Tips for the out-of-work taxpayer

Job hunting costs are deductible. If you accumulated expenses greater than two percent of your adjusted gross income, it may be worth the time to itemize your eligible deductions. Costs for long-distance calls, agency fees, unreimbursed travel - including mileage, lodging or other transportation for out-of-town trips - and resume printing and mailing costs, qualify as deductions. However, these deductions are not available to people looking for their first job out of college or just a different line of work.Unemployment over a certain amount is taxable, so are payments from former employers. Taxes do not have to be paid on unemployment compensation up to $2,400 per recipient, but amounts over $2,400 are still taxable. If a husband and wife both received unemployment compensation in 2009, they can each exclude $2,400. Looking ahead to next year, you can request withholding on your benefits payments if you expect to owe tax on benefits by the end of the year. Severance pay is also taxable as are any additional payments you might have received from a former employer for unused sick or vacation days. It pays to check out available credits. This year there are more credits available, so don't just skim over tax forms and fill them in as you have in the past. Do your homework at www.irs.gov and take advantage of education credits like the improved American Opportunity Tax Credit and Lifetime Learning Credit and others designed for those in a lower income bracket such as the Earned Income Tax Credit. Cancellation of Debt may add to taxable income; Mortgage Forgiveness Debt Relief may exclude income. If you have settled a debt for less than the amount owed, you may be subject to taxes on the forgiven amount. A taxpayer will receive a 1099-C form from a federal agency, credit union or financial institution if they have forgiven more than $600 of debt. For taxpayers in a foreclosure situation, the Mortgage Forgiveness Debt Relief Act allows them to exclude income from the relief of debt on their principal residence or mortgage restructuring. You may also be able to exclude all or part of debt income that occurs in a Title 11 Bankruptcy case if you are considered insolvent. In these more complicated circumstances it might be a good idea to consult a tax professional, such as a CPA, or check what low or no-cost assistance is available in your community.

********** Published: March 19, 2010 - Volume 8 - Issue 48