Washington ESD unemployment compensation - what is the taxable amount on my benefits?

Oh wow, so the full amount? I was hoping maybe some of it wasn't taxable. That's going to be a big tax hit.

Unfortunately yes, 100% of UI benefits are taxable. The good news is you can still set up a payment plan with the IRS if you can't pay it all at once.

At least I'm not alone! Did you end up owing a lot when you filed?

haven't filed yet but my tax software is showing I owe about $2100 between federal and state. Ouch.

I wish I had known this earlier! Is it too late to start having taxes withheld from my remaining payments?

No, you can change your tax withholding election at any time. Just log into your SAW account and update your payment preferences. It will apply to all future payments.

This is really good advice. I'm dealing with trying to reach Washington ESD about updating my withholding but their phone lines are always busy. I've been trying for days and keep getting disconnected. Anyone know the best time to call?

I had the same problem reaching them until I found claimyr.com - it's a service that helps you get through to Washington ESD agents. They have a video demo at https://youtu.be/7DieNd3C7zQ showing how it works. I was able to update my tax withholding the same day I used it.

What did you do when you realized you owed taxes on it?

Had to set up a payment plan with the IRS. It wasn't fun but they were reasonable about letting me pay it off over time.

Yes, Washington ESD is required to send 1099-G forms by January 31st for all unemployment benefits paid in the previous tax year. You should receive it soon if you haven't already.

Thanks! I'll keep an eye out for it. This is my first time dealing with unemployment taxes.

That's helpful to know! Fortunately I haven't had any overpayment issues, but good info for others.

This happened to me. Had to repay $800 in overpayments but it did reduce my tax liability. Make sure you keep records of any repayments.

That was only for 2020 tax returns and only up to $10,200 of unemployment benefits. For 2024 and going forward, all unemployment compensation is fully taxable again.

Right, I just think they should make this clearer when people first apply for benefits.

How do I figure out how much to pay in estimated taxes?

You can use the IRS estimated tax worksheet or talk to a tax professional. Generally you want to pay in at least 90% of what you'll owe to avoid penalties.

Yes, the Federal Pandemic Unemployment Compensation (FPUC) was fully taxable when it was being paid out. Any federal unemployment supplements are treated the same as regular state unemployment for tax purposes.

Thanks, that's what I was afraid of. Looks like I need to amend some old returns.

That's reassuring. I was worried about calculating it wrong.

Yep, the software handles all the calculations. Just make sure you enter the 1099-G amounts exactly as shown on the form.

I mentioned this earlier but I'll say it again - Claimyr really helped me get through to Washington ESD when I needed to verify my benefit information. Much better than spending hours trying to call yourself.

I'm usually skeptical of these services but at this point I'm desperate. I'll check out that video demo you mentioned.

I used Claimyr last month for a different issue and it worked great. Got connected to an actual person at Washington ESD within a few hours instead of calling for days.

I didn't have much other income this year since I was unemployed most of it. Does that mean I'll pay less tax on the unemployment?

Possibly, yes. If your total income for the year is lower, you'll be in a lower tax bracket. The unemployment benefits are just added to whatever other income you had.

Washington state doesn't have income tax, so I think I'm okay on that front.

Oh right, you're lucky then! Just federal taxes to worry about.

I agree completely. Most people don't realize they need to plan for taxes on their benefits.

It's especially hard when you're already struggling financially and then get hit with a tax bill on top of it.

Good to know there are options if I can't pay it all at once. Thanks for mentioning that.

Yeah, the IRS is usually pretty reasonable about setting up payment plans if you're proactive about contacting them.