The rapid spread of the coronavirus pandemic is causing devastating effects on local and global markets. From disrupting supply chains to threatening the global economy, the COVID-19 virus forces businesses to confront a host of challenges.
As tax policy is a section of economic policy, policymakers would respond logically to ensure the reduction of the tax burden and challenges that people must face in this pandemic. 1 Maintaining business cash flow is a major goal of the fiscal policy measures that offer support for financial and monetary policies. Measures include the deferral of tax payments, some tax exemptions, and extending deadlines for tax filing.
Here are some effects of 2020 tax laws on our business and economy.
In the U.S., the Republicans and Democrats continue to debate the incentives that you should apply to combat the effects of recession post coronavirus. While the Democrats focus on implementing food subsidies, paid sick leave, and extension of unemployment insurance, the Republicans are drawing attention to the reduction of social security contributions by companies.
From April 15 to July 15, 2020, the period will not entail any penalty, additional taxes, or interest if you failed to file the Federal income tax return. Generally, taxpayers who owe tax dues can enter a payment plan after meeting certain conditions. Applications for payment plans go through an automatic process in some administrations, whereas discussions with the administration are necessary for others.
In many countries, governments extended income support to households, typically through targeted cash benefits, considering the need to deliver support quickly. As mitigation and containment measures continue, further adaptation to evolving circumstances will be crucial.
Tax policies will continue to focus on limiting challenges while maintaining the ability for a rebound. This stage requires fine-tuning and expanding the set of policies that are already intact.2 While the costs of policy action are high, the prices of inaction are greater. Tax policies must contribute to cover the costs of the crisis and policy responses to it.
What Lies Ahead?
All over the world, tax administrations globally consider and implement measures to support taxpayers as whole or individual taxpayers affected by the COVID-19. While individual taxpayers’ measures will reduce financial burdens and challenges, certain measures for businesses (both self-employed and legal entities) will focus on alleviating cash-flow problems. Yet, many companies are preparing for worst scenarios such as closure or bankruptcy.
The effects of 2020 tax laws will force tax administrations to offer a more targeted response to support taxpayers who can prove that their problems are due to the coronavirus. In this case, tax administrations will choose the best way to aid and reduce the tax administration and taxpayers’ burdens.
Due to the virus’s unprecedented nature, we cannot predict the definite effects of 2020 tax laws or further changes in the current tax policies. Since the tax structure will eventually adapt to the changing economic trends post-pandemic, you need expert advice to save yourself from getting into a financial mess. Consulting with a professional tax lawyer can help you face the challenges that arise from changed tax policies.
If you would like to learn more about the new 2020 tax laws or how to resolve your tax issues, do not hesitate to contact us on our website or call 1-800-290-8160 for your free consultation today.
- USA.gov – Tax Law Changes
- Nerd Wallet – Tax Changes for 2019-2020: Coronavirus Effects and Other New Rules