What withholding means and why you might want it

When you receive unemployment benefits in Georgia, you can choose to have federal income tax withheld from each payment. This means the Georgia Department of Labor sends a portion of your check to the IRS instead of to you. You are not required to do this — it is optional. The choice is yours to make when you file your claim or to change later.

Withholding does not reduce the total amount you are owed. It only changes when you pay the tax. If you withhold now, you pay less (or nothing) when you file your tax return next year. If you do not withhold, you keep the full payment now but will owe the full tax amount when you file.

The standard withholding rate for federal unemployment is 10 percent of your weekly benefit amount. Georgia does not have a state unemployment income tax, so there is nothing to withhold for the state.

Key Takeaways

  • Withholding removes 10 percent from each unemployment check and sends it to the IRS, reducing what you owe at tax time next year.
  • You choose whether to withhold when you file your initial claim, and you can change your choice at any time through your Georgia Department of Labor account.
  • If you do not withhold, you will owe the full federal income tax on your benefits when you file your return, which can be a large bill if you received benefits for several months.
  • Withholding is most useful if you know you will owe taxes anyway or if you prefer to spread the cost across multiple paychecks rather than pay a lump sum later.

When withholding makes sense for your situation

Withholding is worth considering if you had other income during the year — from a job, self-employment, rental property, or investments. Unemployment benefits are taxable income, and if you combine them with other earnings, your total tax bill can be substantial. Withholding spreads that cost across the months you receive benefits instead of hitting you with one large payment in April.

Withholding also helps if you do not like surprises. Some people find it easier to have taxes removed automatically than to set money aside themselves. If you know you tend to spend money as it arrives, withholding forces you to pay your tax obligation without thinking about it.

You should also consider withholding if you received a large amount in benefits over several months. A person who collected unemployment for six months might owe $1,500 to $3,000 in federal tax, depending on their benefit amount and other income. Withholding 10 percent from each check means you are paying that bill gradually rather than all at once.

When you might skip withholding

You do not need to withhold if your only income for the year is unemployment benefits and that income is low enough that you will not owe federal tax. This depends on your filing status and age. For 2024, a single person under 65 with no other income owes no federal tax on the first $14,600 of income. If your unemployment benefits fall below that threshold, withholding just delays money that you will get back anyway.

Skipping withholding also makes sense if you prefer to manage your own tax payments or if you want the full amount of each check now. Some people use the extra cash to cover immediate expenses and plan to pay the tax bill from other sources when it comes due.

Keep in mind that if you do not withhold and you owe taxes, you will need to pay the full amount by April 15 of the following year. The IRS does not accept payment plans for small tax debts without a formal request, so you need to be certain you can pay the bill when it arrives.

How to start or stop withholding

You make the withholding choice when you file your initial unemployment claim with the Georgia Department of Labor. The form asks whether you want federal income tax withheld, and you check yes or no. If you do not decide at that time, the default is no withholding.

You can change your withholding choice at any time after you file. Log into your Georgia Department of Labor account online, find the section for tax withholding or payment elections, and update your preference. The change takes effect on your next payment. You do not need to call anyone or submit a form — the online system handles it immediately.

If you have trouble finding the withholding option in your account, call the Georgia Department of Labor at 1-844-600-0381. They can tell you your current withholding status and help you change it if you want to.

What happens at tax time if you withheld

If you chose withholding, the Georgia Department of Labor sends you a Form 1099-G in January or early February. This form shows the total unemployment benefits you received and the total federal tax withheld. You report both numbers on your tax return.

When you file, the IRS compares the tax you withheld to the actual tax you owe based on all your income. If you withheld too much, you get a refund. If you withheld too little, you owe the difference. In most cases, 10 percent withholding is close enough that you either break even or get a small refund, but this depends on your total income and filing status.

What happens at tax time if you did not withhold

If you did not withhold, your Form 1099-G will show zero tax withheld. You still report the full unemployment income on your return. When you calculate what you owe, the IRS will expect payment for the full tax on those benefits.

You can pay this amount when you file your return, either by check, electronic transfer, or credit card. If you cannot pay the full amount, you can request a payment plan through the IRS, though this involves fees and interest. The sooner you pay, the less interest you accumulate.

The math: an example

Suppose you received $400 per week in Georgia unemployment benefits for 20 weeks, totaling $8,000. Your federal tax on that income, assuming it is your only income and you are single, would be roughly $800 to $1,000 depending on other factors.

If you chose withholding at 10 percent, you would receive $360 per week instead of $400. Over 20 weeks, you would have $800 withheld. When you file your tax return, you would owe close to $800, so the withholding covers most or all of it. You might owe a small additional amount or receive a small refund.

If you did not choose withholding, you would receive the full $400 per week. At tax time, you would owe the full $800 to $1,000 in one lump sum. If you spent the extra $40 per week as it arrived, you might not have the money set aside to pay the bill.

Frequently Asked Questions

Can I change my withholding choice after I start receiving benefits?

Yes. You can change your withholding choice at any time through your Georgia Department of Labor online account. The change takes effect on your next payment. If you need help making the change, call 1-844-600-0381.

What if I withheld taxes but then my benefits were reduced or stopped?

The withholding stops when your benefits stop. When you file your tax return, report only the benefits you actually received and the tax actually withheld. If you withheld more than you owe, you will receive a refund.

Does Georgia withhold state income tax from unemployment?

No. Georgia has no state income tax on unemployment benefits. The only withholding available is federal income tax at 10 percent. You do not have a state tax bill to worry about.

What if I owe other taxes and want the withholding to cover them?

Withholding from unemployment only covers tax on the unemployment income itself. It does not reduce tax you owe from other sources. If you owe taxes from a job or self-employment, you need to handle that separately through estimated tax payments or additional withholding from a paycheck.

Is there a way to withhold more than 10 percent?

No. The Georgia Department of Labor system only allows 10 percent withholding or no withholding. If you want to set aside more money for taxes, you would need to do that yourself by saving a portion of each check.