Jobless Americans may be facing several financial obstacles while they seek a new job, and the prospect of owing a tax bill can be stressful for unemployed individuals. Although individuals will be taxed on 100 percent of their unemployment compensation for the 2011 tax year, there are several deductions job seekers can claim that may help lower their liability during filing season.
"There's no question, most people would rather have a job than have to look for tax breaks for being unemployed," federal tax analyst Mark Luscombe told CNN Money. "But for those facing an extended period of unemployment, they can benefit from knowing the steps to take to lower their tax bill."
Searching for a new job can be expensive once the costs of mailing and printing resumes, phone calls, resume preparation services and traveling to interviews are factored in. But individuals who meet certain requirements can deduct these job search costs. In order to qualify, individuals must be seeking a new position in the same field or industry in which they were previously employed. This means first-time job seekers or those wanting to switch careers are not eligible for this deduction. Second, individuals must be conducting their job search consistently in order to qualify. Adults who take a "substantial break" between losing a position and seeking a new one will be ineligible. Individuals who qualify can treat job search expenses as miscellaneous deductions. Keep in mind that miscellaneous expenses must exceed 2 percent of an taxpayer's income.
After being unemployed for a long period of time, getting hired for a new position can be a huge relief for job seekers. But when this position requires adults to relocate, the costs can be burdensome. The IRS offers some relief in this category as well, and individuals who meet the time and distance test can write off several of their relocation expenses.
First, an individuals' new place of employment must be 50 miles further from their previous home than their prior office was. In addition, new hires must be employed for at least 39 consecutive weeks during the first 12 months of their relocation in order to qualify. The 39-week rule does not require workers to be employed with the same company for which they relocated in order to be eligible.
Every effort has been taken to provide the most accurate and honest analysis of the tax information provided in this blog. Please use your discretion before making any decisions based on the information provided. This blog is not intended to be a substitute for seeking professional tax advice based on your individual needs.
About Liberty Tax Service
Liberty Tax Service is the fastest -growing retail tax preparation company in the industry’s history. Founded in 1997 by CEO John T. Hewitt, a pioneer in the tax industry, Liberty Tax Service has prepared over 8,000,000 individual income tax returns. With 42 years of tax industry experience, Hewitt stands as the most experienced CEO in the tax preparation business, having also founded Jackson Hewitt Tax Service.
Liberty Tax Service is the only tax franchise on the Forbes “Top 20 Franchises to Start,”
and ranks #1 of the tax franchises on the Entrepreneur “Franchise 500.” Each office provides computerized income tax preparation, electronic filing, and online filing through eSmart Tax.