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Anastasia Sokolov

Is unemployment compensation included in gross income for Washington ESD benefits?

I'm really confused about whether my unemployment compensation from Washington ESD counts as gross income when I'm calculating things for taxes and other benefits. I've been getting UI payments for about 2 months now and I need to know if this gets included when someone asks for my gross income. Does anyone know how this works? I'm trying to fill out some paperwork and don't want to mess it up.

Yes, unemployment compensation is considered taxable income by the IRS. Washington ESD should send you a 1099-G form at the end of the year showing how much you received. You'll need to report it on your federal tax return.

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Thanks! So when someone asks for gross income, I should include my UI payments along with any other income I had?

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Exactly. For most purposes when they ask for gross income, unemployment compensation should be included since it's taxable income.

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wait really? i thought unemployment wasnt taxed? ive been getting payments for 3 months and havent been setting anything aside for taxes...

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Unfortunately it is taxable. You might want to start setting aside about 10-20% of your weekly payments for taxes, depending on your total income for the year.

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oh no... thats gonna be a lot of money i owe. wish someone had told me this earlier

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I had this same question last year. The tricky part is that some applications ask for 'earned income' vs 'gross income' and unemployment is NOT earned income - it's unearned income. But for gross income calculations, yes it gets included.

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That's a good point about earned vs unearned income. The form I'm filling out specifically says gross income so I think I need to include it.

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This is why these forms are so confusing. They should be clearer about what they want.

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For Washington state specifically, unemployment compensation is not subject to state income tax since we don't have a state income tax. But federally, yes it's taxable and should be included in gross income calculations.

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That's helpful to know about state taxes. At least I don't have to worry about that part.

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One of the few benefits of living in Washington - no state income tax on unemployment or regular income!

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Just went through this with my accountant. She said unemployment compensation definitely counts as gross income for things like loan applications, benefit eligibility, etc. The lender/agency wants to see your total income picture including UI payments.

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That makes sense. I'm filling out paperwork for assistance programs so they probably want the full picture.

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Yes, most assistance programs will want to know about all income sources including unemployment compensation.

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i hate how complicated this stuff is. why cant they just tell you upfront that unemployment gets taxed?

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I think Washington ESD does mention it in their materials, but it's easy to miss when you're focused on just getting benefits approved.

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yeah probably buried in some fine print somewhere

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Pro tip: if you're still receiving unemployment, you can ask Washington ESD to withhold federal taxes from your weekly payments. It's easier than trying to save money on your own and then owing a big chunk at tax time.

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How do you do that? Is there an option in the online system?

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Yes, you can set it up through your SecureAccess Washington account. They'll withhold 10% for federal taxes.

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That's really good to know. I might set that up to avoid any surprise tax bills.

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Also keep in mind that if you have other income during the year (like from part-time work while on unemployment), the unemployment compensation might push you into a higher tax bracket. It all gets combined when calculating your tax liability.

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I did have some part-time work earlier in the year before I got laid off. So I'll definitely need to include both when calculating gross income.

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Yeah, the tax calculation looks at your total income from all sources for the year.

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One thing to remember is that the 1099-G you get from Washington ESD will show the total amount paid to you, but if you had any overpayments that you paid back, you might be able to deduct those on your tax return.

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Fortunately I haven't had any overpayment issues, so I won't need to worry about that part.

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Good point about overpayments. The tax rules for those can be tricky so anyone in that situation should probably talk to a tax professional.

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Been on unemployment twice in the last 5 years and yes, both times it counted as gross income for everything - taxes, benefit applications, loan applications, you name it. It's income, just not earned income from a job.

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Thanks for sharing your experience. Sounds like I definitely need to include it on this form I'm filling out.

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how much extra did you end up owing in taxes? trying to figure out how much to set aside

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It depends on your total income and tax bracket, but I usually set aside about 15% to be safe.

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the whole system is designed to confuse people i swear. why make it so complicated?

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I think it's just because unemployment sits in this weird category between welfare and regular income, so the rules get complicated.

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still annoying though

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Bottom line for the OP: if a form asks for gross income, include your unemployment compensation. If it asks specifically for earned income or wages, then don't include it. Most of the time when they say gross income they want everything.

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Perfect, that's exactly what I needed to know. The form says gross income so I'll include my UI payments. Thanks everyone!

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That's a good rule of thumb. When in doubt, it's usually better to include it rather than leave it out.

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Also make sure you keep track of all your 1099-G forms if you receive unemployment in multiple years. I made the mistake of losing one and had to request a duplicate from Washington ESD when tax time came around.

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Good advice. I'll make sure to save it when I get it.

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You can also access your 1099-G online through your SecureAccess Washington account if you lose the paper copy.

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One last thing - if you're applying for certain income-based benefits or assistance programs, they might have specific rules about how they count unemployment income. Some programs exclude it or count it differently, so check the specific program requirements.

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That's a good point. I'll double-check the specific requirements for the program I'm applying for.

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Yeah, each program can have its own rules. The general rule is to include it in gross income, but always check if there are exceptions.

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thanks everyone for all the info. gonna go set up that tax withholding thing now before i forget

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Good idea! It's really easy to set up and will save you from a big tax bill later.

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I think I'm going to do the same thing. Better to be safe.

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Hope this thread helps other people too. This question comes up a lot and it's important to get it right for tax purposes.

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Definitely! I learned a lot from everyone's responses. Really appreciate all the help.

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Always happy to help people understand how unemployment compensation works with taxes and income calculations.

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well at least now i know what to expect. still think the whole thing should be simpler but whatever

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I agree it could be clearer, but at least once you know the rules it's pretty straightforward.

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yeah i guess. just wish they explained it better upfront

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Thanks again everyone! I got my form filled out correctly and now I know what to expect for tax time. This community is really helpful.

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Glad we could help! Good luck with whatever you're applying for.

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You're welcome! Don't hesitate to ask if you have more questions about unemployment or taxes.

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For anyone else reading this thread later: the key takeaway is that unemployment compensation is taxable income that should be included in gross income calculations for most purposes. Just remember to set aside money for taxes or have Washington ESD withhold federal taxes from your payments.

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Perfect summary! That covers everything people need to know.

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yep, wish i had known this from the start but better late than never

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One final reminder - keep good records of all your unemployment payments and any taxes withheld. Makes filing your tax return much easier when you have everything organized.

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Good point. I'll start keeping better track of all my UI paperwork.

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Yeah, staying organized with unemployment records really pays off at tax time.

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