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Tax Advice About Unemployment from IRS tax lawyers in Los Angeles

Friday, April 10, 2015
Millions of people apply for unemployment if they suffer from job loss.  If you are eligible for unemployment benefits you may not be aware that unemployment benefits are taxable.  We are the Strategic Tax Lawyers, IRS tax lawyers in Los Angeles, who want to give you some facts about unemployment compensation and how not to trigger an IRS audit.
In general, unemployment income is indeed taxable. Therefore, you will need to consider all of your unemployment payments as a form of income for the year. You will need to fill out Form 1099-G to report the amount of unemployment that was paid to you as well as any federal income tax that was withheld from your payment.  Unemployment compensation is paid under federal or state laws.  Also, you should be aware that if you earn union benefits, those are also taxable as your income.
It may be a wise idea to have tax withheld from your unemployment.  You can opt to do this on Form W-4V.  However, if you decide not to, then you should pay throughout the year.
We have seen even unemployed taxpayers get audited.  They are not safe from audit.  Every tax season, there are nearly 1 out of 99 tax returns that the IRS flags for an audit.  The only way to avoid getting audited by the IRS is to report every income source that you have.  This includes unemployment.  It als includes any stocks and earnings you have or any winnings from gambling.  Basically, income is income, and if you earned it over the tax year you will need to report it.   You should match your financial documents, unemployment statements, and any other financial reports that show income to submit to the IRS.  We all know that the IRS can and will inquire if those income amounts do not match up. And that results in an tax audit.

Be cautious when claiming deductions since those need to be backed up with proof.  So if you are on unemployment, don’t think you can start listing all the deductions you did when you were employed.   We recommend keeping all receipts for your business purchases, charitable contributions and vehicle write-offs.   
Keep smart and you won’t increase your odds of getting audited by the IRS because the last thing you want is to receive an audit letter in the mail.

The Strategic Tax Lawyers, LLP are IRS tax lawyers in Los Angeles, with years of experience in tax-related and IRS issues.  For a free consultation to assist you with your tax-related issues contact the Strategic Tax Lawyers at (800) 669-4775.