Economy changes tax preparation

February 11, 2009 4:36:13 PM PST
April 15th is fast approaching and while it comes as no surprise that you have to file your taxes, this year is different for millions of Americans. From job loses to foreclosures, a lot of people are in trouble and it can have a huge impact on your taxes. Luckily there is a one stop place to find the answers.

The 1040 form is largely unchanged but for many of those filling out tax forms, things are vastly different from a year ago and many tax payers have questions.

"I know friends of mine who have lost a job," said Betty Fuentes who is preparing her taxes. "Some of them have lost their homes and they are finding it difficult."

"Maybe they have lost their jobs locally and they are trying to find out what to do," said Lea Crusberg with the Internal Revenue Service.

Crusberg says getting answers to many economy related tax questions is as easy as checking out the agency's Web site.

"It's for taxpayers who have a situation change," Crusberg said. "They may have lost a job, they are trying to find out where to get help and if the IRS can help them. That's really who it is for."

For those of you who collected unemployment benefits, don't forget to claim them.

"Unemployment compensation will be a part of your taxable income and even if there is not tax withheld on it, you are still going to have to pay income tax on it," said Houston CPA Bob Martin

If your income went down, there are tax credits you may be eligible for as well as expenses you can claim as part of your job search. If you lost your home, recent rule changes help offset your tax obligations.

"Under most circumstances, if it was your principle residence you will not have to pay income taxes on the debt forgiveness related to that," Martin said.

But if you had credit card debit that was forgiven in 2008, you have to report it.

"If there is debt forgiveness, quite often they will receive a 1099 from a credit card company and they will have to pay income tax on that debt forgiveness," Martin said.

And what about your 401K, I know yours has probably lost value, but unfortunately you cannot deduct that loss because the funds use pre-tax dollars.

Where can you find the information? Go to the IRS web site, or my consumer blog, we have a link there.

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