In November 2020, the U.S. Bureau of Labor Statistics reported that 10.7 million people were unemployed. Losing your main source of income can be devastating. However, your new tax status may make you eligible for tax breaks reserved for those with lower incomes. Here are some tax tips to help you maximize your refund and get through this rough patch.
File a tax return even if you don’t have to
If you’re single, under 65 and earned more than $12,400 in 2020, you must file a tax return. Even if you aren’t required to file, it may be worthwhile to do it anyway. You may be eligible for a refundable credit like the Earned Income Tax Credit (EITC) which is worth up to $6,660. Refundable credits can produce a refund when you don’t owe any taxes. Another reason to file your taxes is because if your employer deducted taxes from your pay, you may be able to get your money back.
Do your taxes early
Most people who file a tax return get a refund. This is money you can use to stay afloat until you find your next gig, so don’t procrastinate. According to the IRS, the fastest way to get your refund is to e-file and have your refund direct deposited into your bank account. If you have a simple return, you can file your federal for FREE at ezTaxReturn.com.
Unemployment compensation is taxable
You’re going to owe federal taxes on your unemployment income. Depending on where you live, you may also need to pay state taxes. Make sure you set aside a portion of each check to cover the bill. Aim to save 10% of each payment. Alternatively, you can ask to have taxes withheld or make quarterly estimated tax payments.
Claim all the tax credits you can
Depending on how much money you earned, you may now be eligible for tax credits you weren’t able to claim before. Here are a few you may qualify for:
- Earned Income Tax Credit (EITC) – The credit ranges from $538 to $6,660 depending on your filing status and number of children you claim. You don’t need to have a child to get the credit.
- Child Tax Credit – Parents can get $2,000 for each qualifying child age 16 or younger.
- Child and Dependent Care Credit – If you paid someone to watch your kids while you worked or looked for a job, you may be able to deduct a portion of your childcare expenses.
When you do your taxes with ezTaxReturn, it’s easy to claim every credit and deduction you deserve. You’ll get the biggest possible refund, guaranteed.
Get assistance from the government
Don’t be ashamed to ask for help if you need it. The government has several programs which can assist you with food, housing, healthcare, and other necessities. Here are some programs you can look into:
- Food – Supplemental Nutrition Assistance Program (SNAP)
- Healthcare – Medicaid; Children’s Health Insurance Program (CHIP)
- Housing – Subsidized Housing, Housing Vouchers, and Public Housing programs. Also, check out Low Income Home Energy Assistance Program (LIHEAP) for assistance with heating and cooling costs.
- Financial assistance – Welfare or Temporary Assistance for Needy Families; Supplemental Security Income (SSI).
If you’re in need, determine which programs you’re eligible for and apply.