As April 15 approaches, tax returns can be one difficult time for people with checkered work records and little available cash. They still have a date with Uncle Sam even if they were unemployed in 2008.
A recent report showed that 2008 was a bad year for 2.6 million Americans who lost their jobs, the highest job-loss count in over six decades.
"More people than ever before may be experiencing, for the first time, unemployment and the tax implications related to that," revealed Mark Steber, vice president of tax resources at Jackson Hewitt.
Here are some guides that may help those unemployed taxpayers in 2008.
Will I still have to pay tax even if I was unemployed in 2008?
If you received a W2 from your employer and earned at least $8,950, or made $400 if self-employed, the IRS requires you to file your tax return. If you are expecting a tax refund, then you must file even if you haven’t worked at all.
Am I required to pay tax on my unemployment checks?
Yes. Unemployment payments are subject to taxation on most federal and state tax returns.
When filing for unemployment, you can select whether you prefer state or federal income taxes deducted automatically from you unemployment benefits. Should you decide to withhold, a 10% federal tax withholding rate will apply while state rate varies. Because many financially-burdened taxpayers choose not to withhold, they may have to settle this April.
What if I used some of my 401(k) money?
Taking money out of your 401(k) or retirement account as an add-on to your unemployment checks is counted as income and so is taxable, according to Joseph Perry, the partner in charge of Marcum & Kliegman's tax department.
What about jobs that required relocation?
If your new job requires relocating, any moving expenses not covered by your new employer is tax deductible. The new job location, however, has to be 50 miles further than your old home from your former job, according to Tom Ochsenschlager, vice president of taxation for the American Institute of Certified Public Accountants. This deters you from deducting expenses from a move within the same area.
What if it cost me a lot to look for a job?
Job seekers last year may get a great deal of tax deductions. A lot of the expenses accrued during a job search is tax deductible which can add up to some terrific savings.
Taxpayers may bring down the amount of payable tax by declaring the following deductible items.
• Expenses incurred during the creation, printing and mailing of your resume. Long distance calls or cell phone charges used with your job hunt are also deductible.
• Transport expenses such as bus, train, taxi or plane enroute to a job interview. Also included is applies to fuel cost when you drive from home to interviews or even to an unemployment office. Parking and toll fees, meals, and lodging expenses are deductible if the interview is out of town.
Unfortunately, you cannot deduct the cost of a new suit, briefcase or new shoes that you have used for the interview.
It is important that taxpayers keep all their receipts to substantiate their expenses when requesting for tax deductions. It is advised to consult a professional tax preparer for expert help.
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