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Comment by anon291 | Hacker News Reader

I've seen this with several friends.

One of the issues with tech is that if you make $250k in a good year, you are taxed on that. Whereas if you're then unemployed the next year, you don't get anything back as if you had only made $120k. It should work that you can recuperate paid taxes if you're laid off so that those in volatile industries (which tech is) actually pay their average salary. The tax code is set upon the belief that income is consistent for individuals, when it is not today. This is just an example of things I've seen that seem unfair to me. It's crazy someone can go from making $600k and taxed to their teeth to making nothing for the next two years, and if they had instead made $200k per year, they would have ended up better off (not due to spending, just due to taxation).

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If you know about this ahead of time, and can be a contractor, then forming a corporation that is its own tax entity gives you this in the US. I did exactly this in the mid-90s when 9 months of work was suddenly going to yield 4-5x what I had made the previous year, then I would lose the position immediately after, and I knew I would need a break at that point. I paid myself the regular salary whether the corporation was making a lot or making nothing. The corporation had to pay taxes on the profit the first year, but it could deduct the loses against those profits in later years. The same thing happened 5 years later. All my work for a decade was through the corporation I had formed. You can also do things like have a company car (with the company deducting insurance, gas, maintenance, etc.), rent your home office to the company, and much more. US tax laws are much better for corporations and their owners than for individuals.

Best we can do is loss recognition for the capital class.

But take comfort knowing that the company that fired you probably won't have to pay taxes this year, and will be able to carry the loss forward even in years of profitability. And that the owners of the company stock were able to use the loss in value of their stock to offset their taxes as well.

Thanks, I was almost sad :..)

Here in the Netherlands you can actually request your income for taxes to be averaged every 5 years.

Typically this only makes sense when experiencing big changes in income due to our tax brackets. But when it does happen it can help a lot and saves tens of thousands of euros.

People with lumpy incomes get absolutely brutalized by the tax code. It sucks but also not easy to remedy. The calculations and exemptions change every year, so it isn’t as simple as looking back five years and averaging it.

All I'm saying is that their should be a way to recapture the taxes if you've suddenly gone from tons of income to no income. Even the figures I'm citing are not a lot of money in some places like the CA bay area, unfortunately.

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