Monday, February 17, 2014

2013 – 2014 Job Search Tax Issues and Deductions

When don’t you think about taxes, money and related financial issues? It seems to dominate the thought-process of just about everyone especially CPAs until April 15th. But taxes hit everyone pretty hard and people in career transition need good information.
Job Search Tax Deductions
Tax issues seem so overwhelming to just about everybody but add the pressure of looking and finding work or job search and the game just gets even harder. But if you have looked for a job in 2013 or you plan to search for employment in 2014 then you should take every legitimate tax break you can. Don’t leave money on the table for yourself when it comes to your salary negotiations and don’t leave money on the table for the government when they have opened the tax door of deductions for you.
Keep Good Habits
You should keep records that will give the information needed to figure the deduction according to these rules. Also keep canceled checks, substitute checks, or account statements and receipts of the expenses paid to prove the deductions you claim.
More Information and Source Material. See Publication 587 for more detailed information and a worksheet for figuring the deduction.
The resources below are quite excellent and are actually very readable. The “What Ifs” answers many questions and provides a Job Related, Debt Related and Tax Related Q&A section. Publication 4128 addresses the impact to you in many of these areas in a very real way. Schedule A is, well, Schedule A.
Here Are Additional IRS Resources:
Publication 4128, Tax Impact of Job Loss
Schedule A, Itemized Deductions
Job Search Expenses
The Disclaimer! Always check with your financial adviser or tax consultant but here is some information you need to know and find the critical links below straight from the IRS.gov site:
You can deduct certain expenses you have in looking for a new job in your present occupation, even if you do not get a new job. You cannot deduct these expenses if:
You are looking for a job in a new occupation,
There was a substantial break between the ending of your last job and you're looking for a new one, or
You are looking for a job for the first time. Sorry brand new graduates but again, check with your tax professional on eligibility.
The Good News – What You Can Deduct
Employment and outplacement agency fees. You can deduct employment and outplacement agency fees you pay in looking for a new job in your present occupation. Outplacement fees also includes résumés – yes you can deduct the fees paid for these and other services.
Employer pays you back. If, in a later year, your employer pays you back for employment agency fees, you must include the amount you receive in your gross income up to the amount of your tax benefit in the earlier year. See Recoveries in Publication 525.
Employer pays the employment agency.If your employer pays the fees directly to the employment agency and you are not responsible for them, you do not include them in your gross income.
Legal Fees
You can deduct legal fees related to doing or keeping your job.
Licenses and Regulatory Fees
You can deduct the amount you pay each year to state or local governments for licenses and regulatory fees for your trade, business, or profession.
Don’t Forget
Remember that laws change; however, here is some general advice. It is not mandatory that you are unemployed or employed to deduct expenses. Generally, a deduction is allowed for employment search expenses in the same trade or business regardless of whether or not the search is successful states. 
Your single greatest investment during your career is you. Investing in books, tapes, networking events and training that you pay for and value can make all the difference in your career. Your personalized career training path should not just be dictated by your employer. You should drive this area – the investment in “yourself” area. So too has the government recognized this value.
Your educational expenses may be deductible as a business expense if the education (1) maintains or improves a skill required in your trade or business or (2) the education is required by the employer, laws, or regulations and is a condition of continued employment, status, compensation, etc.
Things you may not need during the search are brand new cars, the hottest computers, newest of the new cell phones, Armani suits and jewelry.