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Wednesday, January 5, 2011

Jobless lose $2400 credit on 2010 tax returns; 401K, job hunting credits possibly available

Seal of the Internal Revenue ServiceImage via Wikipedia
Internal Revenue Service (IRS) announced
on January 4th that tax payers will
have until April 18th to file returns.

In 2011, tax payers will receive three extra days to file their federal tax returns. IRS announced on January 4th at their website, this years’ tax deadline has been extended to April 18th. 

For unemployed Americans under 99 weeks of Federally Extended jobless benefits, a $2400 tax credit jobless workers were allowed to claim on their 2009 returns, has since expired.

The three day extension on tax payers 2010 returns is due to the District of Columbia (D.C.) observed holiday of Emancipation Day. The holiday is on Friday, April 15, 2010. 

By law, District of Columbia observed holidays impact tax deadlines similar to federal holidays; therefore, all taxpayers receive three extra days to file this year.

For up to 13 Million unemployed job seekers, a much-needed tax-break received on their 2009 returns has been eliminated. The American Recovery and Re-Investment Act of 2009 –known as the Recovery Act- allowed for an exemption of the first $2,400 of unemployment insurance from income tax.

The jobless exemption was not renewed when President Obama signed into law HR-4853-The Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act on December 17th. All income received from unemployment compensation in 2009, is now subject to federal taxes.

Some relief could be still available for the unemployed via early withdrawals from Individual Retirement Accounts (IRA’s). Unemployed job seekers could be eligible to receive waivers of penalties for early withdrawals from IRA’s or 401K’s if they were needed to pay certain expenses.

Job hunting expenses can be from 2010 tax returns deducted if certain criteria are met. Specifically, expenses must equal 2 percent of your adjusted gross income, and your expenses must be toward job searching in your current field. It is advised that tax filers who were jobless in 2010 consult either an accountant or tax advisor for details on both of these areas.

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