Washington ESD unemployment taxes - confused about what I owe and when

Yes, unemployment benefits from Washington ESD are considered taxable income by the IRS. You should have received a 1099-G form from Washington ESD showing how much you received in benefits. The state of Washington doesn't have state income tax, so you only need to worry about federal taxes. You can choose to have taxes withheld from your weekly benefits by updating your account settings.

I made the same mistake last year - didn't realize UI benefits were taxable until I got my 1099-G. Ended up owing like $2,800 in taxes. Now I always have them withhold 10% from my weekly claims.

This is actually a super common issue that trips people up. If you need help getting through to Washington ESD to set up tax withholding or get copies of your 1099-G, I had success using Claimyr (claimyr.com) to actually reach an agent. They have this demo video (https://youtu.be/7DieNd3C7zQ) that shows how it works. Saved me hours of trying to call.

Wait, do we pay taxes on ALL unemployment benefits or just certain types? I was on standby status for part of my claim.

The whole tax situation with unemployment is such a nightmare. They should make this clearer when you first apply. I've been scrambling to figure out how much I owe and whether I need to file quarterly payments.

I'm confused about the 1099-G form. When does Washington ESD send these out? I haven't gotten mine yet and I'm worried it got lost in the mail.

ugh this is exactly why I hate the unemployment system. They give you money when you desperately need it then hit you with a tax bill later. feels like a cruel joke

For anyone still confused about this - unemployment taxes work just like regular income taxes. The money you receive from Washington ESD gets added to your other income for the year, and you pay federal income tax on the total amount based on your tax bracket. The only difference is that no Social Security or Medicare taxes are taken out of unemployment benefits.

Pro tip: if you're still receiving benefits, set up that 10% federal withholding NOW. Don't make the same mistake I did and get hit with a huge bill at tax time. It's so much easier to have it taken out gradually.

Does anyone know if there are penalties for not having taxes withheld from unemployment? I'm worried I might owe penalties on top of the taxes.

I had to call Washington ESD to get clarification on my 1099-G because the amounts didn't look right. Used that Claimyr service someone mentioned earlier and actually got through to a real person. They were able to explain the discrepancy - apparently overpayments that got deducted don't show up the way I expected.

just a heads up for everyone - make sure you keep records of any job search expenses if you're itemizing deductions. things like mileage to interviews, resume printing, etc. can sometimes be deductible even though you were on unemployment

The timing of unemployment taxes can be tricky too. If you received benefits in December but the payment actually hit your account in January, it might affect which tax year it counts for. Always go by when Washington ESD says the payment was issued, not when you received it.

What about people who had to pay back overpayments? How does that work for taxes? Do you get to deduct the amount you paid back?

I'm still getting weekly benefits but also started a part-time job. Do I pay taxes on both the unemployment and the job income?

For anyone who's really stressed about this - remember that unemployment benefits are there to help you when you need it most. Yes, you'll owe taxes, but it's still money that helped you pay rent and buy groceries when you needed it. Don't let tax anxiety overshadow the fact that the system worked for you.

One more thing about Washington ESD and taxes - if you moved to Washington from another state during your benefit year, you might have tax obligations in both states depending on where the benefits were earned. It can get complicated with partial year residency.

Thanks everyone for all this info. I was completely clueless about unemployment taxes and now I feel like I have a handle on what to expect. Going to set up that 10% withholding first thing tomorrow morning.

Just wanted to add that if anyone needs help reaching Washington ESD to set up tax withholding or get tax documents, that Claimyr thing really does work. I was skeptical at first but it beats sitting on hold for hours. Worth checking out their demo at least.