If you, like MILLIONS of Americans over the last two years, lost your job and had to take unemployment benefits, you might be in for a nasty surprise.
Even if you have gotten back on your feet and back to work, all those benefits – read that “income” – might be taxable by Uncle Sam. Now, as with ANYTHING to do with taxes, there’s no clear-cut right or wrong way to collect unemployment benefits in many states and even on the Federal level, if you were wading through the paperwork for receiving benefits, you might have missed the option to stipulate a withholding amount on those benefits.
Some states do, some states don’t, and if you missed checking that little box, you might have a nasty surprise come tax season.
Here is how you can avoid that:
- Know what you owe. Filing your income tax as early as possible allows you to understand what it is you owe. You would then have until April 15 to pay that off before incurring additional fees and interest.
- Make plans now to “make” that extra money. Even now, this late in the year, you can make some changes to your withholding with your employer and that will take more taxes out of your paycheck before the end of the year. It might not “feel’ like a lot, but every little bit helps when it comes to paying your taxes.
- Get a pro. Yes, technology has made it easier than ever to file your income tax returns, but if you’re worried about coming up short, understanding the tax credits you qualify for, and how to use those to mitigate your tax bill – can be the difference in owing Uncle Sam come April 15th and having at least a small return in 2022.
- Don’t fall for the “dirty dozen.” Every year, unscrupulous tax preparation firms pop up, file taxes for people, take those folks’ money, and then disappear. The problem with these Fly-by-night preparers is they often won’t come to your aid when the IRS decides to audit your return. Suddenly, that inexpensive tax preparers who set up shop in January and closed up on April 16th isn’t there to help you, and you find out you owe a significant amount of money for their mistakes. The IRS even has a name for these tax preparation groups and the scams they pull on thousands of taxpayers each year- they’re part of the “Dirty Dozen” of tax scams.
But here is the good news: You don’t have to be surprised or mad when you end up having to pay taxes on unemployment benefits. Look on the bright side, you are earning money and you will be able to pay those taxes.
It might not be the way you envision it, but you have an opportunity. As always, I am here to help you sort these types of challenges out before they become too big to handle.
Schedule a no-obligation confidential consultation here to explain your options to permanently resolve your tax problem once and for all!