6 Tax Tips for the Unemployed

As you juggle LinkedIn, classified ads and resume critiques, keep in mind that your unemployment income is taxable.

If you’re wondering if you need to file a prior year tax return for a year you were unemployed in,  the answer is yes.

Don’t look at unemployment as a free pass from taxes. In fact, if you’ve ever searched for a job, you know it can start to feel like a full-time position. Consider it that; your job for the time being. You are earning an income for the job search you are on. You’ll need to report that income you’re earning on a  tax return and pay tax on it.

Chances are, you’ll not only need to report unemployment on a federal return, but on your  state return as well.

Get caught up and file a late tax return

As you now know, the IRS considers unemployment benefits as taxable income. Therefore, you will need to report this income on your tax return.

If you never filed a return in a previous year that you were unemployed, you’ll still need to do so. Fortunately, you can file a late tax return with PriorTax.

That means if you didn’t have enough money to file your taxes in a prior year or had no idea you needed to file, you’ll still be able to do so.

Do I need to report unemployment benefits on my federal AND state tax return?

As with most tax circumstances, each state likes to take their own approach when handling taxpayers. While some states require residents to report unemployment benefits, others do not.

Most states mimic federal law and require residents to report unemployment benefits received. When getting caught up on your late taxes and reporting prior year unemployment income, plan on filing both a state and federal tax return.

However, if you live in one of the following states, you won’t need to report unemployment income or pay tax on it, as they fully EXEMPT unemployment benefits:

1. Alabama
2. Arkansas
3. California
4. Montana
5. New Jersey
6. Pennsylvania
7. Virginia

Indiana and Wisconsin partially exempt unemployment benefits.

Tax tips for the unemployed

Here are six tax tips you’ll want to keep in mind when reporting your unemployment income on your taxes:

1. If you received unemployment benefits,  you should have received Form 1099-G, showing the amount you were paid.
2. Supplemental unemployment benefits received from a company are 100% taxable.
3. The IRS is willing to set up a payment plan if you can’t pay your entire tax bill at once.
4. If you don’t pay your tax due, you could be jeopardizing your future refunds.
5. Some state unemployment benefits are taxable while other’s aren’t.
6. If you received unemployment compensation, you may be required to make quarterly estimated tax payments.

 

Get your late tax return out of the way today

Being unemployed isn’t ideal for most. The last thing on your mind is filing a tax return. However, it’s the law. After all, unemployment compensation is considered a replacement to your wages.

The good news is that you can get caught up and finally report that unemployment income with PriorTax.

Not only can you prepare your back taxes online, you’ll also have support from the PriorTax team who is available via phone, chat or email to help you!

What are you waiting for? Get started today!

This entry was posted on Tuesday, September 30th, 2014 at 7:36 pm and is filed under Tax and Life Changes, Tax Tips and Tricks. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.