Tax Planning - First $2,400 of Unemployment Benefits Tax Free for 2009

If you receive unemployment benefits this tax year (2009) all or part of it may be tax-free.
The American Recovery and Reinvestment Act, makes the first $2,400 of unemployment insurance exempt from tax. So you can exclude the first $2400 of these benefits when you file your tax return next year. If you are married, the exclusion applies to each spouse separately.
If you want to avoid a surprise when you file your taxes, you may choose to request withholding from your unemployment benefits payments. If you choose to have taxes withheld, a flat 10% will be withheld.
If you are unemployed and expect to receive more than $2,400 in benefits this year, consider having more tax withheld from your benefit payments to avoid a nasty surprise come tax time.
To request voluntary withholding - Use Form W-4V, or you can the IRS toll-free at 1-800-TAX-FORM (829-3676).