Many unemployed owe hundreds in taxes - KWWL - Eastern Iowa Breaking News, Weather, Closings

Many unemployed owe hundreds in taxes

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Dubuque (KWWL) -- The number of unemployed Iowans has reached the highest level in 17 years. As the newly laid-off reach record numbers, they're finding that unemployment benefits are taxed, just like income.

The Iowa workforce development finds that 80,600 Iowans are unemployed, passing the 80,000 mark for the first time since 1987. What some of these unemployed are learning for the first time, is that they are on the hook for hundreds or thousands of dollars because taxes aren't automatically withheld from their unemployment checks.

"I've had at least three clients in the last week that this happened to, and two of them ended up having to pay into the federal government. They were normally used to getting a fairly sizeable tax refund," Tim Hurlburt, manager of Liberty Tax Services in Dubuque, said.

That's because unemployment benefits are fully taxable, and you're responsible for the withholding. Some people who chose to get the full amount of benefits instead of withholding the optional ten percent are getting whacked with hundreds or thousands of dollars in taxes owed.

"I had one guy from john Deere who came in here who normally gets a good refund, and he had been on unemployment benefits for a full six months, and it was a fair amount of money he was collecting, so he did end up having to pay in some money," Hurlburt said.

To avoid paying next year, experts here advise checking the withholding box when you sign up for unemployment benefits.

A change on taxes this year if you did not receive your full stimulus rebate from the government in 2008 -- you can get a recovery rebate credit. Instructions are on the all of the 10-40 tax forms.

Online Reporter:  Jamie Grey

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