I don't understand why I'm getting all of my withheld federal income tax from unemployment (1099-G) in my return. Shouldn't some of it have gone to the government?

[Beeeraden]

I opted to have 10% of my unemployment withheld. This was done (as indicated by the number in my Federal income tax withheld box), but according to my return, I'm getting my withheld income tax as part of my refund. Shouldn't the government have taken some of that?

[VolvoGirl]

Do you have any other income?  It's possible your tax is low and you could be getting some credits that reduced the tax due.  Did you enter in any Stimulus payments you got?  It maybe be giving you the Recovery rebate credit in 1040 line 30.

[rjs]

Your refund is not calculated separately for unemployment. Your tax return calculates the tax on your total income for the year, and adds up all the tax you had withheld from various income sources, including your pay and unemployment. The total amount of tax withheld is applied to the total tax on all your income. Your refund is the amount by which your total withholding exceeds your total tax. It's not a refund of the withholding from any specific source.

[Beeeraden]

I do know that the refund is contributed to from all income sources. My concern is that every single bit of the income tax withheld on my unemployment form is included in my overall refund, which seems crazy. To give an idea: I received just over 10k in unemployment compensation. I asked them to withhold 10%, which would be 1,002. The withheld tax comes to 989. Am I to believe that I was only taxed around 13 dollars on that unemployment total? That seems awfully low.

[VolvoGirl]

Where are you seeing the "withheld tax comes to 989"?

[rjs]

@Beeeraden 

You must have had some other income. If unemployment of a little over $10,000 was your only income, you would not pay any tax at all because your income would be less than your standard deduction. So what was your other income, and was tax withheld from it? You can't just look at the unemployment and your refund. But we cannot see your tax return, and you have not given us any other details.

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@Beeeraden wrote:

I asked them to withhold 10%, which would be 1,002. The withheld tax comes to 989.

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Do you mean that your refund is $989? It may be that it just happens to be around the same amount as the tax withheld from your unemployment, but there is no direct connection.

If you want us to try to analyze this further, if possible post a copy of both pages of your Form 1040 with all identifying information removed. This is a public web site. If you can't do that, tell us your filing status and the exact amounts on Form 1040 lines 1, 8, 9, 11, 12, 15, 16, 24, 25a, 25b, 25c, 25d, 33, and 34.

[Beeeraden]

@rjs  

When I started doing this years taxes on Turbo Tax, I filled out my unemployment before my W-2. TT keeps track of your refund as you go, as you know, and that’s how I know that the 989 is the withheld tax, as that’s all I had entered at the time. I entered my W-2, (the other income) but it was only about 1,200 for the year with around 44 dollars withheld in federal. So my overall refund is now up to ~1110 with that factored in. But that still doesn’t explain why I’m getting all of that unemployment withheld tax back, unless it just a case of me not making enough money to get taxed hard. 

[VolvoGirl]

Right, if your total income including unemployment is less than 12,400 you get all your withholding back.  And maybe more if you get any credits like the EIC or Recovery rebate credit.

[Beeeraden]

@VolvoGirl 

Where can I read more about this? I have another W-2 coming that will put my total income slightly over that 12,400 mark. What happens then? Will I still get a majority of the withheld back, or will that cause me to lose it?

OR will I only have to pay taxes (the 10% bracket) on the money I earned that is past the 12,400? Which is only likely to be a few hundred? 

[VolvoGirl]

Just wait until you have entered all your W2s and income.  You only owe tax on the amount over 12,400.  You pay tax on your taxable income (gross income - 12,400 Standard Deduction).

Here is the tax tables 

https://www.irs.gov/pub/irs-pdf/i1040tt.pdf