2011 unemployment insurance benefits are taxable
Millions of Americans are without regular work despite a steadily dropping nationwide jobless rate. Being in this unenviable situation inheres a major tax implication: Unless federal income tax withholding was previously requested by the payee, unemployment insurance benefit recipients face an unwelcome surprise when calculating their 2012 taxes.
Previous Congressional exemption of the first $2,400 in unemployment insurance payments no longer exists. Although all 2011 unemployment benefits are taxable, other allowable deductions are available to offset out-of-work taxpayers’ public pecuniary obligations.
The Earned Income Tax (“EIT”) credit may be claimed by taxpayers whose household compositions underwent major changes during 2011, for instance.
Those who returned to the classroom to pursue advanced education or enhanced professional skills development may be eligible for the American Opportunity Credit or one of many other educational tax deductions.
Internal Revenue Service (“IRS”) officials urge taxpayers to promptly file personal 2011 tax returns even if unable to pay their tax bill in full. Installment payments or negotiation settlements are popular options that help financially-strapped taxpayers avoid substantial penalties and additional interest for unpaid 2012 taxes.
Costs incurred in connection with ongoing job searches are also deductible. Examples include toll charges for long-distance calls, motel room rentals, stationery, and postage. All such associated job-hunting expenditures must have been made in an attempt to secure work in the same or a similar field as one’s previous occupation or profession.
Be sure to retain receipts and keep accurate records of all such expenses to avoid overpayment of 2012 taxes.
- Gambling and taxes – what should you report? (2009tax.org)
- Top Ten Most Overlooked Tax Deductions (2009taxes.org)