Planning to change employers this year? As you look forward to starting your new job, you’re probably not thinking about taxes. But actions you take now can have an impact next April – and beyond.
- Roll your retirement plan. You may be tempted to cash out the balance in your employer-sponsored plan, such as a 401(k). But remember that distributions from these plans are generally taxable. Instead, ask your plan administrator to make a direct rollover to your IRA or another qualified plan. If you’re under age 59½, this decision also avoids the additional 10% penalty on early distributions. Bonus: Your retirement money will continue to grow tax-deferred.
- Adjust your withholding. Assess your overall tax situation before you complete Form W-4 for your new employer. Did you receive severance pay, unemployment compensation, or other taxable income? You might need to increase your withholding to avoid an unexpected tax bill when you file your return.
- Keep track of your job-related expenses. Unreimbursed employment agency fees, résumé preparation costs, and certain travel expenses can be claimed as itemized deductions. Are you moving at least 50 miles to your new job? You may be able to reduce your income even if you don’t itemize. Eligible moving expenses are an above-the-line deduction.
More tax issues to consider when you change jobs include stock options, employment-related educational expenses, and the sale of your home. Give us a call. We’ll be happy to help you implement tax-saving strategies.