|
| Press Releases | | List By Date | Banking/Finance Institutions | Business Law | Corporate | Health Care and Entitlements | Human Resources | Securities | Tax | News Archives | |
For assistance with stories, including interviews with CCH subject experts, please contact
Eric Scott
847-267-2179
eric.scott@wolterskluwer.com |
| |
Contact Information
Job Searching? CCH Outlines Five Ways You Can Lower Your Taxes If Unemployed
(RIVERWOODS, ILL., March 5, 2012) – For people who are actively looking for work, the unemployment compensation they receive while job searching is considered income and subject to taxes. It may seem like an additional burden to have taxes taken out of benefits designed to help job seekers through though times, but there are ways the unemployed can lower their overall tax exposure, according to CCH, a Wolters Kluwer business and a leading global provider of tax, accounting and audit information, software and services (CCHGroup.com).
“There’s no question, most people would rather have a job than have to look for tax breaks for being unemployed,” said CCH Principal Federal Tax Analyst Mark Luscombe, JD, LLM, CPA. “But for those facing an extended period of unemployment, they can benefit from knowing the steps to take to lower their tax bill.”
Additionally, taxpayers who are unable to fully pay their tax debt may see some relief as a result of recent IRS rules related to liens and collection procedures. One of those changes includes barring the IRS from filing a lien against a taxpayer’s property unless they owe more than $10,000 and granting more lien withdrawals, even if the debt has not been fully repaid in some instances.
Below, CCH outlines five ways people who were out of work in 2011 may be able to lower their taxes.
1. Job search deductions. What’s deductible and what’s not can cause some confusion. However, you can deduct on your 2011 tax return expenses incurred in seeking employment in your same line of business during the year – whether or not you managed to find a job by year-end. These costs can include printing and mailing of resumes, as well as travel and transportation expenses. However, if you are looking for a job in a new line of business or looking for your first job, job search expenses can’t be deducted.
Job search deductions are considered a “miscellaneous itemized deduction” and can only be claimed if you itemize and to the extent that all your miscellaneous itemized deductions exceed 2 percent of your adjusted gross income (AGI). Other miscellaneous itemized deductions that may help bring you over the 2-percent mark include:
- Unreimbursed employee expenses if you’d been employed for part of the year or your spouse was employed and incurred ordinary and necessary business expenses, such as business use of your home or car or business travel;
- Tax preparation fees; and
- Certain other expenses, such as investment fees and expenses.
2. Medical expense deductions. You can deduct the costs of unreimbursed health care for yourself, your spouse and dependents if the costs exceed 7.5 percent of your AGI – including that of your spouse if you file a joint return. Someone out of work may be more likely to reach this income threshold. So it’s important to track medical expenses.
Medical expenses include costs for doctor visits, treatments and prescription medication as well as health care premiums, dental costs for transportation and lodging for medically necessary trips. This includes mileage, which for medical purposes was calculated at 19 cents per mile through June 30, 2011 and 23.5 cents per mile on or after July 1, 2011. The cents-per-mile figure dropped back to 23 cents for 2012. To claim medical expenses, taxpayers must itemize their returns.
There are also a number of other tax breaks that have phase-outs at particular income thresholds that might become more available in a year in which income declines due to being unemployed.
3. Moving expenses. Once you find a job after being unemployed, you can generally deduct moving expenses not reimbursed by your employer if the job is more than 50 miles farther from your old residence than your old workplace was.
To claim these expenses, you generally have to move within a year of taking the new job and be employed full time for 39 weeks during the first 12 months following the move. You can claim the expenses even if the full 39 weeks are not up, for example, if you started a job in November of 2011 and are just now filing your 2011 tax return. However, if you fail to meet the 39-weeks requirement, you have to file an amended return or include the deducted expense as part of gross income on your 2012 return.
4. Avoiding penalties on retirement withdrawals. If you need to take a withdrawal from your IRA, you can avoid an early withdrawal penalty by establishing a payment schedule of regular equal withdrawals over your lifetime or the joint lives of you and your beneficiary until you reach age 59½. Penalty-free distributions can also be made from IRAs by unemployed individuals to pay health insurance premiums.
There’s also no penalty if you take a distribution from your 401(k) when you separate from service at age 55 or older. If under age 55, the 401(k) balance can generally be rolled over into a Rollover IRA on separation, and then penalty-free distributions can be made from the Rollover IRA in a manner similar to the traditional IRA.
5. Freelance tax breaks. Those who decide to take on freelance work will need to study up on the self-employment tax laws, including paying both employee and employer Medicare and Social Security taxes. That said, there are some tax breaks as well for the self-employed, including the ability to deduct 100 percent of health insurance premiums, home office expenses, journals and professional association fees and business travel expenses. However, if you earn more from freelancing than your state allows people collecting unemployment benefits to earn, you may lose those benefits – and if your freelance work dries up, you won’t be eligible to have your unemployment benefits restarted.
About CCH, a Wolters Kluwer business
CCH, a Wolters Kluwer business (CCHGroup.com) is a leading global provider of tax, accounting and audit information, software and services. It has served tax, accounting and business professionals since 1913. Among its market-leading solutions are The ProSystem fx® Suite, CorpSystem®, CCH® IntelliConnect®, Accounting Research Manager® and the U.S. Master Tax Guide®. CCH is based in Riverwoods, Ill. Follow us now on Twitter @CCHMediaHelp. Wolters Kluwer (www.wolterskluwer.com) is a market-leading global information services company. Wolters Kluwer is headquartered in Alphen aan den Rijn, the Netherlands. Its shares are quoted on Euronext Amsterdam (WKL) and are included in the AEX and Euronext 100 indices.
--###--
nb-12-47
|
|
|
|