this service called Claimyr at claimyr.com that gets you through to actual ESD agents. Saved my sanity! They have a demo video at https://youtu.be/7DieNd3C7zQ showing how it works.
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NeonNebula
•Never heard of that but honestly anything that helps with ESD phone calls sounds worth trying. How much does it cost?
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Diego Chavez
•It's reasonably priced for what you get - being able to talk to a real person instead of listening to busy signals all day. Worth every penny when you need answers.
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Anastasia Kozlov
The IRS is crystal clear on this - unemployment compensation is taxable but not earned income. This distinction matters for things like the Earned Income Tax Credit (EITC). You can't qualify for EITC with just unemployment benefits because they're not earned income.
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Ravi Malhotra
•Oh wow, so I definitely can't claim EITC this year if unemployment is my only income? That's a bummer.
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Anastasia Kozlov
•Right, you need actual earned income from working to qualify for EITC. But you might qualify for other credits depending on your situation.
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Sean Kelly
Wait I'm confused - if unemployment isn't earned income then why do I have to do job searches to keep getting it? Seems like if I'm required to look for work then it should count as earned somehow??
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Freya Christensen
•The job search requirement is about proving you're available and looking for work, but the UI benefits themselves are insurance payments, not wages for services performed.
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Sean Kelly
•I guess that makes sense when you put it that way. Still feels weird though.
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Zara Mirza
Just went through this exact situation! Had to fill out paperwork for housing assistance and they specifically asked to separate earned vs unearned income. Put my UI benefits in the unearned section and it was accepted no problem.
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Ravi Malhotra
•That's exactly what I needed to know! Thanks for sharing your experience.
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Luca Russo
•Same here, medicaid application asked the same thing and UI went in unearned income category
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Nia Harris
This whole system is so confusing. Like why can't they just make it simple and call it what it is - you're getting money, it's income, done. All these categories and subcategories just make everything harder.
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GalaxyGazer
•I feel you but the categories actually matter for different programs and tax purposes. It's annoying but there are real reasons behind it.
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Nia Harris
•Yeah I know there are reasons but it doesn't make it less frustrating when you're trying to figure out forms
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Chloe Robinson
Pro tip: Always keep your 1099-G form from Washington ESD in a safe place. You'll need it for your tax return and sometimes other agencies ask for proof of your unemployment income. Make copies before you need them.
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Ravi Malhotra
•Good advice! When do they usually send those out?
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Chloe Robinson
•Typically by January 31st for the previous tax year. You can also access it online through your ESD account.
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Mateo Sanchez
been getting UI for 3 months now and honestly had no idea about this distinction until reading this thread, thanks everyone for the info
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Aisha Mahmood
•Same boat here, thought income was income. Good thing I found this before filing my taxes.
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Ethan Moore
Does anyone know if the state taxes unemployment benefits? I know federal does but wasn't sure about Washington state taxes.
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Freya Christensen
•Washington doesn't have state income tax, so you don't need to worry about state taxes on your UI benefits. Only federal taxes apply.
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Ethan Moore
•Oh right, duh! Sometimes I forget how good we have it here with no state income tax.
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Yuki Kobayashi
Had similar questions about my UI benefits and couldn't get through to ESD for weeks. Finally tried that Claimyr service someone mentioned and got connected to an agent same day. The agent explained all this earned vs unearned income stuff perfectly. Really glad I didn't keep trying to call on my own.
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Carmen Vega
•How does that service work exactly? Do they just help you get through the phone queue?
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Yuki Kobayashi
•Yeah they handle the calling and waiting part, then connect you when they get an agent on the line. Super helpful when you have specific questions like this.
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QuantumQuester
For anyone still confused - think of it this way: earned income = you worked for it, unearned income = you received it without working (like UI, social security, investment income, etc.). Both are taxable but treated differently for various programs.
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Ravi Malhotra
•That's actually the clearest explanation I've heard. Thanks!
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Andre Moreau
•Yeah that's a good way to remember it. Simple but accurate.
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Zoe Stavros
Does this affect anything with my weekly claim filings? Like do I need to report unemployment income differently than if I had part-time work income?
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Chloe Robinson
•No, your weekly claims are about reporting any work you do while receiving UI. The earned vs unearned distinction is more about taxes and other benefit applications.
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Zoe Stavros
•Got it, so I just keep doing my weekly claims the same way. Thanks for clarifying.
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Jamal Harris
I made the mistake of putting my UI benefits as earned income on a credit application last year. Had to call and correct it, which was embarrassing. Learn from my mistake!
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Mei Chen
•Oof that sounds awkward. At least you caught it and fixed it though.
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Jamal Harris
•Yeah the loan officer was actually pretty understanding about it. Said it happens more often than you'd think.
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Liam Sullivan
Quick question - if I start working part-time while on UI, would those wages be earned income while the UI portion stays unearned income?
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Freya Christensen
•Exactly right. The wages from your part-time job would be earned income, and any remaining UI benefits would still be unearned income. Report both correctly on applications.
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Liam Sullivan
•Perfect, that's what I thought but wanted to double-check. Thanks!
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Amara Okafor
This thread has been super helpful! I was definitely going to mess up my SNAP renewal application without this info. Glad I stumbled across it.
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CosmicCommander
•Same here, about to fill out some forms and would have gotten it wrong too
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Giovanni Colombo
One more thing to add - some employers verify your previous income when you're applying for jobs, and they might ask about the source. Just be clear that unemployment benefits are separate from your last earned wages.
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Ravi Malhotra
•Good point, I hadn't thought about that scenario. Better to be upfront about it.
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Fatima Al-Qasimi
•Most employers understand unemployment benefits anyway, especially in this job market. Nothing to be ashamed of.
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Dylan Cooper
For what it's worth, when I had questions about my 1099-G and whether certain income counted as earned or not, I used Claimyr to get through to ESD. The agent was able to look at my specific situation and give me definitive answers. Way better than guessing or getting conflicting info online.
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Sofia Ramirez
•That's smart, especially for tax-related questions where you want to be 100% sure you're getting it right.
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Dylan Cooper
•Exactly. Too important to mess up, and the ESD agents actually know the rules inside and out.
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Dmitry Volkov
Thanks everyone for all the helpful responses! I feel much more confident about filling out my forms correctly now. This community is awesome.
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StarSeeker
•Glad we could help! That's what this forum is for.
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Ava Martinez
•yeah everyone here is pretty good about sharing knowledge and experiences
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Miguel Ortiz
Just to summarize for anyone else who finds this thread: UI benefits = unearned income for forms, but still taxable income for your tax return. Keep your 1099-G safe and report everything correctly!
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Ravi Malhotra
•Perfect summary! Thanks to everyone who contributed to this discussion.
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