Lose a job? Take a pay cut? Make sure it’s on your tax re­turn.

The Washington Post Sunday - - BUSINESS - MICHELLE SIN­GLE­TARY The Color of Money

If you had some ma­jor eco­nomic chal­lenges in 2010, your tax sit­u­a­tion may be dif­fer­ent from in years past. So be more than a pas­sive (or pro­cras­ti­nat­ing) filer this year. Even if you use a pro­fes­sional pre­parer, which the ma­jor­ity of tax­pay­ers do, or tax soft­ware, visit the In­ter­nal Rev­enue Ser­vice’sWeb site at www.irs.gov to see whether changes in your life could af­fect your tax re­turn.

For ex­am­ple, what if you were laid off or took a ma­jor pay cut? Then you might be look­ing at a siz­able tax re­fund be­cause you could be el­i­gi­ble for cred­its or de­duc­tions you couldn’t claim be­fore. And if you’re get­ting a re­fund, the In­ter­nal Rev­enue Ser­vice has un­veiled IRS2Go. It’s a smart­phone app that lets tax­pay­ers check the sta­tus of their re­fund.

What if you had to dip into your 401(k) or sim­i­lar tax-ad­van­taged re­tire­ment plan to pay for ne­ces­si­ties af­ter los­ing your job? You might not have re­al­ized that you could face tax con­se­quences for tap­ping into this money, or maybe you did re­al­ize that you would be hit with a hefty tax bill but thought you’d just deal with it later. Well, later is now. I’ma fan of the IRSWeb site’s “What if ” sec­tion, which an­swers ques­tions from peo­ple in new tax sit­u­a­tions. So let’s go through a few.

What if I didn’t earn much money last year? Should I file any­way? I have four words for you— Earned In­come Tax Credit. But to re­ceive this valu­able credit, you have to file a re­turn even if you don’t have a fil­ing re­quire­ment. The max­i­mum credit for 2010 is $5,666 with three or more qual­i­fy­ing chil­dren. You could even get a max­i­mum credit of $457 with no qual­i­fy­ing chil­dren. On the IRS site, search for “EITC As­sis­tant” to find out whether you should claim this credit.

What if I was laid off? You might

have been for­tu­nate to get severance pay, but un­for­tu­nately, it’s tax­able. If you re­ceived pay­ments for any ac­cu­mu­lated vacation or sick time, this is also tax­able. And un­like for the 2009 tax sea­son, all your un­em­ploy­ment ben­e­fits go back to be­ing tax­able. (For the tax year 2009, tax­pay­ers get­ting un­em­ploy­ment com­pen­sa­tion could ex­clude the first $2,400 from their gross in­come.)

I hope you kept track of some ex­penses in­curred while look­ing for a new job. Youmay be able to deduct some of those, such as re­sume prepa­ra­tion or travel ex­penses.

What if I’mget­ting a re­fund? You can now check the sta­tus of your fed­eral re­fund if you have a smart­phone. If you have an Ap­ple iPhone or iTouch, you can down­load the free IRS2Go app by vis­it­ing the iTunes app store. If you have an An­droid de­vice, go to the An­droid Mar­ket­place.

“ This new smart­phone app is the next step in IRS’s con­tin­u­ing ef­forts to pro­vide ser­vices and in­for­ma­tion to tax­pay­ers when they want, where they want,” IRS Com­mis­sioner Doug Shul­man said.

To use the re­fund app, you will have to know your fil­ing sta­tus and the amount of your an­tic­i­pated re­fund and en­ter your So­cial Se­cu­rity num­ber, which will be masked and en­crypted.

Elec­tronic fil­ers will be able to check their re­fund sta­tus af­ter just a few days. If you mail your re­turn, it will take three to four weeks to get an update on the app.

What if I owe be­cause of a 401(k) loan? If you bor­rowed money from your work­place re­tire­ment plan but lost your job be­fore pay­ing the loan back, gen­er­ally (un­less you qual­ify for an ex­cep­tion) the out­stand­ing loan amount is sub­ject to fed­eral and state in­come taxes.

Ad­di­tion­ally, if you are younger than 591/ 2, you have to pay a 10 per­cent penalty for early with­drawal.

If you can’t pay, don’t panic. File your re­turn any­way to avoid the penalty for not fil­ing. Then con­tact the IRS to find out your op­tions for re­pay­ment. Ask about a short-term ex­ten­sion to pay, an in­stall­ment agree­ment or what’s called an of­fer in com­pro­mise.

What if I had to shut downmy small busi­ness last year? You still have to file an an­nual re­turn for the year you go out of busi­ness. On the re­turn, you have to check the box in­di­cat­ing that this tax re­turn is your fi­nal one. To be sure you’ve cov­ered ev­ery­thing, search the IRS site for “Clos­ing a Busi­ness Check­list.”

As much as we love to talk trash about the IRS, it­sWeb site is use­ful and user­friendly. So in­form your­self. Read­ers can write to Michelle Sin­gle­tary c/o TheWash­ing­ton Post, 1150 15th St. N.W., Washington, D.C. 20071. Or e-mail

sin­gle­tarym@wash­post.com. Due to the vol­ume of mail, per­sonal re­sponses may not be pos­si­ble. Please also note com­ments or ques­tions may be used in a fu­ture col­umn, with the writer’s name, un­less a spe­cific request to do oth­er­wise is in­di­cated.

IM­AGE COUR­TESY OF THE IRS; PHOTO IL­LUS­TRA­TION BY THE WASHINGTON POST

IRS2Go is a free smart­phone app that pro­vides the sta­tus of fil­ers’ re­funds.

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