UNEMPLOYMENT INSURANCE - TAX WITHOLDING

The NY State Department of Labor (DOL) has announced that claimants who are receiving NYS Unemployment Insurance (UI) Benefits can now voluntarily elect to have NY State Income Tax withheld from their UI benefit checks. Previously, only Federal Income Taxes could voluntarily be withheld.

Here are answers to FAQs from the NY State Department of Labor:

Are unemployment insurance benefits taxable?
Yes. Any unemployment compensation you receive is subject to Federal, New York State and Local income taxes provided you are required to file a tax return.

Is there tax relief available for UI claimants?
Yes. Under current legislation, the first $2400 of UI benefits paid in the year 2009 will be exempt from federal and state taxes.

Will any benefits be withheld for taxes? The withholding of benefits for Federal income tax or State income tax is voluntary. If you elect to have Federal tax withheld, an amount equal to 10% of your gross benefit payment will be withheld after mandatory deductions (such as child support payments), are made. If you elect to have State tax withheld, an amount equal to 2.5% of your gross benefit payment will be withheld. You can change this option any time by calling the Telephone Claims Center.

Can I change my tax withholding option?
You may start or stop the federal or state tax withholding at any time by contacting the Telephone Claims Center. If you are a new claimant, you can have opt for state income tax deductions at the time that you file online or by phone. If you have an open claim, then you would have to change your withholding options by calling the Telephone Claims Center.

Note: If you elect the Federal tax withholding option, you must have 10% withheld; you cannot have any less or any more than 10% withheld. If you elect the state tax withholding option, you must have 2.5% withheld; you cannot have any less or any more than 2.5% withheld.