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Tax tips for the unemployed

By Jen Haley, CNN
Even if you're unemployed, you must file your taxes to get a refund.
Even if you're unemployed, you must file your taxes to get a refund.
STORY HIGHLIGHTS
  • If you get a W-2 form, you probably need to file a tax return
  • You do not need to pay any taxes on the first $2,400 in unemployment checks
  • Job-hunting expenses exceeding 2 percent of adjusted gross income are deductable
  • Laid off at 55 years or older, you can take money out of your 401(k) without penalty
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New York (CNN) -- Tax time can be a painful time for many of us, and it's especially tough for people without jobs. If you're unemployed, there are a few twists and turns in the tax code that can work to your benefit.

Even if you didn't work last year, you probably still have to pay taxes. Unemployment benefits are taxed. Plus, if you received a W2 form and made at least $9,350 (as a single person), you are required to file a return, says tax analyst Mark Luscombe of CCH.

If you freelanced or started a business, you'll have to file a tax return if you made more than $400 in profit. If you are anticipating a tax refund, you must file, even if you didn't work at all.

1. Take advantage of new benefits

Traditionally, every penny of unemployment insurance is taxed. But with 8.4 million job losses since the start of the recession, that rule is changing this year.

If you received unemployment checks last year, you can exclude the first $2,400 from your return. You have to remember to do this math yourself, since the documents from your state employment agency won't exempt it. This benefit won't be around next year.

You can avoid a "penalty tax" on IRA and 401(k) withdrawals if you took the money out to pay for medical expenses.

Also, if you've been laid off and you're 55 years or older, you can take money out of your 401(k) without penalty.

2. Deduct your job hunting expenses

If you itemize, you can deduct job-hunting expenses. But there are rules. All of your deductions must exceed 2 percent of your adjusted gross income. Here are some things you can deduct: resume printing costs, postage, long-distance calls and faxes and travel expenses, including airfare, taxis or tolls. Make sure to hold onto all your receipts.

And don't forget that you can also deduct your medical expenses, if those expenses exceed 7.5 percent of your adjusted gross income. That used to be a high hurdle. But, if your income plunged because of unemployment, you may very well be able to deduct your medical expenses -- so hold onto drugstore receipts, prescription orders and co-pay information.

 
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