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2011 Tax return tips for Unemployed

04th February 2011
By conorwilliamss in Taxes
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United States of America has gone through some tough economic conditions recently which have directly or indirectly affected the average individual. Many have lost their jobs and many have taken salary cuts. But life continues as many of us fight back to regain the financial loss. We will discuss here how unemployed people can plan for their tax return for year 2011.

There are many rebates which are available for unemployed people under various IRS schemes to reduce their tax liability to bare minimum. Let us study few such options in brief:

COBRA insurance Scheme – Under this scheme an unemployed person and his immediate family is entitled to receive health insurance at heavily subsidised rates for up to 18 months after one has lost his job. Before this scheme came was launched no distinction was between employed and unemployed persons while calculating the annual health insurance premium. For an unemployed individual paying for hefty health insurance premium proved to be very uncomfortable. Government has now taken a more soft approach to benefit and provide basic services to unemployed persons. Now they need to pay only 35% of the annual health insurance premium and still get a 100% cover for themselves and family members.

The balance 65% of the insurance premium will have to be paid by his last employer who in return for this payment will get a equivalent amount of tax credits reducing its tax liability.

Retirement Account Withdrawals –

Retirement account is often the only support for many unemployed people. As per the tax laws any early withdrawals from this accounts attracts a 10% penalty and also these withdraws are added as income for the ongoing assessment year and are liable to be taxed. However there are few exceptions to this:

In case these withdrawals are used to pay higher education expenses of taxpayer, his/her spouse, or any child or grandchild are not liable for any penalties as discussed above.

Job Hunting Expenses – A person usually has to spend some money in finding a new job. Expenses made towards engaging a employment agency, job counsellor, referral service agency, classified advertisements, cost of developing, printing and distributing resume are all deductible from the gross income subject to maximum of 2%.

An unemployed person should be aware and take benefits of the above mentioned special tax incentives.

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