Tax Rules for the Unemployed in 2008, Part 1

As a result of the economic downturn in 2008 or the "Great Reccession" there are many individuals who have lost their jobs in 2008. According to the Wall Street Journal, employers are expected to cut 475,000 jobs from their payrolls after cutting 533,000 jobs in the previous month. The unemployment rate, generated by a separate survey, is expected to have risen to 7% from 6.7% in the previous month. If you are one of the many unemployed who are looking for work, there are still some tax rules that you need to be aware of.

• unemployment compensation is taxable on federal and most state tax returns.

Income tax is not automatically withheld from unemployment compensation, however, individuals can elect to have taxes deducted. If you did not have taxes withheld throughout the year, you may have a potential balance due when you file your 2008 income taxes.