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Tax Deductions for Unemployed Persons Looking For Work
By Stacie Kitts, CPA
There are so many people looking for work, I agree it’s was a good idea to remind people that there is a tax deduction waiting for taxpayers. Although – I think some of the restrictions here are totally bogus as it applies to this economy. I think the restrictions should be lifted. But that’s just my opinion.
Here are seven things the IRS wants you to know about deducting costs related to your job search.
- To qualify for a deduction, the expenses must be spent on a job search in your current occupation. You may not deduct expenses you incur while looking for a job in a new occupation. [This restriction irks me. Rather than wasting away on unemployment, any attempt to get a job should be rewarded]
- You can deduct employment and outplacement agency fees you pay while looking for a job in your present occupation. If your employer pays you back in a later year for employment agency fees, you must include the amount you receive in your gross income, up to the amount of your tax benefit in the earlier year.
- You can deduct amounts you spend for preparing and mailing copies of your résumé to prospective employers as long as you are looking for a new job in your present occupation.
- If you travel to an area to look for a new job in your present occupation, you may be able to deduct travel expenses to and from the area. You can only deduct the travel expenses if the trip is primarily to look for a new job. The amount of time you spend on personal activity compared to the amount of time you spend looking for work is important in determining whether the trip is primarily personal or is primarily to look for a new job.
- You cannot deduct job search expenses if there was a substantial break between the end of your last job and the time you begin looking for a new one. [In this economy, I think this restriction is stupid also]
- You cannot deduct job search expenses if you are looking for a job for the first time. [Okay well maybe I can go along with this one]
- The amount of job search expenses that you can claim on your tax return is limited. You can claim the amount that is more than 2 percent of your adjusted gross income. You figure your deduction on Schedule A. [bogus – these should not be limited – all attempts to find employment – again in this economy – in my opinion should be fully deductible]
For more information about job search expenses, see IRS Publication 529, Miscellaneous Deductions. This publication is available on www.irs.gov or by calling 800-TAX-FORM (800-829-3676).
IRS Patrol – IRS Announces New Voluntary Worker Classification Settlement Program; Past Payroll Tax Relief Provided to Employers Who Reclassify Their Workers as Employees
Worker or Contractor that is the question
If you or your clients think there might be an issue with the classification of employees – that is, are your workers independent contractors or not, now is the time to look into correction.
WASHINGTON – The Internal Revenue Service launched a new program that will enable many employers to resolve past worker classification issues and achieve certainty under the tax law at a low cost by voluntarily reclassifying their workers.
This new program will allow employers the opportunity to get into compliance by making a minimal payment covering past payroll tax obligations rather than waiting for an IRS audit.
This is part of a larger “Fresh Start” initiative at the IRS to help taxpayers and businesses address their tax responsibilities.
“This settlement program provides certainty and relief to employers in an important area,” said IRS Commissioner Doug Shulman. “This is part of a wider effort to help taxpayers and businesses to help give them a fresh start with their tax obligations.”
The new Voluntary Classification Settlement Program (VCSP) is designed to increase tax compliance and reduce burden for employers by providing greater certainty for employers, workers and the government. Under the program, eligible employers can obtain substantial relief from federal payroll taxes they may have owed for the past, if they prospectively treat workers as employees. The VCSP is available to many businesses, tax-exempt organizations and government entities that currently erroneously treat their workers or a class or group of workers as nonemployees or independent contractors, and now want to correctly treat these workers as employees.
To be eligible, an applicant must:
- • Consistently have treated the workers in the past as nonemployees,
- • Have filed all required Forms 1099 for the workers for the previous three years
- • Not currently be under audit by the IRS, the Department of Labor or a state agency concerning the classification of these workers
Interested employers can apply for the program by filing Form 8952, Application for Voluntary Classification Settlement Program, at least 60 days before they want to begin treating the workers as employees.
Employers accepted into the program will pay an amount effectively equaling just over one percent of the wages paid to the reclassified workers for the past year. No interest or penalties will be due, and the employers will not be audited on payroll taxes related to these workers for prior years. Participating employers will, for the first three years under the program, be subject to a special six-year statute of limitations, rather than the usual three years that generally applies to payroll taxes.
Full details, including FAQs, are available on the Employment Tax pages of IRS.gov, and in Announcement 2011-64, posted [September 21, 2011].
Related articles
- IRS Announces – Voluntary Classification Settlement Program (alliancepayroll.wordpress.com)
- IRS Gives Employers a Break on Payrolls (online.wsj.com)
- IRS targets employers on withholding tax (huffingtonpost.com)
- IRS Gives Employers a Break on Payrolls (online.wsj.com)
Stacie's Tax Stuff 