Losing a job may create new tax issues for you and your family. If you or a family member loses a job, be aware that the following items are taxable:
- severance pay
- unemployment compensation
- payments for any accumulated vacation or sick time
Public assistance and food stamps are not taxable.
To avoid a big bill at tax time, you should ensure that enough taxes are withheld from these payments or make estimated tax payments. The IRS Withholding Calculator can help you determine whether you are having too much, or too little, federal income tax withheld.
If you believe you may have trouble paying your tax bill, contact the IRSimmediately. There are steps we can take to help ease your burden. You also should file a tax return even if you are unable to pay so you can avoid additional penalties.