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As more and more layoffs are announced daily, financial situations become more and more uncertain. If you have recently lost your job, are facing unemployment, or changing jobs H&R Block points out three key areas you should look at right away.

Be careful of lump sum payments from your employer. Two types of common lump sum payments, severance pay and pension distributions, may dramatically affect your tax liability. Some taxes are generally withheld, but it may not be the correct amount and you might want to consider making estimated payments or changing other withholding amounts to avoid big surprises at tax time.

Consider you insurance options carefully. Compare the price of COBRA plans and individual insurance plans. Check with your home and auto insurance agent about discounts on health and life you may qualify for as an existing customer. Though you’ll want to avoid tapping into your retirement money if possible, there are exceptions to the penalty tax for early IRA distributions if you use the money to pay health insurance premiums.

Lastly, if you have an employer sponsored retirement plan such as a 401k or IRA, have the trustee of your current plan make the check out directly to the trustee of the plan where the funds will be rolled over. This will eliminate the requirement for income tax withholding and ensure you’re not taxed or penalized for early withdrawal. If a distribution check is made out directly to you, there are several tax implications involved so consider talking to your H&R Block Tax Professional for advice.

You can reach H&R Block’s Cumming office by calling (770) 887-1650 or visit their offices at 537 Lake Center Pkwy in Cumming.
 

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