Tax Breaks for the Unemployed

If you are unemployed, taxes may be the last thing on your mind, however, you are actually entitled to a handful of additional tax breaks. Read on, the unemployed need all the money help they can get.

CNN reports:

"This is your money that you're entitled to, and if you're unemployed it's really in your interest to get that money back this year," said Bob Meighan, vice president at TurboTax. "Refunds are averaging around $3,000, which is a pretty good chunk of money, especially if you're unemployed -- but time is running out, so get your records together and get started."

Job seekers: If you lost your job and were seeking a new one last year, you can deduct many of the costs associated with your hunt.

This includes headhunter or career coach fees, the cost of printing, photocopying or creating resumes, and even fees for joining job search sites. You can also deduct phone and fax expenses, as well as the cost of traveling to and from interviews -- including airplane tickets, bus rides and gas money.

As a job seeker, you can even deduct the cost of taking continuing education classes to maintain the skills used in your previous line of work.

And the money spent on job hunting doesn't have to result in employment. To claim the deductions, you simply need to itemize them on your return. If you do end up scoring a job and need to relocate at least 50 miles away from your current home, you can also deduct the cost of moving.

Continue reading here

5 Signs the Economy is still Struggling

With the November elections just a few weeks away, some politicians want Americans to believe that the U.S. economy is recovering. However, according to a report from Rutgers University, over half of American taxpayers believe the economy has undergone a fundamental and lasting change. Yesterday, I posted this blog entry taking a look at some of the signs of economic recovery, however, not all signs are good. There are also plenty of reasons to still be concerned about the economy.

Auto Sales

We all know that the three main American automakers have been struggling for years. Despite federal funds, the companies are having ongoing problems. Some economists estimate that U.S. automakers must charge an additional $2,000 per vehicle because of labor costs, and high medical and retirement benefit expenses. With this additional overhead, it has become almost impossible for American automakers to stay competitive. Compared with August of 2009, auto sales have decreased by 21% over the past year, and between July and August of 2010, sales fell by 5%. These disappointing numbers have led many economists to call for another Cash-for-Clunkers program, or another type of financial incentive to purchase a new car.

Unemployment

It is impossible to ignore unemployment problem in this country, with thousands of jobs being lost every month. According to the Labor Department the economy lost 100,000 jobs in August, which increased the unemployment rate from 9.5% to 9.6%. The ongoing unemployment problems are commonly cited as the main delay in economic recovery, and although we might see seasonal job creation over the next few months, many experts predict that we will not see any significant employment gains until 2012.

Home sales

Earlier in the year the housing market was showing some signs of improvement, but after the housing credit expired in June, home sales decreased quickly. In July, home sales were down over 25% compared with July of 2009. To make matters worse, home values are also continuing to plummet. Experts are even predicting another 5 to 10% decline in house prices over the next few months. Fortunately, as Neil Irwin or the Washington Post explains, housing activity has already decreased so much that it would be hard for it to hurt future economic recovery. Between 2006 and 2009 home sales fell from 2.3 million annually to under 500,000. This sudden drop was a major strain on the economy, but even if construction levels decrease further it is very unlikely to have the same impact on our economy as the collapse between 2006 and 2009.

Local Double Dips

One of the largest fears about the U.S. economy is the possibility of a double-dip recession. Most economists agree that this is unlikely on the national level. However, many state and local governments are at a serious risk of slipping into a second, more severe recession. Several government agencies across the country are facing unbalanced budgets, and have turned to drastic tax increases to generate revenue. Many economists suggest that these tax hikes could have a negative impact as consumers are left with less money to spend in their local economy.

Bank Failures

Last month the Federal Deposit Insurance Corporation (FDIC) announced that 829 financial institutions (or 1/10th of the banks in this country) were on their problem list. These banks are on the edge of going under, and there have already been 118 bank failures this year. There were 140 total bank failures in 2009, and it does not look like this trend is going to stop anytime soon. The problems facing financial institutions in the U.S. has a significant impact on the overall economy. When banks are struggling lending becomes more difficult, between April and June loan and lease balances fell another 1.3%. Until businesses have easier access to credit, unemployment problems will persist and the economy will continue to struggle.

Job Blues for Gray-Haired Workers

Lower unemployment numbers are great news for everyone, except older workers, says CNNMoney.com. According to the most recent statistics from the Labor Department, while jobless claims are falling overall, the number of unemployed workers over 55 years old is holding steady.

What does that mean? Companies are hiring all right, but only younger workers. "All the gains we've seen from the peak last fall to now, they've gone to people less than 55 years old," said Heidi Shierholz, a labor economist for the Economic Policy Institute. Furthermore, some experts also believe that the unemployment rate for older workers is artificially low, as they tend to become more discouraged and stop looking for work. And unemployment only counts people who are actively seeking employment.

Overlooking older workers is bad news for employers too. According to Tim Driver, CEO of RetirementJobs.com, older workers bring incredible experience and a lifetime of skills to their jobs that younger workers just can’t duplicate. In addition, older workers tend to keep stay in jobs longer, reducing turnover costs for employers.

Read the entire article here.

Wanted: 400,000 truck drivers

It is well known that unemployment is still at an all time high in our country. The problem is nationwide and each individual state is looking for ways to get their residents back into the job force. Businesses are doing their part too—in Sacramento, California where I am located, 1500 people showed up to apply for limited employment positions at the local Campbell’s Soup Factory. While I love that businesses are trying to be a solution to the unemployment problem, it is just unfortunate that there are way too many people who are unemployed and this number outweighs the available job opportunities. This morning, I came across an industry that is calling out to the employed.

According to CNN Money, the U.S. trucking industry will need to hire about 200,000 drivers by the end of this year, and will need to add another 200,000 by the end of 2011, according to the Council of Supply Chain Management Professionals. Overall the industry lost almost 150,000 driving jobs since the start of 2008.

Rosalyn Wilson, the author of the report that was sponsored by Penske Logistics, states that the forecasts is for only a 4% to 6% growth in freight traffic for trucks this year and next, which Wilson says is a conservative estimate. Typically freight grows by about 10% coming out of a recession, she said.

I find it very interesting to know that freight grows by such high percentages after a recession—Read more here and tweet me your thoughts.

www.twitter.com/ronideutch

Special Tax Incentives for Small Businesses to Provide Health Care, Hire New Workers

In their newest press release the IRS explains recent legislation that will provide incentives to small business owners wanting to provide health care, and hire new workers.

A variety of business tax deductions and credits were created, extended and expanded by the American Recovery and Reinvestment Act of 2009 (ARRA), this year’s Hiring Incentives to Restore Employment (HIRE) Act and the Affordable Care Act. Because some of these changes are only available this year, eligible businesses only have a few months to take action and save on their taxes. Here is a rundown of some of the key provisions.

New Health Care Tax Credit Helps Small Employers

The small business health care tax credit, created under the Affordable Care Act, is designed to encourage small employers to offer health insurance coverage for the first time or maintain coverage they already have.

The credit takes effect this year and is generally available to small employers that pay at least half the cost of single coverage for their employees in 2010. The credit is specifically targeted to help small employers that primarily employ low- and moderate-income workers.

For tax years 2010 to 2013, the maximum credit is 35 percent of premiums paid by eligible small business employers. The maximum credit goes to smaller employers ­­–– those with 10 or fewer full-time equivalent (FTE) employees ––­­ paying annual average wages of $25,000 or less. The credit is completely phased out for employers with more than 25 FTEs or with average wages of more than $50,000.

No Job For Years and Still Looking

From CNN Money.com:

John Miller wasn't too nervous when he lost his job in the mortgage industry in June 2008.

The worst of the financial crisis was still months away. While the subprime mortgage industry had already imploded, there was still a debate at the time whether a recession had started. Job losses were steady but not dramatic.

Miller lost his job when Deutsche Bank shut down a unit making government-guaranteed FHA loans, but he had found work in the past when an employer had closed a unit. He thought that even if it took a few months to find another job, something would turn up.

Almost two years later, he's still looking.

"It's unfathomable to me," said Miller. "Never in my wildest dreams did I think I'd be coming up on two years without a job."

Miller is exhibit A of why this economic downturn feels so much worse to most than any other since the Great Depression. Long-term unemployment is at a level that dwarfs anything since the government started tracking the problem shortly after World War II.

More Than 200,000 Jobless Counting On An Extension

A million Americans could lose their unemployment benefits this month if the Senate does not act quickly to extend the benefits, as well as deadline to file. According to CNNMoney.com, Senators are supposed to vote when they come back on Monday, but if they wait until later in the week it could leave thousands of Americans without benefits.

These folks were expected to stop getting checks this week after lawmakers failed to extend an April 5 deadline to file for federally-paid benefits before adjourning for a two-week recess. A total of a million people could lose benefits this month if the Senate doesn't act, according to the National Employment Law Project.

When they return Monday, senators are scheduled to take the first vote needed to push back the deadline until early May.

A final vote, however, is unlikely to come until later next week. Monday's move is a procedural step that simply allows lawmakers to consider the bill. Democrats need at least one Republican to join them to get the legislation past this hurdle.

Though the measure generally enjoys bipartisan support, it has gotten caught in the divisive politics pervading Capitol Hill. Republicans blocked the extension's passage late last month, saying the $9 billion bill should be paid for.

Continue reading at CNN Money.com…

Senate OKs Jobs Bill for Obama's Signature

As many had expected, the new legislation providing employers that hire unemployed workers a tax break has passed the Senate with a 68-29 majority vote. The legislation will now go to President Obama’s desk to get signed into law. You can learn more about this new law in the following story from the Associated Press.

It will be the first of several election-year jobs bills promised by Democrats to be enacted into law, though there's plenty of skepticism that the measure will do much to actually create jobs. Optimistic estimates predict the tax break could generate perhaps 250,000 jobs through the end of the year, but that would be just a tiny fraction of the 8.4 million jobs lost since the start of the recession.

The measure is part of a campaign by Democrats to show that they are addressing the nation's unemployment problem, but that message was overshadowed by Congress' feverish final push to pass health care overhaul legislation by this weekend.

The bill which passed Wednesday contains about $18 billion in tax breaks and a $20 billion infusion of cash into highway and transit programs. Among other things, it exempts businesses that hire the unemployed from paying the 6.2 percent Social Security payroll tax through December and gives employers an additional $1,000 credit if new workers stay on the job a full year. Taxpayers will have to reimburse Social Security for the lost revenue.

Continue reading at Google News…

Senate Approves Tax Breaks for New Hires

The Senate approved Obama’s job creation bill this morning with a 70-28 vote. The legislation includes tax breaks for businesses that hire previously unemployed workers. It will need to get passed by the House of Representatives before going to Obama’s desk for a signature, but many experts predict it will have no problem getting enough votes in the House. Democrats hope that this will be the first of many bills that will help encourage job creation.

According to Yahoo, it's the first major bill to pass the Senate since the Christmas Eve passage of a deeply controversial health care bill and the subsequent election of Massachusetts Republican Scott Brown, which rocked Democrats by demonstrating their falling standing even among heavily Democratic voters.

The bill contains two major provisions. First, it would exempt businesses hiring the unemployed from the 6.2 percent Social Security payroll tax through December and give them an additional $1,000 credit if new workers stay on the job a full year. The Social Security trust funds would be reimbursed for the lost revenue.

Second, it would extend highway and mass transit programs through the end of the year and pump $20 billion into them in time for the spring construction season. The money would make up for lower than expected gasoline tax revenues.

Continue reading at Yahoo.com…

Some Relief for the Nation's Unemployed

Recent reports seem to indicate that while the economy may find its way out of the current recession and job growth is on the horizon (See article on job growth) the nation's unemployment rate is unlikely to be effected.

Although this is undoubtedly disheartening for the jobless, there is a bit of silver lining when it comes to unemployment benefits. If you haven't heard already, there's good news for those who were unemployed at any time in 2009 and collecting unemployment benefits. These taxpayers are entitled to a special tax break when they file their 2009 federal tax returns. This tax break is part of the American Recovery and Reinvestment Act (ARRA) of 2009.

Here are five important facts you need to know about your unemployment benefits:

1. Unemployment compensation generally includes any amounts received under the employment compensation laws of the United States or of a specific state. It includes state unemployment insurance benefits, railroad compensation benefits and benefits paid to you by a state or the District of Columbia from the Federal Unemployment Trust Fund. It does not include worker's compensation.

2. Normally, all unemployment benefits are taxable; however, under the ARRA, every person who receives unemployment benefits during 2009 is eligible to exclude the first $2,400 of these benefits when they file their federal tax return.

3. For a married couple, if each spouse received unemployment compensation, then each spouse is eligible to exclude the first $2,400 of benefits.

4. You should receive a Form 1099-G, Certain Government Payments, which will show the total unemployment compensation paid to you in 2009, in box 1.

5. All you have to do is subtract $2,400 from the amount in box 1 of your Form 1099-G to figure out how much of your unemployment compensation is taxable and then report this amount on your federal tax return, do not enter less than zero. You must report unemployment benefits received on your tax return.

Finally, if you collected more than $2,400 in unemployment benefits in 2009, don't forget to claim a deduction for your job-hunting expenses. Tips on expenses you can include in the job-hunting deduction can be found here.

Making the Most of Your Taxes for the Growing Legions of Unemployed – Part 2

As a follow up to the entry I posted yesterday, here are some ways to make the most of your taxes if you are one of the millions currently struggling with unemployment.

First of all, you can probably expect a larger refund. Taxes are withheld from wage earners based on the assumption of continued employment and continued income throughout the year. Abruptly losing your source of income means you probably had taxes overwithheld from your previous pay, expecting you would end up in a higher tax bracket. When you file, you will correct that assumption and enjoy a little extra money coming your way in the form of a refund.

If you received public assistance, like food stamps or WIC, or if someone gave you money to help you out, those forms of income are not taxable. You can receive up to $13,000 a year in gifts from a single source, tax-free. Unfortunately, gifts to an individual cannot be deducted by the giver as a charitable contribution.

Many unemployed people do some freelance work to gain some income. While this means you have to pay self-employment taxes on that income (including Medicare and Social Security taxes), it also means you might be able to deduct expenses for the business. So, be sure you keep good records (and receipts!) and deduct everything to which you are entitled. You can also take advantage of the home office deduction, which is available for both owners and renters, so long as there is a dedicated space used regularly and exclusively for business, and it is the principal place of your business. This could include deducting mortgage interest, insurance, utilities, repairs and depreciation.

Since your income was cut-off, your are probably going to have a lower adjusted gross income (AGI) than in years past. Thus, you may be able to deduct medical expenses, student loan interest, and other miscellaneous deductions that you may have been ineligible to claim in the past. For example, you can usually only deduct medical expenses that exceed 7.5% of your AGI, making many employed people and those with employer provided health care ineligible. However, with a lower AGI, more of these expenses will become deductible. Also, remember that if you are paying COBRA fees to keep your medical insurance, you can deduct those fees as part of the medical deduction.

You may be able to undo your IRA contributions from earlier in the year. This means you can withdraw the amount you put in, including interest and dividends without tax hits. The only trick here is that you can not then also claim a deduction for those contributions, and you must still include any income you earned from the contribution.

This could be the perfect opportunity to dump some loser stocks and use capital losses to your advantage. Generally capital losses locked in by selling stocks are used to negate capital gains. However, if you have no capital gains, or have more losses than gains, you can use up to $3,000 of that loss to negate ordinary income. You can also carry the remainder of the loss forward into future years until you deplete the entire loss. And of course, one of the best parts is that by selling the stocks, you get an instant cash infusion.

Many tax professionals are offering free or low cost tax preparation for people who are having hardships or unemployed. Check around and find out if there are any reputable tax-preparers doing so in your local area. And the IRS is also offering free electronic tax filing and preparation for taxpayers with an adjusted gross income under $56,000 through the Free File program. Prefer in person help? The IRS offers Low Income Taxpayer Clinics. These clinics are run through independent organizations providing low-income taxpayers with representation in federal tax controversies with th4e IRS for free, or for a nominal charge. The clinics also offer tax education and outreach for taxpayers when English is their second language. If those options don’t work for you, the IRS offers free tax preparation help nationwide form IRS trained volunteers. The Volunteer Income Tax Assistance program is designed to help low income taxpayers, and the Tax Counseling for the Elderly program is designed to assist taxpayers over 60 years old with their returns.

While it doesn’t help you this year, there will be a number of tax breaks and unemployment help available for 2009. From $2,400 tax free in unemployment compensation, increased unemployment benefits, and prolonged eligibility periods, the American Recovery and Reinvestment Act (AKA the Stimulus Package) may help ease the burdens of families struggling with unemployment. Small comfort for those who needed help last year, but hopefully some of the tips in this post can help you make the most of a bad situation.

Tax Tips for Job Hunters

More and more people are losing their jobs in this country every day. As such there are thousands of normally employed Americans out looking for a new job. Luckily, there are numerous tax breaks and deductions available to help those in this particular position. To assist the readers of my blog that are actively looking for new employment, I have compiled the following list of tax tips for job hunters.

Keep Organized

While being out of a job and collecting unemployment can be disorienting, it is a good idea to remain vigilant with your organization and recordkeeping. You do not want to lose track of your financial documents and tax records. The costs of job hunting can be used to your advantage come tax season, so keep all receipts and documents related to your search for a new job.

Travel Costs

Travel expenses spent while traveling to an interview for a prospective employer can be written off. Although only 50% of your meal expense can be written off, airfare, hotels, and other, related travel expenses can be deducted in full.

Advertising Expenses

If you decide to post an ad for yourself on a job board, make sure you keep the receipt!

The IRS will allow you to deduct any costs of advertising your services if made while unemployed. This includes online ads, periodical and newspaper fees, and other ads.

Career Counseling

If you seek the advice of a career counselor while unemployed, those costs can also be deducted. Just be sure to keep all receipts, as well as a business card of the counselor you spoke with.

Legal Fees

If offered a position that requires an employment contract, then you might consider having a legal professional look it over. Not only are the legal fees tax deductible, the review may save you from getting into a contact that you do not understand.

Résumé Prep

Getting a job without even a minimal résumé these days can be tough. Fortunately, the costs to create, prepare, and send out your résumé are all eligible unemployment deductions. This includes stamps, envelopes, résumé programs, and mailing costs.

Employment Agency

Many unemployed taxpayers are choosing to get some help from an employment agent. If you do enlist the help of an employment agency to land the right job, you can probably write off any related fees.

Moving Costs Paid

If you need to re-locate for a new position, those costs may also be deductible. However, there are strict distance minimums and dozens of other qualifications. If you are going to deduct moving expenses then I highly recommend you check with a tax specialist before making any decisions.

Still See a Pro

Even though you are currently unemployed, and possibly a little strapped for cash, it is still advised you seek professional help on your taxes. In many cases, a tax preparer can point out helpful credit and deductions you may have missed. They can also make sure that you qualify for all the deductions you do claim. Finally, professional tax preparation services are also tax deductible.

Unemployed? You Could Qualify For Tax Breaks

From USA Today:

If you're unemployed, your tax bill will probably decline. That's small consolation — sort of like suggesting that going bald isn't so bad because you'll save money on shampoo. Given a choice, most people would rather have a full head of hair and a job.

Still, if you were laid off last year, you could be eligible for a host of tax deductions and credits that could put money in your pocket when you need it most. Tax breaks that could become available when your income is down:

•Deduction for medical expenses. Co-payments, deductibles and other unreimbursed medical expenses are deductible only if they exceed 7.5% of your adjusted gross income.

The income cut-off prevents most people with jobs and employer-provided health insurance from deducting medical expenses. But if your income has declined and you're paying more for health care, the threshold could become easier to cross.

Under a federal law known as COBRA (Consolidated Omnibus Budget Reconciliation Act), you can continue your former employer's coverage for at least 18 months. To maintain coverage, though, you must pay the entire premium, plus an administrative fee. These expenses qualify for the medical expense deduction, says Leslie Laffie, tax analyst for Thomson Reuters.

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Many employees who can't afford COBRA opt instead to buy an individual insurance policy. Premiums for these policies are also deductible, Laffie says. And if you're required to pay a specific amount out-of-pocket before your insurance kicks in, those payments also count toward the medical expense deduction.

Miscellaneous itemized deductions. Expenses that fall into this category include tax preparation costs, safe deposit box fees and — significantly, for unemployed people — job search expenses. To claim this deduction, your combined miscellaneous expenses must exceed 2% of your AGI, so this is another break that becomes more accessible when your income has declined.

Your can deduct job-hunting costs even if your search was unsuccessful, Laffie says. However, you must seek a job in the same business or trade where you were previously employed to deduct those costs.

"If you were a teacher, you have to be looking for a job as an educator, vs. looking for a job as an engineer or accountant," she says.