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Lessons Learned from the COVID-19 Relief Packages and Impacts on Individual Taxpayers

The sheer size and scope of the tax changes within the CARES Act and subsequent relief legislation created significant administrative challenges for the IRS and taxpayers alike.

The National Taxpayer Advocate found that despite the significant relief Congress has provided, many taxpayers and businesses have had difficulty navigating the various tax provisions.

And even though the most recent relief legislation, the Consolidated Appropriations Act, 2021, addressed some issues with the CARES Act, confusion and compliance challenges remain. For example:

  • Taxpayers with direct deposit information with the IRS received their recovery rebates quickly, while others lacking this information, such as non-tax filers and beneficiaries of programs such as Social Security, waited longer.
  • Uncertainty persists among individuals who received recovery rebates or unemployment benefits about whether those benefits are taxable.
  • As Tax Day 2021 approaches, confusion will likely increase as taxpayers receive different refund amounts than expected due to their eligibility under relief provisions.
  • Despite clarifications in the most recent COVID-19 relief legislation, some businesses may still be unsure about the deductibility of expenses paid for with Paycheck Protection Program loans and differences between various payroll tax provisions, among other things.

This experience highlights the importance for policymakers to prioritize simplicity in future relief efforts and in tax legislation in general.

To discuss this issue and other lessons we can learn from COVID-19 relief legislation so far, Tax Foundation and the The Tax Institute at H&R Block hosted a special Talking Tax Reform webinar discussion, which was moderated by Tax Foundation President Scott Hodge and featured several of today’s leading economic and tax experts:

  • Elaine Maag, Principal Research Associate, Urban-Brookings Tax Policy Center
  • Kevin Martin, J.D., LL.M., Principal Tax Research Analyst, The Tax Institute at H&R Block
  • Erica York, Economist, Tax Foundation