When filing your 2012 taxes, make sure you pay taxes on your unemployment insurance benefits.
While the rate of unemployment may be reducing, there are still millions of people who are unemployed. Sadly, these individuals also have to pay taxes on their unemployment insurance benefits.
If you are unemployed and you collected unemployment insurance benefits last year, you must pay taxes on it. After calculating your tax incidence, you will be surprised at the amount of tax you owe the government, unless you requested the federal government to withhold taxes.
The VP of TurboTax, Bob Meighan says that people still think that unemployment benefits are not taxable. While that might have been the case in 2009, congress reviewed that provision.
However, when filing your returns, you will find yourself in the lowest tax bracket because of your low income. In fact, you might also find yourself qualifying for several tax breaks.
Terry Lemons, I.R.S. spokesman says the agency encourages taxpayers to take advantage of things like earned income credit when they lose their jobs.
He also said that the agency encourages individuals to file their returns even if they do not have the money to pay their taxes. In such cases, taxpayers can benefit from installment agreements to pay their taxes.
Many households in the U.S are still recovering from the Great Recession of 2007 – 2009. According to government statistics, more than 13 million who are not employed have stopped looking for jobs because companies have not yet started recruiting new workers.
Fortunately, those who spent the better part of 2011 can get tax breaks on 2012 taxes.