LendEDU: Tax Debt Could Become Issue in 2021 Due to the Coronavirus Pandemic & Recession

A new study from LendEDU revealed many Americans are worried about tax debt next year when 2020 taxes are owed because of the coronavirus pandemic and its economic impacts. 

The study, which involved the surveying of 1,000 adult Americans on December 1st, 2020, found a combined 53% of Americans are worried about tax debt next year due to the coronavirus and its economic impacts. 42% of Americans are not worried about tax debt next year, while 6% are not sure either way.

When only answers from respondents who have been laid off due to the pandemic were analyzed, a combined 76% are concerned over tax debt next year, while just 20% are not. 

The full report from LendEDU can be found here: https://lendedu.com/blog/coronavirus-tax-debt-2021/

The coronavirus pandemic has weakened the finances of many Americans, especially those who have lost jobs, which helps explain why many taxpayers are not confident in their ability to pay 2020 taxes in 2021. Additionally, many people had to resort to drastic financial measures to cover expenses during the pandemic, which also helps explain the tax debt fears.

LendEDU’s study found 70% of respondents who have received unemployment benefits during the pandemic are worried about owing more taxes next year. Further, 78% of those who have drawn from a retirement account to cover expenses during the pandemic share this tax debt concern, while 72% of those who have sold stocks to cover costs during the pandemic are also worried about their tax bill next year.

Any of the above actions will likely lead to a larger tax bill next year regardless of any special consumer protections implemented due to the coronavirus pandemic. For this reason, it’s imperative for taxpaying consumers to get their books in order and fully understand their unique tax situations so that they are prepared for what figures to be an unprecedented tax season next year.

The study from LendEDU also found 10% of Americans were unable to file and pay all 2019 taxes by the extended July 15th, 2020 filing, including 17% of those who have been laid off due to the coronavirus pandemic. Amongst those who were unable to pay all taxes by the July 15th deadline but still filed their returns, 53% still have tax debt remaining while 46% have since paid all tax debts.

Those that still have tax debt remaining have an average balance of $3,662 according to the LendEDU report.

If you have tax debt remaining, it’s important to know all available options, including the potential ability to settle your tax debt with the IRS through something like an offer in compromise or installment agreement. Additionally, you could look into a tax relief company that may help you resolve state and federal tax issues while possibly avoiding fees and penalties. 

LendEDU, a personal finance comparison and information site, is based out of Hoboken, New Jersey, and aims to help consumers make educated financial decisions from college financing to homebuying. LendEDU can be followed on Twitter @GoLendEDU

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Website: https://lendedu.com/