Unemployment and Taxes

This blog was written by our guest blogger Andrew Brusnahan

As the old say goes,
there are two things that are certain in life—death and taxes.
The same holds true even if you are unemployed. However, while taxes seem like
something more to gripe about in the midst of unemployment, they can actually
result in a decent refund check, that is, if you know what you are doing.

One mistake that many who are enduring unemployment
make is neglecting to file taxes because they feel as though they do not have a
legitimate income. However, does an unemployment check or severance package not
count as income? The truth behind the matter is, yes. Both a severance package
and those monthly unemployment checks are taxable. The first $2400.00 from
unemployment does not have to be taxed, but as soon as you move beyond that
point, you will have to fill out a 1099-G. This form will help you figure out
what taxes you owe, as well as what you were paid and any withholdings you
chose to have (or not have) taken out. The same is true for a severance package
you may have received from your previous employer.

Naturally, while on unemployment, you are supposed to
be on the prowl for another job. When it comes to job searching and filing
taxes, there are quite a few items that can be deducted. Let’s face, finding
another job can be costly. You could have spent money having your resume
properly prepared, purchased a surplus of envelopes and stamps to mail said
resume, traveled to other cities which resulted in gas and lodging
expenditures, even calls made to employment prospects. All of these things
could be deductible when you file your taxes. If you have no idea what can be
deducted or if you are eligible for any tax breaks or credits, look into a
free
IRS efile, which is offered by many accredited sources. You should be
able to get an idea of just what to expect when filling out your tax forms,
whether a deduction or a tax credit.

Speaking of tax credits, unemployment may have opened
the doors for you to be eligible for some. Tax credits are usually not as
abundant for those in society who make what would be considered a higher
income. However, unemployment generally means that you are not making as much
as you used to which means you may be eligible for the Earned
Income Tax Credit. This credit is for people who have lower wages and
cuts down on the amount of taxes you might owe. Furthermore, if you have
children, you may be eligible for another tax credit—the child tax credit. If
you are unaware of what credits you may be able to take advantage of, do some
research online, or speak with a tax professional.

Sadly, it seems as though death is the only way to
avoid taxes. However, filing taxes does not have to mean the end of the world,
even if you are unemployed. In fact, you may end up getting a decent refund
check. Moreover, there are all kinds of credits and deductions that you may be
able to mark on your tax forms that save (and maybe even make) you more money.

© 2011 Andrew Brusnahan

Unemployedwoman.com would like to thank Andrew for his guest blog.