Out of Work? Five Things You Should Know When Filing Your Taxes

CHICAGO, March 16 /PRNewswire-USNewswire/ -- Many Americans found themselves out of work this past year, and high unemployment rates indicate it's still hard to find a job. If you've been out of work for some time, you may think you don't owe taxes or need to file a return, but think again. Higher amounts of unemployment compensation are taxable and there are credits that could get you money from the IRS. It's important to do a thorough job of completing your tax returns so you receive the refund you deserve or pay only what's needed. As the tax deadline nears, the Illinois CPA Society wants to be sure you're aware of these points when you file:

1. 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.
2. 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.
3. 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.
4. 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.
5. The IRS has new rules on negotiating settlements. The IRS recently announced they'll be doing more to help taxpayers who are having trouble paying their taxes because of unemployment or other financial problems. Among the steps the IRS is taking are more flexibility on payment compromises, such as using current income to calculate the taxpayer's ability to pay, and "open houses" for taxpayers to work directly with the IRS employees to resolve issues. They have also created a new section on their website (www.irs.gov) which serves as a tax center to assist unemployed taxpayers, providing them with more information and resources.

It's important to file tax returns by April 15th - and not ignore collection notices - in order to get the help you need from the IRS and avoid problems with them in the future. Visit the Illinois CPA Society site – www.icpas.org - for more information about credits, deductions and other tax filing season facts, including direct links to IRS topics.

About the Illinois CPA Society

The Illinois CPA Society, founded in 1903, is the fifth largest state CPA society in the nation, with more than 24,000 members. It is the premier professional organization that represents CPAs in Illinois. During its over 100 years of existence, the Society has advanced the highest ethical and financial standards of the profession, and has been a leader in educating the public on financial issues.

SOURCE Illinois CPA Society