Washington ESD unemployment taxes - what taxes do you pay on unemployment benefits?

Thanks! So if I'm getting $650/week that would be about $65 withheld each week for federal taxes if I choose the 10% option?

Exactly right. The 10% withholding is optional but it can help you avoid owing a big chunk at tax time, especially if you're in a higher tax bracket.

Ouch! That's exactly what I'm trying to avoid. Did you have any trouble getting through to Washington ESD to set up the tax withholding?

The phone system is a nightmare. I spent hours trying to get through. Actually ended up using this service called Claimyr that helped me reach an agent - you can check it out at claimyr.com. They have a demo video at https://youtu.be/7DieNd3C7zQ that shows how it works.

This is important to understand. If you're normally in a 22% tax bracket, that 10% withholding won't cover your full tax liability on the unemployment income.

Good point. I think I was in the 12% bracket last year before I lost my job, so 10% should be pretty close.

Perfect, I'll look for that option when I file my claim this Sunday. Is it under the payment preferences or somewhere else?

It should be in the weekly claim filing process itself, not in your account preferences. You'll see a question about tax withholding when you're going through the weekly claim questions.

Thanks for the reminder! I'll make sure to watch for that form in January.

That's a good point I hadn't considered. I'm hoping to find work soon so I should probably plan for that scenario.

Yeah this happened to me. Got a job in September after being on unemployment for 6 months and ended up owing way more in taxes than I expected because the combined income put me in a higher bracket.

While employers do pay into the unemployment insurance system, the benefits you receive are still considered income replacement by the IRS, so they're taxable just like regular wages would be.

I guess that makes sense, even though it feels like double taxation somehow.

How much does something like that cost? Seems like we shouldn't have to pay extra just to reach our own unemployment office.

I hear you on the frustration. The service was worth it for me because I needed to resolve an issue quickly. You can see how it works on their site at claimyr.com before deciding.

Good advice! I'll screenshot my payment history once I set up the withholding so I have my own records.

Tax withholding elections only apply to future payments, not retroactively. So if you've already received 8 weeks of benefits without withholding, you'll need to plan for those taxes separately.

Thanks! That's what I figured but wanted to confirm.

If you expect to owe more than $1,000 in taxes when you file your return, you should probably make estimated payments to avoid underpayment penalties. The IRS has safe harbor rules though - if you pay 100% of last year's tax liability through withholding and estimated payments, you won't get penalized.

That's helpful context. I think I need to dig out last year's tax return and do some calculations.

Yes, exactly. If you elect 10% federal tax withholding on $650 in weekly benefits, you'll receive $585 in your direct deposit and $65 will be sent to the IRS on your behalf.

Perfect, that's what I needed to know for my budget planning. Thanks!

Wow, that's something I never would have thought of. Good to know in case I end up relocating for a job.

Thanks for explaining how that works. I've never received a 1099-G before so this is all new to me.

Good reminder. I usually use TurboTax and they have a specific section for unemployment income that's pretty straightforward.

Fortunately unemployment is my only income right now, but that's definitely something to keep in mind if I pick up any gig work while job searching.

Good to hear a success story. I'm hoping I can handle the tax withholding setup online, but it's nice to know there are options if I run into issues.