Even if you were unemployed during the year, you will probably need to file a tax return. You may even be surprised to discover that you owe a considerable amount in taxes. If you did not have enough withheld during the year or if you did not make quarterly estimated tax payments, you may also owe an underpayment penalty.
If your former employer is no longer in business, you may be able to use your last pay stub to arrive at your taxable income.
If you collected unemployment benefits during the year, you should receive Form 1099-G, Certain Government Payments . All state unemployment benefits are taxable income for federal tax purposes and are reported on Form 1099-G, Box 1. The federal withholding amount, if any, is reported in Box 4.
If you started your own business during the year, or offered your services as a consultant while looking for a new job, your income is considered self-employment income. You may receive a Form 1099-MISC, Miscellaneous Income , which reports some of this income. If you are considered self-employed and your net earnings are $400 or more, you must pay self-employment tax on the income you received. In addition, you may need to make estimated payments to cover the amount of self-employment tax or income tax associated with the income you earned.
If you withdrew funds from a time-savings account or other deferred interest account before maturity, you may be charged a penalty. This amount is reported on Form 1099-INT, Interest Income , Box 2. You must include in income all the interest shown on Form 1099-INT, Box 1 but you can deduct the penalty against your income. You can deduct the entire penalty, even if it is more than your interest income.
If you withdrew an amount from your traditional IRA, 401(k), or other qualified retirement plan or annuity, and you were not age 59 Â½ , the distribution is generally subject to tax and, in most cases, is subject to an additional 10% tax on early distributions. You should receive Form 1099-R, Distributions from Pensions, Annuities, Retirement or Profit Sharing Plans, IRAs, Insurance Contracts, etc. The payer will indicate that your distribution was an early withdrawal with no known exception using code 1 in Box 7. However, you may be able to reduce the additional 10% tax on withdrawals from your traditional IRA if any of the following exceptions apply:
- You have un-reimbursed medical expenses that are more than 7.5% of your adjusted gross income (you do not have to itemize your deductions to take advantage of this exception)
- You have un-reimbursed medical insurance premiums for yourself, your spouse, or your dependents and you met all four of the following conditions:
- You lost your job
- You received unemployment compensation for 12 consecutive weeks
- You received the distribution during the year you received the unemployment compensation or the following year
- You received the distributions no later than 60 days after you have been reemployed
- You have qualified higher education expenses at an eligible education institution for yourself, your spouse, or your children or grandchildren.
- You are age 55 or greater and are separated from the service of an employer making a distribution from a 401(k) plan
- You are disabled.
If you were a student during the tax year, you may be able to use your qualified education expenses, such as tuition fees, to reduce your taxes. You may be eligible for either of the education credits (the American Opportunity Credit or the Lifetime Learning Credit). If you are making payments on a student loan you previously took out, up to $2,500 of the interest may also be deductible. This deduction is available even if you do not itemize. If you have any of these expenses, you should receive Form 1098-T, Tuition Statement , which reports the tuition payments you made or Form 1098-E, Student Loan Interest Statement , which reports the interest you paid.
You may also be able to reduce your taxes by deducting certain other un-reimbursed expenses such as expenses for travel, tolls, parking, employment agency fees, long-distance phone calls, career counseling, and typing, printing, copying, or mailing resumes for job hunting as long as the job you are searching for is in your present field of employment. You can deduct these even if you did not get the job.
If you accepted a job and had to relocate, you may be able to deduct any qualified moving expenses not reimbursed by your new employer. You should keep receipts to substantiate these expenses. If you meet the requirements, you may be able to deduct the following expenses:
- Moving your household goods and personal effects
- Traveling (including lodging but not meals) to your new home. If you use your car, you can calculate your car expenses by deducting either:
- Your actual expenses, such as gas and oil for your car
- The standard mileage rate
Note: Whether you use actual expenses or the standard mileage rate to calculate your expenses, you can deduct parking fees and tolls you paid during the move. You cannot deduct any part of general repairs, general maintenance, insurance, or depreciation for your car.
You should consider filing a return even if you are in a situation where you do not have to file a return, for example, to obtain a refund for federal income taxes that may have been withheld from your income. You might even qualify for the Earned Income Credit, which could give you a refund that is larger than the taxes that were withheld.