TRENTON, NJ AREA - HandR Block Warns Taxpayers About Unemployment Benefits

TRENTON, NJ AREA - H&R Block Warns Taxpayers About Unemployment Benefits

With the unemployment rate at 8.7 percent in the county and 8.6 percent at the state level, H&R Block is warning taxpayers about money they will owe on their unemployment benefits.

According to the tax service provider, eight in 10 taxpayers believe they don't have to pay taxes on unemployment benefits, according to a survey conducted by The Tax Institute at H&R Block.

For the thousands of unemployed in Chautauqua County and the more than one million others nationally who filed for unemployment in the past two months, it's critical to understand the tax implications of receiving those benefits. Those who don't, may have an unexpected tax bill next April.

''For most individuals, taxes are very confusing. If your situation has changed and you are now unemployed, that adds a new level of complexity and stress to an apprehensive time,'' said Anthony Rosania, H&R Block spokesman.

To help relieve some of that stress, Burton said it's important to learn a little more about three key areas: taxability of unemployment benefits, COBRA insurance subsidy and the reasons for tracking job search expenses.

''Because even the little expenses add up, be sure to document and keep receipts,'' Mr. Rosania said.

According to H&R Block, Congress did pass some additional relief. A provision in this year's Recovery Act is designed to relieve some financial burden for those who are unemployed. For anyone receiving unemployment benefits in 2009, an extra $25 per week is added to their benefit. In addition, the time a person can receive unemployment payments was extended to 20 weeks and in certain high unemployment states, extended an additional 13 weeks. Be sure to check with a local tax professional or unemployment office to determine which states gives the extension.

The legislation passed in February also gives a break on COBRA insurance premiums to those who qualify. This benefit is a federal subsidy of 65 percent on monthly premiums for up to nine months. This decreases the out-of-pocket expense on COBRA by almost two-thirds for those who are eligible.

Although unemployment compensation is taxable, the Recovery Act contains a provision that exempts the first $2,400 of unemployment benefits earned in 2009 from federal taxes. However, any unemployment compensation earned over $2,400 is still taxable.

So, for those unemployed, H&R Block said the following steps can simplify the tax picture: setting aside a portion of your benefit amount to pay taxes next year or fill out form W-4V to have it automatically withheld, tracking and documenting job search related expenses and talking to a tax professional to avoid confusion.

Ms. Burton said many expenses incurred as a result of a job search are tax deductible when a taxpayer seeks employment in the same field or business as their previous job. That includes resume development, professional placement services and mileage driven to job interviews and other unreimbursed travel expenses such as airfare.

Taxpayers must itemize as part of their miscellaneous deductions to deduct job search expenses. However, only miscellaneous expenses that exceed 2 percent of adjusted gross income are deductible.

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