Taxes And job Search With A Buzz.
First, let’s just go through a couple of general points regarding unemployment benefits and their tax liabilities.
- You must pay income taxes on unemployment benefits. All 2010 unemployment benefits are considered taxable income. The 2009 $2,400 dollar credit was only a temporary deduction. Thanks Uncle Sam. Glad to help out when everyone is hurting
- But wait, there’s more! If you did not withhold, you could be on the hook for the full amount of the benefit, and unlike the government, we can’t just change the rule and call it “temporary.”
Now for the potentially good news. There a host of deductions and tax credits that can help offset any tax you owe, or perhaps increase your refund on the other end if you’re fortunate. There are four major areas that you will want to focus on.
Certain job search expenses can be deducted if you’re looking for a job in your most recent occupation. That means similar job titles in different industries, such as a Software Developer, Tool & Die Maker or Coat Accountant, moving from the auto to aerospace industries. Costs for a search that enabled you to switch from being an Project Management Engineer to a Outplacement Consultant would be an unacceptable stretch, but would more than likely qualify you for a great deal of sympathy from me.
If your former employer didn’t hook you with me, your fees for resume preparation, job counseling and employment agencies may be claimed. Contact your telephone carrier and request a copy/log of your calls in 2010 during the period of time in which you were unemployed. You may be able to claim a portion of your phone bill. Then use Google voice, Skype, etc because they are free.
The expenses related for travel to interviews can qualify. You can claim the travel, but not the new shirt or shoes that you purchased before the interview. You can deduct the job hunting expenses if the amount of all of your miscellaneous deductions is more than two percent of your adjusted gross income. Check your records to see if you had expenses that weren’t reimbursed by your former employer. These would be items such as professional association fees or conferences, seminars, memberships, and certification requirements. Combining these may help lift your deductions high enough to qualify.
If you relocated in 2010 to take a new job, you may be able to claim your relocation costs, whether or not you changed your career field. However, your new job has to be at least 50 miles away from your former home than your old job was.
Your out-of-pocket medical expenses, including your COBRA premiums can be a major expense. So, expenses in excess of 7.5% percent of adjusted gross income are deductible. This is an often-overlooked area. because it is difficult for a wage-earner to meet the 7.5% percent threshold, so it’s often a forgotten possibility for someone who is unemployed.
There are a number of tax credits that may apply to your situation. If you went back to school or were out of work for majority of 2010. Your education expenses up to $2,500 may be offset using the American Opportunity credit, for someone working toward a degree. A Lifetime Learning credit, of up to $2,000, may be claimed for courses used to acquire or improve job skills. Also if you earned $27,750 or less ($55,500 for married filing jointly) and deposited money in an Individual Retirement Account, 401(k) plan or other retirement program during the year, you may qualify for the Saver’s credit of up to $1,000. Lastly, the Earned Income Tax Credit is also aimed at low- and moderate-wage earners. If you earned less than $43,452 ($48,362 married filing jointly) you may qualify. The amount of the credit gets smaller the higher your income.
So thats it, with the exception of the obvious disclaimer. I’m not an accountant, nor would I ever want to be one. Best to check with your accountant or tax preparer before utilizing any or all of these suggestions.
Buzz Smith is SR Curmudgeon & VP Consulting Services for OPI National Outplacement. OPI is a national provider of outplacement and career transition services located in Knoxville, Tennessee.