Unemployment Benefits will trigger tax bills in 2010
Millions of Americans who have been out of work for months are relying on unemployment benefits to put food on the table. In November, Congress extended benefits by up to 20 weeks for workers in states with high jobless rates.
But what many people may not realize is that some of those benefits are taxable. The economic stimulus package enacted last year excluded the first $2,400 of unemployment benefits from 2009 gross income. For unemployed married couples, each spouse is eligible to exclude up to $2,400 in benefits.
Taxpayers who receive unemployment benefits should receive Form 1099-G, which shows the amount of benefits you received for the year. You should report unemployment compensation that exceeds $2,400 on line 19 of Form 1040, line 13 of Form 1040A, or line 3 of Form 1040EZ.
The $2,400 exclusion wasn’t extended into 2010. That means all of the unemployment benefits you receive this year could be taxable. For more information, see IRS Publication 525.
To reduce the tax hit, make sure you take advantage of all the deductions available to you. For example, expenses in connection with looking for another job may be deductible.
Legitimate deductions include the cost of printing and mailing a résumé, traveling for interviews and job placement agency fees. You must itemize to deduct job-hunting costs, and only expenses that exceed 2% of your adjusted gross income are deductible.
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Unemployed people will not be able to pay taxes..
Thanks for the post..