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  • Job Search: Tax Deductions

    Judi Lacko, a 45-year-old CPA from Denver who has been actively searching for work as a chief accounting officer for months, says, “Looking back, I wish I had thought right away about deductions and record-keeping.”

    It’s no secret that millions of Americans are looking for work, from recent graduates to downsized late-career employees who aren’t ready to retire.

    Far fewer are aware of how Uncle Sam’s tax code can be used to blunt the cost of a job search—especially one that may go on for longer than in the past.

    Judi Lacko, a 45-year-old CPA from Denver who has been actively searching for work as a chief accounting officer for months, says, “Looking back, I wish I had thought right away about deductions and record-keeping.”

    Career coaches usually don’t help with taxes. “My job is to get my clients back to work as quickly and efficiently as possible,” not to dissect deductions, says Win Sheffield, a career coach in New York who is part of a network called the Five O’Clock Club.

    The tax issues affecting job seekers are numerous, with many parts of the code coming into play. They also are tricky. One key provision—the “miscellaneous deduction”—can severely limit job-hunting write-offs, while another—the “alternative minimum tax”—denies them entirely.

    But there are opportunities, especially for people who can earn some income in a side business. “By starting a consulting practice, taxpayers may convert limited write-offs into full deductions,” says David Kautter, who heads the Kogod Tax Center for Small Business at American University.

    That’s what Steven Milewicz has done. Mr. Milewicz, 50, was the general counsel for a large construction company until this summer. While looking for his ideal permanent position, he is doing contract work for a law firm specializing in construction. “I can take a full deduction for our health-insurance premiums, plus other expenses,” he says.

    The bottom line: Getting tax help is a wise move for job hunters. “Even a little goes a long way, and a quick phone call could save you a lot of money,” says Melissa Labant of the American Institute of CPAs.

    The first place many job-hunters look for write-offs is the miscellaneous deduction, which includes unreimbursed employee expenses and applies to the recently unemployed as well. It is the go-to slot for deducting travel, entertainment, subscriptions, business cards and other costs.

    There is a problem, however. Permitted expenses are deductible only to the extent that they exceed 2% of a taxpayer’s “adjusted gross income,” which is income minus a few items. On a $200,000 income, that’s $4,000.

    This is “a killer” if the job hunter has a working spouse, large severance or other income, says Bob Meighan of Intuit‘s Turbotax team. (Expenses must be deducted in the year incurred.)

    If the taxpayer falls into the alternative minimum tax, which was designed to tax the wealthy by limiting deductions, there isn’t any writeoff at all. This is often a problem in high-tax states.

    Read Full Story in the Wall Street Journal.com

    Good luck.

    Calvin Wilson
    Founder and CEO
    Upstart: Business and Management for 20-40 Year Old Professionals
    calvin.wilson1@verizon.net
    http://twitter.com/Upstart__Nation

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