Are you changing jobs? Then you should add a meeting with a tax preparer to your to-do list. Here are a few of the most important things they will help you with.
1. Determining Withholding.
You may not want to claim the same withholding information at your new employer that you did with your old one. There are many reasons for this, including the need to lower withholding to cover interim expenses, earning more or less money, and the inclusion of unemployment or other income during the transition. A tax preparer will help you decide what to withhold.
2. Assessing Benefits Packages.
Benefits have wide-ranging effects, some of which are significant and others that are minimal. Learn about the tax effects of benefits options like Roth and traditional IRAs, health insurance deductions, life insurance coverage, and transportation reimbursements. This will help you avoid tax surprises at the end of the year and maximize your new salary.
3. Filing Multi-State Taxes.
Does your new job mean moving to a new area? Then you may have to deal with filing and paying taxes in more than one state for at least one year. This can easily lead to double taxation and other errors if you don't file correctly. Since most people have no experience with multi-state taxes, you may need help with this.
4. Reporting Unusual Income.
Income irregularities happen between jobs, and these often come with their own tax effects. You might have temporary income, such as from a side gig or unemployment insurance. You may have bonuses or severance packages at your old employer or a signing bonus with your new one — both of which can boost your income into new tax brackets. And you might get by between jobs through things like selling an asset or investment, resulting in capital gains taxes. All these income sources may need special handling to avoid tax bills.
5. Avoiding Penalties.
Some income sources not only trigger taxes but also penalties. Most people have the option to cash out some retirement accounts when they leave a company, but few understand the true cost of doing so. Before you take a check for your 401(k), pension, or stock options, check with a preparer to ensure a big portion of it doesn't go to taxes.
An experienced tax service can help those who are transitioning to a new job. From helping you make good choices when income is low to ensuring you choose the best new benefits, their services will help stabilize your finances for the future. Make an appointment to learn more.