In March, Congress moved quickly as COVID-19 spread across the country and shut down our economy. They passed a massive stimulus package called the CARES Act (Coronavirus Aid, Relief and Economic Security Act) that provided economic relief payments to millions of taxpayers, expanded unemployment benefits, and created a forgivable loan program for small businesses (Paycheck Protection Program)...
I started to write this article in July, after what seemed like a long five months of a worldwide pandemic that was starting to get better. We were learning to live with the uncertainty in our lives and the health and financial impact that COVID was causing. Masks had become commonplace and we had flattened the initial curve. Now, four months later, it feels like we are entering what could be the toughest stretch in this fight, but there is some light at the end of the tunnel. Our treatment of the virus has improved and there are several promising vaccines that will hopefully begin distribution soon.
Our income tax system is incredibly complex and constantly changing, which makes it very difficult to plan for the future. Individual income tax planning has historically been focused on deferring income and accelerating deductions. The theory behind this approach is to maximize the time value of money by paying as little tax now as possible, let your money grow over time, then pay taxes later. That approach has been changing in recent years, and as we have pointed out in past articles, sometimes it even makes sense to flip the script and accelerate income while deferring deductions. In order to understand why this makes sense, you have to understand the bracket structure of our tax system.
With COVID-19 cases trending back up across the country, stimulus talks still ongoing, and an election just a couple of weeks away, it might feel like 2020 is the year that will never end. There is plenty of negativity to be found in the world right now, but not if you look at recent performance in the investment markets.
2020 has been a unique year in many ways. In the tax world, there have been constantly changing deadlines, new tax laws, and one-time changes to existing rules. We’ve been busy keeping up with all these changes and thinking about the tax planning opportunities they created for our clients.
Tax laws change so frequently it can be hard to keep up with everything. There have been a number of notable announcements recently so we thought we’d summarize some of the important ones here. This article covers the latest updates on the next stimulus bill, Joe Biden's tax policy proposal, President Trump's recent remarks on potential tax cuts and the payroll tax holiday.