Tax Advice For The Unemployed

Was your job one of the 2.6 million lost this year? Tough luck, you still have file a tax return. But a shaky employment history can raise a lot of questions, so here are some answers from CNNMoney:

Do I still have to pay tax if I was out of work in 2008?

Probably. The IRS requires anyone who received a W2 from their employer and made at least $8,950 (if you’re single and under 65 years old), or made at least $400 if you’re self employed, to file a tax return. If you’re anticipating a tax refund, you must file – even if you didn’t work at all.

Do I have to pay tax on my unemployment checks?

Yes. Unemployment compensation is taxable on federal and most state tax returns.

What if I took money from my 401(k)?

You may owe taxes if you took money out of a retirement plan or 401(k) to supplement your unemployment checks. That counts as income and is taxable too, said Joseph Perry, the partner in charge of Marcum & Kliegman’s tax department. And that might not be all you owe. The taxes are in addition to a 10% penalty on early withdrawals if you’re below the age of 59-1/2, he cautioned.

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