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Consumer
Tax ideas to help unemployed
PRINCETON, N.J. (3/2/11)--Filing tax returns with the Internal Revenue Service (IRS) can be challenging enough for the average tax-payer, but tax season can be full of surprises for the long-term unemployed. Especially since almost 25% of adults in the U.S. incorrectly believe that filing a tax return is unnecessary for the unemployed, according to a recent survey (usatoday.com Feb. 7). Unemployment continues to fluctuate as income tax season approaches. Jobless claims rose to 10% in mid-February, up from 9.8% at the end of January (gallup.com Feb. 17). The newly unemployed join more than 14 million individuals already out of work. Of those, 4.2 million--or 30% of those unemployed through December 2010--have been without a job for a year or longer (moneywatch.bnet.com Feb. 4). Consider these items before filing your return if unemployment affected you during the 2010 tax year:
* Benefits are taxable. All unemployment benefits collected by individuals during 2010 are taxable. This wasn’t the case in 2009, when the economic stimulus package allowed the first $2,400 of unemployment benefits to be subtracted from gross income. * What is deductible. Job hunting costs may be tax deductible as long as your job search is within the same trade or profession, the costs exceed 2% of your adjusted gross income, and you itemize them on your tax return. Examples include mailing résumés to prospective employers, job placement agency fees, and travel related to your job search. Read “Six Tax Benefits for Job Seekers” and “Publication 529” on the IRS website for more details. * Free tax help. Check with your credit union to determine if you qualify for free tax preparation assistance through the Volunteer Income Tax Assistance Program or the Tax Counseling for the Elderly Program. These programs provide certified volunteers to help prepare income tax returns for low- to moderate-income families, military personnel and their families, and those aged 60 and older.
For more information, read “The Tax Consequences of Unemployment” in the Home & Family Finance Resource Center.
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