People facing financial difficulties may find that there’s a tax impact to events such as job loss, debt forgiveness or tapping a retirement fund. For example, if your income decreased, you may be newly eligible for certain tax credits, such as the Earned Income Tax Credit.
Most importantly, if you believe you may have trouble paying your tax bill, action should be taken immediately. In many cases, there are steps we can take to help ease the burden. You also should file a tax return even if you are unable to pay so you can avoid additional penalties.
Here are some “what if” scenarios and the possible tax impact: