You don’t keep one job all your life. There are many times when you switch from one job to another or you might start a business of your own. Sometimes you might lose the job completely. All these scenarios are possible in your career.
Here are some tax related issues related to change in your employment status:
If you are unemployed and you are getting unemployment compensation, you should be aware that the compensation is considered taxable income.
So while collecting unemployment compensation you must be aware that you will receive Form 1099-G showing the amount you were paid and any Federal income tax you elected to have withheld.
According to the Law these amounts should be reported on your income tax return when you file.
Retirement in case of Disability
If you have come across some disability, there are two options in that:
- Your disability is temporary
If you retire on disability income, you must include as ‘income’ any disability pension you receive under a plan paid for by your employer. You must report your taxable disability payments as ‘wages’ on Line 7 of Form 1040 until you reach minimum retirement age.
- Your disability is permanent
If you were permanently and totally disabled at the time you retired, you may be entitled to a tax credit. Generally, you can qualify for this tax credit if you are age 65 or older at the end of the tax year; or if you are under age 65 but retired on permanent/total disability and have taxable disability income.
You can get guidance for the professionals at Tax Help MD to understand the changes in taxes.