How Changing Jobs Will Affect Your Taxes
Changing jobs can be very exciting or extremely nerve wracking, depending on whether it is your choice to make the change or if it is somehow forced upon you. No matter how you are feeling about your job change, there are several important things to remember as you make this transition. Changing jobs can have some fairly significant tax implications, so thinking about this ahead of time will give you a jump start come tax time!
1. Previous Employer Payouts
Any severance pay (including payouts for vacation or paid time off balances) that you receive from your previous employer is considered income by the IRS. When it comes time to file your taxes, do not forget that you will receive a W-2 from this employer. They are required to send this to you by January 31st, but if you do not receive it, do not hesitate to follow up with your previous employer so that you do not make the mistake of leaving that income off of your tax return.
2. Your Job Search
Expenses that you incur for a job search can sometimes be tax deductible. You can deduct things like printing and mailing your resume, travelling expenses for interviews, and employment agency fees. Two catches to these deductions: you must itemize your deductions on your tax return AND only miscellaneous expenses that exceed 2% of your adjusted gross income can be deducted.
3. Moving Expenses
If your new job requires relocation, you may also be able to deduct these expenses. Fortunately, unlike job search expenses, you do not have to itemize to qualify for these deductions. Your job must be located more than 50 miles farther from your old home than the location of your previous job.
Changing jobs is a great opportunity to examine how much you are having the IRS withhold from your paycheck each month. If you get a sizable refund each year, you may choose to change your withholding so that you receive this amount over the course of the year. After all, a tax refund is simply that – a refund of your own money that you have overpaid to the IRS that year.
When you start a new job, you should also inquire about retirement benefits and think about how you will handle any balances left at your previous employer. You may want to rollover your balance from your 401k to a Roth IRA. While you will have to pay taxes for the amount you roll over, you will NOT have to pay taxes down the road when you make withdrawals during retirement.
Get Tax Support If You Need It
Changing jobs is a huge transition with far reaching impact into many areas of your life, including your taxes. If you have additional questions about the tax implications of a job change, you can always seek some guidance from a tax firm. Success Tax Relief specializes in a wide variety of tax support with a knowledgeable team of professionals who provides each and every customer top notch service. If you have tax questions – call us today at (877) 958-6638.