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Tax Tips For the Unemployed

For The Tax YearEnded 12/31/09

Unemployment benefits are subject to federal, state and local income tax.

The withholding of Federal income tax or State income tax from NYS UI benefits is voluntary. If you elected to have Federal tax withheld in 2009, you should have received Form –1099G showing your 2009 gross benefit and the attendant federal tax withheld.

Taxability of NYS UI Benefits

First $2400 of unemployment is excluded from income. The gross amount of 2009 NYSUI unemployment received less $2,400 is entered on line 19 of form 1040.

Every person who receives unemployment benefits during 2009 is eligible. For a married couple, the exclusion applies to each spouse, separately.

Income Subject to Tax

2009 Standard Deductions

Exemptions

$3,650 for each exemption

Single or married filing separately – $5,700

Married filing jointly or Qualifying widow(er) - $11,400

Head of household - $8,350

Should you file?

Itemized Deductions

Qualifying expenses, such as state and local income and property taxes, mortgage interest, charitable contributions and medical expenses.

If you itemize your deductions, job seeking expenses are deductible. You must itemize job-hunting expenses on Schedule A as Miscellaneous Deductions.

The deduction is limited by a threshold amount you must meet. Your job search costs are considered miscellaneous expenses. They are deductible only when they, and all other allowable expenses in this category, are more than 2 percent of your adjusted gross income .

They are deductible only when they are more than 2 percent of your adjusted gross income . You can deduct expenses only if you’re looking for another job in the same occupation .

Miscellaneous Deductions

Other Deductions

Moving ExpensesYou can deduct expenses only if you’re looking for another job in the same occupation

Educational Expenses Education expenses are deductable if incurred in an employee's current

field.

Examples Of Deductable Job Search Expenses

Résumé - You can deduct amounts you spend for preparing the document.

Cost of advertising your services and newspapers and other periodicals you purchased to monitor help-wanted ads.

Travel expenses incurred in your employment search. This includes food expenses, lodging and transportation to and from another city to look for a job.

Employment and outplacement agency fees.

Lot of long distance phone calls for job interviews.

Job Hunting ExpenseDeduction Eligibility

You can deduct expenses only if you’re looking for another job in the same occupation.

New graduates cannot deduct job search expenses if trying to get the first full-time job in their chosen career.

Deductions are not allowed if you took a substantial break between your last job and your search for a new one.

You can write off eligible search costs even if you don’t get a new job.

Job Hunting ExpenseDocumentation

Receipts must be saved to substantiate your expenses.

Mileage log for the car with start/finish odometer readings, date, and purpose of the trip.

The standard mileage rates allowed for the use of a vehicle are:

55 cents per mile for miles driven searching for work.

24 cents per mile driven for medical or moving purposes and 14 cents per mile driven in service of charitable organizations.

Credits Against Income TaxMaking Work Pay Credit - If you have been working for a part of 2009 or your spouse is working, you are entitled to a payroll tax credit for 2009 and 2010 of up to $400 a year for single taxpayers, and up to $800 for couples filing jointly.

Earned Income Credit Increased - For families with three or more children.

First Time Home Buyers Credits - Get $8000 from IRS

Residential Energy Credits -Save up to $1500 with qualified energy efficient home improvements.

Unemployed status also waives the hefty penalties for withdrawing from IRA and 401(k) plans for certain expenses (including healthcare).

Unemployed status also opens a loophole for IRA contributions. IRA contributions aren't tax deductible if an employee is already covered by their employer's retirement plan. Being unemployed for any part of the year opens a window of eligibility.

Any costs that are related to a job-related move are deductible

Other Considerations

Lowered cost for COBRA health insurance is a valuable benefit for workers who lost their health insurance when they lost their jobs. This government subsidy is designed to help unemployed people keep their health insurance

Keep in mind that there may be additional credits and deductions that are not related to your employment status, however may still result in a significant tax refund like the Car Sales Tax Deduction. You can deduct the sales tax you pay on a new vehicle, if you buy it between February 17 and December 31, 2009. And you get this tax break even if you claim the standard rather than itemizing deductions on your tax return.For people who take the standard deduction on their 2009 returns, the sales tax deduction will be added to their standard deduction.

Qther Considerations

Facts of Life

The amount of time that people with jobs actually worked in May tied for the lowest number since 1964 - 33.1 hours a week.

The unemployment rate, which is based on a separate household survey, hit 9.4% last month, the highest in 25 years

Jim doing job search