Eliminating Unnecessary Payroll Deductions. If your income has gone down, you may be having excessive amounts deducted from your pay for income taxes. Check with your employer or with an accountant if necessary. If you are having trouble meeting your obligations, you are better off having the income now rather than getting a tax refund next year.
You may also have agreed to a payroll deduction, such as savings plans, voluntary pension contributions, vacation clubs, credit union deductions, optional but inessential health coverages, charitable contributions, or voluntary wage assignments to creditors that you have decided are not a high priority. Check to see if these deductions should be temporarily reduced or eliminated.
The Earned Income Tax Credit. The Earned Income Tax Credit (EITC) is a frequently overlooked means of increasing your income if you are employed. If you have not qualified for this credit in the past, a change in your income or a lay-off may make you eligible during a year in which you have financial problems.
The amount of your tax credit is based on the amount of your income and the size of your family. If you are employed and your total income falls below a certain amount, you qualify for the credit even if you do not have to pay any taxes that year. You can get money back even if you pay little or no taxes. You can also get advance payments on your earned income tax credit if your employer provides that option.
You should check with a tax professional to determine if you qualify. See Chapter 8 for tips on saving money on tax preparation and Chapter 1 for free assistance with tax issues. Obtaining the earned income tax credit will require that you file the necessary tax returns.