It's Your Money: Tax Changes

February 11, 2009 7:01:47 AM PST
In tough economic times, the last thing you need is tax trouble. Ben Franklin said, "In this world, nothing is certain but death and taxes."

And in this time of uncertainty, it's no wonder he's the face of tax preparation software.

But, what happens when you lose your job and the Benjamins stop flowing? What do you do about taxes?

"You could have to fork over additional monies to cover the tax on your severance pay," Elda Di Re told Eyewitness News. "Unemployment compensation typically does not have withholding and you will owe the full tax on those unemployment benefits you've received."

Di Re is a tax partner at Ernst & Young.

If you're thinking of raiding your retirement nest egg, think again.

"You will pay ordinary income tax plus a 10 percent penalty, and if you're in a relatively high tax bracket, you could lose up to 50 percent of your pension plan or IRA distribution to taxes," Di Re said.

And, if you are under the age of 59-and-a-half, an additional tax may apply.

So, what is tax deductible?

Many of the expenses incurred in a job search can be written off.

"Transportation, going to job interview, printing up your resume, perhaps meals you're having with prospective employers," Di Re explained.

Even moving costs are eligible, if a new job means finding a new home. But you have to meet certain criteria.

The bottom line is take time to make sure your taxes are filed accurately.

"You could have numerous tax credits which become available because you're at a lower income level and have new, different expenses," Di Re said.

During these difficult times, every dollar back makes a difference.

If you are unsure about anything, get the help of a tax expert.


Load Comments