2020 Year-End Tax Guide

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This Year in Review

It has been an extremely busy year related to federal taxes. The Treasury Department and the Internal Revenue Service were involved throughout the year with interpreting and providing guidance on certain areas of tax law under the Tax Cuts and Jobs Act (TCJA). However, as a result of the COVID-19 pandemic, the Service had to deal with a new reality and develop rules under the massive pieces of legislation passed by Congress and numerous Executive Orders signed by the President to provide relief to affected taxpayers. In addition, natural disasters throughout the country created additional need for relief. This all had to be done while the Service itself was short-staffed due to the closure of IRS centers under lock-down conditions. This article provides a brief review of COVID-19 actions taken by the IRS and Congress and updates some non- COVID-related issues which occurred during this past year.

DECLARATION OF A DISASTER After the confirmation of the first coronavirus case in the United States, the Secretary of Health and Human Services (HHS) declared a public health emergency on January 31, 2020. On March 13, 2020, President Trump declared a nationwide emergency under the Stafford Act, which meant that governors would not need to request individual emergency declarations to get federal assistance. The federal declaration proclaimed the COVID-19 outbreak a national emergency. All 50 states, the District of Columbia, and four territories were approved for major disaster aid. Additionally, 32 tribes would work directly with the Federal Emergency Management Agency (FEMA) under the declaration. Declaring the entire country a disaster area affected by COVID-19 produces a number of federal tax consequences under the Internal Revenue Code (“IRC” or “Code”): X The Treasury Secretary becomes empowered under IRS to provide up to one year of relief for the filing and payment of certain taxes. X Personal casualty losses in a disaster area are eligible to be deducted. X Losses related to a disaster are eligible to be deducted, at the taxpayer’s election, in the year prior to the year of the loss. X Amounts paid as Qualified Disaster Relief Payments can be excluded from the income of the recipient. The Families First Coronavirus Response Act (FFCRA) requires that all comprehensive health insurance plans cover FDA-approved testing needed to detect or diagnose COVID-19, including in-person or telehealth visits to a doctor’s office, urgent care center, or emergency room, which eliminates co-pays or deductibles for testing. The Coronavirus Aid, Relief and Economic Security (CARES) Act extended this requirement to cover certain non-FDA-approved testing.