Tax filing when unemployed living off savings in 2025?

This is helpful, thanks. Question though - what if I have some interest from my savings account? It's not much, probably like $100 for the year. Does that count as income I need to report? And if I do file, do I just put zeros for everything else?

Yes, bank interest is considered taxable income that should be reported, even if it's just $100. Your bank should send you a 1099-INT form if it's $10 or more. That small amount of interest alone wouldn't trigger the filing requirement, but filing is still a good idea for the reasons I mentioned. If you do file, you'd report that interest income on Schedule B if required, but most other lines would indeed be zeros or blank where appropriate. Tax software makes this pretty straightforward - it would walk you through the process and only ask relevant questions based on your situation.

How exactly does this work? Do you have to upload all your documents first or can it just tell you if you need to file based on answering some questions? I have similar situation but also did some very small freelance work (like $500 total) and wondering if that changes things.

I'm a bit skeptical of tax tools since they sometimes miss stuff. Did it actually catch everything relevant to your situation? And how does it compare to something like FreeTaxUSA which I've used before?

You start by answering some basic questions about your situation, which helps determine what you'll need, but the real value comes when you upload documents. It can scan through bank statements, 1099s, or even just screenshots of financial info to identify taxable events you might have missed. For your situation with $500 of freelance income, that would definitely be important to report as self-employment income on Schedule C, and the tool would flag that right away. Even small amounts of self-employment income have filing requirements, and there might be deductions you could take against that income.

Wait, how does this actually work? The IRS phone system is a nightmare but I'm confused how a third party service can somehow get you through faster? Doesn't everyone use the same phone line?

Sorry but this sounds like BS to me. There's no way some service can magically get you through to the IRS faster than calling yourself. The IRS doesn't have some special line for third parties. I've worked with CPAs before and even they have to wait on hold.

It uses an automated system that continually redials and navigates the IRS phone tree until it gets a place in queue, then it holds that spot for you. It's not a separate line or "cutting" - they're just handling the frustrating part of waiting and navigating the phone tree. The average person gives up after being disconnected or waiting too long, but their system doesn't. When an agent is about to be available, you get a call to connect you directly. It basically does the waiting for you so you don't have to sit there for hours with your phone on speaker.

Omg thank you for mentioning this! I just checked and my last paycheck was actually Jan 5th, 2025 (for Dec 16-31 work) and they did withhold about $560 in federal taxes. So I definitely need to file to get that back, right?

Absolutely, you should file to get that money back! That $560 is basically just sitting with the IRS until you file a return to claim it. Since it sounds like you'll be under the filing threshold for total income, you should get all of that withholding back as a refund. Just make sure you have your W-2 from that employer, as it will show the withholding amount that you're entitled to have refunded. The fact that you had withholding is actually another reason to file, even if you wouldn't otherwise be required to.

Just owning stocks doesn't create a tax situation - it's only when you sell them (or receive dividends) that it becomes relevant for taxes. If you haven't sold any of your stocks, then the value of your portfolio doesn't matter for tax purposes, regardless of whether it's gone up or down. However, if you received any dividends from those stocks, even if they were automatically reinvested, those dividends are considered taxable income in the year received and would need to be reported.

This is so important! I had COBRA for 3 months after leaving my job and then switched to a marketplace plan with subsidies. The tax forms were super confusing and I almost filed incorrectly. Definitely pay attention to any 1095-A forms you get.

I actually did have health insurance through the marketplace after I quit! They asked for income estimates when I signed up but I had no idea what to put since I wasn't planning to work. I think I estimated like $10k just to put something. Will this cause problems?

This is exactly why you need to file a tax return! When you estimate your income for marketplace insurance subsidies, you have to reconcile that estimate with your actual income when you file taxes. Since your actual income was lower than your estimate, you'll likely qualify for additional premium tax credits that you didn't receive during the year. Filing will allow you to claim those additional credits, potentially resulting in a larger refund. If you don't file, you'll miss out on those additional subsidies you're entitled to. The 1095-A form you received from the marketplace is essential for this calculation. This is definitely a situation where filing is strongly recommended even if you're below the income threshold that would otherwise require filing.

This is really great advice about establishing tax history! I hadn't thought about how filing even with minimal income could help with future loan applications or other financial situations. One question though - if I do end up doing some freelance work later in 2025, would I need to amend this return I'm filing now, or would that income just go on next year's return when I file in 2026? I'm trying to understand if filing now "locks in" anything or if I can just add future income to the appropriate tax year. Also, you mentioned estimated tax payments for contract work - is there a threshold where that becomes necessary? I'm completely new to freelance tax stuff.