As Deadline Approaches, Job Seekers Should Investigate Tax Breaks

With the April 17 tax deadline about two weeks away, millions of taxpayers will be scrambling to file on time and, as a result, could overlook the numerous tax credits and deductions available to workers, freelancers and job seekers, advises employment authority John A. Challenger, chief executive officer of global outplacement consultancy Challenger, Gray & Christmas, Inc.

The tax breaks for job seekers could be especially beneficial, considering that the number of jobless Americans averaged about 13.7 million throughout 2011.  That figure does not include an average of 6.4 million Americans who, in any given month, had given up actively looking for a job but still wanted one. Continue reading

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Companies Threaten To Leave IL; Want Tax Breaks

ILLINOIS AT RISK OF LOSING MAJOR EMPLOYERS AND THOUSANDS OF JOBS

The state of Illinoiscould soon find itself in the midst of a mass corporate exodus.  Several major employers, including Sears Holdings Corp., Caterpillar and the CME Group, are threatening to leave the state in search of more friendly corporate tax environments.   These three companies alone employ more than 30,000 workers in the state, but thousands more could be impacted as the departures ripple through the local economies that depend on these firms and their employees.  The state may be willing to negotiate with these companies in order to prevent them from leaving, but Illinois, like many other states, is facing significant budget deficits.  How could the loss of major employers impact the recovery in Illinois?  Should the state negotiate better tax terms to keep employers in the state?  Could tax breaks tied to job creation help spur growth or will it accelerate the departure of employers?

Job Seekers Can Enjoy Real Tax Breaks

The number of unemployed Americans reached record levels in 2010, with many experiencing prolonged joblessness lasting six months or more.  And, while more than 14 million people continue to look for employment, some might find a measure of financial solace in the several tax breaks for which they are likely to become eligible as a result of their employment situation.

With the April 15 tax deadline less than one month away, the nation’s taxpayers should make themselves aware of the many tax credits and deductions available to workers, freelancers and job seekers, advises employment authority John A. Challenger, chief executive officer of global outplacement consultancy Challenger, Gray & Christmas, Inc.

“There are so many tax rules and they seem to change every year or two.  It is undoubtedly an overwhelming task for most people to sift through all of the materials to figure out eligibility for a particular deduction or credit.  For the unemployed it can be even more daunting, since their top priority is to find a job, not a tax credit,” said Challenger.

The Internal Revenue Service will see a record number of filings from taxpayers who were unemployed at some point in 2010.  In January of last year, the number of unemployed Americans reached 16,147,000, the highest level in Bureau of Labor Statistics data going back to 1948.  Over the course of the year, unemployment averaged 14,825,000, the highest annual average on record.

Making matters worse for the nation’s jobless was the fact that on average there were 6.4 million people every month who were unemployed for 27 weeks or more, which is also a record high annual average.

“Obviously, prolonged unemployment has significant implications on one’s income tax.  In most cases, it is going to lower the burden.  Many people will be able to lower the burden even further, for example, if they took continuing education classes to keep their skills fresh, traveled for job interviews or maintained a home office to complete freelance assignments,” said Challenger.

The unemployed are not the only ones who can enjoy tax credits.  Full- and part-time workers have a wide variety of deductions they can consider when completing their taxes.  Most fall under miscellaneous deductions, which allow taxpayers to claim eligible expenses that exceed two percent of adjusted gross income.

For instance, workers who have numerous unreimbursed business expenses can deduct them from their taxes.  Some of the unreimbursed employee expenses that may be eligible for deduction include dues paid to professional societies; depreciation on a computer or cell phone required by an employer; licenses and regulatory fees; home office used regularly and exclusively in one’s work; subscriptions to professional journals and trade magazines; travel, transportation, entertainment and gift expenses related to one’s work; union dues and expenses; and work-related education. 

Miscellaneous deductions exceeding two percent of adjusted gross income can also be applied to job-search expenses.

“Most people looking for jobs will not reach the two percent expense level from job-search costs alone.  The exception might be those who have been jobless for an extended period and those looking for jobs out of town,” said Challenger.

“Those who are having difficulty finding new employment are more apt to extend their job search to other regions.  Trips to interview with prospective employers significantly increase job-hunting expenses if companies do not reimburse for travel,” Challenger said.

Travel expenses, including airfare, lodging, rental car, parking, food, tolls, taxis, bus and rail costs are deductible as long as the trip relates primarily to seeking new employment in a person’s current trade or business.

Additionally, typical job hunting costs, such as typing, photocopying, printing, postage, stationery and special envelopes, are also deductible.  Items associated with the job hunt, such as file folders, appointment schedulers, computers and fax machines, can be deducted as well. 

Those who ended up relocating for a position may also be able to deduct expenses related to the move. 

There are also deductions related to medical expenses and health insurance premiums paid by independent contractors and freelancers.  Additionally, the long-term unemployed forced to dip into their retirement savings may be able to avoid some of the penalties associated with early withdrawal. 

For additional and detailed explanations on all work- and education-related deductions, including those related to the job search and maintaining a home office, Challenger advises taxpayers to visit the Internal Revenue Service website (www.irs.gov) or seek the counsel of a professional tax advisor or accountant.

Tax Day Scramble: Job-Search Expenses Equal Deductions

MILLIONS COULD OVERLOOK JOB-SEARCH TAX DEDUCTIONS

As the mad scramble to meet the April 15 tax deadline reaches its peak this week, millions of jobless Americans could be eligible for easily-overlooked deductions. More than 3.8 million people joined the ranks of the unemployed in 2009. About 3.6 million were added to the roles of long-term unemployed (jobless for 27 weeks or longer). For these Americans, important tax deductions to consider are those related to job-search expenses. If these expenses, along with other miscellaneous expenses, including unreimbursed employee expenses and professional association membership dues, add up to 2% of one’s adjusted gross income, the amount above the 2% threshold becomes eligible for deductions. Many people overlook job search expenses, assuming that they won’t add up to much. However, for the long-term unemployed with a significantly reduced adjusted gross income, it is much easier to reach the 2% limit. Add expenses related to professional resume services, job-search related travel, or employment agencies fees and one’s expenses could soar well beyond the 2% level.  Most deductions are only applicable if you are looking for a new job in the same occupation.
 
Some deductions include:
Resume service expenses (includes creating, printing and copying resume)
Career counseling

Job-Search-related travel or transportation expenses
Cost of phone calls to potential employers/contacts