Issue link: https://digital.copcomm.com/i/56088
Your pocketbook Tax strategies in a tough economy - by Jason Alderman For most of us, income tax calculations don't change much from year to year. But thanks to the roller coaster economy of the past few years, many people have undergone major life changes that can have a significant impact – good or bad – on their taxable income and how they should file taxes. to start planning your strategy, par- ticularly if you experienced finan- cial hardships in 2011 that could affect your taxes. The IRS has a handy guide called "The What Ifs of an Economic Downturn" (search www.irs.gov) that reviews the tax impacts of different scenarios such as job loss, debt forgiveness or tap- ping a retirement fund. Here's a roundup of common eco- nomic challenges you may be facing and their possible tax implications: E Someone in your family lost their job Remember that unemployment benefits, severance pay and payout of accumulated vacation or sick leave are all considered taxable income, so if you didn't have taxes withheld from these payments, be prepared for a potentially nasty tax bill. If you withdrew money from your regular IRA or 401(k) account to cover expenses, you'll owe income tax on the amount, plus an addi- tional 10 percent penalty unless you're over age 59 or meet special circumstances. Also, outstanding 401(k) loans must be repaid (usually within 60 to 90 days of termination) or they'll be counted taxable income – plus be subject to the same 10 per- cent penalty. The good news is that many pub- lic assistance benefits such as wel- fare, food stamps and disaster relief payments don't count toward taxable income. Read the IRS's "Tax Impact of Job Loss" for details. Go to . ven though April 17 (this year's tax-filing deadline) is a ways off, it's never too soon Member-only discounts app now ready for your Smart Phone • Deals near home, the office, or wherever you travel in the U.S. Enjoy a deal-finding app that delivers big discounts. mobile device and save up to 50% on dining, shopping S Jason Alderman is a senior director at Visa Inc. and runs the company's global financial literacy initiative. Follow him at www.twitter.com/PracticalMoney. Lowered income If your adjusted gross income (AGI) is low, check to see if it quali- fies you for the Earned Income Tax Credit (EITC). EITC is a "refund- able" tax credit, which means that if you owe less in income tax than your eligible credit, you'll not only pay no tax, but actually get a refund for the difference. To learn more, search EITC at . Forgiven debt Many people don't realize that when you borrow money from a bank or other commercial lender and the lender "forgives" the debt, you generally must count the for- given amount as taxable income. There are several exceptions to the rule, however. For example, the Mortgage Debt Relief Act of 2007 generally allows taxpayers to exclude up to $2 million in forgiven mortgage debt ($1 million if mar- ried but filing separately) on their principal residence if it came through mortgage restructuring, foreclosure or a short sale. The mortgage exclusion is set to expire at the end of 2012 unless Congress intervenes. Other exceptions include: Debts discharged through bankruptcy; or, if you are insolvent when the debt is cancelled, some or all of it may not be taxable (Insolvency means your total debts are greater than the fair market value of your total assets). For more information, search for Mortgage Debt Forgiveness at . Taxes are the last thing you want to worry about when facing finan- cial hardships. Just be sure you're prepared for the possible tax impli- cations if your income or debt situ- ation has changed in the past year. 20 February 2012 DSEA ACTION! Features: • No printing! Just show your mobile coupon and save. • Multiple-use coupons. Save as often as you wish. • GPS search. Find deals near you—wherever you are. • Over 75,000 locations... and more being added daily. Android Market: Once you've registered the app, you'll need your membership ID number located on your DSEA membership card, you're good to go. Enjoy getting your DSEA deals on the go! Hot Deals and Discounts from NEA Member Benefits Did you know there are addi- tional member-only discounts from NEA Member Benefits? Tax reminders: Tuesday, April 17 is deadline for IRS filing • Don't forget to include any "ener- gy-efficiency tax credits" you may be entitled to. For details about this, go to page 20 of the Nov/December issue of , available at under "Publica- tions," or at . • And, the popular tax deduction for educator out-of-pocket expenses where eligible continues for 2011. If you worked at least 900 hours dur- ing a school year as a teacher, instructor, counselor, principal or aide, you can deduct up to $250 from your adjusted gross income for qualified, out-of-pocket expenses used for books and classroom sup- plies. You must have saved your receipts to claim this tax deduction. I t's called "NEA Click & Save." February's features include: Hotels.com: Get 10% off (through Feb. 20) Harry and David: Get 20% off Shoebuy.com: Get 10% off Sears: Get $35 off $300 Home Depot: Get 10% off $297 Join the 225,000 NEA members already registered for NEA Click & Save. Go to and start shopping today. Special Discounts for NEA Members from H&R Block During February 2012, download a coupon for special NEA member discounts. File a federal form 1040EZ for free (through February 29, 2012) or save $20 to $99 on tax preparation at a participating H&R Block tax office or online at Block LiveTM . or call 1-800-786-3429 for details. and more. You'll find tons of sav- ings in every big city, and in most small towns in America. imply show the coupon from your To start saving, simply download the "ACCESS" app by searching for "My Deals" in the iTunes App Store or the Android Market. Your regis- tration code is 8832- followed by your DSEA ID. You can also click on the following: iTunes: www.dsea.org http://itunes.apple.com/us/app/my -deals-mobile/id427118196?my=8 https://market.android.com/details ?id=com.access.access www.neamb.com/click www.irs.gov andsave www.dsea.org ACTION! http://digital.cop comm.com/ issue/48993 www.neamb.com/ hrblock Visit www.irs.gov www.irs.gov/pub/irs-pdf/p4128.pdf