Walter & Shuffain, P.C.
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The economic times are taking its toll on many individuals with job loss on the rise, but that doesn't mean you can't take advantage of the wonderful tax code that has been implemented in our great nation. While you may be searching for jobs and potentially relocating to different areas, it is important to keep in mind the tax benefits available. This tip will identify the deductions available.
Job hunting expenses are incurred usually any time you are in the market for employment, as long as the employment is not in a new trade or business. The expenses are subject to the 2% floor and are taken as unreimbursed employee business expenses, which are reported as a miscellaneous itemized deduction your schedule A on Form 1040. Such expenses include any travel to and from job interviews ($.55/Mile in 2009), resume preparation, placement service fees, advertising, and legal fees incurred to protect employment status (should the individual be dismissed from a current job).
Graduates seeking first time employment are not allowed deductions for job hunting as the IRS deems a first job as a new trade or business. If an individual establishes an occupation during school, presumably they would be allowed to deduct job hunting expenses.
If unemployed, job hunting expenses are deductible if there is not a substantial lack of continuity between the end of a previous job and seeking new employment. The IRS does not clearly define a period of time that constitutes lack of continuity, however, the IRS can argue that less than one year of unemployment can substantiate a lack of continuity. At the same time, the Tax Court has indicated that the period between unemployment and reemployment can be up to three years. If you anticipate the potential for a long job search, maintain a log and other documentation to substantiate the expenses throughout the search process.
Moving expenses paid or incurred during the tax year in connection with the commencement of work at a new principal place of work are deductible. These expenses are subject to certain IRS guidelines/tests, which must be satisfied before deducting any moving expenses.
Other deductible moving expenses include transportation expenses for shipping household goods and personal effects, lodging, parking fees and tolls, gasoline, car maintenance or repairs relating to the move. In lieu of keeping track of the gasoline, oil, and repairs, the taxpayer can calculate costs based on the standard mileage rate of $.24 per mile for 2009.
If you would like more detailed information, please do not hesitate to contact us.