Online Tax Filing Blog

The Official Blog of Tax Software


Events In Life That Have A Significant Tax Impact Series: Losing Your Job


Tax Significance Of Losing Your Job  When you lose your job, you have a lot on your mind and your taxes may be the last thing you are thinking about. However, losing your job can have a significant impact on your tax return. You need to be aware of the tax consequences to avoid costing yourself money and be able to take advantage of potential tax benefits. Below are a few of the tax consequences and benefits you should be aware of.

Tax Consequences
Unemployment Compensation Is Taxable
The IRS states, that you must report all unemployment compensation as income.
• Your state unemployment insurance benefits (up to 26 weeks) and your extended benefits (up to an additional 13 weeks) are taxable. When you apply for unemployment, you may choose to have 10% withheld for federal taxes by completing Form W-4V, Voluntary Withholding Request.
o The State will provide you with a Form 1099-G prior to January 31st of each year, showing the amount of taxable benefits paid in the prior year.
Severance Pay, Accumulated Vacation Time Or Sick Pay Is Taxable
Payments for any severance pay, accumulated vacation or sick time are taxable. Taxes will be withheld at the same rate as it was from your salary while you were working. You should ensure that enough taxes are withheld from these payments, or make estimated payments.
• Severance pay becomes taxable income for the year you receive it. If your severance pay is large compared to your yearly salary, this could bump you into a higher tax bracket.
o If you are bumped into a higher tax bracket, you can try and negotiate to have your severance pay paid out over time rather than in one lump sum.
Withdrawals From Your Pension May Be Taxable
Try and avoid taking money out of your IRA or 401K. Generally speaking, if you withdraw the funds before you reach eligible age, and do not roll it over into another qualified retirement plan or Individual Retirement Account (IRA) within 60 days, that amount will be taxable income in the year in which it is withdrawn. If you are under age 59 1⁄2, an additional early withdrawal penalty of 10% tax may apply on those early distributions.
Potential Tax Benefits
Job Search Expenses May Be Tax Deductible
Certain expenses incurred while looking for a new job may be deductible. Examples of deductible expenses include employment and outplacement agency fees, resume preparation, and travel expenses for job search and interviews.
Moving Costs Due to Change In Job Location May Be Deductible
Moving costs you incur because of a change in your job location may be deductible. How far you moved and the amount of time you spend on the job will have a major impact on whether you qualify for the tax break. If you can meet certain criteria relating to distance moved and timing of the move, then job-related moving expenses that you incur may be tax deductible.
• You will meet the distance test if your new workplace is at least 50 miles further from your former home than your previous workplace was from that home.
• The time test requires you work full-time for at least 39 weeks during the 12 months immediately after your move. If you are self-employed, the time test requires you to work full-time for at least 39 weeks during the first 12 months and for a total of at least 78 weeks during the first 24 months after your move. You can deduct your moving expenses on your tax return even though you have not met the time test by the date your return is due, if you expect to meet the 39-week or the 78-week test as required.
• Members of the armed forces do not have to meet these tests if the move was due to a permanent change of station.
• Reasonable moving expenses are deductible and include the costs of moving your household goods and personal effects to your new home. You can also deduct the expenses of traveling to your new home, including lodging costs.
Additional information on moving expenses, including an extensive list of deductible and non-deductible expenses, can be found in the IRS Publication 521: Moving Expenses.
Tune in next week as we discuss the tax consequences of divorce or separation.
Comments are closed
Copyright © 2013 TaxSlayer LLC | 706-922-6741 | 3003 Allen Drive Evans, GA 30809
© 2013 Refund distribution subject to IRS acceptance of return & University National Bank. *IRS refund times will vary but most IRS refunds will be issued in less than 21 days after efiling. TaxSlayer cannot guarantee date of receipt of refund. Your Privacy is Important: We do not rent, sell or share your personal information with anyone. Your e-mail is used to communicate with you about your return status, retrieve your Username or reset your Password. *TaxSlayer phone support available January 2nd through April 19th. (C) 2013 JR Motorsports, LLC. The name, likeness and signature of Dale Earnhardt Jr are used with the permission of JR Motorsports, LLC and JRM Licensing, LLC.

*Free tax advice is available for free with TaxSlayer Premium Edition. This product is available by phone or email, Monday – Friday through April 15th. Please check the website for the hours of operation as they may vary due to capacity. * guarantees accurate calculations or we will reimburse you any Federal and/or State penalties and interest charges. *Maximum Refund Guarantee- Your refund is based on data supplied by you and is calculated based on the schedule and forms supported by A larger refund or smaller tax liability cannot be due to differences in data submitted to or positions taken that are contrary to law. If you find that another tax software calculated a larger refund or smaller tax liability based on the same information provided to, we will refund your applicable fees paid to *Actual prices for services rendered are determined at the time of print or efile and are subject to change without notice. Prices are good until April 1st 2013.

*All major forms and schedules: Your return is completed by all of the major forms and schedules supported by To see the complete list of major forms and schedules supported by visit *Supported Federal Forms page.
Go to top