Tips for Paying Taxes While You’re Unemployed
If you are one of the many Americans that have found themselves unemployed this year, you have already experienced a major decrease in your monthly income. You may also be concerned about additional financial implications that not working could have on your annual taxes. The key, as with most tax issues, is to plan ahead and take control over your tax situation so that you are not surprised by the unexpected at the last minute.
Do not worry…we have pulled together some of the key tips for getting a handle on how your unemployment status could impact your taxes:
1. Remember the Basics
Because you are unemployed and have not received the same amount of income as in previous years, you may (mistakenly) feel like it is not as important to complete your tax return on time or at all. Regardless of your employment status, it is critical to file and to do so on time. The IRS will be looking for your return if you made $10,000 or more (filing single) or $20,000 or more (filing jointly). Your employer will report this salary information to the IRS. Your income from the year also includes any severance or other payouts so you will want to take that into account. Remember, too, that there is a decent chance that you could actually find that you are due a refund!
2. Special Deductions
There are some additional deductions that you might be eligible for, so do not forget to itemize your return and deduct in all of the categories that you can. The most relevant deductible expenses may be related to your job search including travel costs for job interviews, resume preparation, fees for using an employment agency and postage and mailing costs.
3. Tax Credits
This may also be a great time to look at the possible tax credits that you may be eligible for, including the earned income tax credit, the savers credit, the child tax credit and the child and dependent care credit. These tax credits help your return dollar-for-dollar so do not forget to claim them if you can.
4. Taxes on Unemployment
We would be remiss if we did not mention that the IRS will tax any unemployment compensation that you receive in a given year. You should be on the lookout for Form 1099-G, which will list the amount of unemployment that you received in the previous year.
5. Take Advantage of Your State’s Tax Free Benefits
Many states do not tax food stamps or other state public assistance, so find out if you qualify for these benefits in your state.
Get Some Help
If you have found yourself facing unemployment this year and have more questions about how this might impact your tax return, give Success Tax Relief a call at (877) 958-6638. Our trained professionals understand how difficult this process can be and can offer sound advice and help you keep the most money in your pocket at this difficult time.