The Tax Questions Blog

Posts Tagged ‘Taxable Income’

Question: ROTH IRA Question!?!?!?

I just set up a ROTH IRA Account, and now I need to know how much to invest. I am 18 years old, and I made about 600 dollars at a summer job. I work another job, but its under the table, so I only have 600 dollars taxable income. How much can I put into the ROTH IRA account?

Answer: you can't put more than $600 into the account, then.

if you have an extra $600 just kicking around, i'd recommend fully funding the account for the 2008 tax year (assuming the summer job was summer 2008, and not just expected for the summer 2009 - you can still make contributions against the 2008 tax year until tax day).

but you're basically in a 0% tax bracket. why not try working legitimately and taking advantage of the standard deduction, and max out the Roth this year?

Money tip: Before filing away tax return, use it as a financial guide

So you completed your federal income-tax return and filed it. Now you can relax until next year, right? Not so fast. Don't be too quick to put away that tax return. You can use it as a guide to see whether your financial position is where you want it to be or whether you need to make some changes.

Question: Is unemployment compensation considered adjusted gross income?

I lost my job in April 2009. In the first 4 months of the year, I earned $7,386.36, of which I had $793 withheld for federal income tax. After that, I earned $10,360.00 in unemployment compensation, which I collected from April to January of 2010. I know that the first $2,400 of unemployment is not taxable, but is the remaining amount, $7,960.00 considered part of my adjusted gross income?

I'm worried I'll have to owe money for the unemployment collected, even though it was barely enough to get by.

Answer: Yes, the remaining amount of your unemployment will be taxable. Your AGI would 15356. However, you will probably still be able to get a refund. I do not know all the details that affect your tax situation. However, if you are single and are not someone else's dependent, then you can take a standard deduction of $5700 and a personal exemption of $3650. Your tax liabilty then turns out to be $598. But, you already had $793 withheld so you would be due a refund of almost $200. Additionally, you would qualify for the special Make work pay credit (like a stimulus) which is $400. So, your federal refund would be $595. Please again be aware that I have had to make assumptions to calculate this refund. Your refund may be different depending on your life situation.

Untaxed unemployment

A disturbing tax surprise for many folks who collect unemployment benefits is that those payments count as taxable income. For 2009 taxes, however, the first $2,400 of such compensation is tax-free.