Important 2010 Tax Changes for the Unemployed [Video]
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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Lisa Johnson Mandell is an award-winning multi-media journalist and author of Career Comeback--Repackage Yourself to Get the Job You Want. Her work has been translated into 20 different languages, and she is a frequent expert guest and commentator on news and talk shows. She has been featured in The Wall St. Journal, on the CBS Early Show, NBC Today, CNBC, Fox Business News, Dr. Phil, Oprah.com and many other media outlets. Lisa discusses her AOL pieces each week and interviews vital guests on the web TV show, This Week in Careers. Learn more on LisaJohnsonMandell.com.