Unemployment and Taxes
When you're not working you have no income.
You might have savings to draw from but you don't have to worry about income taxes from those sources unless you are drawing from a pre-tax fund.
If you are drawing from retirement or 401K accounts, you might have to pay taxes against the funds you are withdrawing.
So, be careful and know what you are doing before you begin drawing money from pre-tax accounts to help you through unemployment.
Things are difficult enough when you are looking for work, you don't need to put yourself in a situation where you are going to owe the Internal Revenue Service at tax time.
Also, remember to keep records of all your expenditures that are even remotely related to looking for a new job.
Transportation costs when going to interviews are tax deductible, whether the travel is across town or across the country.
If you are traveling any appreciable distance for an interview, your air travel and lodgings become a tax-deductible expense.
Remember that if you buy new clothing or a new briefcase, you can deduct these expenses, as well.
If you incur printing costs for resumes, hire a resume service, or buy envelopes and stamps in order to send out resumes, you can deduct those costs, too.
If you hire a job counselor or placement agency and they charge a fee, you can deduct it on your income tax return.
If you have to buy newspapers or take on a newspaper subscription in order to help you look for work, get a receipt because this expense might be deductible.
If you purchase computer software to help you produce a resume or for anything related to hunting for work, the cost is tax deductible.
In short, get receipts for any and all job-hunting costs.
While all of this can help you when tax time comes around on April 15, nothing can help you with the taxes you will owe the Internal Revenue Service on your unemployment earnings.
That is right, unemployment earnings are subject to income tax.
Imagine that! The fact that you are out of a job is not going to stop the Internal Revenue Service from collecting off of your unemployment earnings.
The Internal Revenue Service considers your unemployment earnings to be income and, as such, they are going to collect.
You can, however prepare a W-2 and file for withholding to be taken out of your unemployment compensation.
At least this way you won't have to be concerned about coming up with the tax dollars for the Internal Revenue Service if you are not back to work by April 15.
You might have savings to draw from but you don't have to worry about income taxes from those sources unless you are drawing from a pre-tax fund.
If you are drawing from retirement or 401K accounts, you might have to pay taxes against the funds you are withdrawing.
So, be careful and know what you are doing before you begin drawing money from pre-tax accounts to help you through unemployment.
Things are difficult enough when you are looking for work, you don't need to put yourself in a situation where you are going to owe the Internal Revenue Service at tax time.
Also, remember to keep records of all your expenditures that are even remotely related to looking for a new job.
Transportation costs when going to interviews are tax deductible, whether the travel is across town or across the country.
If you are traveling any appreciable distance for an interview, your air travel and lodgings become a tax-deductible expense.
Remember that if you buy new clothing or a new briefcase, you can deduct these expenses, as well.
If you incur printing costs for resumes, hire a resume service, or buy envelopes and stamps in order to send out resumes, you can deduct those costs, too.
If you hire a job counselor or placement agency and they charge a fee, you can deduct it on your income tax return.
If you have to buy newspapers or take on a newspaper subscription in order to help you look for work, get a receipt because this expense might be deductible.
If you purchase computer software to help you produce a resume or for anything related to hunting for work, the cost is tax deductible.
In short, get receipts for any and all job-hunting costs.
While all of this can help you when tax time comes around on April 15, nothing can help you with the taxes you will owe the Internal Revenue Service on your unemployment earnings.
That is right, unemployment earnings are subject to income tax.
Imagine that! The fact that you are out of a job is not going to stop the Internal Revenue Service from collecting off of your unemployment earnings.
The Internal Revenue Service considers your unemployment earnings to be income and, as such, they are going to collect.
You can, however prepare a W-2 and file for withholding to be taken out of your unemployment compensation.
At least this way you won't have to be concerned about coming up with the tax dollars for the Internal Revenue Service if you are not back to work by April 15.
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