All 2011 unemployment insurance benefits taxable
The jobless rate is dipping, but millions of people are still out of work. And that could have implications when they file their income tax returns.
Collecting unemployment insurance benefits? All that you received in 2011 is taxed as income. Unless you requested that federal taxes be withheld, you could be in for a big surprise when you calculate taxes owed.
Collecting unemployment insurance benefits? All that you received in 2011 is taxed as income. Unless you requested that federal taxes be withheld, you could be in for a big surprise when you calculate taxes owed.
If it’s any consolation, you may find yourself in a lower tax bracket because of reduced income, even counting the unemployment benefits. And you might also be eligible for tax breaks that you didn’t qualify for before. “If you have major household changes, say you lost your job in 2011, we encourage people to take a close look at things like the earned income credit,’’ Internal Revenue Service spokesman Terry Lemons said. He said people should go ahead and file their taxes even if they don’t have the money to pay any taxes that are due. “There are more options there than many people realize,’’ he said, including installment agreements.
The aftermath of the Great Recession, which gripped the nation from 2007 to 2009, is still being felt across America. Employers still worried about the state of the economy are hesitant to bring on new workers. And many of the more than 13 million unemployed people have stopped looking for jobs.
For those who spent part or all of 2011 searching for work, there are tax breaks. “All of those job search expenses are deductible — the stationery, the long-distance phone calls, the hotels, anything you can relate to the job search,’’ said Jeff Schnepper, author of “How to Pay Zero Taxes’’ (McGraw-Hill, 2011). To qualify for this deduction, you have to be looking for a job in the same field or profession as your previous one. Expenses incurred trying to get your first job are not deductible. “Until you start working, you don’t have a profession,’’ Schnepper said.
You also have to itemize. And the cost of preparing your resume, working with job search services, mileage and other job search expenses has to exceed 2 percent of your adjusted gross income if you are to benefit, according to Greg Rosica, tax partner with Ernst & Young. Make sure you save your receipts. “You have to be able to substantiate,’’ he said. Those out of work may find the jobs have dried up in their cities or towns. “Many people are picking up and moving to where the jobs are,’’ Meighan said.
The aftermath of the Great Recession, which gripped the nation from 2007 to 2009, is still being felt across America. Employers still worried about the state of the economy are hesitant to bring on new workers. And many of the more than 13 million unemployed people have stopped looking for jobs.
For those who spent part or all of 2011 searching for work, there are tax breaks. “All of those job search expenses are deductible — the stationery, the long-distance phone calls, the hotels, anything you can relate to the job search,’’ said Jeff Schnepper, author of “How to Pay Zero Taxes’’ (McGraw-Hill, 2011). To qualify for this deduction, you have to be looking for a job in the same field or profession as your previous one. Expenses incurred trying to get your first job are not deductible. “Until you start working, you don’t have a profession,’’ Schnepper said.
You also have to itemize. And the cost of preparing your resume, working with job search services, mileage and other job search expenses has to exceed 2 percent of your adjusted gross income if you are to benefit, according to Greg Rosica, tax partner with Ernst & Young. Make sure you save your receipts. “You have to be able to substantiate,’’ he said. Those out of work may find the jobs have dried up in their cities or towns. “Many people are picking up and moving to where the jobs are,’’ Meighan said.
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