COVID-19: How it Affected Taxes and Relief Efforts

People have battled with job loss, company closures, and financial instability, thus the government has implemented a variety of tax relief measures to reduce the load. On top of deductions that is. 

This article will look at how COVID-19 may affect taxes and how independent contractors may handle the changing tax landscape.

Tax Payment and Filing Due Dates

One of the most important changes made by COVID-19 is the extension of the tax filing and payment deadlines. In reaction to the epidemic, the IRS extended the filing and payment deadline for federal income taxes for the 2020 tax year from April 15 to May 17, 2021. This implies that it also affected their tax refund.

This extension was made available to provide taxpayers—particularly those who were experiencing financial hardship as a consequence of the pandemic—more time to prepare and submit their tax returns.This extension also applies to self-employed workers who typically submit their taxes using Form 1040 and Schedule C. 

If a freelancer anticipates having problems reaching the May 17 deadline, they may file Form 4868 before the deadline to seek an extension. On October 15, 2021, they must file their tax returns.

Initiatives for tax reduction in

To provide further help to taxpayers affected by the epidemic, the government has put in place a variety of tax relief procedures. For instance, the CARES Act, which was passed into law in March 2020, provided qualifying individuals and families with access to economic impact payments, sometimes known as stimulus payments.

Freelancers who were eligible for stimulus funding should have received them automatically based on their 2019 or 2020 tax returns. The contributions were not taxable and did not need repayment.

The CARES Act also provided businesses and independent contractors with a variety of tax relief options. For example, the law allowed for the temporary suspension of the 10% penalty for early retirement account withdrawals brought on by coronaviruses. Additionally, it provided tax rebates to businesses who retained their staff members during the epidemic.

The CARES Act also enhances the amount of charitable donations that may be written off on tax returns and extends some limits on the use of net operating losses (NOLs) to offset taxable income.

Local and State Tax Relief

In addition to federal tax relief measures, several states and local governments have also implemented their own tax relief programs in response to the epidemic. For instance, some states have delayed the deadlines for filing and paying taxes, while others have granted tax exemptions to businesses that have been negatively impacted by the epidemic.

Freelancers may consult a tax professional or look up information on the state’s department of revenue’s website if they have concerns about the tax relief alternatives available in their state. 

Navigating the Changing Tax Environment

As a consequence of the COVID-19 pandemic, new relief measures and amendments to tax law are often implemented, and the tax climate is rapidly changing.

Because of this, it could be difficult for independent contractors to comprehend their tax duties and take advantage of all available tax advantages.If you want to ensure that you are using all of the tax relief choices and breaks available to you, it is essential to stay educated and seek the advice of a tax professional.

Working with a tax expert can help you better understand the changing tax environment and how it impacts your unique tax position.Independent contractors may take action to stay current with the most recent tax law changes in addition to contacting a professional.

This might include reading tax-related blogs and journals as well as routinely monitoring the IRS website for changes and news.

The bottom line

In conclusion, the COVID-19 pandemic has had a considerable impact on taxes, and a variety of tax benefits are available to assist individuals and companies cope with the repercussions on their finances.

These include the Employee Retention Credit, tax relief programs, and stimulus payments. It is essential to remain current on the most recent changes and alterations to tax rules and regulations to ensure you are taking full advantage of any potential tax advantages and avoiding any potential tax issues.