I feel so lucky that I’m retired in this economy. I can’t imagine having to deal with the loss of a job, trying to find something NEW and having to manage supporting a family. I am involved in quite a few forums, and it’s heartbreaking to read the updates of people trying to cope with having no job or trying to make ends meet when they aren’t earning what they used to.
To top it off, tax time is right around the corner.
Here are a few tips from the California Society of CPAs as to how to deal with tax time when you’re unemployed
CPA Strategy 1: You can exclude up to $2,400 of unemployment compensation from your 2009 gross income. This break has expired for 2010.
CPA Strategy 2: You can avoid a “penalty tax” on IRA and 401(k) withdrawals if the withdrawal covers (but doesn’t exceed) deductible medical expenses whether or not you actually take an itemized deduction for the expenses. (If you’re receiving Trade Readjustment Allowances under the Trade Adjustment Assistance program and similar programs, you may be eligible for an even better deal, the Health Care Tax Credit, which can pay up to 80 percent of your premiums.)
CPA Strategy 3: You can avoid the penalty tax on 401(k) and IRA withdrawals by establishing a payment schedule of regular equal withdrawals over your lifetime or the joint lives of you and your beneficiary. There’s also no penalty if you take a distribution from your 401(k) when you separate from service at age 55 or older.
CPA Strategy 4: If you itemize, you can deduct job-hunting expenses as a “miscellaneous itemized deduction,” to the extent that all your miscellaneous itemized deductions exceed 2 percent of your adjusted gross income. Job-hunting expenses can include: resume printing costs; postage; long-distance calls and faxes; travel expenses, including air, taxi and rail as well as mileage and tolls; and lodging expenses for out-of-town interviews.
CPA Strategy 5: If you find a new job and move, you may be able to deduct moving expenses. To qualify, the new job must be at least 50 miles further from your old home than your old job was from your old home. This is an “above the line” deduction, available whether you itemize or not.
For more information, check out IRS Publication 4128, Tax Impact of Job Loss, Publication 521, Moving Expenses and Publication 575, Pension and Annuity Income.
Check out the California Society of CPAs’ free Web site on this and other personal finance topics to better survive the recession and provide a sense of comfort and support. This Web site can be accessed at: www.calcpa.org Don’t forget to check out the Dollars & Sense program.