Unemployment and Taxes Explained – TurboTax Tax Tip Video

[Music – Piano melody] Hello, I’m Nick from TurboTax with some
important information for unemployed taxpayers. If you experience a period of unemployment
or are currently unable to find work, the last thing you’re probably thinking about
is your taxes. But since you still need to file a tax return, you may be interested in
some of the tax benefits available to you. If you receive unemployment compensation during
the year, regardless of the amount, it’s fully taxable and you must report it on your
federal tax return. Your state will report the total amount to you on a Form 1099-G.
And if you elect to have federal and state income taxes withheld from your unemployment
payments, the 1099-G will report those amounts as well. Some states don’t tax unemployment
benefits, and in those cases, no state income taxes will be withheld.
There are, however, deductions available that cover the cost of looking for work and relocating
for a new job. You may spend a significant amount of time
each week looking through employment opportunities, going to interviews, mailing resumes and applying
for jobs in person. Luckily, if you itemize deductions, you can deduct some of the expenses
you incur when searching for a job. The expenses you may be able to deduct include
the cost of travel and transportation, the expense of purchasing paper, envelopes and
stamps for mailing resumes, and even the fee you pay to an outplacement agency that helps
you find a job. And if you find a new job that requires you
to relocate–you may be eligible to deduct your moving expenses. Deductible moving expenses
will cover the cost of transporting yourself and your personal effects to the new area,
and in some cases, the cost of renting a storage unit for your household items.
If at any point during a period of unemployment you find it necessary to make an early withdrawal
from your IRA, you should know that the IRS allows you to do so without incurring the
10-percent penalty that normally applies. However, you must use the funds for an approved
purpose, like paying your medical insurance premiums.
If you end up owing taxes to the IRS, and due to your lack of work you are unable to
pay it in full, you should look into setting up a monthly payment plan or make an offer
in compromise to request a reduction in the amount of tax you owe.
Remember, when you file with TurboTax, you don’t need to know a thing about taxes.
We’ll ask you simple questions and fill out all the right forms for you.
For more information about this and other tax topics, visit Turbotax.com [Music – Piano melody]

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