If you lost your job in 2011, or spent the full year on unemployment, there are some things you’ll need to know before you file your federal and state income taxes. Remember that unemployment benefits count as income, so you will need to file taxes before the end of April or face the wrath of the IRS.
File Your Return
The first step in staying out of trouble with the IRS is in actually filing your return. You would be surprised at the number of people who don’t file, not realizing that unemployment benefits are considered income, just like paychecks.
Understand Taxable Income
If you are receiving food stamps or other types of public assistance, these monies may or may not be taxable depending on the state in which you reside. Be sure to consult the IRS website or your tax advisor so that you claim all of your income correctly.
Deduct Job Search Expenses
If you have paid someone to prepare your resume, traveled to attend a job interview or even mailed applications, any expenses incurred are tax deductible. You cannot, however, deduct clothing or personal care items.
Health Care
If you lost your health insurance when you lost your job and have had to pay your premiums on your own, you can deduct these expenses in certain circumstances. Namely, your medical expenses must exceed 7.5 percent of your Adjusted Gross Income.
Educational Expenses
If you returned to school for a degree or trade in order to make yourself more employable, don’t forget that you may be able to deduct expenses or that you may even qualify for a tax credit. There are a myriad of credits for students; be sure to consult the IRS website to find out what you may qualify for.
Know Your Credits
There are credits for which you may be eligible:
- Earned Income Tax Credit: if you have a low paying job and are supporting at least one child, you may qualify for the earned income tax credit. The more children you have, the higher your benefit.
- Child Tax Credit: as a parent, you are eligible for a $1000 tax credit for each qualifying child who has not yet reached 18 years of age.
- Child and Dependent Care Credit: this credit is dependent upon your income but you may qualify if you have to pay childcare expenses in order to maintain your employment.
- Savers Credit: if you have paid into a retirement account and are a low-income taxpayer, you may be eligible for a tax credit of up to $1000.
Losing your job is stressful and, at times, overwhelming. If you lost your job and received unemployment benefits, you will still need to file your federal and state taxes. It’s important that you do so as early as possible. Remember that if you end up owing money to the government, the IRS will work with you in creating a payment plan. You may even consider taking a payday loan to pay your debt.
Don’t neglect to file your taxes this year. Doing so will only get you into hot water with the government and heighten your level of stress.
Author Thomas Hathaway is a financial consultant and content contributor to a payday loans site providing information and advances when you may need money before your regular paycheck arrives.
