Mar 8, 2010

Unemployed? IRS will cut you some slack on your taxes this year

If you're unemployed, the IRS will cut you some slack this year.

There are several tax breaks available to people who are jobless or are looking for work.

"When you are unemployed, every dollar counts," said Mark Luscombe, principal tax analyst at business and tax software firm CCH. "Being aware of how the tax law works in your favor can be very important."

  • Unemployment benefits are taxable. But this year, the American Recovery and Reinvestment Act allows the jobless to exclude up to $2,400 of unemployment pay from gross income. For a person in a low-income, 15% tax bracket, the amount saved would be $360.
  • In tough times, many people are tempted to make early withdrawals from their retirement accounts. Unfortunately, they're hit with a 10% penalty. But if you're unemployed, you can avoid the penalty if the withdrawals are for deductible medical expenses.

    "Congress created exceptions where you can waive the penalty," Luscombe said. "If you meet the definition of unemployed and you make a withdrawal from your IRA or 401(k) to pay for any deductible medical expense, you get a break whether or not you are able to claim the expense on your tax return."
  • If you're older than 55 and withdraw money from your 401(k) after you quit or lose your job, there would also be no penalty.
  • Job hunting expenses are deductible if you itemize your return. Expenses can include the cost of résumé printing, long-distance phone calls, faxes, postage and travel bills.

    You don't have to be out of work to be eligible. But you do have be searching for a new job in a similar career field.

    Job-hunting expenses get counted as part of your miscellaneous itemized deductions, which must exceed 2% of your adjusted gross income to be deductible.
  • If you move to take a new job, you may be able to deduct your moving expenses. To qualify, the new job must be at least 50 miles farther from your old home.


 
Posted by at

S.O.S. To the IRS

Some college students may be familiar with the annual responsibility of filing out a federal tax form. Other college students may only be familiar with tax forms from stand-up comedy routines and late night talk show jokes. For students who may be filing tax forms for the first time in 2010, the process may seem confusing. How can students gain a better understanding of their responsibility to the nation? With some helpful information concerning common tax form questions, Kean University students may find that navigating the tax form process is not as difficult as it seems.

"Do I have to file a federal tax form?"
In the United States, the federal agency in charge of collecting taxes is the Internal Revenue Service. Each year, the IRS releases Publication 501, a taxpayer guidebook that is available online at the IRS government web site. Publication 501 presents very long and detailed descriptions of different taxpayer categories. With a little patience, a student can read through the descriptions and determine their taxpayer status. According to Publication 501, students should first find out if another person will claim them as a dependent. When a student relies on another person for financial support, such as a parent, guardian, or spouse, that person can claim tax exemptions by listing the student as a dependent. After finding this information, it is important that students who are claimed as dependents do not halt their tax status investigations. Even though a student may be financially reliant on another person, they are not necessarily free of tax responsibilities. Students who are claimed as dependents may be required to file a tax form under various circumstances. Descriptions of these circumstances can be found in Publication 501.

"What paperwork do I need to fill out?"
To file a tax form, students must complete a 1040 form. The IRS offers shorter versions of the 1040 form that may be suitable for some students. Students with a taxable income of less than $100,000 who do not claim any dependents and earn less than $1,500 in interest income may choose to fill out the 1040EZ form. Students with an income of less than $100,000 who are looking to claim tax credits for educational expenses and other similar costs may opt for the 1040A form. If the shorter versions of the 1040 form are not suitable, students can fill out the traditional 1040 form. The forms will be sent to students in through the mail, but copies can usually be found at public libraries. To avoid mistakes, it may be wise for students to double check their important documents before they begin to fill out their tax forms. Students may decide to fill out a rough draft and save it as a personal record.
Posted by at

After Rejecting 1.7 Million Returns, IRS Offers Help

New 800-number phone service available for seniors confused over whether they've received Economic Recovery Payments.

被过滤广告被过滤广告
pic
Forbes 2010 Tax Guide
Stimulus Creates New Tax-Time Headaches
1040 Traps And Tips
Hiring Cheaper Protection From The IRS

The Internal Revenue Service is belatedly moving to fix one of this tax filing season's most vexing problems--one that already led more than 1 million taxpayers to have their electronically filed returns rejected.

The problem, which affects mostly new retirees and seniors with part-time jobs, involves the interaction of two economic stimulus provisions Congress passed last year: The $400 per worker ($800 per couple) Making Work Pay credit and the $250 per retiree ($500 per retired couple) Economic Recovery Payment.

The $250 per person payment was supposed to be sent to those receiving Social Security retirement and disability and Veterans and Railroad Retirement benefits. Recipients who worked in 2009 are also eligible for the $400 worker's credit, but must reduce the $400 by the $250 payment and calculate their Making Work Pay credit on Schedule M. Since the $250 payment was directly deposited into the same checking accounts their Social Security or other benefits checks are put in, some recipients don't know if they got the money.

Beginning Monday, however, the IRS is offering a toll-free automated line for checking on whether you've gotten an Economic Recovery Payment. Taxpayers can call 1-866-234-2942. To retrieve the information, you (or your tax preparer) will need your Social Security number, birth date and your ZIP code at the time you filed your last tax return. (If you file a joint return and need the information for both spouses, you'll have to get the low-down for one, hang up and call back for the other.)

So far this year large numbers of seniors have been getting their electronically filed returns bounced back because, according to the IRS computers, they haven't accurately stated whether they got the $250 payment. IRS National Taxpayer Advocate Nina E. Olson tells Forbes that through last Thursday, 1.7 million returns out of 46 million filed, or nearly 4% of all those filed, have been rejected for this reason. (In some cases, taxpayers attempted to file more than once and so a total of 1.2 million taxpayers have been affected, she says.)

"This will certainly help those taxpayers who can't remember if they received the ERP," said Robert Meighan, a CPA and vice president of Turbo Tax, Intuit's ( INTU - news - people ) tax preparation software unit.

Rate This Story

  • Your Rating
  • Overall Rating

Reader Comments

The IRS expects to have a look-up tool available on the Web at irs.gov by March 22, in time for the second filing peak of the season, Olson said. (The first filing peak was in late January and early February, when taxpayers expecting refunds rushed to file.) Before Monday seniors had to call Social Security and wait on hold to speak to a person. In addition, their preparers couldn't retrieve the information for them.

"It's too bad (the automated IRS phone service) wasn't available sooner and that we still will have to wait until just a few weeks before April 15 to have the Web application," said Claudia Hill, a Cupertino, Calif., tax pro. Hill notes the new service doesn't address widespread confusion among government retirees, who weren't sent the $250, but are eligible for it if they fill out a Schedule M.

For more on how this and other changes have been causing taxpayers' headaches this year, click here.

被过滤广告

Reader Comments

Posted by at
Subscribe to: Posts (Atom)