Important 2010 Tax Changes for the Unemployed [Video]

Unemployed Tax Here's one more unavoidable thing you can count on in addition to death and taxes, and that's change in the tax laws, according to tax specialist Douglas Rucal, who, as a franchise owner of 26 Liberty Tax locations in Southern California, comes across thousands of people with specific unemployment and job search questions this time each year. If you are new to unemployment, you might not realize just how taxing your meager payments can be.

Rucal recently sat down with AOL on This Week in Careers, to talk about the changes that occurred since last you filed in 2010. One of the most important things to be aware of, says Rucal, is the change that came about in 2010 on taxable unemployment compensation. For tax year 2009, the exclusion was the 1st $2,400 on your federal return. This year all of your unemployment compensation needs to be included in calculating your taxable income.

But you might not feel that hit too severely if you had any earned income, aside from unemployment, explains Rucal. That could make you eligible for earned income credits, which, if you make a certain amount, are over 25 and have three or more children, could be as high as $5,666.

Another important change this year is the tax deadline itself. While the deadline is usually April 15, the 2010 filing deadline has been extended to Monday, April 18, 2011, giving you an extra weekend to complete them. That's because this year, Emancipation Day, a holiday observed in the District of Columbia, falls on Friday, April 15. While it doesn't celebrate emancipation from taxes, at least it gives us a little more wiggle room.

To avoid last minute panic, Rucal says that when you first start receiving unemployment, it's advisable to check the box that says, "Yes" to the question of whether or not you want federal tax withheld. Even though the checks seem small in the first place and having tax deducted makes them even smaller, most people are unable to save the 10-15 percent that's often necessary for taxes on unemployment payments.

Rucal also advises anyone who is looking for a job, whether you're employed, unemployed or receiving unemployment checks, to deduct all job-seeking expenses. Some that people don't often think of include:

  • Mileage for your job search: Whether you're driving to Kinko's or the office supply store, or driving a certain distance for a job interview or to meet with someone who can help you network, you can deduct the mileage it took you to get there. If you moved for a job, that mileage is also deductible at 16.5 cents per mile -- and you can bet it will be more per mile next year, since gas prices went so high in 2011.
  • Additional travel expenses: Meals, hotel, phone expenses you incur while you're on the road searching for a job are all tax deductible.
  • Resume preparation: If you hire a professional to help you with your resume, that is certainly tax deductible, but so is the price of the paper it's printed on, copying fees -- even ink toners and cartridges for your printer.
  • Internet expenses to find a job: Some of the specialized online agencies charge a monthly fee to give you access to job openings in your particular field, or to look for jobs for you. Other professional networking sites, like LinkedIn, charge extra for upgraded professional services. Those are all tax deductible as well.
  • Meeting/meal expenses: If you're meeting with someone who is helping you with your job search and you decide to take that meeting over lunch or coffee, 50 percent of the cost of that is tax deductible.
  • Phone expenses: If you make any long distance calls on behalf of your job search, those are also tax deductible. Certain cell phone expenses are also deductible.

Be advised that, "If someone has been unemployed for most of the year, they may not have made over the standard deduction limitation, and therefore they have no tax liability," says Rucal. "It really depends on how much they made that year, whether or not they're married, how many children they have -- each situation will be a little different, and it changes from year to year."

If all that information makes your head spin, you're not alone. U.S. income taxes have become so complicated that many people seek out professional help, which is not a bad idea. Tax preparers like Liberty can prepare and file your taxes for as little as $49.95, which is far less than most people's refunds, according to Rucal.

Most tax preparers have extended hours in April -- some are even open 24/7 the week before taxes are due. But why not avoid the last day chaos, and do your taxes right now, while it's fresh in your mind, if you haven't already? Somewhere out there, there's a tax professional waiting to help you.

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Wayne Parker

I agree with you Lisa. I like when you said: "Even though the checks seem small in the first place and having tax deducted makes them even smaller, most people are unable to save the 10-15 percent that's often necessary for taxes on unemployment payments." Best wishes.

Wayne. |

March 03 2014 at 10:42 PM Report abuse rate up rate down Reply
Bill Stewart

Taxes can be confusing with or without all kinds of changes. After making a mess of my taxes my friend recommended I try accounting services fort walton beach fl. That's where I'm looking next time.

March 11 2013 at 8:19 PM Report abuse rate up rate down Reply

Yeah we can tax unemployment benefits that are paid for by employers and earned by employees through actual work but guess what isnt taxed one damn dime? Welfare, food stamps, housing assistance, medicaid, etc. and these are FLAT OUT FREEBIES given to a group that doesnt work. The big scam is that these freebies have to be counted as income for the purpose oif obtaining credit to buy a new set of 22" rims and is not considered income when fileing taxes. Unemployment however if listed on a credit application is a RED MARK against the applicant and NOW it is taxable. This is what the democrats have DONE TO AND FOR our country.

April 12 2011 at 11:11 AM Report abuse +1 rate up rate down Reply

Taxes on unemployment bennies... how cruel!! Congress should rot in Hell for allowing this debauchery.

April 12 2011 at 10:27 AM Report abuse +2 rate up rate down Reply

The BIGGEST problem with this article is that people who are desperate will believe what it says and question legitimate tax professionals saying, "But, I read it on AOL." People want to believe what is in their best interest. Check Mandy's comment below. She has the accurate information...probably straight off of the IRS website or directly out of an IRS publication.

April 12 2011 at 9:56 AM Report abuse rate up rate down Reply

"that extra income you have to declare could make you eligible for earned income credits, which, if you make a certain amount, are over 25 and have three or more children, could be as high as $5,800."

In response to the above comment. That is absolutely inaccurate. The IRS clearly states;
Earned income does not include any of the following types of income:

Investment Income
Taxable refunds
Alimony received
Unemployment compensation
Pay received for work while an inmate in a penal institution
Retirement income
Child support
Money or property that was inherited, willed to you, or received as a gift
Life insurance proceeds received because of a person's death
Section 8 Housing Allowance
Food Stamps
TANF and other welfare benefits
Minister's housing. The rental value of a home or a housing allowance provided to a minister as part of the minister's pay generally is not subject to income tax, but is included in net earnings from self-employment. For that reason, it is included in earned income

April 12 2011 at 9:49 AM Report abuse +2 rate up rate down Reply
1 reply to Mandy's comment

A minimum wage job 30 hrs per week is enough for the earned income credit..........And all of the entitlements you mentioned above are only counted as income for the purpose of obtaining credit.....IT'S THE when it's all over and done these alledged poor people have 30k - 50K of expendible income.

April 12 2011 at 11:15 AM Report abuse rate up rate down Reply

I would say that whomever AOL got this information from , has absolutely NO idea what he is talking about. it was the first 2400.00 of unemployment not 800.00 and the irs does not count unemployment as earned income for earned income credit. AOL where did you find this guy, from the blonde and dangwood comics?

April 12 2011 at 9:48 AM Report abuse +1 rate up rate down Reply

I counted my unemployment this year fully as required, and used it for earned income credit, the IRS disclaimed it said it was not earned income??? whats up with that...therefore I did not get earned income credit and have child in school. if this is correct what you are saying IRS screwed up!! someone please tell IRS unemployment is earned income, they do not think so.
thanks BV in Florida

April 12 2011 at 9:40 AM Report abuse rate up rate down Reply
1 reply to Beth's comment

Beth: the IRS did not screw up! This article did. In order for you to receive Earned Income Credit you must have some earned income. Unemployment income, by definition, is unearned income.

April 12 2011 at 9:46 AM Report abuse rate up rate down Reply

Wow! This is an interesting article. So many things are incorrect as those below have pointed out. One other thing to keep in mind...after you have totaled all those job hunting expenses and any possible unreimbursed job expenses you may have had while you were employed that year, only the amount that exceeds 2% of your adjusted gross income is a deduction and your itemized deductions have to exceed your standard deduction or you won't really have a benefit. Also, "for as little as $49.95" probably doesn't include a tax return with deductible job hunting expenses!

April 12 2011 at 9:37 AM Report abuse rate up rate down Reply

Wow, there's a tax advisor NOT to go to.
AOL, you should do a better job on Research before you interview these quacks who knows less about taxes returns than the "common" man.
In 2010, you don't have to pay income taxes on the first $3000. I know, I was unemployed and I didn't.

April 12 2011 at 7:36 AM Report abuse rate up rate down Reply

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