7 Tax Tips For The Suddenly Unemployed

It’s been one of those days. When you got up this morning, you had a job. Now, just a few hours later, you don’t anymore. While you’re figuring out your next steps, here’s something else to consider: your tax status has just changed quite a bit, and there are a number of tax-related issues you’ll need to address. Here are seven important tax tips for when you’ve just lost a job:Tax tips if you are suddenly unemployed
1. Realize you still have to file and pay taxes!
The last thing you want to think about is the possibility of paying out money when you just lost your primary source of income. But not filing and paying taxes after losing a job will lead to costly fees and potential legal trouble. So take a deep breath, face the music and don’t forget to file on time.
2. Determine what you may owe taxes on already
Your former employer likely withheld taxes from your regular paychecks, but that may not be the case with other income related to job loss. Severance pay and family leave pay are taxable, for instance, and if they haven’t had withholding applied to them, you’ll need to pay that tax yourself. If you’re considering withdrawing funds from a company pension plan or 401(k), those withdrawals are taxable as well. Finally, unemployment compensation is taxable unless you fill out a withholding form. So immediately and in the short-term future, you may find yourself with some extra taxes to pay.
3. Look for helpful new tax credits
On the other hand, now that your income has decreased, you may be eligible for tax credits you couldn’t get before. The Earned Income Tax Credit can get you a refund based on income alone, and others like the Child Tax Credit, Child and Dependent Care Credit, Savers Credit, etc., can lower your declared income to reduce your tax burden.
4. Deduct your job search
Up to 2% of your gross income can be deducted in job search expenses, and if you’re unemployed, that’s 2% of not much at all. So anytime you print copies of your resume, buy or clean work clothes for interviews, or travel for your job search, keep your receipts and deduct those expenses when you file.
5. Deduct medical expenses, if applicable
This step works a lot like the previous step. Medical expenses over 7.5% of your gross income are tax-deductible, and 7.5% of not much is still not much. Even if you don’t have any major expenses, deducting the costs of doctor visits and prescription medication can add up.
6. Look into self-employment taxes
Not everyone is lucky enough to walk out of one job right into another. Chances are you may need to do some 1099 work to tide you over. If so, get familiar with the Schedule C and Form SE forms to include business expenses and self-employment income in your tax return.
7. Get the help you need
Clearly this situation is a major shift in many ways, including in how you’ll file your taxes. If you need help figuring out the best tax solutions, you’re not alone. Accounting firms and accounting software can help, and you may be able to deduct their costs as a business expense.
Dealing with taxes after a sudden job loss may not be easy, but with a little foresight it can at least be straightforward—and hopefully will get you a bit of money to help see you through to the next job.

Contact Levy & Associates for Dependable Tax Audit Services

Levy & Associates is available for free initial consultations. We’re happy to answer any questions you have about the audit process or address any concerns about your specific situation.

There’s never a good time to be audited, and the time-consuming process will take away from your business or family if you try to face it alone. Let us handle and coordinate communication, so you can return to your daily life.

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