We examine the rise of the tiny job economy below.

Digital Work Erases Barriers
In an age where an increasing percentage of work is done virtually, it is no longer necessary (or in some cases, even desirable) for someone to be in your office while performing tasks for you. A Yahoo Finance article offers an instructive example:

“Fernando Navales threw himself into the work, taking between 30 and 40 ‘gigs’ per day (often photographing restaurants for Microsoft’s (MSFT) Bing search engine). Over the past year, he has completed about 750 gigs—and this new kind of employment has changed his perceptions of the working world.”

It’s a great deal for companies, too. After all, why hire a full-time employee (or tie up an existing employee’s time) with tiny jobs that can easily and capably be done by a consumer? Websites like Gigwalk offer a system for companies to hire “tasksumers,” as they are now called, to perform miniscule tasks for modest pay.

What Kinds of Jobs?
Naturally, the types of jobs assigned through these networks tend to be quick, “one-off” tasks. Yahoo lists the following examples, which are typical of the tiny jobs being posted for completion:

• $35 to test customer service experience at a well-known store
• $4 to photograph restaurant menus
• $29 to stand in line at a restaurant and deliver food to a nearby office

No one expects to get rich from a single job, but taking on many jobs can cumulatively result in a substantial part-time or even full-time income. Tiny jobs aren’t limited to manual labor, either. Some companies, like CloudFactory, harness the same concept for data entry or technical tasks. Some websites even segment their remote workers by skill level and track record, allowing companies to have their choice of the highest-quality talent for the short-term tasks they need done.

Resume-Building For the 21st Century?
One of the less-discussed benefits of tiny jobs is the potential career boost it can provide. The most common complaint among people who lack work experience is that no one wants to hire them. But with tiny jobs, someone with a meager resume can build work experience one task at a time and weave those tasks into a narrative that makes them appealing to a traditional hiring manager.

Naturally, a resume full of menial tasks isn’t going to turn many heads, but career-minded workers can accept tiny jobs more strategically. For instance, someone who spends six months doing data analysis for various companies can piece together a resume that captures these experiences and use that to pursue a long-term role.

Conceivably, someone with a stellar track record in excelling at doing tiny jobs could even get hired full-time by one of the companies that he or she worked for. After all, most firms would rather hire someone they already have established a good working relationship with than roll the dice on new and unproven talent from outside the organization.

Like almost everything related to your income, expect a change in your job to have an impact on your tax situation. And when it comes to taxes, the ‘how and why’ of your job transition has quite a bit of weight as well. Believe it or not, the IRS cares about why you’re leaving your current job and how you’re looking for your new job.

Since the IRS cares so much (and since the answers have a lot to do with how much or how little you may owe come April 15), it’s a good idea to be as prepared and read up on a few different scenarios below.

Severance and the IRS

Whatever walk of life you come from, the word severance tends to carry a negative connotation. It’s usually paired with being let go, laid off, or forced into retirement.

No matter what reason for your severance pay, you need to know that the IRS wants their cut.

According to Publication 525, the IRS categorizes severance pay as any form of payment “for the cancellation of your employment contract”. And this severance pay must be included as part of your income when you file your tax paperwork.

You do have the choice to reduce the amount of severance pay you receive if you decide to accept outplacement services such as learning how to write a résumé or conducting a successful interview. In this case, you must still include the original amount of severance you would have received as part of your income, but you have the option to deduct the value of the outplacement services from your overall income.

Finding Yourself Without a Job (i.e. Unemployment)

For many people who experience the sudden loss of a job, unemployment benefits are vital to keeping food on the table and paying the bills. Unfortunately, most people aren’t knowledgeable about how unemployment benefits and compensation are taxed until they experience it first hand.

Why is this important to know? You may not realize unemployment compensation is added to any other income you earned and it is still taxable.

Job Searches and Deductions

One of the few bright lights at the end of the tax tunnel is the ability to deduct job search expenses from your taxes. In many instances, you can deduct expenses for job search even if you didn’t get that particular job.

Job search expenses that are deductible range from traveling to and from interviews, resume preparation and printing, professional job placement resources, and even postage.

TurboTax is up to date with all of these tax laws and will ask you questions specific to your tax situation so that you get every tax deduction and credit you’re eligible for.  Have a question?  Only TurboTax lets you talk to a tax expert whose a CPA, IRS enrolled agent, or tax attorney, free.

Job Hunting Costs

Did you start a new job in 2012? If so, you might be able to deduct the costs related to your job hunt. There are some rules, though:

• You can only take deductions if you were looking for a new job in the same field.
• You can’t take the job hunting deduction if you were looking for your first job.
• Your costs must exceed 2% of your AGI, and you can only deduct the amount over that 2%.
• There cannot have been a substantial break between when your old job ended, and you began looking for a new job.

If you meet those conditions, you can deduct the costs of career counseling, hiring a head hunter, resume help, cost of mailings and phone calls, and the cost of travel to go to job interviews. Remember, these are deductions from your income, when you itemize, and not a tax credit. What this means is that if you spend $500 for someone to review your resume, you don’t get $500 off your tax liability. You get $500 off as a deduction to the extent that all of these expenses exceed 2% of your AGI.

Other Unreimbursed Employee Costs

You can also take a tax deduction for costs related to your employment that you aren’t reimbursed for by your employer. This tax deduction is available whether you are an old job, in a new job, or starting your first job.

Some of the expenses that you might be able to deduct include:

• Depreciation on equipment, such as a cell phone or computer, that you bought in order to do your job.
• Dues to professional societies, unions, and chambers of commerce.
• Employment-related education costs
• The cost of obtaining licenses related to your profession.
• Travel costs related to a business trip, including passport fees.
• Tools and other supplies that you use for your work.
• The cost of uniforms, and how much you have to pay to keep them properly maintained.
• Subscriptions to trade magazines and professional journals in your field.
• Home office expenses, if you have a designated area exclusively related to work as you telecommute.

Once again, your ability to deduct expenses is subject to the 2% rule. So, if your AGI is $42,000, your costs need to be at least $840, and you can only deduct the amount above that number. So, if you spent $1,000 on employment related expenses, you can only deduct $160 from your income.

You can only claim expenses for which you were not reimbursed. If the company is paying for your cell phone, or if it covers your business travel expenses, you can’t deduct those. Anything the company pays for can’t be deducted from your taxes, it’s considered double dipping and is not permitted.

If you found yourself paying costs related to your new job, you might be able to reduce your tax liability to help offset some of your expenses to keep more money in your pocket.

TurboTax will figure out the employee deductions your eligible for based on your answers to simple questions.

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College Grad

Although finding a job in your career field may take some time, two key elements will help you sort through the confusion and land the job you want: staying prepared and developing a job hunting (or marketing) strategy.

Remember, finding your first job might be hard work, but it’s not impossible.

Customization is Key

Throughout your college career, during all of those technical writing classes, and even dating back to high school, you’ve probably read dozens or even hundreds of sample cover letters and resumes. Generic and unimpressive.

You’ve probably got a few samples or rough drafts saved on your computer right now.

Instead of trying to impress the hiring agent with typography and layout design, customize your cover letter and resume for each company that you apply to.

Mention some interesting facts about the company in your cover letter. Go a step further and talk about recent news articles pertaining to the company or its area of expertise. Dig deeper than the few facts on their website; do some research and show the firm that you are knowledgeable and enthusiastic about their company.

Whatever you plan, don’t send out your generic one-size-fits-all resume to every potential employer. More often than not, your familiar-sounding information will get lost in the shuffle.

Networking Outside the Box

Most graduates’ idea of networking includes hitting up professors, family, friends, and maybe the university’s career services department.

It’s time to take job networking outside of the box and ratchet up your capabilities.

Reach out to executives and hiring managers of the companies you’ve targeted in your job search. Websites like LinkedIn.com and Ryze.com aren’t just for seasoned professionals.

You can use these tools to network with company employees and other business professionals already in the field that you’re looking into.

Make certain that all of your networking profiles, whether strictly professional or simply social, are all employer-friendly. Recruiters are scouting Facebook and Myspace these days as well.

You can also make connections through business associations or visiting industry seminars and conferences.

Whichever method you choose, remember to show your passion for the profession, show your interest in the person that you’re speaking with, and be clear about your short-term and long-term career goals.

Great Interview, Regardless of a Job Offer

Let’s face it, interviews can be some of the most pressure-packed situations on the planet, especially when there’s no clear job offer.

No matter what occurs during your interview, maintain your professionalism and develop a rapport with the people at your interview meeting. Be clear and straightforward about your desires and expectations.

Even if you don’t get a job offer, a positive impression can go a long way. Your name could be moved to the top of their “potentials” list (great when another job becomes available), or your name might be mentioned when a recruiter from another company makes a friendly call.

Don’t Become Blinded by the Ideal Situation

There’s a fine line between settling for a job and holding out for your ideal career situation.

Although you’ll have to make your own choices when it comes to turning down a job offer or taking whatever you’re given, focusing too much on “ideal” can cost you some great opportunities.

Set reasonable goals when beginning your job search…reasonable, but high enough to satisfy your expectations.

Broaden your job hunting to include lesser known companies or less-glamorous positions. Don’t expect to start at the top, but don’t settle for a go-nowhere paycheck.

Don’t Give Up

It’s easy to get frustrated and exhausted when you’ve been on the job hunt for months with no leads. It’s easy to want to throw in the towel after ten or fifteen interviews without a single offer.

But the worst thing you could do at this point is give up.

Take a look at your resume and tweak it. After so many disappointing interviews, you should at least have some idea of what needs to be reworked in regards to the way you’re presenting your information.

Keep making new contacts through various networking avenues and keep up contact with professionals you’ve already met. You never know when an opening might pop up.

Sometimes the resilience you display during difficult times is exactly what someone needs to see before they hire you.

Also, remember job search expenses may be tax deductible, but not when you are looking for your first job.  Don’t worry, when you prepare your taxes for your first job you will still reap the benefits of a standard deduction and when you’re on you’re path to career growth and seeking a job in the same profession as your first, your job search expenses will be eligible for tax deduction.

Job-Related Deductions

While not as generous as tax deductions available to business owners, the ability to deduct some job-related expenses can certainly add up. If you’re required to travel or conduct a lot of business outside of the office there’s a good chance your employer reimburses you for many of these expenses, but every company is different and you may be footing the bill for things that you could possibly claim as a deduction.

Before getting into the actual deductions we need to understand what the IRS considers unreimbursed employee expenses. Your expenses must have been required for you to carry out the job for which you were hired and must be what the IRS calls “ordinary and necessary.” This means the item or service is common and accepted in your line of work and is appropriate and helpful to your job. In addition, to be able to claim these deductions you must itemize on Schedule A, and your unreimbursed business expenses must total more than 2 percent of your adjusted gross income(AGI). To give you an idea, if you have an AGI of $40,000, your expenses need to be more than $800 before you could begin claiming any deductions.

Possible Deduction Categories

To give you a better idea of what types of expenses might qualify for unreimbursed job-related expenses, here is a brief overview. And again, these only qualify if your employer doesn’t already reimburse you.

• Legal fees related to doing or keeping your job.
• Licenses and regulatory fees as well as occupational taxes.
• Dues to professional groups, unions, or local trade groups.
• Education that is related to or required for employment.
• Work clothes and uniforms, and possibly upkeep costs.
• Subscriptions to professional journals and magazines related to your line of work.
• Medical examinations that are required by your employer.
• Depreciation on technology required to do your job.
• A home office or part of your home used regularly and exclusively for work.

Unfortunately, commuting expenses to get to and from your job are not a deductible expense, but if you do need to use your vehicle for work-related activities such as meetings, conferences, trade shows, or other travel, you may be able to deduct the actual expenses required for the trip or use the IRS standard mileage deduction.

Above all else, keep good records throughout the year. You may or may not reach the 2 percent threshold, but it’s worth keeping track just in case, and it’s a lot easier to tally up receipts at the end of the year rather than trying to come up with all of your expenses after the fact. If you’ve determined that you qualify for deducting some of these expenses you can look to Form 2106 or 2106-EZ. And of course, TurboTax will assist you with recording and claiming these unreimbursed job-related expenses.

Unemployment benefits are taxable

In 2009, an exemption was given for the first $2,400 of unemployment benefits received. That break has expired for tax year 2010 so you’re going to need to budget accordingly (Form 1099-G will tell you how much unemployment you must report.). Also keep in mind that severance pay and accumulated sick leave or sick time are taxable as well.

Tapping retirement accounts early is costly

One of the first things people do when they’re out of work and need money is tap their retirement accounts. Raid the IRA, and with very few exceptions, you’ll be subject to a 10% early withdrawal penalty (if you are under the age of 59 1/2); 401(k) plans are subject to similar rules.

Job hunting expenses are tax deductible

Assuming you looked for a position in the same line of work in 2010, you can deduct all sorts of job-hunting costs — travel and transportation expenses to/from interviews, business cards, career counseling, the costs of preparing and copying your resume, and more. Granted, there are some caveats -expenses incurred by those seeking first-time employment are not deductible (sorry, recent grads!), you have to itemize, and all miscellaneous deductions must exceed 2% of your adjusted gross income – but you get this break even if the job search was unsuccessful.

Take credit(s!) where credit is due

Did you go back to school in 2010? Were you out of work much of the year? There are a number of tax credits that may apply to your situation. Among them: the American Opportunity credit (up to $2,500) for those who were working toward a degree in 2010; the Lifetime Learning credit (up to $2,000) for those who took classes last year to acquire or improve job skills; the Earned Income Tax Credit for low-to-moderate wage earners; and the lesser known Saver’s tax credit (up to $1,000). If you earned $27,750 or less ($55,500 for married filing jointly) and deposited money into an IRA 401(k) plan or other retirement program during the year, you may qualify for it.

Earned income tax credit (EITC)

The IRS estimates that nearly 6 million taxpayers who are eligible for the Earned Income Tax Credit (EITC) fail to claim it.  That’s one in five! And the reason we’re not claiming this credit — a credit designed to supplement wages for low-to-moderate income workers (which is a lot of people these days, including many individuals and families who were previously classified as “middle class”) – is generally due to one of two reasons: a) the rules pertaining to this credit are confusing, and b) taxpayers are not aware that they qualify! What’s it worth? The maximum credit for 2010 is $5,666 for those with three or more dependent children; smaller credit amounts are available for those with fewer – or no – qualifying children. While the exact refund you receive depends on your income, marital status, and family size, consider this: qualifying taxpayers who claimed the EITC last year got an extra $2,200 on average.

Job-hunting costs

With 15 million Americans out of work, you might very well be one of them. But if you looked for a position in the same line of work in 2010, and if you itemize your return (!), you can deduct job-hunting costs — from cab fares to food, travel and transportation expenses to/from interviews, to business cards, career counseling, the costs of preparing and copying your resume and more — as miscellaneous expenses.  A few caveats: expenses incurred by those seeking first-time employment are not deductible (Sorry, recent grads!), and in order to get this break, the amount of all miscellaneous itemized tax deductions must exceed 2% of your adjusted gross income. That may sound like a lot, but you’d be surprised how easy it is to clear this threshold–particularly if you didn’t make much last year.  Furthermore, you get this break even if the job search was unsuccessful.

Out of pocket charitable contributions

While you surely remember any big charitable cash donations you made in 2010, you may easily forget the smaller, non-cash contributions. No, you can’t deduct your time, but you can deduct various out of pocket costs you incurred while doing good deeds–things like ingredients for pies you made for your favorite charity, materials you used to make blankets for a homeless shelter, stamps you bought for a fundraising event, and miles.  You can claim 14 cents a mile for any driving you do in service of a charity or volunteer project.

State sales tax deduction

When you have the option of claiming either state and local income taxes OR state and local sales taxes, the income tax deduction is typically a better deal. However, this write-off makes the most sense for those who in states that do not impose an income tax. How much can you deduct? Use the IRS’ tables as a guideline or prepare your taxes with software, it will do all the hard work for you!

Child-care tax credit

The child-care tax credit is easy to miss, particularly if you working parents pay your child-care bills (such as daycare or nanny services) through a tax-favored reimbursement account at work. While only $5,000 in expenses can be paid through one of these accounts, up to $6,000 (for the care of two or more children, under the age of 13) can qualify for the credit. What if you hit the cap at work and spend another $300? $500? $700? So long as these expenses are for work-related child care, up to an $1000 of additional costs can be claimed. How much it this credit worth? While that depends on your income, the number of children, and the cost of care, the credit starts at 35% of qualifying expenses if your adjusted gross income is less than $15,000 and phases out to 20% of eligible expenses if your adjusted gross income is more than $43,000.

Listen here:

[podcast]http://cloud.consumerismcommentary.com/audio/taxcast006.mp3[/podcast]

What job search tips do you have to offer fellow new grads or students?

If you’re out of work, it’s even more important that you try to volunteer in your local neighborhood because it can pay huge emotional and spiritual dividends. You don’t have to volunteer each and every day, just a few hours a week can make an impact towards a cause you believe in.

It Boosts Morale

Searching for a job can be a very emotional exhausting experience. My wife looked for a job for six months before she found one and I saw the roller coaster of emotions she dealt with. You send out resumes day in and day out, hearing back from only a couple, and there’s a feeling like you’re fighting a forest fire with a spray bottle. By volunteering, you get to claim small wins each time you volunteer because you are helping out an organization that desperately needs your support.

Satisfies Social Needs

The job hunt can also be very lonely. There’s very little human contact when you submit resumes for hours at a time, so it’s important to keep your social needs fulfilled by interacting with other volunteers. Volunteers are almost always very kind and inviting, because they know how valuable other volunteers are!

By working with other people, you don’t feel like you’re on an island all by yourself. If you feel open to it you can discuss your frustrations and difficulties with other volunteers. Maybe they’re in the same boat, maybe they’ve gone through it before, it’s like a support group you can learn to lean on as you build relationships with them.

Resume Builder

Employers are always looking for gaps in resumes and being able to say that you volunteered when you were out of work sounds better than saying all you did was submit resume and go to job fairs. While I argue that you should job hunt full throttle at first, there will come a time when you won’t be able to fill many hours of the day with resume submissions. When that happens, consider volunteering and it gives you something positive to say during your time off.

Networking Potential

Anytime you can get out and meet new people, you increase the chances that you’ll find a job through networking. While I wouldn’t expect it to happen, you never know who you will meet. Perhaps you meet someone who has a friend who works at the company you’ve had your eye on? Maybe someone is married to an HR generalist at a company in your industry? By getting out of your house, or the library, you meet more people and increase the chances you’ll find a job through word of mouth.

They Might Hire You!

Most organizations have paid staff to perform some of the more arduous tasks or to fill in when the volunteer ranks are looking thin. Meals on Wheels occasionally hired paid drivers to drive certain routes when there were fewer volunteers. If you have specific and specialized skills the organization is looking for, you might find yourself a part-time job to help make ends meet.

In the end, the big value in volunteering is in boosting your morale and filling up hours in the day with something productive. After days of job searching, taking a break can refresh your mind and give you renewed energy. If you take a break by volunteer, you’ll boost both even more!