Washington ESD unemployment benefits - will I owe taxes on payments?

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. You can have Washington ESD withhold 10% federal tax from your weekly payments or pay quarterly estimated taxes.

definitely get the taxes withheld trust me. i didnt do it last year and owed like $1200 at tax time which was brutal when i was already struggling

This is super common confusion! Yes, unemployment is federally taxable but Washington has no state income tax. If you're getting $487/week, having 10% withheld means you'll get $438 but won't owe a big lump sum later. The withholding option is definitely in your Washington ESD online account.

I had trouble finding the tax withholding option in my Washington ESD account last year. Spent forever trying to get through to someone on the phone to help me set it up. Finally found this service called Claimyr that helps you actually get through to Washington ESD agents. Used their system at claimyr.com and got connected in like 15 minutes instead of calling for hours. They have a demo video at https://youtu.be/7DieNd3C7zQ that shows how it works.

The tax thing caught me off guard too when I first started getting unemployment. Washington ESD sends you a 1099-G form at the end of the year showing how much you received. That goes on your federal tax return as income.

ugh why do they make everything so complicated!! cant they just automatically take out taxes like a regular job does?? now i have to worry about this on top of finding work

Pro tip: even if you have taxes withheld, keep track of your unemployment income throughout the year. Makes filing your taxes way easier when you know exactly what to expect.

I'm getting unemployment too and decided not to have taxes withheld because I wanted the full amount each week. Planning to save some of it for tax time instead. Might be risky but I need every dollar right now.

The whole tax situation with unemployment is so stressful when you're already dealing with job loss. At least in Washington we don't have to worry about state taxes on top of federal.

Make sure you keep all your Washington ESD correspondence and payment records. You'll need them for tax filing and sometimes for other purposes too.

wait so if i made like $30k at my job before getting laid off and then get $12k in unemployment, i pay taxes on the full $42k? that seems like a lot when the unemployment barely covers my rent

If you're really struggling financially there might be tax credits you qualify for that could help offset what you owe. Earned Income Credit, Child Tax Credit if you have kids, etc.

Another thing to consider - if you do odd jobs or freelance work while on unemployment, that income is also taxable and you might need to pay quarterly estimated taxes on it.

The tax withholding through Washington ESD is really convenient once you set it up. I did it after my first payment and it's been automatic ever since.

One more tip - if you're having trouble navigating the Washington ESD website or phone system, I also had success with that Claimyr service someone mentioned earlier. Really helped when I had questions about my claim that I couldn't get answered through normal channels.

Bottom line - unemployment is taxable income federally, Washington doesn't tax it, and having 10% withheld will save you from a big tax bill later. Pretty straightforward once you understand it.

glad you asked this question because i was wondering the same thing. this thread was super helpful for understanding the tax situation with unemployment benefits

Just wanted to add that if you end up owing taxes and can't pay them all at once, the IRS has payment plan options. Don't panic if you get a big tax bill - there are ways to handle it.

This whole discussion makes me glad I set up tax withholding from day one. Worth the slightly smaller weekly payment to avoid stress at tax time.

For anyone still reading this thread - I tried that Claimyr thing mentioned earlier when I couldn't get my tax withholding set up online. Worked great and the agent walked me through the whole process. Sometimes you just need to talk to a real person at Washington ESD.