At the end of 2010, 14.5 million people were unemployed and many more were out of work at one time or another throughout the year. In preparing 2010 tax returns, people who've been unemployed should make sure they are getting every available tax break they deserve and preparing their taxes correctly.
"Being out of work is stressful enough. Not knowing if you're getting all the tax breaks you should, or being concerned you're going to make mistakes that may cost you, just adds to the stress," says Gary Lundberg a tax software professional with CompleteTax. CompleteTax is an online tax software program offering free federal tax preparation for people who were unemployed during 2010.
He offers these tax tips to help people who have been unemployed.
1. Understand what your tax responsibilities are. People who are out of work are still responsible for filing a tax return and paying income taxes. This includes taxes on unemployment benefits or severance benefits they may have received.
Many people incorrectly believe that simply being out of work means they do not have to prepare a tax return or pay taxes, according to a nationwide survey conducted by CompleteTax of more than 1,000 taxpayers.
"Even though you still have to file a tax return, your income is likely lower than in previous years, so there's a good chance you may have a refund coming," says Lundberg.
2. Make sure to get all the tax breaks you deserve. Being out of work may allow people to take advantage of several credits and deductions. For example, certain job-search expenses can be deducted if you're looking for a job in your current profession. These include:
* Travel for job interviews
* Printing and mailing resumes
* Outplacement firm fees
However, the CompleteTax survey found that many taxpayers also incorrectly believe they can deduct haircuts or clothes necessary for job interviews, a home office to use in their job search and classes to learn new skills outside their trade.
Many taxpayers also mistakenly believe that simply being out of work allows them to deduct their health care costs. While in some instances, people who are unemployed can deduct their health care costs, other criteria also must be met.
"You want to make sure you know what you can and can't claim. By using a tax program that includes resources to help you make those decisions, you can be confident you're completing your taxes accurately and getting the maximum tax refund you deserve," says Lundberg.
3. Look for affordable tax prep and file as soon as possible. People using online tax preparation programs can often prepare and file their tax returns for less than $70. People who are out of work may be able to file for considerably less. For example, Lundberg notes, CompleteTax offers free federal tax preparation for people who were unemployed during 2010.
People who were out of work also want to file as early as possible. "If you were unemployed, you'll especially want your refund as soon as possible," says Lundberg. "If you e-file and choose direct deposit, you could have your money in as few as eight days."
For more tips on tax preparation and to read the nationwide survey on unemployment and taxes go to www.CompleteTax.com.
Original News6 Article