As the pandemic brought much of the world to a halt, it also created an entirely new legal practice area. Congress has passed several laws providing COVID relief to individuals, families, and businesses hurt by the economic shutdown caused by the pandemic. Some of the relief is realized only on a tax return while other aid resulted in direct cash payments. Whether you are an individual or business taxpayer, a COVID relief tax lawyer can help you understand how the pandemic has changed your taxes.
Why a COVID Relief Tax Lawyer Is Critical for Accurate Tax Return Preparation
The closure of businesses and schools during the lockdown caused many businesses to turn to home-based operations if not shutter their doors altogether. These sudden changes left many individuals and businesses reeling. Those who lost their incomes due to layoffs or the closure of businesses turned to unemployment compensation, but the shutdown made finding new jobs difficult.
Recognizing the financial difficulties that resulted, Congress passed several pieces of relief legislation in 2020 and 2021. Each law was intended to aid individual taxpayers, businesses, or both. Some provided immediate, financial sustenance, while others affect the bottom line on federal tax returns. Here, an Indiana COVID relief tax lawyer points out some of the areas to watch when preparing your 2021 federal tax return.
The Tax Consequences of COVID Relief for Individual Taxpayers
Many individual taxpayers were hit hard by the lockdown and the subsequent economic havoc it caused for many businesses. The shutdown itself left many without jobs. Even after businesses could reopen, some did not survive. Of those that reopened, some have been crippled by decreased demand for their business, leading to further staffing reductions. In other words, many individual taxpayers are still struggling.
To help individuals during the lockdown and as we attempt to forge a return to a healthy economy, Congress passed several pieces of relief legislation to directly aid individual taxpayers and families. Examples include the following, with benefits often dependent on income level:
- Families First Coronavirus Response Act, which, in part, affected unemployment benefits;
- Coronavirus Aid, Relief, and Economic Security (CARES) Act, which, in part, provided direct payments to taxpayers and additional unemployment benefits;
- Consolidated Appropriations Act, which, in part, funded direct financial aid to individuals with dependent children and additional unemployment benefits; and
- American Rescue Plan Act of 2021 (ARPA), which, in part, provided direct payments to individual taxpayers and additional amounts for those with dependent children.
Benefits paid under each of these acts can affect how individual recipients’ taxes are calculated for the year received. For example, unemployment benefits are normally taxable, but, under ARPA, some taxpayers may exclude up to $10,200 of unemployment benefits from their taxable income.
An Indiana COVID relief tax lawyer can help you identify the ARPA tax implications that might impact you when you file your tax return. A tax attorney can also assess other relief benefits that could affect your taxable income so that you don’t over- or underpay your federal taxes.
How COVID Relief Could Hurt Business Taxpayers
The US Bureau of Labor Statistics has released a report showing how businesses have suffered as a result of the pandemic. In most industries, at least half of the businesses and their employees have been negatively affected by some aspect of the pandemic, whether from business slowdowns or closures or reduced workforce availability.
Throughout the pandemic, Congress has attempted to bolster the country’s employers by passing legislative relief acts such as the Paycheck Protection Program (PPP), a part of the CARES Act that provided small businesses a forgivable loan for employee wages and other financial assistance to larger businesses. ARPA also benefits businesses, offering loans to enterprises through a new Federal Reserve lending facility.
The financial assistance offered through loan programs, loans, and deferral of certain tax obligations helps only if the business accounts for them correctly on the company’s tax return. For Hoosier businesses, a Carmel/Fishers, Indiana tax lawyer can help your business identify the relief your business has availed itself of and ensure that your tax obligations are not negatively affected.
Where to Find an Experienced COVID Relief Tax Lawyer
Whether you’re an individual taxpayer or a small or large business, you’ve likely suffered as a result of the pandemic. The help provided by federal COVID relief can be wiped out if you do not account for that relief appropriately on your tax return. Julie A. Camden of Camden & Meridew, P.C., is a knowledgeable COVID relief tax lawyer who can help ensure the COVID relief you received does not work against you. To learn more, call 317-770-0000 or complete this online contact form to schedule an appointment with Julie.