WalletPop experts have the answers, from 401(k) withdrawals to payroll taxes

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taxesIf you have plans for that tax refund check, think again. States from Hawaii to North Carolina are delaying refunds to residents because of massive holes in their budgets. And those refunds will likely be processed on a first-come, first-serve basis. Unless you can wait until the fall to get your money back, get that tax return in asap.

Here, WalletPop experts take on questions about 401 (k) withdrawals, payroll taxes and dependent credit.

Question:
The plant I was working in closed in 2008. In November, they sent me my 401(k). They withheld $3,005 for taxes. I also was getting unemployment of $370 a week. I didn't have taxes taken out. So I was on unemployment for a total of six months. I didn't claim the two months in 2008, but I will claim them this year along with the four months of 2009. How do you think I will do on my taxes? I do own a home and have interest to claim. Are there any breaks for being unemployed? I am also single.
-- Bobby Guerrero

Answer from Barbara Weltman of The J.K Lasser Institute
You can avoid taxes on the 401(k) distribution if you rolled it (plus the amount of taxes withheld) over to an IRA or other qualified retirement plan within 60 days. If you didn't, then the distribution is taxable. However, there is a special tax break for unemployment benefits. The first $2,400 of benefits received in 2009 is not taxable. Any benefits over this amount is included in your income and subject to tax.

Question:
In 2005, I owned a company in Georgia and failed to pay payroll taxes. Since then, I was in an auto accident. The IRS now has my debt CNC (currently not collectible) and won't even consider an offer in compromise. I need to pay payroll tax bills? Who should I contact? I am still 100% disabled while the company made $1.8 million. Now what?
--Ballard J. Kamees

Answer from Outright.com
Frankly, the best option is to contact a local attorney who specializes in dealing with the local IRS office. To some extent, the relationship helps, though the odds of success in an unpaid payroll tax collection, regardless of that relationship, are pretty slim (simply, you have no bargaining power). Bankruptcy will not relieve you of the obligation, and it's fair to say that the IRS is least forgiving of folks who don't pay their payroll taxes.

Question:
I have been married to my wife since Feb. 14, 2009. She is an unregistered alien with no tax ID#. I have paid for well over 3/4 of our living expenses. Can I file as head of household?
--Michael

Answer from Frank Armstrong, founder and CEO of Investor Solutions Inc.
Because you were married through the end of 2009, you cannot file as head of household. See IRS Publication 501 Page 7-8: Head of Household Requirements. However, if she applies for either a Social Security Number (SSN), or Individual Taxpayer Identification Number (ITIN), you should be able to claim her as a dependent. See Page 22 of the same publication. As always, get competent legal and tax advice from an appropriate professional.

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