The Daily Money

ALL THE MONEY NEWS YOU NEED TO KNOW

Sun Apr 2 2023

Paul Davidson | Economics and Jobs Reporter

Despite a wobbly economy, turbulent stock market and mounting recession fears, most companies decided not to conduct mass layoffs last year.

Amid persistent worker shortages, CEOs feared they would cut workers only to face renewed struggles to hire as the economy recovered from a brief and mild downturn in 2023.

But while layoffs overall remained low, some industries battered by the Federal Reserve's aggressive interest rate hikes chopped lots of jobs, especially technology, housing and finance.

Big tech companies, such as Meta, Twitter and Amazon, laid off more than 160,000 workers in 2022 and have nearly matched that total through the first three months of this year, according to layoffs.fyi.

If you lost your job last year, you may be wondering what that means for your income taxes, which are due Tuesday, April 18.

Do you have to file a tax return?

In most cases, yes. Even if your income was sharply reduced, you still need to file if you were single, under 65 and earned more than $12,950, or you were married and earned more than $25,900, according to TurboTax owner Intuit.

Should you file early or procrastinate?

Don't put off the inevitable because you may well have a refund coming, Intuit says. That's because your reduced income from a job loss may move you into a lower tax bracket even though the taxes withheld by your employer were based on the higher bracket.

Do you need to pay taxes on unemployment benefits?

Yes. After a record 22 million workers lost their jobs in early 2020 because of the pandemic, the 2021 American Rescue Plan included a provision that made up to $10,200 of unemployment income tax-free for most people, according to Motley Fool . But that perk applied only to the 2020 tax year and you need to report the full amount of jobless benefits you received in 2022.

You should have gotten a Form 1099-G that states the amount.

Do you have to pay taxes on severance money?

Yes, if you got severance pay, as well as payment for unused vacation or sick days, those amounts are fully taxable and should be included on the W-2 form you get from your employer, Intuit says.

Do you qualify for more tax breaks?

You may. If you were single with no children and your adjusted gross income was at or below $16,480 – or married filing jointly with AGI below $22,610 -- you would qualify for the earned income tax credit (EITC), according to ezTaxReturn , which provides free online returns. If you have up to three or more children, the income limit reaches $59,187.

Your credit can range from $560 if you have no children to $6,935 if you have three or more children.

Depending on your income, the number of children you have and whether they're in day care, and your retirement plan contributions, you may also qualify for a child tax credit, a child and dependent care credit or a savers credit, Intuit says.

Can you deduct your job search expenses?

No. The Tax Cuts and Jobs Act of 2017 eliminated the deduction for job-hunting expenses after the 2017 tax year. Until then, you could claim a deduction for costs such as resume preparation, travel to interviews and employment agency fees.

Do you need to pay taxes on side gigs?

Yes. You need to report any income you received. If you earned $600 or more from a company, the firm should have sent you and the IRS a Form 1099-NEC. The IRS may consider your earnings self-employment income, in which case you'll have to file Schedule C and Schedule SE with your return, Intuit says.