Frequently asked Tax and Accounting Questions

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• What are tax implications of withdrawing money early from a retirement account?

You can withdraw money from your retirement funds before you retire, though this should be avoided as much as possible. When cashed in early, retirement funds would have a tax penalty of 10 percent on every withdrawal. You may  also have to pay income tax on the amount you withdraw.

• Can I deduct the cost of searching for a new job and moving for a new job?

Yes, as a matter of fact you can deduct job searching expenses on your income tax returns. Here is what you can deduct:

• Employment agency fee.
• Money you spent getting your resume ready and sending these to prospective employers
• Traveling costs that are incurred to appear an interview while searching for a new job.
• Traveling costs you have incurred while searching for the new job.
• The job-searching expenses would be filed under “miscellaneous” and when the miscellaneous costs exceed 2 percent of your AGI (adjusted gross income) it is deductible.

You cannot claim deductions if:

• There is a long break between your first job and the new job
• This is your FIRST job
• The new job is not in the same occupation line
• You’re travelling time is disproportionate with the object of the travel (if you mix business and pleasure)

• What are the tax implications of a foreclosure?

Foreclosure affects your credit score and history and thereafter impacts your ability to obtain any credit. Here is what you should expect to happen:

• Your credit score dips significantly; sometimes the drop is as much as 300 points. This will drastically change the way creditors see you in terms of risk.

• The foreclosure will not be removed from your credit history.

• Any future mortgage applications will require you to inform about the earlier foreclosure.

• You will have trouble finding a job with the government, law enforcing agencies and the military as these employers normally do a detailed credit check and may not find it favorable to employ someone with a huge credit liability.

• A lender can get a judgement against you if and when they think they can recuperate the money lent. Such a judgment would hold you responsible for continued payments even after the foreclosure placing tremendous stress on your finances – indefinitely. This depends on the state of which you reside.

• You will need to relocate because you are losing your home.

• What type of gifts can be excluded from gift tax?

A gift tax – which is imposed on any transfer to a person that can be measured in money – is normally paid the donor. There are exceptions to this rule where the gift my not attract any tax:

• Any gifts offered to a political group/organization
• Gifts to spouse
• Gifting education for someone
• Picking up the medical bill for someone
• Gifts that do not exceed the annual exclusion within a calendar year.