Paying Your Taxes This Year While Unemployed

Unemployment Compensation is taxable income. You may decide to withhold 10 percent (the minimum U.S. tax) of your unemployment benefits for federal taxes (Form W-4V); you can pay estimated quarterly tax; or you can pay it all come April 15. Whichever option you choose, you will be taxed based on your gross income for the year. Chances are you will owe more for the year than the 10 percent you paid.

If you work as a contractor or open your own business, you will need to file a 1099 form and pay out for taxes, Social Security and Medicare. If you plan to work for yourself for an extended period of time and expect to pay more than $1,000 in taxes on earned income, the IRS recommends you make quarterly estimated tax payments.

Like payroll withholding tax, you may still owe money at the end of the year, or you may receive a refund.

If you sell investments and property to help pay the bills, the proceeds will most likely be considered taxable income.

If it turns out you’re obligated for taxes you can’t pay, the IRS recommends you nevertheless file a return on time and pay what you can. You will still be charged interest on the amount owed and assessed late-payment penalties, but you’ll avoid the penalty for failing to file a tax return. You can also arrange at that time for a payment plan.

These are just a few things to keep in mind this year when you file your taxes while continuing your job search.