Date: 2009-03-05

Jackson Hewitt Offers Tax Filing Information for Taxpayers Unemployed In 2008

PARSIPPANY, N.J., March 5, 2009 /PRNewswire-FirstCall via COMTEX/ -- Many people who found themselves unemployed for the first time in 2008 may not be aware of the tax obligations and implications of being out of work. It is estimated that over the past 12 months, the unemployment rate rose 2.7 percentage points and nearly 11.6 million people found themselves out of a job for at least a portion of 2008.* To help avoid surprises as we enter into the final weeks of tax season 2009, Jackson Hewitt Tax Service(R) outlines some of the tax implications associated with unemployment.

"For those that were unemployed, it is important that they understand the tax consequences of the benefits they may have received last year," said Mark Steber, vice president of tax resources at Jackson Hewitt Tax Service, Inc. "There are many deductions available for those who are unemployed, but there are obligations, too."

Steber notes that there are four general areas that the unemployed should be aware of:

• Taxes on unemployment compensation,
• Expenses and benefits associated with becoming self-employed,
• Tax liabilities related to the distribution of a retirement account, and
• Tax deductions related to looking for a new job.

Unemployment benefits are taxable

Unemployment benefits are taxable under the federal income tax code and in most states. It is important to remember that federal income taxes are not automatically withheld from a benefit check, and if individuals did not specifically elect to have the taxes deducted, they will owe taxes on the amount received when they file their income tax return.

Self-employment has tax plusses and minuses

Some people who lost jobs last year may have become self-employed as a contractor or a consultant. It is important to note that income from odd jobs, consulting or entrepreneurial pursuits are subject to income tax and self-employment tax. There are also a number of deductions and benefits self-employed individuals may reap when filing their tax return this year, including:

• Deducting half of the self-employment tax paid.
• If the taxpayer is not eligible for health insurance from an employer, health insurance premiums may also be deducted, and
• Business expenses such as travel, tools for use on the job, and home office equipment and supplies may be deductible.

Tapping into a retirement account has tax consequences

To help make ends meet, some unemployed individuals may have tapped into a retirement plan or an IRA. For those who did -- there are a few key points to be aware of:

• If a taxpayer under 59 1/2 withdrew funds in 2008, the amount withdrawn is subject to an additional 10 percent tax. This penalty can sneak up on individuals who, at tax time, fail to take it into account along with the income tax required on any distribution of a retirement plan or traditional IRA.
• For taxpayers who withdrew from retirement accounts and IRAs last year, there are no tax consequences if the money was reinvested within 60 days. One pitfall to be aware of is that precisely the same amount of money withdrawn must have been reinvested; this includes any withholdings from the distribution and any fees paid to a plan administrator. If not, taxes will be due on the amount that was not reinvested.
• State taxes are an additional liability people will have to pay on their 2008 income tax return. Often these taxes are not automatically deducted from the amount withdrawn, and failure to pay by the due date can lead to penalties and interest, in addition to payment of the taxes.

Many costs of looking for a job are deductible

Taxpayers who spent time looking for work in 2008 may be eligible for various tax deductions. These can include travel expenses, the cost of printing, mailing, and creating a resume, the expense of a headhunter or job placement agency, lodging and meals when traveling out of town for a job search, parking, tolls, long distance or cell phone charges, and even the expense of a physical exam if required by the potential employer.

"People who faced unemployment last year likely already have had a few financial issues to deal with, and tax season is one they may not have fully considered," Steber said. "To make sure they are getting the most from their tax returns, consumers in this situation should visit a professional tax preparer who understands all of the tax liabilities and potential deductions associated with unemployment."

To locate a Jackson Hewitt Tax Service location nearest you visit www.jacksonhewitt.com and click on the Office Locator link at the top of the homepage. For more information on overlooked credits and deductions, visit: http://www.jacksonhewitt.com/DeductionsCredits/.

About Jackson Hewitt Tax Service Inc.

Jackson Hewitt Tax Service Inc. (NYSE: JTX), with approximately 6,800 franchised and company-owned offices throughout the United States during the 2008 tax season, is an industry leader providing full service individual federal and state income tax return preparation. Most offices are independently owned and operated. The Company is based in Parsippany, New Jersey. More information may be obtained at www.jacksonhewitt.com. To locate the Jackson Hewitt Tax Service(R) office nearest to you, call 1-800-234-1040.

*Department of Labor, 2/6/09

Contact:
Sara Garibaldi
Ketchum (Public Relations)
646-935-4097
Sara.garibaldi@ketchum.com

Ally Gellert
Ketchum (Public Relations)
646-935-3924
Ally.gellert@ketchum.com

SOURCE Jackson Hewitt Tax Service, Inc.

http://www.jacksonhewitt.com