Tax season can be, well, taxing to say the least, and this year it might be more so on many Americans who are unemployed, have seen their incomes shrink or are hoping for a sizable return to pay off bills.
For cash-strapped workers, a tax return can be a much-needed income boost. According to a new CareerBuilder survey of more than 5,200 workers, more than half (56 percent) of workers report they will use their tax return to pay off bills that have accumulated. Does this sound familiar?
While many workers indicated that they will use their tax returns to tackle bills, others said they will use their refunds for the following:
- Put into savings — 34 percent
- Make home improvements — 12 percent
- Go on vacation — 11 percent
- Pay back money I owe to people — 8 percent
- Invest it — 7 percent
- Buy a car — 2 percent
With America still reeling from the Great Recession, 78 percent of workers said they currently live paycheck to paycheck; up from 61 percent who said the same in May 2009. In addition, economic pressures have resulted in some workers downsizing their investments to help make ends meet. Nearly one-in-five (17 percent) report they reduced their 401 (k) contributions in the last year.
Before they can even think about receiving or spending their tax returns, many unemployed taxpayers are simply concerned about filing them. Some major questions include:
- What job search expenses can be deducted?
- How do I claim unemployment benefits on my tax return?
- What if I can’t pay my taxes this year because I’m unemployed?
If you’re one of these people, here are some resources you might want to check out:
- Click here to go to the IRS’s Tax Center to Assist Unemployed Taxpayers. It’s fairly comprehensive and provides many tips in English and Spanish.
- The IRS has also set up a YouTube channel with short videos that address many taxpayer questions including the ones I mentioned above.
- Finally, a CNN blog gives a very high level look at deductible job search expenses and who qualifies.
Later this week: Tax tips for freelancers