Despite the decrease in the number of cases in the United States, but a still very high number of daily deathsthe covid-19 pandemic is still going on.
The United States reported 3,958 COVID deaths yesterday.
We’ve been above 3K every day this month so far, bringing the total to 14.2K.
Mass infection = mass death
—Walker Bragman (@WalkerBragman) February 6, 2022
Many are wondering what the pandemic will mean for their tax returns, especially as tax season kicks off by mid-April.
One aspect that could have potentially affected your tax return is “qualified disaster relief,” special funds allocated by the federal government in times of natural crisis. However, a loophole means that despite the title, people who missed work due to contracting covid-19 do not get any additional tax relief.
What is qualified disaster relief?
Skilled disaster relief is money that the the federal government provides people who have been affected by natural disasters in the United States. Usually this applies to events such as tornadoes and wildfires.
An employee who receives qualified disaster funds must pay taxes on those funds, but can spread the taxable income over three tax years.
In addition, the Qualified Catastrophe Distribution is exempt from the 10% tax penalty that may apply to early distributions from tax-eligible plans.
What’s the connection with the pandemic?
The pandemic was declared a qualified disaster on March 12, 2020and has been extended to cover the entire covid-19 disaster.
There was some hope that this would mean that time taken off work due to Covid-19 could qualify for a tax reduction, in line with natural disaster regulations.
But the IRS quashed the rumor about it by pointing out that during the covid-19 outbreak:
Qualified wages are not exclusive qualified disaster relief payments, as qualified wages are what an individual would otherwise earn as compensation, rather than payments to offset any particular expense an individual would incur due of covid-19.
Basically, that means that payments do not include qualified wages that are paid by an employereven those who are paid when an employee does not provide services.