Is Unemployment Compensation Received in 2009 Taxable ?

Is Unemployment Compensation Received in 2009 Taxable ?

Is Unemployment Compensation Received in 2009 Taxable ? photo 0

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With all of the corporate restructuring and resulting layoffs from businesses going out of business, it’s important this year to know if unemployment benefits received during 2009 are taxable and also how to report those unemployment benefits. There is good news, that some of the unemployment taxes are not taxable for 2009.

Is Unemployment Compensation Received in 2009 Taxable ? photo 1

As a result of President Barack Obama signing the American Recovery and Reinvestment Act of 2009, the first $2,400 of unemployment income received during 2009 will be exempt from taxable income when taxpayers file their 2009 tax return. This legislation, is a small improvement from last year, since for many unemployed workers,the first $2,400 of unemployment benefits received in 2009 will be tax-free.

With millions of Americans out of work, this legislation provides some relief in the form of a tax break for unemployed taxpayers. Under this new tax law, each person who receives unemployment benefits during 2009 is eligible to exclude the first $2,400 of these benefits when they file their 2009 tax returns.

For a married couple, this exclusion is applicable to either or both the husband and wife. If both were unemployed, than both may exclude the first $2,400 of unemployment benefits per recipient received during 2009 for a total of $4,800.

For those persons not familiar with the forms and have received unemployment compensation, the unemployment compensation is reflected on Form 1099-G. The taxpayer would report the unemployment compensation on line 3 of Form 1040EZ, line 13 of Form 1040 A or line 19 of Form 1040. Additionally, if you contributed to a government unemployment compensation program, then you are required to reduce the amount you reflect on Form 1040 by the amount of those contributions that you made to a governmental unemployment compensation program. In addition, if you received an overpayment of any unemployment compensation in 2009 and you had to repay any of those amounts in 2009, then reduce the amount you report by the amount you repaid.

If you would like more information explaining the treatment of overpayment and for other information concerning unemployment compensation please refer to IRS Publication 525. Tax laws are complex, change constantly and each situation is unique. This article is not intended to provide legal or accounting advice. The reader should perform his or her own due diligence and consult competent professionals in this area.

Learn more about our competitively priced internet and paperless based approach to tax preparation at affordable prices. Sandor(Sandy) E. Lenner,CPA-MBA has provided accounting and business services for 35 years and enjoys working part-time at his wife’s CPA firm

categories: unemployed,benefits,tax deductions,taxes,recovery act,excluded benefits,married,poverty,benefits,compensation,small business,income taxes,finance,business

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