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December 09, 2020 | Posted in:

Tax Smart Advice for Laid Off Workers

If you’re one of the millions of Americans who has lost work due to the pandemic, there are ways to reduce your 2020 taxes and get aid now. Among them:

Take tax credits.

With your income reduced you may now qualify for the EITC which can be worth over $6,000 for a family with three kids. The bonus? As a refundable credit, it pays even if you don’t owe any taxes. Two other credits to inquire about: the Saver’s Credit for those who have contributed to an IRA or 401 (k), and the Dependent Care Credit if you paid someone to watch your child while you worked or looked for a job.

Tap your IRA.

Need cash now? There are two ways your IRA can help. First, if you made a contribution during the year but need the money back, you can withdraw it without penalty. Second, you may also withdraw up to $100,000 from a tax-qualified retirement plan in 2020 without the usual 10% penalty, thanks to the CARES Act.

Suspend student loan payments.

If you have a loan from a bank, credit union, college, or private company, contact the lender. Many are offering assistance to individuals whose incomes have been impacted by the pandemic.

Inquire about public assistance.

While unemployment compensation is taxable, public assistance benefits generally are not. Don’t be afraid or ask for aid like food stamps to tide you over while you look for work. You pay taxes year after year, so it’s your right to claim this aid when you need it most.

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