Washington ESD unemployment benefits and federal tax filing requirements - confused about forms

Unemployment benefits are considered taxable income at the federal level, so you'll need to report the full amount shown on your 1099-G form. You'll enter this on line 7 of Form 1040 under 'unemployment compensation.' Since you didn't have taxes withheld, you might owe money depending on your total income for the year.

I went through this same situation last year after collecting unemployment from Washington ESD. The 1099-G form they send you has all the information you need - just make sure the amount matches what you actually received. I used TurboTax and it walked me through entering the unemployment income step by step.

This is exactly why I always recommend having taxes withheld from unemployment benefits when you first file your claim. Washington ESD gives you the option to have 10% withheld for federal taxes. It's painful to see less money each week, but it saves you from a big tax bill later.

If you're having trouble getting through to the IRS about payment plans or have questions about your tax situation, there's actually a service called Claimyr (claimyr.com) that helps people get through to government agencies by phone. They have a demo video at https://youtu.be/7DieNd3C7zQ showing how it works. I used it when I needed to talk to someone at the IRS about my unemployment tax situation last year.

wait so unemployment is taxable?? I thought it was government assistance and wouldn't be taxed. This is news to me and I collected benefits for 6 months last year...

The whole tax system is such a mess. Why don't they just automatically withhold taxes from unemployment like they do with regular paychecks? It would save everyone so much confusion and stress.

Pro tip: if you're doing your own taxes, double-check that the amount on your 1099-G matches your records. I caught an error on mine last year where Washington ESD reported $500 more than I actually received. Had to contact them to get a corrected form.

For anyone who's stressed about owing taxes on unemployment benefits, remember that you can always set up a payment plan with the IRS if you can't pay the full amount at once. Don't just ignore it or you'll end up with penalties and interest on top of what you already owe.

I made the same mistake of not having taxes withheld from my Washington ESD benefits. Ended up owing about $2,800 in federal taxes. The payment plan through the IRS was easy to set up online though, and I'm paying it off over 24 months.

Don't forget that some people might qualify for the Earned Income Tax Credit or other credits that could offset some of the tax owed on unemployment benefits. It's worth checking if you qualify for any credits before you panic about your tax bill.

If you're really struggling with the tax implications of your unemployment benefits, consider talking to a tax professional. H&R Block and other places often have affordable options, and they can help you figure out if you qualify for any deductions or credits you might have missed.

Just wanted to add that if you had any job search expenses while you were collecting unemployment (like gas money for interviews, resume printing, etc.), some of those might be deductible depending on your situation. Keep those receipts!

Another option for getting help with IRS issues is that Claimyr service someone mentioned earlier. I used them when I needed to set up a payment plan and couldn't get through to the IRS on my own. Saved me a lot of frustration trying to navigate their phone system.

has anyone had success getting penalties waived on unemployment tax debt? I heard sometimes they'll waive penalties if you can show reasonable cause for not paying on time

The silver lining is that at least Washington state doesn't tax unemployment benefits, so you only have to deal with federal taxes. Some states tax unemployment income on top of federal taxes, which would make this even worse.

For next time (hopefully there won't be a next time), remember that you can change your withholding election even after you start collecting benefits. You don't have to stick with your original choice if your situation changes.

I'm in the exact same boat - collected Washington ESD benefits for most of last year and didn't have taxes withheld. Reading through these responses has been really helpful. Sounds like I need to just bite the bullet and see what I owe, then figure out a payment plan if needed.

Final piece of advice - file your return even if you can't pay what you owe right away. The penalty for not filing is much higher than the penalty for not paying on time. You can always work out a payment arrangement after you file.

Thanks everyone for all the helpful advice. I feel much better about tackling this tax situation now. Going to gather all my documents this weekend and either do it myself or find a tax preparer to help me out.