If you took money out of a 401(k) or IRA to meet some of your expenses, normally if you’re under 59 ½ you’ll be taxed and charged a 10% penalty,” St. Onge said. You’ll be sent a 1099-R and you’ll need to count the amount you pulled out as income, plus pay the penalty. One exception: The 10% penalty does not apply to withdrawals used to pay for health insurance after a layoff, as long as you received unemployment benefits for at least 12 consecutive weeks
Tax Tips For the Unemployed<br />For The Tax Year<br />Ended 12/31/09<br />
Taxability of NYS UI Benefits<br /><ul><li>Unemployment benefits are subject to federal, state and local income tax.
The withholding of Federal income tax or State income tax from NYS UI benefits is voluntary. If you elected to have Federal tax withheld in 2009, you should have received Form –1099G showing your 2009 gross benefit and the attendant federal tax withheld.</li></li></ul><li>Income Subject to Tax<br /><ul><li>First $2400 of unemployment is excluded from income. The gross amount of 2009 NYSUI unemployment received less $2,400 is entered on line 19 of form 1040.
Every person who receives unemployment benefits during 2009 is eligible. For a married couple, the exclusion applies to each spouse, separately. </li></li></ul><li>2009 Standard Deductions<br /><ul><li>Single or married filing separately – $5,700
Married filing jointly or Qualifying widow(er) - $11,400
Head of household - $8,350</li></ul>Exemptions<br /><ul><li>$3,650 for each exemption</li></li></ul><li>Should you file? <br />
Itemized Deductions <br /><ul><li>Qualifying expenses, such as state and local income and property taxes, mortgage interest, charitable contributions and medical expenses.
If you itemize your deductions, job seeking expenses are deductible. You must itemize job-hunting expenses on Schedule A as Miscellaneous Deductions.</li></li></ul><li>Miscellaneous Deductions <br /><ul><li>The deduction is limited by a threshold amount you must meet. Your job search costs are considered miscellaneous expenses. They are deductible only when they, and all other allowable expenses in this category, are more than 2 percent of your adjusted gross income .
They are deductible only when they are more than 2 percent of your adjusted gross income . You can deduct expenses only if you’re looking for another job in the same occupation . </li></li></ul><li>Other Deductions<br />Moving Expenses<br /><ul><li>You can deduct expenses only if you’re looking for another job in the same occupation </li></ul>Educational Expenses<br />Education expenses are deductable if incurred in an employee's current field.<br />
Examples Of Deductable Job Search Expenses<br /><ul><li>Résumé - You can deduct amounts you spend for preparing the document.
Cost of advertising your services and newspapers and other periodicals you purchased to monitor help-wanted ads.
Travel expenses incurred in your employment search. This includes food expenses, lodging and transportation to and from another city to look for a job.
Lot of long distance phone calls for job interviews.</li></li></ul><li>Job Hunting Expense<br />Deduction Eligibility<br /><ul><li>You can deduct expenses only if you’re looking for another job in the same occupation.
New graduates cannot deduct job search expenses if trying to get the ﬁrst full-time job in their chosen career.
Deductions are not allowed if you took a substantial break between your last job and your search for a new one.
You can write off eligible search costs even if you don’t get a new job.</li></li></ul><li>Job Hunting Expense<br />Documentation<br /><ul><li>Receipts must be saved to substantiate your expenses.
Mileage log for the car with start/ﬁnish odometer readings, date, and purpose of the trip.
The standard mileage rates allowed for the use of a vehicle are:
55 cents per mile for miles driven searching for work.
24 cents per mile driven for medical or moving purposes and </li></ul>14 cents per mile driven in service of charitable organizations.<br />
Credits Against Income Tax<br /><ul><li>Making Work Pay Credit - If you have been working for a part of 2009 or your spouse is working, you are entitled to a payroll tax credit for 2009 and 2010 of up to $400 a year for single taxpayers, and up to $800 for couples filing jointly.
Earned Income Credit Increased - For families with three or more children.
First Time Home Buyers Credits - Get $8000 from IRS
Residential Energy Credits -Save up to $1500 with qualified energy efficient home improvements. </li></li></ul><li>Other Considerations<br /><ul><li>Unemployed status also waives the hefty penalties for withdrawing from IRA and 401(k) plans for certain expenses (including healthcare).
Unemployed status also opens a loophole for IRA contributions. IRA contributions aren't tax deductible if an employee is already covered by their employer's retirement plan. Being unemployed for any part of the year opens a window of eligibility.
Any costs that are related to a job-related move are deductible</li></li></ul><li>Qther Considerations<br /><ul><li>Lowered cost for COBRA health insurance is a valuable benefit for workers who lost their health insurance when they lost their jobs. This government subsidy is designed to help unemployed people keep their health insurance
Keep in mind that there may be additional credits and deductions that are not related to your employment status, however may still result in a significant tax refund like the Car Sales Tax Deduction. You can deduct the sales tax you pay on a new vehicle, if you buy it between February 17 and December 31, 2009. And you get this tax break even if you claim the standard rather than itemizing deductions on your tax return.</li></ul>For people who take the standard deduction on their 2009 returns, the sales tax deduction will be added to their standard deduction. <br />
Facts of Life<br /><ul><li>The amount of time that people with jobs actually worked in May tied for the lowest number since 1964 - 33.1 hours a week.
The unemployment rate, which is based on a separate household survey, hit 9.4% last month, the highest in 25 years</li></ul>Jim doing job search<br />