Tax withholding on ESD benefits - does this prevent overpayment issues at tax time?

Tax withholding and overpayments are completely different things! Just because they take out taxes doesn't mean your eligible for the benefits in the first place.

The tax withholding (which is actually a flat 10% federal withholding if you opted in) is completely separate from potential overpayment issues. Overpayments happen when ESD determines after the fact that you weren't eligible for some or all benefits you received - maybe due to unreported work hours, availability issues, or eligibility reassessment. The withholding just means you've prepaid some of the taxes you'll owe on the unemployment income, which is fully taxable. You'll still need to report all unemployment income on your tax return, but having the withholding should help prevent a large tax bill specifically related to these benefits.

To answer your follow-up question, ESD can generally issue overpayment notices up to 3 years after benefits are paid (longer in cases of fraud). However, most eligibility issues are identified within the first few months. To minimize risk, make sure your wife is: 1. Accurately reporting ALL work and earnings each week 2. Meeting the 3 job search requirements every week 3. Remaining able and available for work 4. Promptly responding to any ESD requests for information If she's doing all that, the risk of overpayment decreases significantly over time.

Had the EXACT same worry last year! The withholding helped with taxes (still owed a bit tho) but then got hit with an overpayment 8 months later bc they said my work search wasn't valid for 2 weeks. Such BS!

The tax withholding is just one part of the unemployment financial picture. I got caught by surprise last year when my withholding wasn't enough - still ended up owing almost $800 at tax time because of the unemployment income pushing us into a higher tax bracket overall. As for overpayment risk, if you're really concerned about potential issues reaching ESD, I found Claimyr (claimyr.com) to be super helpful when I had questions about my claim status. You can see how it works in their video demo: https://youtu.be/7DieNd3C7zQ?si=26TzE_zGms-DODN3 It helped me get through to an actual agent when I was worried about a possible issue with my claim. The agent was able to review my file and confirm everything was in order, which gave me peace of mind.

idk why everyone's being so dramatic lol. been on unemployment 3 times and never had an overpayment. just dont lie on your weekly claims and youll be fine.

I'm dealing with this RIGHT NOW! Had taxes taken out all last year, thought everything was fine. Then in February 2025 got a notice saying I had an overpayment from weeks in August 2024 because my employer contested my claim saying I quit instead of being laid off. Now I owe $2,750 back even though I spent that money months ago on rent and food. Is anyone here good at writing appeals? I have 30 days to respond and I'm panicking!!!

To wrap up the original question: Tax withholding only addresses the tax liability on legitimate benefits. It won't protect you from overpayment determinations. For peace of mind, I recommend: 1. Keep detailed records of all weekly claims and job search activities for at least 3 years 2. Save copies of any ESD correspondence (take screenshots of online notices) 3. Set aside a small emergency fund if possible to cover potential overpayments 4. Make sure your wife responds immediately to any ESD requests or questionnaires Most people who diligently follow the rules never experience overpayment issues, but having documentation ready just in case is always smart.