IRS Provides Assistance for Unemployed Taxpayers
OKLAHOMA CITY – The economic downturn has disrupted the financial lives of many in our nation’s workforce. How have you been affected? Perhaps you are searching for a new job or are in the process of relocating after finding one. Or maybe you tapped into your retirement fund and now wonder about the tax implications. The Internal Revenue Service (IRS) recognizes that many people may be having difficult times and has resources available to help you.
The tax code includes programs such as the Earned Income Tax Credit (EITC) that many taxpayers do not know about, say tax experts at the Oklahoma Society of Certified Public Accountants. Unemployed taxpayers should take advantage of these resources to ensure they are following the law while reducing their tax burden.
Information at your fingertips
Frequently Asked Questions
The IRS’ Tax Center to Assist Unemployed Taxpayers is a good starting place if your job and income status have changed over the course of 2010. The IRS offers information on a wide range of tax-related topics that may be applicable to your situation. The document, Tax Impact of a Job Loss, provides questions and answers about the tax implications of:
Severance pay;
Accumulated leave or vacation pay and sick pay;
Unemployment compensation;
The COBRA health insurance continuation premium subsidy; and
Withdrawals from your pension plan or IRA.
Earned Income Tax Credit
The Earned Income Tax Credit (EITC) is a refundable federal income tax credit for low- to moderate-income working individuals and families and is designed to offset the burden of social security taxes and provide an incentive to work. When the EITC exceeds the amount of taxes owed, it results in a tax refund to those who claim and qualify for the credit. To qualify, taxpayers must meet certain requirements and file a tax return, even if they do not have a filing requirement. Taxpayers can find out if they are eligible for the EITC by answering questions and providing basic income information using the EITC Assistant.
Additional resources
The Tax Center to Assist Unemployed Taxpayers also provides a wealth of additional information that may be helpful including:
“Job Related Questions During an Economic Downturn (Publication 4763);”
Free tax assistance;
How to get help with unresolved tax problems;
Starting your own business;
Tax issues related to bankruptcy; and
Mortgage debt forgiveness.
Deducting job hunt expenses
Finally, don’t forget that while you’re looking for a new job, certain job search expenses such as résumé services, employment and outplacement agency fees, postage, travel to and from interviews, long distance calls to prospective employers, and expenses related to moving to accept a new job are all tax deductible.
Do your research about what is and what is not allowed because there are some deduction no-nos, and you do not want to raise the ire of the IRS. Track your expenses carefully and hang onto your receipts so you can take advantage of the deductions where allowed. For additional information, see IRS Publication 529, “Miscellaneous Deductions.
“It’s been a tough year and many taxpayers may be facing tax implications that they’ve never experienced before,” said Blaine Peterson, CPA, of DeBee Gilchrist, PC in Oklahoma City and chair of the OSCPA Taxation Committee. “Taxpayers should take advantage of the many free resources the IRS provides on its website.”
If you would like to work with a CPA to address your needs, contact your local CPA. He or she can offer the advice you need to make the best decisions on your finances. If you do not have a CPA, visit www.KnowWhatCounts.org for a complimentary CPA referral, which also includes a free 30-minute consultation and a place to get your questions answered, called “Ask-A-CPA.”
Updated 11-16-2010
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