Preparing For Taxes When You Are Struggling With Unemployment

The economy is still struggling, and far too many people are still out of work. With tax season coming up, thoughts are turning to the tax bills. You must file your taxes, even if you are currently out of work. Here are some tips to help you prepare for filing this important paperwork and paying the bill.

Free Filing

You don’t have to spend $30 dollars on a tax program; many places are now offering free filing. If you have an adjusted gross income, or AGI, of less than $58,000, then you can file your taxes free of charge online. You must be able to use the basic form, because these basic systems won’t do any advanced calculations.

Increased Write-offs

If you own a home or have other deductions, then you may not be able to use the basic form. In this case, maximize deductions to limit your tax bill as much as possible. Take time to add up all the expenses you have incurred in your job search. If you buy the Sunday paper just for the classifieds, that expense can be written off. Special interview clothes you have invested in are a write off, although a new wardrobe once you get the job is not. The mileage you may have driven going to interviews and searching for a job can also be written off, along with any printing fees, resume writing fees or other expenses that were incurred specifically for your job search.

Track Medical Expenses

If your medical expenses exceed 7.5 percentage of your adjusted gross income, you can take a write-off. You can’t claim the premiums paid through your employer if they are deducted pre-tax, so most people don’t meet this minimum threshold. However, if you have been paying COBRA premiums out of your own pocket, then there is a good chance you will qualify. Add up the expenses for doctor’s visits, dental care, prescriptions and even vision care. If you meet that 7.5 percentage minimum, you could see a big reduction in your overall tax bill.

Taxable Income

Your unemployment compensation received in 2011 is taxable in full for Federal taxes. You must claim it and you will have to pay federal taxes on it. However, they may not be taxable on a local level. Not all cities with income tax require you to pay taxes on unemployment payments. Call your local city hall to find out if you should claim this income on your local income tax forms. . Any severance pay from your job is taxable, including vacation days or sick days that you may have received. Odd jobs you may have done and earnings from working as an independent contractor are also fully taxable. Additionally, you will need to pay self-employment taxes on these earnings to Medicare and Social Security. On the bright side, fifty percent of those self-employment taxes can then be written off on the Federal return.

It is imperative that you sit down and do the taxes as soon as the relevant information arrives. If you owe, it will give you some time to try to come up with the payment before the April 15th deadline. If you are getting a refund, then you can claim that money sooner and get it in your bank faster. These tips can help you minimize your tax bill, but it is up to you to avoid problems by filing your taxes before the deadline.

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.

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