“Respect your efforts, respect yourself. Self-respect leads to self-discipline. When you have both firmly under your belt, that’s real power.”
– Clint Eastwood
First for the warnings…
Are you a social media butterfly…and hiding from the IRS? (Well, in truth–if you’re one of our clients, that’s HIGHLY unlikely. 🙂 ) You better watch out–looks like our federal friends are starting to hop onto the popular social sites to find tax evaders.
Article here: http://online.wsj.com/article/SB125132627009861985.html .
Watch out scofflaws! (I know that’s not you…just thought we’d all find this interesting.)
Here’s a juicy one…was in the news in the winter that our Treasury Secretary used the “Turbo Tax defense” to explain how he failed to pay some delinquent taxes. (Goes to show you–don’t trust the “cheap” options!) Well, turns out that defense didn’t *quite* work for some regular folks:
Key bit: “In the end, reliance on tax return preparation software does not excuse petitioners’ failure to review their 2006 tax return.” Oops!
Now for some good stuff–did you hear about how one lucky lady received a $122,783 refund check from the IRS…by mistake? Fortunately, this woman did the right thing (and didn’t live her life like she was playing Monopoly) and returned the money. Goodness knows she could have used it–she works as a housecleaner. But it also goes to show you that good people still do the right thing!
(story here: http://www.cbsnews.com/stories/2009/08/24/national/main5261997.shtml )
In this week’s Personal Strategy Note, I know that times are still tough for many folks out there. Despite the good economic news that we’ve recently been seeing, the JOBS number is what economists call a “lagging indicator” (i.e.–good news shows up there later than in other places). So, I’ve put together some pertinent items for the unemployed.
“Real World” Personal Strategy
Tax Considerations When You’re Unemployed
The bad news…you don’t have a job, and the job market ain’t exactly bursting with opportunity these days.
The good news…your joblessness translates into tax-savings for you. Turns out the tax code occasionally has a heart!
There are, of course, some caveats for you–and I’m here, as usual, to sort them out for you!
IMPORTANT NOTE: If you’re looking for work in the SAME line of work you previously held–you’re in luck, as many expenses for your job search are deductible. If you’re switching careers, well…you didn’t think Uncle Sam was *that generous* did you? I’m sorry to say that switching careers renders many tax breaks irrelevant.
So…to qualify for a deduction, you must be looking for work in the same trade or business. Whether or not your job search is successful (or whether or not you accept an offered position), these items can be written off. It also doesn’t matter whether or not you are currently employed while searching; in fact, you may even be temporarily employed in some other industry while looking for a permanent job in your field.
The following expenses incurred in a job search in your current field may qualify for a deduction:
* Travel and transportation expenses
. This includes meals and lodging while away from home as long as the expenses aren’t considered “lavish.” It includes travel for the purpose of a job interview (to the extent not reimbursed by the prospective employer). Also, the purpose of the trip must primarily be for a job search and any personal activities must be only incidental. Otherwise, the travel expenses are not deductible. However, even if the travel expenses are nondeductible because the primary purpose of the trip is personal, this does not preclude the deduction of any actual costs incurred for the job search. The standard mileage rate may be used to calculate car expenses.
* Administrative fees (Copying fees and postage incurred to send your resume to prospective employers)
* Employment or job placement service fees, including any fees charged for counseling and referral services
* Fees for a resume preparation service
* Professional photographs and demo tapes (for those in the entertainment industry)
* Telephone charges incurred Harry Potter and the Goblet of Fire dvd when seeking work
The following are NOT deductible, however… Red Dawn movie download
* When looking for your first job. (If this is you, you can get around this by trying an internship in your chosen field)
* If you are hired on a probationary basis with the understanding that the job could become permanent, none of the expenses incurred (such as travel, meals or lodging) are deductible.
* If, while you are searching for work, you put down a deposit on a residence in the area where you hope to find a job–and then later must forfeit that deposit.
* If you sell stock of your former employer and realize a loss, this is not deductible.
* A real estate agent’s commission
on the sale of your house, in connection with a move to a new job location
* If too much time elapses between the end of your last job and the beginning of your job search (generally more than one year), you cannot deduct your job search expenses. For example, taking time off from the job market for several years to raise a family or go back to school will make future job searching expenses nondeductible. However, there are legitimate exceptions to this, such as if the time lapse is due to a disability. (Note that there is no similar restriction on the length of time spent job searching as long as the taxpayer can show a continuing effort.)
The most important things–SAVE YOUR RECEIPTS and see a professional to prepare your return, as the paperwork (and the relevant code here) is often more complicated than most regular families want to take on!
I hope this helps!