Deductions appear to be fresh on everyone’s mind since April 15th is around the corner. If you are job searching, you need to be aware of several key areas that could make a huge difference in what you can and cannot deduct.
I recently sat down with Jeff Canady, a CPA who shared some good tips on what to keep in mind when job search deductions are being discussed. Canady said there are three areas that you need to be aware of:
1. Where to take the deductions,
2. The requirements involved in taking deductions, and
3. The types of expenses that can be deducted.
Let’s take them in order:
Where to take the deductions – If you are itemizing deductions on Schedule A you need to refer to IRS publication 529 for more detailed information on where you can take the itemized miscellaneous deductions.
The requirements for taking deductions can be a bit confusing, and in order to get the correct information for your personal questions it’s always a good idea to seek the assistance of a tax professional or a CPA. To take these deductions, you must be job searching in a similar occupation to the one you are in. Canady said an engineer seeking a higher engineering position is an example of staying within a similar occupation, but an engineer who decides to change careers and become a lawyer, for example, would not qualify.
The most confusing of all the requirements is the guideline regarding the “substantial break” term. The IRS states that you cannot deduct expenses if there was a “substantial break” between the ending of your last job and looking for a new one. The term “substantial break” can be interpreted several ways and is difficult to neatly match to every job seekers situation. What is meant by substantial? Canady has spent time researching the term “substantial break” and found according to court rulings substantial break was held to be in excess of 2.5 months. Since the IRS is somewhat vague on the term, this might be one area that is based on individual cases with specific factors and a host of other issues to be considered. The vague nature of the term leaves more questions than answers and is exactly the reason to consult with a tax professional.
The last requirement involves first-time job seekers, and there is no confusion in this area. There are no deductibles for those seeking a job for the first time.
The type of expenses – deducting expenses involves such factors such as travel for job searching. For those who drive numerous miles for job searching should check to ensure the correct amount per mile is used and should keep a record of mileage to and from job-search activities.
Buying a separate notebook to record mileage is a more accurate way to keep track of mileage than jotting numbers down on random pieces of paper.
Be sure to keep receipts and records of money paid for career outplacement services, resume preparation or employment-service fees. In keeping with the IRS guidelines all of these items can be deducted, if you are looking for a new job in your present occupation.
Canady encouraged individuals to make a habit of keeping records all year long and not just during tax season. Staying within the guidelines and listing all expenses is the best way to avoid tax-related issues.
And here’s a very important point: Always check with a certified professional accountant or tax professional to determine the correct information for your specific questions, and seek legal assistance if you have difficulty in interpreting the tax law. Refer to the Internal Revenue Service for personal assistance.
