Monday, December 22, 2008

And you thought Christmas came quickly

Heads up, job hunters. We have one more thing we need to do very soon.

Make a quick dry run through next spring's tax return to see if we need to make any special tax moves before the year ends a week from Thursday. Yippee. I know.

But there are some new tax changes to consider that Congress made while we may have been distracted by challenges such as replacing lost income. Both the Internal Revenue Service and contributors to major newsletters such as can catch us up on the basics. Check for changes that may affect anyone who bought or sold a house, paid mortgage interest or went through a foreclosure this year.

Meantime, those of still between jobs have some additional issues to deal with. You know some of the ugly ones. Unemployment benefits and severance packages are both taxable. But if unemployment benefits were your only income this year, you may qualify for a bigger tax refund through the earned income tax credit program too.

Any work you did, say, as a consultant or freelancer during your job hunt is taxable too, as self employment income. And the bite may be bigger than you expect. If you made more than a few hundred dollars, you may owe Social Security, Medicare and some other payroll taxes too.

There is a bright side, though. Job hunters have more opportunities for potential tax deductions than the still-working. Itemizers can deduct most out-of-pocket job hunting expenses that exceed 2 percent of their adjusted gross incomes. And those pain-in-the-rear big COBRA payments to maintain health coverage become potentially deductible when they exceed 7.5 percent of adjusted gross income.

Finally, if you think you will want extra help with your taxes because of your job change this time around, start scouting now. Tax professionals will only get busier as April approaches.

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