There were millions of people who were unemployed in 2010 and if you were one of them we want to make sure that you are prepared to pay taxes this year.
And do NOT forget to have withholdings taken from your unemployment compensation or you could end up owing more taxes than you bargained for.
Many taxpayers fail to realize that they owe taxes on unemployment benefits. For tax year 2010 all unemployment benefits are considered taxable. In 2009, an exemption was given for the first $2,400.
Unemployment benefits vary from state to state so it best to meet with your Liberty Tax® specialist to determine what your liability will be so you can plan for it.
If you have the unfortunate circumstances of being unemployed here are some possible deductions that you may qualify for to help increase your refund. First, your job search may have some expenses that are tax deductable.
Job Search Expenses. If you are searching for a job within your previous career with similar titles then your expenses for resume preparation, job counseling or employment agencies may be claimed. Other expenses such has phone, mileage, and other costs of travel assuming the costs were specifically for the job search. The expenses must be more than two percent of your adjusted gross income to qualify for the deductions. It is important to keep all receipts and proof of your records.
Moving Expenses. If your job search required you to move cities then you will be able to claim your moving expenses as long as your relocation was more than 50 miles away.
COBRA Insurance Premiums: Medical expenses in excess of 7.5% of your adjusted gross income including COBRA premiums are deductible.
There are also several tax credits that may apply to your situation including education expenses up to $2,500 which can be offset by the American Opportunity credit. There is also the Lifetime Learning credit up to $2,000 if the courses are used to improve your job skills.
Finally, you may also qualify for the Earned Income Tax Credit which is used for low-and-moderate wage earners. It’s important to note that unemployment does NOT count towards the “earned” income portion for the calculation purposes of this credit.
If you have any questions regarding your options, please give us a call at Liberty Tax®.: 1-866-871-1040 We look forward to helping you.