New York State changed 2020 tax return to include unemployment compensation I received. I declared this and had taxes taken out at the time of payment. Why do I owe now?

[xmasbaby0]

No one can see your tax return, and no one at TT gets any information from the state when the state changes something on your return.   However, New York continued to tax ALL unemployment on the state return even after the first $10,200 was waived from federal tax.

If you do not understand what NY did with your return you need to contact the state and ask them.

[rjs]

The tax that was withheld from your unemployment payments is not the tax on that income. It's just an advance payment towards the total tax that you will owe for the year, the same as tax withheld from your paycheck. Your tax return calculates your total tax on all of your income. Then it adds up all the tax that was withheld during the year, from paychecks, unemployment, or anywhere else. If the total tax withheld is less than your total tax for the year, you have to pay the difference.

Did you have state tax withheld from your unemployment, or only federal tax? State tax withheld would be in box 11 of your Form 1099-G.

[msemler93-gmail-]

yes i have a total withheld in box 11 on my 1099-G

[rjs]

So the total New York tax that you had withheld from your unemployment, plus any other New York tax that you had withheld anywhere else, was not enough to cover your total New York tax for the year. It's not specifically for the unemployment. The total tax on your tax return is calculated on all your income: unemployment plus any other income that you had. The total tax that was withheld from all sources is applied to the total tax on all your income. Since we can't see your tax return, we have no way of knowing where you might have had inadequate state withholding.

[msemler93-gmail-]

interesting, ive never had an issue filing 0 exemptions with any of my other returns and doing the same for the unemployment. This is why im confused why such a large number (obviously undisclosed) is being requested. 

[rjs]

In your original question you said that New York changed your tax return to include the unemployment that you received. I assume that means that you must have omitted the unemployment when you filed your tax return, which means that you didn't enter your 1099-G at all. If you didn't enter your 1099-G, the state tax withheld was not entered in your tax return. When New York added the unemployment income to your tax return, did they also add the tax withheld in box 11 of your 1099-G? If they did not add the withheld tax, that's why you owe so much now. They are not giving you credit for the tax that was withheld from your unemployment. You have to get them to add the withheld tax. Look in the notice that you got from the state for instructions for what to do if you don't think that their changes are correct.

If you didn't enter your 1099-G when you filed your 2020 tax return, then the unemployment income was also not included in your federal tax return. If the gross unemployment compensation, box 1 of the 1099-G, is more than $10,200, the IRS is going to be asking you for more money too. Even if box 1 is not more than $10,200, if you didn't enter the 1099-G, any federal tax withheld in box 4 of the 1099-G was not included in your federal tax return. So you should file an amended federal tax return to add the 1099-G if box 1 is more than $10,000 or there is any amount at all in box 4. It's better to do that now than to wait until you get a notice from the IRS. If the federal withholding was omitted, you might actually be entitled to an additional federal refund.

If you did enter your 1099-G when you prepared your tax return, why did New York have to add the unemployment?