It’s stressful enough that you’re unemployed, even more so if you still have to deal with the cruelest time of the year - the month of April. Imagine yourself facing the Internal Revenue Service while only receiving an unemployment check from the government and having to pay your mortgage, credit card bills, and groceries. Needless to say, being out of work for months or sometimes for a year and lining up to every job fair there is in town while thinking about your tax obligation, is a pretty difficult and frustrating situation.
In spite of your financial difficulties, there is some good news you need to learn about. You just have to be savvy about tax deductions and credits if you want to significantly lessen your tax obligations and in some cases, avoid the IRS until you find a job.
Here are the following essential tips you might want to look into as an unemployed taxpayer:
Find Out if You Qualify for the Earned Income Tax Credit
Unfortunately, not so many people know about Earned Income Tax Credit. Even though there were 27 million eligible workers and families who received more than $65 billion, with an average credit of $2, 455 last year, the IRS is expecting more people to take the credit supposedly.
To find out if you qualify, you must fall into the following categories:
Take Advantage of Tax-Free Government Benefit Programs
The federal, state, and local governments every year distribute 1.8 trillion in benefits. There are government benefit programs from money for food to health care plans that can help reduce your everyday expenses. Here are just some of the money-saving benefits you should check out:
Deduct Your Job Search Expenses
While searching for a job, your common expenses like referral fees, resume preparation costs, traveling fees, and relocation costs can be deducted as job search expenses provided they meet the requirements. One of the requirements states that the job you’re looking for must be within your current profession. If you’re a first-time job seeker, you will not qualify for the deduction. You also won’t be able to deduct your expenses if there was a substantial break between the end of your last job an the time you begin looking for a new one.
Consider a Home Office Deduction
You may want to consider jobs like freelancing or being a paid contractor working at home as it may qualify you for a home office deduction. The IRS allows people who work at home to deduct mortgage interest, insurance, utilities, maintenance, and cleaning, repairs, and depreciation if you’re using a specific space in your house solely for business purposes. The amount of money deductible will depend on the size of the office relative t the overall square footage of the home. If calculating the expenses is difficult for you, the IRS offers a home office deduction of up to $, 500 based on $5 per square foot at home solely used for business purposes.
File Your Taxes Anyway
It’s wrong for taxpayers to think that they no longer have to pay taxes just because they weren't able to work the previous year. Once you collected unemployment benefits, the IRS will still require you to pay taxes for them. Those who are unemployed for all or part of 2016, a Form 1099-G is provided to them showing how much unemployment you need to report on your tax return. The amount you owe will depend on whether your taxes were withheld from your unemployment benefits. Most taxpayers opt to receive their full benefits from being unemployed right away which can be understandable because you need the money to find work and survive while doing so. Opting to have taxes withheld, however, can offset the amount you owe, or you may qualify for a tax refund.
