Tax Benefits For Job Seekers

Job search expenses can be deducted as miscellaneous itemized tax deductions if you look for a job in the same field at the same level as the one you left. The job search expenses are deductible even if you don't get the job.

You can deduct job-seeking expenses as long as the amount of all miscellaneous itemized tax deductions is more than 2% of your adjusted gross income (AGI). To figure your tax deduction, subtract 2% of your AGI from the total amount of these expenses. Job search expense deductions are also subject to the overall limitation on itemized deductions based on income threshold amounts.

To qualify, your job search must be for a job in your current, or most recent, trade or business and should be at a similar level of responsibility with duties similar to those of your most recent job.

• If you haven't held a job in that trade or business for an extended length of time, your job search will be considered for a new trade or business, and your deductions may not be allowed.
• If you held a college internship or valid job while in college and your search is for a job in the same trade or business, you will be able to deduct job search expenses.
• If you're just out of school and had no paying jobs while in school that were related to your trade or business, your deductions won't be allowed.

You can deduct employment and outplacement agency fees you pay while looking for a job in your present occupation. If your employer pays you back in a later year for employment agency fees, you must include the amount you receive in your gross income up to the amount of your tax benefit in the earlier year. Also, If your employer pays the fees directly to the employment agency and you are not responsible for them, you do not include them in your gross income.

You can deduct amounts you spend for preparing and mailing copies of a resume to prospective employers as long as you are looking for a new job in your present occupation. Cost for preparing resumes includes typing, printing, postage, long-distance charges, advertising, and photographs required for your resume.

If you travel to an area to look for a new job in your present occupation, you may be able to deduct travel expenses to and from the area. You can only deduct the travel expenses if the trip is primarily to look for a new job. The amount of time you spend on personal activity compared to the amount of time you spend looking for work is important in determining whether the trip is primarily personal or is primarily to look for a new job.

If you are receiving unemployment compensation, these amounts are considered taxable income. You will receive Form 1099-G showing the amount you were paid and any federal income tax you elected to have withheld. If you did not elect to have any taxes withheld from your unemployment compensation you may be faced with an unexpected tax burden.

To minimize the pain felt by taxpayers who lost their jobs, the American Recovery and Reinvestment Act temporarily changed the taxation of unemployment benefits in 2009. The first $2,400 of unemployment benefits received in 2009 is tax free. Any amount over $2,400 will be subject to federal income tax. Individuals who receive unemployment benefits this year should check their withholding to ensure they are not having unnecessary tax withheld.

If you were employer either filed bankruptcy or went out of business here is some information you should know. Your employer must provide you with a Form W-2 showing your wages and withholdings by January 31 of the following year. You should keep up-to-date records or pay stubs until you receive your Form W-2. If your employer or its representatives fails to provide you with a Form W-2 by February 15, contact the IRS in order to obtain a substitute Form W-2. If your employer is liquidating your 401(k) plan, you have 60 days to roll it over to another qualified retirement plan or IRA.

Tax Deductions Incurred As A Result of Job Loss

As the jobless rate is expected to reach 9.5 for August and 10 percent by 2010 and you unfortunately find yourself among the 6.7 million individuals who have lost their jobs since the recession officially began in 2007, here is some information you should know about the tax effects of your job loss.

Severance pay and unemployment compensation are taxable. Payments for any accumulated vacation or sick time are also taxable. You should ensure that enough taxes are withheld from these payments or make estimated payments. Under the American Recovery and Reinvestment Act (ARRA), the first $2,400 of unemployment benefits an individual receives in 2009 are tax free. This provision applies only to benefits received in 2009: Normally, unemployment benefits are taxable. Also, you may request that taxes be deducted from your unemployment benefits so that you do not wind up with an unexpected tax bill during tax time.

You can deduct certain expenses you have in looking for a new job in your present occupation, even if you do not get a new job. You cannot deduct these expenses if:

• You are looking for a job in a new occupation,
• There was a substantial break between the ending of your last job and your looking for a new one, or
• You are looking for a job for the first time.

Employment and outplacement agency fees. You can deduct employment and outplacement agency fees you pay in looking for a new job in your present occupation.

Employer pays you back. If, in a later year, your employer pays you back for employment agency fees, you must include the amount you receive in your gross income up to the amount of your tax benefit in the earlier year.

Employer pays the employment agency. If your employer pays the fees directly to the employment agency and you are not responsible for them, you do not include them in your gross income. This one you do not have to worry about since fees paid to the employment agency are not disclosed.

Resume. You can deduct amounts you spend for preparing and mailing copies of a resume to prospective employers if you are looking for a new job in your present occupation. This includes the cost of typing, printing and mailing your resume.

Travel and transportation expenses. If you travel to an area and, while there, you look for a new job in your present occupation, you may be able to deduct travel expenses to and from the area. You can deduct the travel expenses if the trip is primarily to look for a new job. The amount of time you spend on personal activity compared to the amount of time you spend in looking for work is important in determining whether the trip is primarily personal or is primarily to look for a new job.
Even if you cannot deduct the travel expenses to and from an area, you can deduct the expenses of looking for a new job in your present occupation while in the area.
You can choose to use the standard mileage rate to figure your car expenses. The 2008 rate for business use of a vehicle is 50½ cents per mile (58 ½ cents per mile after June 30, 2008).

Tax Rules for the Unemployed in 2008, Part 2

For individuals who found themselves unemployed as a result of lay-offs, business closures, or any other unfortunate reason, there are still tax rules that you must be aware of if you are searching for a new job. The following is a list of some of the deductible costs that you may have incurred in your job search.

• Mileage costs accrued on a personal vehicle while job hunting including trips to job interviews and to the unemployment office. Between January 1, 2008, and June 30, 2008, taxpayers can claim 50.5 cents per mile. Between July 1, 2008 and December 31, 2008, taxpayers can claim 58.5 cents per mile.


• Costs for creating, printing and mailing a resume.


• Costs for a headhunter or job placement agency. This applies to costs only paid by you. It does not apply to fees paid by the employer to the job placement agency.


• Transportation costs such as a bus, taxi, train or plane to an interview.


• Meals and lodging if out of town for an interview.


• Parking and tolls when driving to an interview.


• Long distance or mobile phone call charges directly associated with a job search.


• Business research services.


• Physical exam expenses if required by a potential employer.

Tax Rules for the Unemployed in 2008, Part 1

As a result of the economic downturn in 2008 or the "Great Reccession" there are many individuals who have lost their jobs in 2008. According to the Wall Street Journal, employers are expected to cut 475,000 jobs from their payrolls after cutting 533,000 jobs in the previous month. The unemployment rate, generated by a separate survey, is expected to have risen to 7% from 6.7% in the previous month. If you are one of the many unemployed who are looking for work, there are still some tax rules that you need to be aware of.

• unemployment compensation is taxable on federal and most state tax returns.

Income tax is not automatically withheld from unemployment compensation, however, individuals can elect to have taxes deducted. If you did not have taxes withheld throughout the year, you may have a potential balance due when you file your 2008 income taxes.