Before you know it, federal income tax season will be here. If you were one of the millions of unfortunate Americans who lost their job in 2009, be aware it may have created new tax issues.

The Federal Stimulus Act has extended the tax benefit for those who received unemployment compensation in 2009. The first $2,400 of 2009 Unemployment Compensation is TAX-FREE. However, the unemployment benefits above the $2,400 limit will still count as taxable income.

Otther income tax issues created by unemployment have to do with severance and other payments. Severage payments from your former employer are taxable. In addition, any payments you received for accumulated vacation or sick time is also taxable. Always ensure that enough taxes are withheld from these payments to avoid a big tax bill.

Generally, withdrawals from pension plans are taxable unless they are transferred to a qualified plan (like an IRA). If you happen be under 59 1/2, an additional tax may apply to the taxable portion on your federal income tax.

If you sell stocks, bonds and investment property are not immediately taxable. However the sale of assets should be reported. If you have a gain on a sale, it may generate an income tax liability. You should review your overall tax situation and make sure you pay the required taxes to avoid any estimated tax penalty. Be aware that it may effect your federal income tax and state income tax (if applicable).

There are some deductions you can take when filing your federal income tax forms. You can deduct employment and outplacement agency fees, resume preparation, and travel expenses for job search and interviews.

If you lost your job, be advised that moving costs incurred because of a job change may be deductible. You must meet certain criteria relating to distance moved and timing of the move.

If you decide to start your own business after becoming unemployed, be aware that the IRS provides information and classes.

If you become eligible for Public Assistance or Food Stamps it is not taxable.

Your former employer must provide your W-2 by January 1, 2010, even if the business filed bankruptcy. If you haven’t received your W2 by the required time, contact your former employer. If that fails, the IRS can assist you in filing a substitute W-2.

If you lost your job in 2009, we suggest you contact IRS (www.irs.gov), your accountant or a tax attorney to maximize your tax deductions and reduce your tax liabilities.

By a vote of 241-181, the House on Wednesday sent the Senate a bill (HR 4213) to extend through 2010 a $31 billion package of temporary tax credits and other fiscal incentives that benefit a multitude of U.S. businesses, farms, units of government, schools, charities, individuals, nonprofit organizations, religious institutions and other recipients.

The bill uses two measures to pay for itself. One would tax the earnings of hedge-fund managers and certain investment partners as ordinary income rather than capital gains. The other would increase Treasury receipts by cracking down on wealthy Americans who use secret overseas bank accounts to evade taxes.

• A sales tax deduction that mainly benefits people who live in the nine states without a state income tax. The states are Alaska, Florida, Nevada, New Hampshire, South Dakota, Texas, Tennessee, Washington and Wyoming. Cost: $1.8 billion.
• An additional standard deduction for state and local property taxes for taxpayers who don’t itemize their deductions. Cost: $1.5 billion
• A deduction of up to $4,000 for college tuition and related expenses. Cost: $1.5 billion.
• A deduction of up to $250 for teachers who spend their own money for books and other classroom supplies. Cost: $228 million.
• A credit that helps businesses finance research and development. Cost: $7 billion.
• Accelerated depreciation for improvements made to leased restaurant and retail property. Cost: $5.4 billion.
• Additional depreciation allowance for businesses that suffer damage from a federally-declared disaster. Cost: $1.4 billion.

Do you know how your state member of Congress voted on this issue of tax break extensions in 2010? Do you know the true tax facts about these bills?

You should!

Source: corsicanadailysun.com, seattletimes.nwsource.com