Sunday, February 20, 2011

Tax Tips for the Unemployed

If it's not enough that you have been unemployed for so long, now you have tax season to make you feel worse.  We all could use a little help sorting out the maze of forms and deductions that need to be kept up on to do our taxes correctly. Courtesy of they have listed 5 helpful tips to get you started.

1. Unemployment Benefits

  • Expiration alert: all unemployment benefits in 2010 are taxable. In 2009, the first $2,400 in unemployment benefits were tax free — but this benefit has since expired.
  • When claiming your unemployment benefits, you can choose to have 10 percent of your unemployment payment withheld to help pay your federal taxes. You can also withhold your state income taxes.
  • Although withholding is voluntary, it is beneficial because it eliminates the need to make estimated tax payments.
  • Start on tax withholding unemployment payments by filing Form W-4V, Voluntary Withholding Request, with the payer of the unemployment.

2. Job Search Expenses

  • Here's some good news: if you are looking for a new job, you may qualify for a number of tax deductions.
  • These deductions include travel expenses, cost of printing, mailing, and creating a resume, job placement agency expenses, and more.
  • Remember that expenses for a job search in your same line of work are deductible, but you will have to clear several hurdles to reap the benefits.
  • If you itemize, job hunting expenses in your same line of work are considered miscellaneous itemized deductions.
  • Your total miscellaneous deductions must be greater than 2 percent of your adjusted gross income, and only the amount that exceeds the 2 percent “floor” is deductible.

3. Moving Expenses

  • More good news: if you moved for a new job, the expenses associated with that move are deductible, even if you do not itemize.
  • To deduct moving expenses, the new job must be at least 50 miles farther from your old home than the old job was. For example, if you commute 20 miles to your old job, your new job must be at least 70 miles from your previous home.
  • The deductible amount is the unreimbursed cost of moving you and your belongings to the new location.
  • You must stay at the new job at least 39 weeks to qualify for this deduction.

4. Medical Deduction

  • If you aren’t working and are paying COBRA premiums, you should track these and other out of pocket medical expenses as they may qualify for a medical expense deduction.
  • Unreimbursed medical expenses, which include COBRA premiums, prescription drug costs, dental expenses, and more totaling more than 7.5 percent of your adjusted gross income, are deductible.
  • This is one instance where married couples may benefit by filing separately. If one isn't working and has low income/big medical bills, married filing separately may be a good way to go.

5. Health Insurance

  • If you are under 27 years old and do not have access to employer-provided insurance, you may be added to your parents' health insurance policies starting in 2011. This benefit is not taxable.

1 comment:

  1. I really really enjoyed reading this post, which is full of knowledge and information.


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