7 Tips for Filing Taxes if you were out of work last year: If you are unemployed, or experienced any period of unemployment last year, filing your taxes might be the last thing on your mind. (Talk about pouring salt on a wound, if you owe money!)
Since you do still need to file your taxes, make sure you do it right, and get every unemployment-related deduction that you can. Here are some important things to consider:
Here are 7 useful tips for those who collected unemployment last tax year:
- If you received any unemployment compensation / benefits, this money is fully taxable, and you have to report it on your federal & state taxes
- Your state reports this amount on form 1099G
- If you elected to have taxes withheld from unemployment compensation, this will also be reported on the 1099G form
- To reduce what you might owe the IRS (or to increase your Federal refund) consider deductions on your return, such as the cost of looking for a job such as relocation or travel (applying for jobs, or going to interviews) as well as the cost of applying for jobs including mailing resumes, (stationery, printing, inkjet cartridges, stamps, etc) or any fee you may have paid to an employment agency.
- If you were unemployed and made an early withdrawal from your IRA, you may be exempt from the normal 10% penalty if it was for an acceptable reason, like paying medical insurance premiums; (probably not pet medical expenses though!)
- If you weren’t able to pay your taxes due to your unemployment, you can request a reduction in the amount of taxes that you owe, or set up a monthly payment plan for your taxes
If you’re getting nervous that you might forget one of these tips, have no fear. Top tax filing names like Turbo Tax and H&R Block are on top of their game, and they walk you through the process step by step. This is a great reason not to go cheap (or a second-rate “free efile” brand) when it comes to filing your taxes online. That $20-75 you spend on software (depending on whether you buy a “Basic Edition” or Deluxe) might get you $1000 more on your tax refund!