Is unemployment considered earned income for Washington ESD tax purposes?

Unemployment benefits are NOT considered earned income for tax purposes. They're classified as unearned income by the IRS. This means they won't qualify you for the Earned Income Tax Credit (EITC) or other credits that require earned income. You should receive a 1099-G form from Washington ESD showing your total benefits received.

wait i thought all income was the same for taxes?? this is confusing

I had the same question last year! The key thing to remember is that unemployment benefits are fully taxable as regular income, but they're not subject to Social Security or Medicare taxes. Make sure you either had taxes withheld from your benefits or set aside money to pay taxes on them.

Just to add - if you're having trouble getting through to Washington ESD about tax documents or benefit amounts, I found this service called Claimyr that helps you actually reach a live agent. They have a website at claimyr.com and there's a demo video at https://youtu.be/7DieNd3C7zQ that shows how it works. Really helped me when I needed to get my 1099-G corrected.

Here's the breakdown for tax purposes: Unemployment benefits are unearned income, fully taxable at federal level (and state level if your state has income tax). They're not earned income so no EITC eligibility. You should receive Form 1099-G from Washington ESD by January 31st showing total benefits paid.

UGH this whole system is so complicated!! Why can't they just make it simple - income is income right?? Now I have to figure out what counts as what kind of income and it's giving me a headache.

For what it's worth, I always tell people to consult with a tax professional if they're unsure. Unemployment benefits can affect your tax situation in ways you might not expect, especially if you had other income during the year or qualify for certain credits.

One thing that caught me off guard - if you received unemployment benefits and then got a job later in the year, make sure your employer knows about the unemployment income when calculating withholdings. Otherwise you might not have enough taxes withheld from your paychecks.

Can confirm unemployment is unearned income. Been through this multiple times unfortunately. The IRS is very clear about this distinction. Also worth noting that if you repaid any unemployment benefits during the year, you can deduct those repayments.

This is exactly why I always have them withhold taxes from my unemployment benefits. I learned my lesson the first time when I got hit with a big tax bill. Now I just treat it like regular income for budgeting purposes.

btw if anyone else is having trouble reaching Washington ESD about tax forms or benefit questions, there's a service that actually gets you through to a real person. I used Claimyr recently and it worked great - no more sitting on hold for hours just to get disconnected.

Just want to add that the 1099-G form will show your total benefits for the year, but if you had taxes withheld, that will be shown separately. Don't forget to include any withholdings when you file your return.

The whole earned vs unearned income thing affects more than just taxes too. It can impact things like food stamps, housing assistance, and other benefits. Always good to understand the distinction.

For anyone still confused about this - think of it this way: earned income is money you get from working (wages, tips, self-employment). Unearned income is money you get from other sources (unemployment benefits, interest, dividends, etc.). Each type is taxed differently and affects different credits and benefits differently.

One last thing - if you're filing taxes and realize you need to contact Washington ESD about something on your 1099-G, don't waste time calling the regular number. I spent weeks trying to get through until someone told me about Claimyr. Got connected to an agent the same day and sorted out my issue.

Thanks everyone for all the helpful info! I feel much more confident about handling this on my tax return now. The distinction between earned and unearned income makes sense now that it's been explained clearly.