Ask The EDD Lawyer – Tax Tips On EDD Unemployment Benefits Part 2

By Robert S. Schriebman

April 30, 2015

Introduction

This is Part Two of a Two Part series dealing with Unemployment Insurance (UI) Benefit Claims from the point of view of the EDD UI benefit recipient.

There is not a week that goes by when we do not receive several calls seeking help for issues relating to EDD Unemployment Insurance Benefits (UI). We do not usually handle these types of cases because we are an EDD tax controversy office. However, we have learned much from our callers and I want to pass on to you some of the tax tips and real world strategies we have learned. This article will discuss the taxability EDD UI benefits.

EDD UI Benefits Are Taxable

EDD UI benefits are important and they provide much needed relief in an economy that has not made significant improvements since the crash of 2008. But did you know that EDD UI benefits are taxable. Here are a few important tax tips involving EDD UI benefits:

Unemployment Benefits Are Taxable

You must include all EDD UI compensation as income on your IRS and FTB tax returns. You should receive a Form 1099-G. This form will show the amount paid to you and the amount of any income tax withheld.

Check IRS Publication 525 “Taxable and Non Taxable Income”

There are various types of UI benefits payable under federal and state laws. The treatment of these benefits may be complicated. IRS Publication 525 is available online free of charge. Visit IRS.gov and look under publications. You can view, download and printout this publication at no charge.

Union Benefits May Be Taxable

You must include benefits paid to you from regular union dues in your income. You may have also contributed to a special union fund and those contributions are not deductible. In that case you only include as income any amount you received that was greater than the contributions that you made.

You May Have Tax Withheld

Both the IRS and FTB allow you to withhold taxes from your EDD UI benefits. Use IRS form W-4V “Voluntary Withholding Request.” If you do not elect to have withholdings you may need to make estimated tax payments throughout the year.

We get calls from people who have entered into installment payment agreements to pay back taxes only to have lost their job after only making a few installment payments. These people no longer can afford to make their monthly installment IRS or FTB payment. They are frightened and confused. They are afraid to notify the IRS or FTB because they are afraid that enforced collection action will be taken against them. So, they elect not to communicate with the IRS or FTB. This is a big mistake. Both the IRS and FTB have call sites where you can inform them of your current situation and request relief. If you do not communicate with the IRS or FTB you run the risk of having a defaulted installment payment agreement on your record. This may prevent you from establishing another agreement in the future. Please take the initiative and call the IRS and FTB to let them know what is going on in your life. If you simply default on your agreement you run the risk of bank account levies and drastic collection matters. Both governmental agencies can place “stays” on your matter for several months at a time. If you find work it is up to you to notify the IRS and the FTB to resume or modify your payment arrangement.

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Robert Schriebman has a successful practice in the Rolling Hills Estates area of Los Angeles County serving clients throughout California and the United States. He has successfully dedicated more than 40 years to helping individual taxpayers, business owners, CPAs, Enrolled Agents, and tax attorneys navigate the complicated tax systems of the federal and state governments.

Robert Schriebman has written the only 2 books ever published dealing with how California Employment Development Department (EDD) operates. See “California Tax Collection Practice and Procedures” and “California Taxation Practice and Procedure”, both published by Commerce Clearing House.

Robert Schriebman has written over 20 books including the major manual used nationally by practitioners and the IRS, “IRS Tax Collection Procedures – A Manual for Practitioners” published by Commerce Clearing House.

Robert Schriebman has written over 20 books including the major manual used nationally by practitioners and the IRS, “IRS Tax Collection Procedures – A Manual for Practitioners” published by Commerce Clearing House in addition to the only 2 books ever published dealing with how California Employment Development Department (EDD) operates. See “California Tax Collection Practice and Procedures” and “California Taxation Practice and Procedure”, both published by Commerce Clearing House.