Turbotax incorrectly calculated unemployment taxes from 1099-G, what should I do?

[kashou]

There are no California taxes on unemployment benefits, but Turbotax calculated a big chunk in state taxes. Additionally, Turbotax calculated over 24% of federal taxes on my unemployment benefits, which far exceeds my bracket. What should I do?

[DoninGA]

Unemployment compensation on a 2022 federal tax return is taxable.

What is your taxable income on the IRS Form 1040 Line 15 and what is the tax on the taxable income on Line 16?

[VolvoGirl]

Turbo Tax doesn't tax you on each kind of income but on the total income.  So all your income must have pushed you into a higher tax bracket.

[MonikaK1 · Accepted solution]

If you enter your Form 1099-G in TurboTax and identify it as unemployment compensation, TurboTax will automatically enter it in California Schedule CA as a subtraction from income when you prepare your California return, in Section B, Line 7.

Check the unemployment section under Wages & Income in the Federal section to confirm that it was entered correctly.

See this article for instructions on how to preview your returns before filing.

To check your Federal tax bracket and marginal tax rate, use this TurboTax tool.

[kashou]

Monika, you are right. I had mistakenly entered the 1099-G under "other 1099-G", because I missed the dedicated section for unemployment. Under Unemployment section, the Easy Steps flow did not give me the option to select "unemployment compensation", it forced me to choose among categories that did not apply to unemployment benefits, such as "taxable grants", "agriculture payments", etc. I think that when user selects a wrong category, that causes miscalculation on state taxes. Fortunately, I was able to enter the numbers directly into box 1 using "Forms". Box 1 is for unemployment benefits. Not sure why TT does not include Box 1 into Easy Steps. It seems to be a bug.