Know your tax benefits during job loss activities


United States, 7th September: Having awareness about the results of your current income tax could keep you protected from some of the worst events taking place including the risk of job loss.

United States, 7th September: Having awareness about the results of your current income tax could keep you protected from some of the worst events taking place including the risk of job loss.

So, its high time, one starts planning for the next year to sail through the year without worries.
Losing a job is a big blow for the concerned employee as well as his family. And to avoid circumstances resulting in increased taxes, here are some vital considerations to be kept in mind—
A.    Job loss activities risking increased income taxes—
•    All jobless insurance benefits are liable to tax in the current year. By filling Form W-4V, one can get 10 percent of such benefits withheld for government taxes. A form 1099-G is provided by the state before 31st January every year. It shows the total taxable benefits paid in the previous year.
•    All withdrawals made from IRA or any qualified pension plan are liable to tax deductions. Those aged below 59 and a half years while making withdrawals are liable to 10 percent penalty for early withdrawal  unless—
1.    The concerned person makes withdrawal from a plan and re-deposits the whole amount within 60 days into some other qualified traditional IRA or retirement plan. Such an amount will not be liable to tax deductions.
2.    For knowing more about such conditions, browse through IRS Publication 575, Pension and Annuity Income.
•    Forgiving any debt including debt concerning your credit card is also liable to tax deductions from your income.
•    Selling of assets for covering bonds, stocks, mutual funds or investment property can be saved from tax deductions provided you report the year of the sale. However, any gain from such a sale is liable to income tax deductions while the loss is not.
•    All vacation pay, sick pay, any accumulated leave or severance pay is subject to income tax deductions.
B.    Job loss activities likely to increase refund of income tax—
•    You can avail a host of tax benefits if you opt for a college course. These include income tax deductions and tax credits.
•    American Opportunity Credit for college tuition, EITC (Earned Income Tax Credit) and additional Child Tax Credit are good examples for getting tax benefits due to decreased income.
•    You can ask for job hunting expenses such as travelling costs for employment search or interviews. Since, such things lead to decreased income, you will be refunded tax credits.
•    Moving to a new place for getting work within time and distance conditions can make you eligible for claiming tax deductions.