Washington ESD unemployment benefits - is unemployment taxable income?

Yes, unemployment benefits are taxable income at the federal level. Washington state doesn't have income tax so you don't owe state taxes on it, but you'll definitely owe federal taxes. You should have received a 1099-G form from Washington ESD showing how much you received.

Yes, unemployment benefits are definitely taxable income at the federal level. Washington state doesn't have income tax so you don't worry about that part, but you'll owe federal taxes on every dollar you received from Washington ESD.

Oh no, I haven't gotten any 1099-G form yet. When do they usually send those out?

You can request tax withholding when you file your weekly claims on the Washington ESD website. There's an option to have 10% withheld for federal taxes. I wish I had done this from the beginning instead of scrambling to save money for taxes now.

This is such a common surprise for people! Washington ESD should really make this clearer when you first apply. The unemployment benefits are reported on Form 1099-G that you'll receive in January. You'll need to report the full amount as income on your federal tax return.

I had the same panic when I realized this! If you're having trouble getting through to Washington ESD to set up tax withholding, I found this service called Claimyr (claimyr.com) that actually gets you through to a real person. They have a video demo at https://youtu.be/7DieNd3C7zQ showing how it works. Way better than sitting on hold for hours.

They're usually mailed by the end of January. You can also access it online through your SecureAccess Washington account.

You can have federal taxes withheld from your weekly claim payments if you want. When you file your weekly claim, there's an option to withhold 10% for federal taxes. I wish I had done this from the beginning because now I owe like $2,800.

wait unemployment is TAXABLE?? nobody told me this when i applied! ive been spending all my money thinking it was free money basically. this is such bs

Same here! I owed $3,200 last year and had to set up a payment plan with the IRS. Definitely recommend having taxes withheld.

Pro tip: if you can't afford to pay the taxes all at once when you file, you can set up a payment plan with the IRS. Don't just ignore it and hope it goes away because the penalties and interest add up fast.

How do I set up the tax withholding? Is it too late to start now?

No, you can start anytime. Just look for the tax withholding option when you file your next weekly claim online.

I had the same panic last year! What I did was estimate how much I'd owe and started making quarterly estimated tax payments to the IRS. You can use Form 1040ES to calculate what you should pay. Better to pay as you go than get hit with a big bill plus penalties.

I made this mistake in 2023 and ended up owing $4,200 in taxes on my unemployment benefits. Had to use my tax refund from my part-time job just to cover it. Definitely start having taxes withheld now if you haven't already.

The 10% withholding might not be enough depending on your other income and tax situation. I had 10% withheld and still owed another $800 when I filed. Consider having more withheld or setting aside additional money each week.

That's a good idea. Do you remember roughly what percentage of your unemployment you had to pay in taxes?

It depends on your total income and tax bracket, but I ended up owing about 22% of my unemployment benefits in federal taxes.

Another option is to make quarterly estimated tax payments to the IRS instead of waiting until you file your return. This way you don't get hit with a huge bill all at once.

I'm dealing with the same thing right now. Been trying to get through to Washington ESD to change my tax withholding but their phone lines are always busy. Someone mentioned Claimyr earlier - has anyone else used that service?

I'm so frustrated with how confusing this all is. Washington ESD should make it clearer that unemployment is taxable. I've been struggling to get through to them for weeks to ask about my claim status and now I find out I might owe thousands in taxes too. Anyone know a reliable way to actually reach someone at Washington ESD?

I had the same problem calling Washington ESD until someone told me about Claimyr. It's a service that helps you get through to unemployment offices. They have a website at claimyr.com and there's a video demo at https://youtu.be/7DieNd3C7zQ showing how it works. Saved me hours of calling.

Is that legit? I'm desperate at this point but worried about scams.

Just remember that even if you don't have taxes withheld, you still need to report the unemployment income on your tax return. The IRS gets a copy of your 1099-G so they know exactly how much you received.

this whole tax thing is making me so anxious. I wish washington esd would make this clearer when you first apply. feels like a trap

Yeah it's real. They basically call for you and get you connected to an actual person. Much better than sitting on hold for hours.

wait unemployment is taxable?? I thought since we already paid into the system through payroll taxes that we wouldn't owe taxes on benefits. This is ridiculous.

For what it's worth, you can also increase your tax withholding at a new job to help cover the taxes you'll owe on unemployment benefits. That way it comes out gradually instead of all at once.

I know it seems unfair, but unemployment benefits have always been taxable income. The money you paid into the system through payroll taxes was to fund the program, not prepay your taxes on benefits.

ugh this system is so broken

Pro tip: if you're still collecting benefits, log into your Washington ESD account and update your tax withholding preferences NOW. Don't wait until next year like I did. The 10% federal withholding option is right there in your weekly claim filing.

Thanks for the reminder! I'm going to do this with my next weekly claim.

Is 10% enough though? Seems low if some people are owing 20%+

It's better than nothing, but you might still owe some depending on your tax bracket. You can always make additional estimated payments.

For anyone who's already stopped collecting unemployment and didn't have taxes withheld, start saving money now for tax season. I put aside 25% of whatever I received just to be safe. Better to have extra money than come up short.

That's smart advice. I'm kicking myself for not thinking about this earlier.

25% seems like a lot but probably better safe than sorry. I'm going to start setting money aside right away.

Just to clarify some tax details: unemployment benefits are reported as 'other income' on your federal tax return. If you received more than $10,200 in unemployment in 2024, all of it is taxable. There was a temporary exclusion during COVID but that's expired now.

Good to know about the $10,200 threshold. I definitely received more than that so I'll owe on the full amount.

Wait, so if I only got like $8,000 total I don't owe taxes on it?

No, that threshold I mentioned was only for 2020. For 2024 and going forward, all unemployment benefits are taxable regardless of the amount.

I learned this the hard way too. Owed $4,500 in taxes on my unemployment benefits and had to take out a loan to pay it. The worst part is Washington ESD never really explains this clearly when you first file for benefits.

Ouch, $4,500 is a lot. They really should make this more obvious during the application process.

Agreed, there should be a big warning or something when you apply that says 'these benefits are taxable income

Does anyone know if there are any deductions or credits that can help offset the tax burden from unemployment benefits? Seems like there should be something since we're in a tough financial situation already.

You can deduct job search expenses if you itemize, but with the higher standard deduction most people take now, it probably won't help much. There aren't really any special credits for unemployment.

That's disappointing but thanks for the info.

I'm still trying to get my 1099-G from last year sorted out because Washington ESD had the wrong address on file. Been calling for weeks with no luck getting through. This tax stuff is stressful enough without having to fight the system just to get basic forms.

Have you tried using Claimyr to get through to Washington ESD? I mentioned it earlier but it really does work for getting connected to an actual person who can help with things like updating your address for tax forms.

I'll check it out, thanks. At this point I'm willing to try anything to avoid sitting on hold for hours.

PSA: if you can't afford to pay your unemployment taxes all at once, the IRS does offer payment plans. Don't just ignore it and hope it goes away because the penalties and interest will make it much worse.

Good point. What's the process for setting up a payment plan with the IRS?

You can apply online at irs.gov or call them. There are short-term plans (120 days or less) and long-term installment agreements. Just don't wait until the last minute.

This whole thread is making me nervous. I collected unemployment for 8 months last year and never had taxes withheld. Probably looking at owing $5,000+ that I don't have. Why doesn't Washington ESD make this clearer??

Don't panic yet. Calculate your actual tax liability first - it might not be as bad as you think depending on your other income and deductions.

Yeah, use a tax calculator online or talk to a tax preparer. The amount you owe depends on your total income, not just the unemployment.

For what it's worth, I used FreeTaxUSA last year to file my taxes with unemployment income and it walked me through everything step by step. Much cheaper than going to H&R Block and they handle unemployment benefits just fine.

Thanks for the recommendation! I was wondering about tax software vs paying someone to do it.

I second FreeTaxUSA. Used it for years and it's way cheaper than TurboTax.

Can someone explain why unemployment benefits are taxable but other forms of assistance like food stamps aren't? Seems inconsistent to me.

Unemployment insurance is considered a replacement for wages, so it's taxed like wages. Food stamps and similar programs are considered welfare assistance and aren't taxable. That's the basic distinction.

I guess that makes sense from a policy perspective, even if it's frustrating.

Just want to add that if you're married and file jointly, your spouse's income affects how much tax you'll owe on unemployment benefits. We ended up owing way more than expected because my husband's salary pushed us into a higher tax bracket.

Good point. I'm single so I don't have to worry about that, but it's definitely something married couples should consider.

Same thing happened to us. We owed almost $6,000 because of the combined income.

I know this is stressful for everyone but remember that owing taxes on unemployment means you actually received benefits, which helped you through a difficult time. Yes it's an additional burden but it's better than not having had the support at all.

That's a good way to look at it. I'm definitely grateful for the unemployment benefits even if the tax situation is stressful.

True, but they still should make it clearer upfront that benefits are taxable.

One more tip: keep all your unemployment-related paperwork organized for tax season. This includes your 1099-G, any correspondence from Washington ESD, and records of any job search expenses you might be able to deduct.

Thanks for all the helpful advice everyone. This thread has been really informative even though the news about taxes isn't great.

Glad we could help! And don't forget about Claimyr if you need to reach Washington ESD about anything - definitely worth checking out their demo video.

Yeah this has been super helpful. I'm going to start setting aside money for taxes right away.

I actually got audited because I forgot to report my unemployment income one year. Don't make my mistake - always report it even if you think the IRS won't notice.

One more tip - keep good records of all your unemployment payments throughout the year. Don't just rely on the 1099-G because sometimes there are discrepancies.

Thanks everyone for all the helpful info. I'm going to try to call Washington ESD tomorrow to set up tax withholding, and if I can't get through I'll check out that Claimyr service. Better late than never I guess.