Tax Savvy Can Help Jobless Americans Save

BOSTON (TheStreet) -- The estimated 15.3 million Americans out of work could find relief this tax season if they know where to look for it.

For those on the job hunt, costs for preparing resumes, hiring a headhunter, legal advice, long-distance calls and travel can be itemized and deducted. For those who landed a new position in a different city last year, moving expenses can also be deducted.

The key to taking advantage of these tax breaks is saving receipts and records for the purchases.

"For a single taxpayer, this could mean a savings of as much as $240 in income taxes," says Mark Steber, chief tax officer for Jackson Hewitt ( JTX). "Married taxpayers who both received unemployment benefits during 2009 will see even greater savings, given they are each eligible for the exclusion."

The federal Workers, Homeownership, and Business Assistance Act of 2009 extended unemployment benefits by 14 weeks. In states where the unemployment rate is at 8.5% or higher, individuals will receive an additional six weeks of aid.

Traditionally, such compensation has been considered taxable. But, thanks to the American Recovery and Reinvestment Act, the first $2,400 of unemployment benefits received in 2009 wasn't taxed. Public assistance programs, such as food stamps, also aren't taxable.

Not everyone will be able to recoup some of their losses by April 15. Freelancers and independent contractors are considered employed, if not gainfully so, if they earned more than $400.

Still, there are numerous expenses the IRS allows freelancers to deduct, such as those for business cards, insurance, technology purchases and Web site design. If it's job related, chances are a case can be made for their deductibility.

Less fortunate are those who were forced to dip into their retirement plan to make ends meet.

The IRS allows 401(k) hardship withdrawals for some unemployment-related circumstances, such as medical expenses and payments necessary to prevent eviction or foreclosure. These withdrawals, however, are still subject to income taxes and, if you are under the age of 59 and a half, a 10% penalty.

When it comes to severance packages, there's good news and bad news. On the down side, this compensation is fully taxable. Payments for any accumulated vacation or sick time are also taxable.

For some, however, the loss of steady income could shift them to a lower tax bracket, ultimately saving them money.

Be careful if friends or family lend a helping hand. Generally, a person who receives a monetary gift isn't liable for any taxes, but if it produces income like interest, dividends or rent payments, the receiver would be responsible for taxes on that income.

For anyone unable to meet their tax obligations or who have tax issues that will create what the IRS terms as "economic harm," they might be eligible to help from the Taxpayer Advocate Services.

-- Reported by Joe Mont in Boston.

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