Tax Considerations In Layoffs
Earning self employment income can also affect your unemployment benefits, so be sure to check with your state before starting your new business. Some states including New York, Maine, Delaware, Maryland, New Jersey, Pennsylvania, and Oregon, offer “self employment assistance” programs which pay benefits similar to unemployment benefits while participants launch their businesses. Like unemployment benefits, self employment allowances are considered taxable income.
Tax Deductions
Higher tax brackets due to lump sum payments, income taxes on unemployment pay, additional self employment taxes – where does it end? While your tax burden has become more complex now that you’re unemployed, you can take advantage of additional tax deductions related to your job search. For example, most job hunting expenses are tax deductible. Keep receipts for everything related to your job search such as resume preparation expenses and employment agency fees, and keep track of all travel expenses and mileage to and from job interviews. If you must relocate, some of your moving costs may be deductible if the move meets certain criteria outlined by the IRS.
Losing a job is bad enough on its own. Add in a few unexpected taxes and you may find yourself overburdened with income taxes next year. Consult with a tax professional now and avoid the unpleasant tax surprises that come with layoffs.
Read More