If you’re changing employers, taxes are probably the last thing on your mind. But the actions you take now can make a big difference on your tax return in April — and beyond.
Here are three tips that’ll help put you in a good position for the upcoming tax season:
1. Roll over your retirement plan
You may be tempted to cash out the balance in an 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. This avoids the additional 10% penalty on early distributions you would face if you’re under age 59½. Your retirement money will continue to grow tax-deferred.
2. Adjust your tax withholding
Assess your overall tax situation before you complete a 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.
3. Don’t expect to deduct job-related moving expenses
Unless you are a member of the U.S. Armed Forces, you can no longer deduct moving expenses related to your employment.
More issues to consider when you change jobs include stock options, employment-related educational expenses, and the sale of your home.
Have questions about your taxes? Let’s talk!