Should I withhold 10% of Washington ESD unemployment for taxes - confused about tax implications

How do I set up the withholding? Is there a form I need to fill out in my Washington ESD account?

You can request tax withholding when you file your weekly claims online. There should be an option in your claim form to withhold 10% for federal taxes.

Ouch, that's exactly what I'm trying to avoid. Was that just federal taxes or did you owe state taxes too?

Just federal - Washington doesn't have state income tax so that's one less thing to worry about at least.

Never heard of Claimyr before. Did they actually help you get through to Washington ESD?

Yeah, it was pretty straightforward. They handle the calling and get you connected when an agent is available. Saved me from spending all day redialing.

Is there a cost for using that service? Sounds too good to be true if it's free.

What if I only collect unemployment for a few months? Still worth doing the withholding?

Depends on your total income for the year. If unemployment plus any other income puts you over the standard deduction, then yes, withholding helps avoid underpayment penalties.

That's about what mine would be too. Did you notice a big difference in your weekly deposit amount?

Not really - you adjust pretty quickly. I'd rather get a smaller amount weekly than owe hundreds later.

Good choice! You'll thank yourself next tax season.

Smart move. Learn from my mistake and avoid that tax bill surprise.

Yes, you can change your withholding election when you file your weekly claims. Just update the tax withholding option on your claim form.

Perfect, that makes me feel better about starting the withholding then.

It depends on your tax bracket. If you were in a higher bracket when working, 10% might not be enough. You might want to make quarterly estimated payments to be safe.

Ugh, taxes are so complicated. I should probably talk to a tax professional about this.

Good point! I'll make sure to watch for that form next January.

Yes, and if you move make sure Washington ESD has your current address so you get that form.

That's a good way to think about it. Like a forced savings account that you get back if you don't need it.

Exactly. Much better than owing money you don't have when taxes are due.

Yeah the site can be glitchy. If you can't get it changed online, that's another reason to use something like Claimyr to actually talk to an agent who can update it for you.

Thanks, I might have to look into that. Getting frustrated with the website issues.

That makes sense - if your total income for the year is low enough, you might not owe much in taxes anyway.

I'm planning to be on unemployment longer than that, so I think withholding is still the right choice for me.

Standby benefits are still unemployment compensation, so yes, they're taxable the same way. The 10% withholding option should be available for standby claims too.

Thanks for clarifying that. I wasn't sure if standby was treated differently.

Main thing is that unemployment is taxed as ordinary income, just like wages. So it gets added to any other income you have for the year.

Also worth noting that unemployment benefits don't have Social Security or Medicare taxes taken out, only federal income tax if you elect withholding.

Wait, you have to select it every week? I thought it was a one-time setting.

Yeah, at least on the Washington ESD system I use, it's a checkbox I have to mark each week. Not a huge deal once you get in the habit.

How do you figure out if you need to make quarterly payments? This is getting complicated.

Generally if you expect to owe more than $1000 in taxes after withholding and credits. The IRS has worksheets to help calculate it.

That's exactly what I'm trying to avoid. Better to plan ahead than get surprised.

Your tax preparer is smart. I learned that lesson the hard way.

Good advice. I'll start keeping better track of everything now.

Yes, and screenshot or print your benefit statements from Washington ESD as backup documentation.

Yeah, that seems to be what most people recommend. Glad the discussion was helpful for you too!

Definitely the safer approach. You can always adjust if your situation changes.

That's a really good point. When the benefits stop, you don't want to be stuck with a tax bill you can't pay.

Exactly why I chose to withhold. Peace of mind is worth the smaller weekly amount.

Good to know! I was able to set up withholding online, but it's nice to know there's a backup option if I need to talk to someone.

Yeah, it's definitely handy when the regular phone system isn't working. Saves a lot of time and frustration.