Skipping tax withholding on ESD unemployment benefits - good idea or huge mistake?

i did that last year and TOTALLY regretted it. got hit with a $2100 tax bill in april that i wasnt prepared for. not fun.

I've been through three unemployment periods in my career, and I always have taxes withheld. Yes, it reduces your weekly amount (they withhold 10% for federal taxes), but it prevents a nasty surprise at tax time. Remember that unemployment benefits are fully taxable income at the federal level. Washington doesn't have state income tax, so that's not a concern, but the federal tax bill can add up quickly, especially if you're receiving the higher benefit amount like you mentioned. If you absolutely need the full amount now for essential expenses, you might consider not withholding but IMMEDIATELY start setting aside at least 15% of each payment in a separate savings account for taxes. The discipline is crucial though - most people intend to save but end up spending it all.

Having worked with many clients who've collected unemployment, I'd add that your tax situation depends on a few factors: 1. What your total yearly income will be (including the months you worked before unemployment) 2. Whether you have any dependents or deductions that might offset the tax liability 3. How long you expect to be on unemployment If you're only going to be on unemployment for a short period and expect to find work again soon, the tax impact might be manageable. But if you're looking at several months of benefits, that tax bill can grow quickly. Also worth noting that if you're receiving the maximum benefit amount in Washington, you were likely in a higher tax bracket before, which means the tax impact could be more significant for you.

nobody talks about how THE SYSTEM is designed to keep us broke either way!!! take out taxes = barely survive now. dont take out taxes = get CRUSHED later. its a trap designed to keep working people down!!!!

Has anyone had luck getting through to ESD to change this after you've already started claims? I chose no withholding at first and now regret it but can't get anyone on the phone to help me change it.

One more thing to consider - if you do opt for no withholding, you might want to make quarterly estimated tax payments to avoid an underpayment penalty. The IRS expects you to pay taxes throughout the year, not just at filing time. Just something else to think about.

When I got laid off last year I chose NO withholding for the first two months then switched to YES for the rest of my unemployment period. It was kind of a compromise - I needed the full amount at first while I was adjusting my budget, then switched to withholding once I had my expenses under control. Just sharing another approach!

I went through the same decision last year when I was laid off from my retail job. I chose to have taxes withheld from day one, and honestly it was the right call for me. Yes, my weekly benefit was smaller (around $680 instead of $750), but when tax season came around I actually got a small refund instead of owing money. The peace of mind was worth it - I was already stressed about finding work and didn't need the extra worry of a looming tax bill. Plus, once you adjust your budget to the smaller amount, you don't really miss that extra money. Just my 2 cents as someone who's been there!