No job doesn’t mean no taxes, Franklin Park accountant warns
Certified public accountant James Stonehocker said taxpayers may be surprised to find out the Internal Revenue Service may be willing to work with them. He lives in Franklin Park and works in Deerfield. | Joel Lerner~Sun-Times Media
Updated: February 11, 2013 6:28AM
FRANKLIN PARK — If you were unemployed in 2012, you probably still owe taxes.
“Unemployment compensation, a lot of people don’t realize its taxable,” said James Stonehocker, a certified public accountant who lives in Franklin Park. “They get laid off and collect unemployment. Nine months later they’ll get this 1099-G saying they received unemployment benefits.”
Those 1099-G forms should arrive in the mail by Feb. 15. Individuals who collected unemployment compensation are on the hook for 10 percent.
If you’ve recently become unemployed, Stonehocker strongly recommends you request 10 percent of your unemployment compensation be withheld.
“When you file (yearly taxes), you’re covered,” Stonehocker said. “If you don’t (owe taxes), you just get a bigger refund.”
In November 2012, there were 229,627 people living in Cook County who were out of work, said Greg Rivera with the Illinois Department of Employment Security.
If you’re lucky enough to have gotten severance pay from your former employer, that pay is taxable, Stonehocker said.
In contrast, if you’re lucky enough to have gotten money from a family member or friend, it’s probably not taxable.
“It would considered a gift unless it’s a loan,” Stonehocker said. “As long as it under $13,000, there’s no tax effect.”
If it’s more than $13,000, the person who gave the money is responsible for taxes.
“If it is a loan situation, a good rule of thumb is to charge some kind of interest,” Stonehocker said. “Write it down and have proof. They can use the documentation to write off loan as a loss.”
If things are bad and you need to pull money from a retirement account, remember that you pay a 10 percent penalty if you’re under 65. Stonehocker suggests withholding 10 percent on what you withdraw.
There are job-hunting expenses that can be deducted from your taxes. You have to have more expenses than the standard deduction (about $12,000 for a couple) but no more than 2% of your total income.
Expenses that can be written off include fees to an employment agency, typing resumes, assembling a work portfolio, career counseling, transportation to an from interviews, long distance calls to prospective employers, etc.
The cost of schooling to find work or get a better job may also be deducted, Stonehocker said.
If you just don’t have the money to pay taxes, Stonehocker recommends contacting the IRS.
“The IRS is very willing to work with people,” he said. “They’ll set up an installment plan. They are even willing to forgive. Or wage garnishment once you find a job.”
Joe Munoz, an IRS spokesman based in Chicago,agrees.
“They can always come and talk to us and try to tailor a payment plan,” Munoz said. He adds, “You also should file a tax return even if you are unable to pay so you can avoid additional penalties.”
For more information, go to the IRS website and look up “Tax Impact of Job Loss.”