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New Year, New Job: 5 Tax Tips for Job Changers

12/6/2017

2 Comments

 
New Year, New Job: 5 Tax Tips for Job Changers
​There are a lot of new things to get used to when you change jobs, from new responsibilities to adjusting to a new company culture. One thing you may not have considered are the tax issues created when you change jobs. Here are tips to reduce any potential tax problems related to making a job change this coming year.

​5 Tax Tips for Job Changers

  1. Don't forget about in-between pay. It is easy to forget to account for pay received while you're between jobs. This includes severance and accrued vacation or sick pay from your former employer. It may also include unemployment benefits. All are taxable but may not have had taxes withheld, causing a surprise at tax time.
  2. Adjust your withholdings. A new job requires you to fill out a new Form W-4, which directs your employer how much to withhold from each paycheck. It may not be best to go with the default withholding schedule, which assumes you have been making the salary of your new job all year. You may need to make special adjustments to avoid having too much or too little taken from your paycheck. This is especially true if there is a significant salary change or you have a period of low-or-no income. Luckily, the IRS provides a withholding calculator on its website. Keep in mind you'll have to fill out a new W-4 in the next year to rebalance your withholding for a full year of your new salary.
  3. Roll over your 401(k). While you can leave your 401(k) in your old employer's plan, you may wish to roll it over into your new employer's 401(k) or into an IRA. The best way is to get your retirement funds rolled over directly between investment companies. If you take a direct check, you'll have to deposit it into the new account within 60 days, or you may be assessed a 10 percent penalty and pay income tax on the withdrawal.
  4. Deduct job-hunting expenses. Tally up your job-seeking expenses. If they and other miscellaneous deductible expenses total more than two percent of your adjusted gross income for the year, you can deduct them on an itemized return. This includes things like costs for job-search tools, placement agencies and recruiters, and printing, mailing and travel costs. A couple caveats: you can only use these deductions if your expenses were to search for a job in the same industry as your previous job and you were not reimbursed for them by your new employer.
  5. Deduct moving and home sale expenses. If you moved to take a new job that is at least 50 miles farther from your previous home than your old job was, you can also deduct your moving expenses. There's another benefit for movers, too. Typically, you can only use the $250,000 capital gain exclusion for home sales if you lived in your primary residence for two of the last five years before you sold it. But there is an exception to the rule if you sold your home to take a new job.

Finding a new job can be an exciting experience, and one that can create tax consequences if not handled correctly. Feel free to call Ellsworth & Associates to discuss your individual situation.
2 Comments
Kairi Gainsborough link
4/18/2018 10:49:25 pm

Thanks for the tip about remembering your income from the time you spent between jobs. I also didn't realize that you could deduct job-hunting expenses. My husband found a new job this year, so this will be something to remember during tax season. It might be best if we use a professional tax service this year since our taxes will more complicated than usual.

Reply
Federaltax link
2/6/2023 04:00:01 pm

There is definitely a great deal to learn about this topic. I love all the points you've made.

Reply



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  • About
  • Services
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    • Outsourced Accounting
    • Business Consulting
  • Individuals
    • Individuals
    • Real Estate Investors
    • Clergy
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