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Thursday, March 28, 2013

Turbotax: How To Manage Your Taxes When Facing Unemployment?


Are you facing an unexpected unemployment? Have you lost your job recently? 
According to Turbotax, losing job may change your tax status. You may be qualified for credits and deductions that were once available for lower-income taxpayers. Even if you are unemployed, you may still have to pay taxes.

While searching for your next job, here are the things you can do to manage your taxes.

1. File your tax return as early as possible. 
You may have lost your job but you must not delay in filing your tax return. The withholding you had from your former job was too high which may result in greater amount of refund during tax time. Unfortunately, for some unemployed, they tend to forget to file a tax return.

2. Check your tax-free state benefits. 
You may be eligible to receive food stamps and state public assistance. But you must keep in mind that not all unemployed are qualified for such tax-free state benefits. So, check with your state about the requirements.

3. Find out if you are qualified for a tax break. 
Additional tax breaks are given to those who have lost their jobs. You may qualify for Earned Income Tax Credit of $5891, if you have at least three children. If you pay someone to care for your kids while you are at work or looking for a job, then the total amount you have paid for that service may be deductible. But this will depend on your level of income.

4. Educate yourself about self-employment taxes. 
If you have become unemployed, then chances are you would find yourself becoming self-employed. And that will incur a new set of tax rules. When this happens, you must report your expenses on either Schedule C or Schedule F. Also, you must not forget about paying your SS and Medicare taxes.

5. Deduct the expenses you made while searching for a job. 
Here are things that you can deduct:
The cost of preparing your resume.
Your travel expenses. These must be related to your job search.
Mailing fees.
Agency fees.

In order to qualify, Turbotax advised to itemize your deductions and search for a job in the same field as your last job. Keep in mind that if you are looking for a job as an actor after working as a laboratory scientist, then those job search expenses are not deductible. You are also not qualified for job search deductions if you are a first-time job seeker.

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