$2,400 Unemployment Tax Break

A large portion of taxpayer’s believe that unemployment income is not taxable because it isn’t earned income. This is a myth, all income no matter the origins is taxable except for a few cases. Unemployment income unfortunately has not been once of these cases until this tax year.
One of the new implements that was initiated with the American Recovery and Reinvestment Act of 2009 was a change in the taxability of unemployment. So far, just for this year the first $2,400 is tax free. Only unemployment gained in 2009 is eligible for this exemption. Although, with this tax break you can also save money on your unemployment withholdings. Since the first $2,400 is tax free it is unnecessary to have federal tax withheld on that portion of money. However, if you believe you’ll forget to change your W-4 back after the $2,400 then leave it be. Taxpayers in this category could perhaps have that unnecesary tax withheld and at the end of the year use it as a small savings plan.
To see what the IRS has to say about the unemployment tax exemption ane other credits visit http://www.irs.gov/newsroom/article/0,,id=205643,00.html