Unemployment and Income Tax

 (Courtesy of the New York Times “Bucks” blog)

If you collected unemployment this year, the first $2,400 of any unemployment insurance collected is not subject to tax. You should receive what’s known as a Form 1099-G, which will show what you were paid and any federal income tax you elected to have withheld. If you didn’t withhold taxes, you may owe them now. Severance and pay for vacation time is also taxable.

If you’re one of the many Americans who couldn’t find a job this year and you decided to strike out on your own, you’ll need to familiarize yourself with a new set of tax rules. While there are many more deductible expenses, there are also new taxes to take note of. Even if you’re temporarily doing consulting work, you are considered self-employed. That means you’re required to pay income tax, as well as self-employment taxes, including Social Security and Medicare. To learn more about how taxes will effect you this year, visit http://www.irs.gov.

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