(508) 746-4663

Customer Inquiry

Client Portal Login

One Park Place, Suite 3A

Plymouth, MA 02360

(508) 746-4663

By Fax at:
(508) 746-4889

The loss of a job changes your tax situation drastically. This may mean that you have less income, collect unemployment, you may have to withdraw funds early from a retirement plan, you need to start a new job search, or you could have to relocate for a new job. All of these scenarios have a very different effect on your tax return.

Types of Income

  • Your regular paycheck may have stopped, but you could receive payments of severance, or accumulated vacation and sick time. You can apply to receive state funded unemployment compensation after losing a job also. It is important to request having taxes withheld from these sources as they are all taxable types of income.
  • Usually, taking funds from a pension plan is a taxable event. If you have the funds directed rolled into another retirement plan, this is exempt. However, if you are not older than 59½ and do not have documented medical reason to withdraw these funds early, you can also be subject to an early withdrawal tax.
  • Receiving Public Assistance such as food stamps is not taxable to you. Also, any gifts given to you (that are less than the maximum allowed for that year) are tax free.

Types of Deductions

  • You are able to deduct the costs of looking for a job on your Schedule A (subject to the 2% of adjusted gross income limit). These expenses can be the cost to travel to a job interview, any employment agency fees, and costs to mail your resume to prospective employers.
  • Moving can be a costly event; you are allowed to deduct a portion of your moving expenses if you must relocate because of your new job. In order to use this deduction, you must also meet the IRS time and distance requirements.
  • You may now be eligible for the Earned Income Credit. This is a credit that was created to help taxpayers in the lower income brackets. The credit amount varies depending on your tax situation, the amount of income you earned, your age, and if you have qualifying dependents.

Job loss can modify the amount of taxable income on your return or change the amount of deductions and credits as well. Any big financial changes that occur throughout the year should be discussed with your accountant. This will help ensure that you are fully prepared for any tax consequences that may arise from those events!