The Obama administration says that the unemployment rate in America is down to 8.3%, the real number is over 10%. That means that for the 2011 tax year, millions will have to consider their unemployment benefits when filing their income tax.

While unemployment benefits are paid by individual states, you must include them on your federal income tax income tax return. This will undoubtedly end up having tax implications that will determine whether you are entitled to a tax refund or must pay income tax. Either way, the amount of unemployment benefits you receive must be reported on line 19 of Form 1040, line 13 of Form 1040A, or line 3 of Form 1040EZ.

Here are four tips from the IRS about unemployment benefits.

1. You must include all unemployment compensation you receive in your total income for the year. You should receive a Form 1099-G, with the total unemployment compensation paid to you shown in box
2. Be certain to include these other types of unemployment benefits on your tax return:
   • Unemployment paid by a state or the District of Columbia from the Federal Unemployment Trust Fund
   • Railroad unemployment compensation benefits
   • Disability payments from a government program paid as a substitute for unemployment compensation
   • Trade readjustment allowances under the Trade Act of 1974
   • Unemployment assistance under the Disaster Relief and Emergency Assistance Act

   For complete information on each of the benefits listed, see chapter 12 in IRS Publication 17, Your Federal Income Tax, or Publication 525, Taxable and Nontaxable Income.

3. You must report benefits paid to you as an unemployed member of a union from regular union dues. However, if you contribute to a special union fund and your payments to the fund are not deductible, you only need to include in your income the unemployment benefits that exceed the amount of your contributions.
4. You can choose to have federal income tax withheld from your unemployment compensation. To make this choice, complete Form W-4V, Voluntary Withholding Request, and give it to the paying office. Tax will be withheld at 10 percent of your payment. If you choose not to have tax withheld, you may have to make estimated tax payments throughout the year.

For more information on income tax tips visit the IRS Website.

Expecting a income tax refund this tax year? Do you want your refund sent by check, Direct Deposit or Bonds? That’s right, taxpayers have the option of receiving their federal income tax refund in the form of U.S. Series 1 Savings Bonds.

In order for taxpayers to receive their income tax refund in Savings Bonds, Tax Form 8888, Allocation of Refund (Including Savings Bond Purchases) must be completed.

Here are the guidelines and rules taxpayers should know when contemplating a tax refund in the form of U.S. Savings Bonds:

• Taxpayers must complete and attach Tax Form 8888 Allocation of Refund (Including Savings Bond Purchases).
• Taxpayers can allocate all or a portion of their tax return in the form of bonds.
• Allocation must be made in multiples of $50.
• The maximum dollar amount that can be used to buy Savings Bonds is $5000.
• You can buy bonds for yourself (and your spouse, if filing jointly).
• You can buy bonds for someone other than yourself.
• You can buy bonds for yourself, your spouse and someone else.
• You can indicate a co-owner or beneficiary on the bond registration.
• The bonds will be registered in the name shown in the appropriate lines of tax form 8888.

Taxpayers may not the requested Savings Bond Allocation if:

• Any information on your Tax Form 8888 is crossed off or whited out, the IRS will reject your allocation of refund and savings bond purchases, and send you a check instead.
• The bond request amounts are not in mulitples of $50
• The total amount of all bond allocations is over $5,000.
• Your refund is decreased because of a math error (you will receive a check instead).
• Your refund is offset for any reason (ex: part of your refund amount is deducted to pay past-due Federal Tax amounts).

If you make a math error that increases your tax return amount, the difference will be paid in the form of a check.

So now that you know more about income tax refunds, would you like your income tax refund in Savings Bonds?

Experts were surprised when presidential candidate Rick Santorum released four years of tax returns this week.  Although he earned less than his republican rival Mitt Romney, he paid at a higher rate.

The details of his tax records showed that he and his wife Karen earned more than $3.7 million over the last four years (2007-2010) and paid almost one-quarter of it in income tax.

He made his millions as a corporate consultant and a media commentator after serving as Senator of Pennsylvania.  His earnings jumped from $600,000 in 2007 to $1.1 million in 2009. His 2010 tax return showed his income as $923,000.

In 2009, Santorum’s income tax rate was 28% while Mitt Romney only paid an effective income tax rate of 13.9% on earnings of about $27 million.

The release of Santorum’s tax returns could affect his campaign. During his campaign, Santorum has claimed to have close ties with middle-class blue collar Americans.

Expect to see Mitt Romney use Santorum’s tax records against him. He’ll try to label him as a “Washington insider” and not a friend of the working class.