Tax Mistakes and Misunderstandings of the Unemployed

It’s that time of year again when you sit patiently by the mailbox waiting for the mail carrier to bring your W-2’s so you can fill out this year’s taxes and hopefully net a nice return. But what about filing your taxes if you’re just looking for a job? If you’re on unemployment and don’t have any W-2s do you even have to file at all? And if so what job search expenses can you deduct? If these types of questions have your head spinning already, you’re not alone.

In a survey conducted by online tax preparation service CompleteTax.com only 1% of more than 1,000 adults asked could correctly determine if all of the statements made about job search deductions were true or false. Less than one half of them realized that they could deduct printing their resumes or fees paid to outplacement firms. About 70% of people surveyed incorrectly assumed they could deduct the cost of classes that instruct them on new skills outside of their trade and almost 60% thought they could write off a home office, which they can’t.

Even more shocking was that over 75% believed that being unemployed made them exempt from having to file taxes and 43% thought it allowed them to file late. Neither of these ideas are correct. The truth is both severance pay and unemployment benefits are taxable. If you had to tap into a retirement account, that withdrawal can be taxed too.

Healthcare costs deductions can also be tricky to understand when you’re unemployed. Medical bills can be deducted only if they total more than 7.5% of your AGI (Annual Gross Income) and that’s only if you have enough combined medical and Section A deductions to itemize. Note too that these are deductions and not credits, the government won’t reimburse you for expenses they will only reduce the amount of taxes that you owe.

Taxes can be tricky and it might seem simpler to just skip it all together but the truth is it’s a lot easier and cheaper to pay a preparer now than have to wade through an audit later. On top of that, tax preparation services ARE deductible.

By Heather Fairchild - Heather is a multimedia developer with experience in web, film, photography and animation as well as traditional fine arts like painting and sculpting. In addition to writing for TechCareersBlog.com, she is co-founder of design and promotion company, Creative Kazoo with fellow Nexxt blogger, Staci Dennis. Heather’s spare time consists of making puppets, teaching Sunday School, building Legos and doing science experiments with her children.