I have recently had an opportunity come up with regards to my employment. As you
ID: 2588129 • Letter: I
Question
I have recently had an opportunity come up with regards to my employment. As you know, I have been working at IBM for many years, and have enjoyed the many fringe benefits they have offered - including reimbursing my travel costs, health insurance for myself and my wife, annual parking passes and a free turkey each year at Thanksgiving. Well, I now have an opportunity to go work as a sales consultant for a new company in San Diego as a independent consultant making $150,000 gross per year. AS you know, I am currenlty making $150,000 oer year as an employee at IBM. What are the tax ramifications if I move to the new company and how much or less in taxes will I pay? Are there any other things I should consider in possibly making the change?
Explanation / Answer
Changing jobs will certainly have tax implications. The first thing one shall take into account is the employer’s 401(k) benefit plan. If you’re an existing employee of IBM then you’re under IBM benefit plan which is obviously different from the employer you’re considering to switch to. Your savings and investment options might get change and accordingly you will have to adjust the scheme under the plan of new employer. Your provident fund account balance can be transferred to your new employer and can be continued without much effect. Or you can close your existing PF account and create a new one with the accumulated balance left with IBM for your new employer. Usually employees are free to choose from these two options.
Other fringe benefits in the form of cash or entitled benefits you may lose once you opt for another employment because some of the fringe benefits may require you to stay in the service till the year-end for which it accrues. The same applies for your Leave Travel Concession.
Income tax withholdings may have to be adjusted accordingly as your earnings pattern will change and so will the income tax accruals on the earnings. If after calculation it is found that you owe further amount of taxes you have to settle it by paying the additional amount or it is that you owe a refund you can either claim it or can adjust it against the future tax liability in the subsequent years. The nature of fringe benefits you will be entitled to under the new employment have to be critically considered because that will decide how much of your fringe benefits will become taxable and what portion will be tax exempt.
Other things you shall consider are the working conditions, job profiles, scope of growth, the field you’ll be working in, a detailed analysis of whether switching to a new jobs can give you added boost to your career or not etc.