From The Tax Institute at H&R Block

Down but not out
With the unemployment rate at 8.5% in April 2009, millions of hard-working taxpayers have had to deal with the stress and uncertainty that comes with being out of work.

There is some good news for the jobless, however, thanks to the recently passed 2009 Stimulus (a.k.a. the American Recovery & Reinvestment Act). Here’s what you should be aware of during this time of unemployment:

Tax-exempt benefit: The first $2,400 of benefits in 2009 is now exempt from federal income taxes. You will pay tax only on benefits received in excess of this amount.

Any additional unemployment benefits are taxable income under current federal tax law and you will owe federal income tax on them, however. You can minimize your balance due by filing Form W-4V with the payer to specify the amount of federal income tax that you want withheld from your unemployment benefits.

Extended unemployment benefits: The date by which an individual must exhaust his regular unemployment benefits in order to qualify for extended unemployment benefits has been changed to Dec. 31, 2009. The original ending date was March 31, 2009.

Extended benefits continue for 20 weeks plus an additional 13 weeks in high unemployment areas. Check with your local unemployment office to see if this applies to you.

Increased benefit: Unemployment benefits will temporarily increase by $25 per week. Prior to the increase, the average weekly unemployment benefit was around $295.

Government-subsidized COBRA coverage:  COBRA coverage allows you to keep insurance coverage provided by your former employer, but often at a much greater cost to you. Now, for workers laid off between Sept. 1, 2008 and Dec. 31, 2009, the government will subsidize 65% of your premiums under COBRA for up to 9 months.
 
Contact your former employer to find out if you qualify for the new subsidized COBRA insurance.

There is a phase out for this provision, however. The 65% subsidy is limited to those whose income for the year is $125,000 or less or $250,000 for couples filing jointly.

Note: Individuals who receive the subsidized premiums but who are all or partly phased out of the benefit will have to repay the excess benefit as an additional tax reported on their tax return.