The entire world was shaken up by the sudden hit of Covid-19. Many changes had to be made in Tax Provisions including our daily lifestyle and government policies. Every government had to make changes and revisions in government policies due to the economic state.
This includes taxation policies because taxpayers found it hard to pay the regular tax charges when there was a steep decline in employment. The U.S. government made various changes in the taxation system to support its citizens.
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Stimulus Payments
The IRS issued an Economic Impact Payment or stimulus check due to the COVID-19 pandemic. There were three stimulus checks and it was as follows:
• $1200 in April 2020
• $600 in December 2020
• $1400 in March 2021
All the payments were sent to eligible individuals as direct bank deposits or in the mail as a paper check or debit card.
Self Employed PPP
The Paycheque protection program was launched by the federal government and was expanded from April 2020 till August 2020. An additional amount of $310 was issued in funding for this program.
Student Loan Forbearance
The percentage of student loans in the U.S. is high and it keeps growing. To provide some relief to the students during the pandemic, new policies were made for Tax Provisions. They are,
• Stop collecting student loans in default
• Interest rate at 0% for 60 days
• Suspend student loans temporarily
Removal Of Withdrawal Penalty On Retirement Accounts
A penalty of 10% is charged on withdrawing the amount from retirement accounts. This was decided to be withdrawn as it was the last resort available for many people during the pandemic. The CARES Act allows taxpayers to utilize amounts from retirement accounts as temporary relief without penalties
Deduction On Charitable Contribution
Many individuals started making cash donations in the pandemic to support the low-income group of people. The federal government introduced tax deductions on cash donations to qualifying charities up to the limit of $300 per individual taxpayer. To avail of this deduction, you need not itemize the donation which makes it easier to file returns.
Additional Eligible Expenses
Many tax advantage accounts were modified and additional expenses were added to the list under CARES Act. The various accounts include HRA, HSA, Health FSAs, etc.
Reimbursement was not given on many items when utilized from these accounts. Thanks to CARES Act, many people were able to utilize tax advantage accounts for additional products including medications, over-the-counter products, pads, tampons, etc.
All the above modifications or revisions were made in tax provisions to help support people during the pandemic and reduce the burden of the tax. Many other relief programs were introduced during this period by the legislation
It is important to make the right choice for change in tax provisions and hence we are ready to answer your queries. Contact All American Tax and Credit Advisers at +1 770-280-1082.