Sisterly Savings

Guest Post by Roni Deutch

Let’s face it, being unemployed stinks. But there are ways to make unemployment work for you, tax-wise. Here’s what you need to know to make the most of your tax season if you’re one of the millions who are out of work:

1. Enjoy $2400 tax free! While your unemployment checks are usually considered taxable income, in 2009, the first $2,400 you received will not be taxed. Simply subtract that amount from the total benefits your received (which should be reported to you on form 1099-G).

2. Deduct Job Hunting Expenses. If you’ve been using your time out of work looking for a new job, you may be able to deduct your job hunting expenses. You need to itemize your deductions to get this great tax break, and the deduction is claimed on Schedule A, as part of your miscellaneous deductions.

The caveat here is that you can only deduct the amount of miscellaneous deductions that exceed 2% of your Adjusted Gross Income. However, I’m willing to bet most people will have no trouble meeting that requirement.

If you’re not sure what you can deduct, see below for a few ideas:

a. Travel to and from interviews
b. Resume printing and mailing costs
c. Phone and fax expenses
d. Costs to attend job fairs, or employment workshops

3. Expect a Smaller Tax Bill. Because your income was reduced, so too is your tax bill. This may even mean a bigger refund. Remember, taxes are withheld on the assumption that your current level of pay will continue all year. But if you lose your paycheck at some point during the year, you probably overpaid. So, you may have a little more of a windfall than you were expecting come April 15.

Certainly, being unemployed is no picnic. But with a few smart moves, you can use your status to save money on your taxes.

About the author: Roni Deutch is an esteemed tax attorney and author of, Tax Lady’s Guide to Beating the IRS. For more tips and suggestions, visit www.TaxLadyBook.com.

READY FOR TAX BREAKS?

- Guest Post By Safiya Andrew

“Show me the money!!” is what we all said during the Presidential campaign. President Obama promised that there will be a lot of tax breaks for the majority of the population who did not fall under the 3% wealthy bracket, and even more for the middle class. We are now upon the first tax season since the implementation of President Obama’s new tax breaks and I think we are off to an excellent start! President Obama you get an A- for the new tax incentives.

Let’s take a look at what’s in-store this season:

1. Make Work Pay Credit- This year everyone that is making earned income is eligible for up to a $400 (Single, Head of Household) or $800 (Married Filing Joint) refundable credit just for working.

Of course there are income limitations, however, for most of the population this is a wonderful boost to your refund. It may not be a lot, but it’s $400 more than what you were going to get.

2. HOPE Education Credit- the changes to this credit is AWESOME. With the new changes, it now allows for a maximum credit of $2500 for the first 4 years of college (previously only for first 1st and 2nd year) and 40% (up to $1,000) now refundable. Did you read that? If this isn’t an incentive for finishing your degree or going back to school, I don’t know what it is.

The changes also expanded the covered expenses to course material (i.e. books, supplies, equipment).

3. Sales and Local Taxes on Purchased Vehicle- What is awesome about this deduction is that everyone who purchased a motor vehicle (i.e. car, van, motorcycle, motor home) up to $49,500 in costs can take this deduction either as an add on to the standard deduction or under itemized deductions.

This deduction is for those that purchased their qualifying vehicle after 2/16/2009.

4. Homebuyer Credit- This credit has been extended to cover homes purchased from 11/7/2009 – 4/30/2010.

If you are building a home you must sign the contract by 4/30/2010 and home must be ready by 6/30/2010.

Now, the credit of up to $8,000 is not required to be paid back if you stay in the house longer than 3 years. Which is better than the original credit, in which the credit had to be paid back over a 15 year period.

Also they have extended this credit to homebuyers who have previously lived in a primary residence for 5 consecutive years and purchases a new primary residence , however, the tax credit is limited to $6500 (which is more than the credit they received last year…$0) Of course there are some limitations but not so strict , so most people qualify.

5. Earned Income Tax Credits- This year they have added another dimension to the earned income tax credit by having another level of credit possibilities for 3 or more children (previously the cap was 2 qualifying children).

Also, the earned income has been increased and the credit amounts are higher. So we are talking MO MONEY, MO MONEY, MO MONEY!.

6. Unemployment- This is a BIG one. This year anyone receiving unemployment compensation do not pay taxes on the first $2400 of unemployment compensation they receive.

I have had several tax clients who’s tax refunds were reduced because they received unemployment and did not have any federal taxes withheld. With so many people being unemployed, I know that this one will be great.

These are the top 6 new tax law changes that will provide great benefits to the taxpayers who work tirelessly to keep their heads above water during this “recession”.

These are definitely not inclusive as there are several more tax breaks, such as: increased standard deductions; home energy improvements; increased medical and moving mileage rates; higher income limits for IRA; increased 401(k) contributions; increased adoption credits and more.

{Please be sure to visit my website at andrewstaxes to see some more tax tips and advise for lifetime events.}

With tax season soon coming to a close, Roni Deutch, tax expert and author of The Tax Lady’s Guide to Beating the IRS: And Saving Big Bucks on Your Taxes, has tips you can start doing RIGHT AWAY so you’re not blindsided by the IRS in April:

1.      Clean, correct, current and complete Use good recordkeeping habits and a computer to complete your return and you will have gotten yourself off to a fabulous start.

2.      Right forms in the right order Using the right forms and putting them in sequential order makes it easier for the IRS to quickly read and review – which is what you want!

3.      Use the correct filing status The wrong tax category could cost you plenty in credits and deductions.

4.      Claim all of your allowable exemptions At $3,500 per exemption, that is a pretty penny to kiss away.

5.      Don’t use round numbers Rounded numbers is a big red flag that the taxpayer is estimating the numbers and may increase your chance for an audit.

6.      Double check your math Make sure to pay special attention to the Earned Income tax credit and Child tax credit—they are most often calculated incorrectly.

7.      Sign your return Yes, it seems like an obvious point. But the IRS says unsigned tax returns are one of the most common taxpayer miscues.

8.      File and pay on time and avoid penalties You must pay at least 90% of your tax due by April 15 to avoid penalties

9.      If you are not ready, file an extension File IRS Form 4868 and you will get until October 15 to file and avoid a late filing penalty.

10.  Keep a copy of your return For at least 6 years after filing your return, retain a copy just in case.

For more tips and suggestions, visit www.TaxLadyBook.com.

Yes, it’s that time of year when the dreaded tax season is almost upon us! I am particularly concerned this year because I was laid off in May last year and have been receiving unemployment compensation since and I am unsure how this will affect me regarding filing this year. So I’ve been getting ready now and preparing myself by reading all the latest articles I can find!

I found a lot of great resources on Turbo Tax that were free to read including some information regarding unemployment that were a great help! Here are a few to share with you below:

TurboTax – Tax Preparation Checklist

TurboTax Content Link for Tools and Calculators

Content – TurboTax – TaxCaster

TurboTax – The 11 Most Overlooked Tax Deductions

Content – TurboTax – Tax Rebate Information

If your interested in doing your own taxes online (which saves you a lot of money- H&R Block charges almost $300 to do your taxes for you!), you can try out Turbo Tax since they offer their software for free. Turbo Tax offers free e-file too and yes you can still get your refund in as little as 8 days.!

There are 4 different versions to choose from:

Free Edition
Deluxe Edition
Premiere Edition
Business Edition

Find out which TurboTax Is Right For You.

Personally I suggest starting with the Free Edition unless of course you own a business, then you may needthe Business Edition. But basically, if your taxes are simple, then the Free Edition will work for most although the other editions have options that make it easier to file for next year like importing all of last year’s info to save time.

How many of you file your taxes online and if you do, what program do you use?