IRS Offers "Fresh Start" for Unemployed

To paraphrase Ronald Reagan, the most terrifying words in the English language just might be: "I'm from the IRS, and I'm here to help."

You may have heard that the IRS has a new program to help the unemployed who are having trouble coming up with the money to pay their taxes this spring. Under this "fresh start" program, folks who were jobless for at least 30 days between the beginning of 2011 and the coming tax deadline can get a six-month reprieve from the IRS's failure-to-pay penalty. Usually, that levy mounts up at one-half percent for each month you're late -- up to a maximum penalty of 25% of what you owe. Under the relief program, there will be no penalty if you pay up by October 15. The same reprieve applies to qualified self-employed workers whose business income shrank by at least 25% in 2011 due to the lousy economy.

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Sounds good. But, of course, there are hoops to jump through. To protect yourself from the penalty, you have to file a new Form 1127-A by April 17. You have to report how much tax you'll owe for 2011, which means you pretty much have to complete your 1040, 1040-A or 1040-EZ first.

And you still have to file your return -- or file a Form 4868 to request an extension of time to file -- by April 17. Otherwise, you'll be hit with the failure-to-file penalty. That's 5% of the amount due each month until you pay up. And, oh yeah: The law won't permit the IRS to waive the interest you'll owe for paying late. The current rate is 3% a year. Those who take advantage of the "fresh start" will get a bill for the interest once they pay their taxes.

It's no wonder people gripe about the complexity of the tax law. But the IRS is trying to help people who need it. So I take back that quote from Ronald Regan.

Job-hunting expenses

Remember also that many of the costs of finding a job are tax-deductible. If you're looking for a new position in the same line of work, you can deduct job-hunting costs as miscellaneous expenses if you itemize, but only to the extent that your total miscellaneous itemized deductions exceed 2% of your adjusted gross income. Job-hunting expenses incurred while looking for your first job don't qualify.

Deductible job-search costs include, but aren't limited to:

-- Food, lodging and transportation, if your search takes you away from home overnight;

-- Cab fares, tolls and parking costs;

-- Employment-agency fees; and

-- Costs of printing resumes and business cards, advertising costs, and postage.

Although job-hunting expenses incurred while looking for your first job are not deductible, moving expenses to get to that first position -- or any subsequent job -- are. And you get this write-off even if you don't itemize. To qualify for the deduction, your first job must be at least 50 miles away from your old home. If you qualify, you can deduct the cost of getting yourself and your household goods to the new area, including 19 cents per mile for driving your own vehicle for a move in the first six months of 2011, plus parking fees and tolls. (If your move was in the second half of 2011, you can deduct 23.5 cents per mile). You can claim your moving costs as an "above the line" deduction on Form 1040A (the "short form").

McCormally retired in 2018 after more than 40 years at Kiplinger. He joined Kiplinger in 1977 as a reporter specializing in taxes, retirement, credit and other personal finance issues. He is the author and editor of many books, helped develop and improve popular tax-preparation software programs, and has written and appeared in several educational videos. In 2005, he was named Editorial Director of The Kiplinger Washington Editors, responsible for overseeing all of our publications and Web site. At the time, Editor in Chief Knight Kiplinger called McCormally "the watchdog of editorial quality, integrity and fairness in all that we do." In 2015, Kevin was named Chief Content Officer and Senior Vice President.