What if the worst happens and you lose your job? There are some options you have to get through this rough time.
Unemployment. First, if you have been laid off, you can file for unemployment. This income is taxable, just as any other income.
New legislation: For unemployment between Jan. 27, 2020, and Dec. 31, 2020, a covered individual (one who cannot work or is laid off because of the coronavirus pandemic) can receive up to 39 weeks of unemployment pay. The amount of unemployment pay is the state amount, plus $600 per week from the federal government. This includes part-time employees and those who are self-employed.
Government benefits. Governmental welfare benefits are not taxable. This includes the Low Income Home Energy Assistance Program (LIHEAP), Medicaid, Supplemental Nutrition Assistance Program (SNAP, also called food stamps), Temporary Assistance for Needy Families (TANF), and Women, Infants and Children (WIC).
Distributions from qualified plans. This should be considered as a last resort. Distributions from a retirement plan are generally includable in income. And for many people, they are subject to a 10% early distribution penalty as well. See the chart below for exceptions to the penalty provisions.
New legislation: Qualified birth or adoption distributions and disaster relief distributions are covered by the SECURE Act. Coronavirus-related distributions are covered by the CARES Act.
