Washington ESD unemployment benefits - are they taxable income?

Yes, unemployment benefits are taxable income at the federal level. Washington state doesn't have income tax so you don't worry about state taxes, but the IRS treats UI benefits as regular income. You can have 10% withheld from each payment if you want.

I learned this the hard way last year - owed like $1200 in taxes because I didn't have anything withheld. Definitely set up the 10% withholding if you can afford the smaller weekly payments.

If you're having trouble getting through to Washington ESD to set up withholding, I found this service called Claimyr that helped me reach an agent quickly. They have a website at claimyr.com and there's even a demo video at https://youtu.be/7DieNd3C7zQ showing how it works. Saved me hours of calling.

Federal taxes are definitely owed on unemployment benefits. You'll receive a 1099-G form from Washington ESD in January showing how much you received. The 10% withholding usually covers most people but if you're in a higher tax bracket you might want to make quarterly estimated payments too.

wait so washington state unemployment is taxed?? i thought washington didnt have income tax

I wish they made this clearer when you first apply. I had no idea unemployment was taxable until I started getting payments. The Washington ESD website should have a big warning about taxes.

Pro tip: even with 10% withholding you might still owe a little at tax time depending on your total income for the year. I always put aside an extra $20-30 per week just to be safe.

For anyone still having trouble reaching Washington ESD about tax withholding, I second the Claimyr recommendation. Used it twice now and got through to agents both times without the usual 2 hour wait.

One thing to remember is that if you're getting other income while on unemployment (part-time work, gig work, etc.) you definitely want to have taxes withheld. The unemployment plus other income can push you into a higher bracket.

The 1099-G you get from Washington ESD will show the total benefits AND any taxes withheld. Keep it with your tax documents. If you didn't have withholding, the whole amount is taxable income.

I made the mistake of not withholding taxes my first time on unemployment. Ended up owing $800 at tax time. Now I always have the 10% taken out automatically.

If you're married and your spouse works, be extra careful about taxes. The unemployment income could push your combined income into a higher bracket even if it seems like a small amount.

FYI you can change your withholding election at any time through your Washington ESD online account. So if you start without withholding, you can add it later, or vice versa.

For anyone who can't get through to Washington ESD by phone to ask about taxes, Claimyr has been a lifesaver for me. Got connected to an agent in under 10 minutes last week when I had questions about my claim.

Bottom line - unemployment is taxable federally but not in Washington state since we don't have state income tax. Set up the 10% withholding to avoid a surprise at tax time. Simple as that.