You should keep complete records of all your business income and expenses. You may need to make quarterly estimated tax payments, since income tax is not withheld.
If you work from home, you may be able to claim a tax deduction for business use of your home.
Be sure to check out the IRS' Publication 334, Tax Guide for Small Businesses, for more information.
The IRS also offers a number of small-business seminars throughout the nation. You can also order a small-business workshop DVD and other products through the IRS' Small Business and Self-Employed Tax Center website.
No. 2: 401(k), IRA withdrawals
You should avoid taking money out of your IRA or 401(k) plan and instead roll it over to another IRA or other retirement account.
Withdrawals are generally taxable and, if you are under age 59 and 1/2, you could be subject to an additional 10 percent penalty.
TurboTax online points out that if you have taken out a 401(k) loan and then lose your job, you must normally repay the loan within 60 days.
If not, the balance of the loan could be considered an early distribution subject to tax and the 10 percent penalty.
If the loan isn't repaid, you should receive a Form 1099-R, which would list the amount of the early withdrawal (Box 1) and how much of that amount is taxable income (Box 2a).
No. 1: Potential tax benefits
It takes a glass-half-full view of things, but not all of the tax impacts of losing your job are negative.
For instance, you may be able to claim the earned income credit if you have a lower level of income after losing your job.
If you pay someone to take care of your children or other dependents while you look for work, you can claim the tax credit for child and dependent care expenses, which can be up to 35 percent of your expenses.
If you itemize, and take courses to update or improve your skills, or decide to go back to school, there are tax credits for education expenses.
If you have to move in order to take another job or start your own business, you can deduct moving expenses without having to itemize. Make sure to keep all necessary receipts to claim these benefits.