Why Remittance Payments Have Dropped Worldwide

Remittance Payments Have Dropped Worldwide

In addition to the health concerns of the global pandemic, Covid-19 has had a huge impact on the world economy. Many countries have completely shut down all economic activities, therefore directly affecting its laborers and those dependent on them. Migrant and foreign workers are among the most vulnerable and have felt the sting of lost hours and wages. Furthermore, their families at home  also feel the affects since remittance payments have dropped worldwide. For those who are not supporting families outside the country, here are a few considerations of how this affects countries reliant upon foreign income.

Global Predictions for Remittance Payments

In poorer regions of the world, many people are dependent upon remittance payments from family members working abroad as a primary source of income. This money helps with daily living expenses, health care, education, and building a better future for their family. However, job losses due to Covid-19 are threatening many livelihoods.

Global remittance payments hit an all-time high in 2019 with an estimated $706 billion. Unfortunately, many foreign workers are employed in the service sector and not seen as essential employees. Furthermore, many of these workers are unable to return home due to travel restrictions. This means the steady cash flow has come to an abrupt halt. According to predictions from the World Bank, experts say this figure will drop by 20% this year. It is the most drastic decline in recent memory and is going to affect national economies in countries already struggling to cope with the pandemic.

Regions Where Remittance Payments Have Dropped

Even slight changes in policies have a huge impact over time. Keep in mind that many developing countries count on this income to sustain their economies. In the poorest countries, a few dollars a day can mean the difference between putting food on the table or going to bed hungry. For example, in countries like Nepal, Tonga and Haiti these remittance payments account for more than 29% of the national GDP. However, since the countries with the largest amount of outgoing cash are locked down,  remittance payments have dropped worldwide.

Although the average global decline is about 20%, Europe and Central Asia (27.5%), Sub-Saharan African (23.1%), and Southeast Asia (22.1%) will be hardest hit. The drop in remittance payments is especially worrisome for countries with large refugee populations. Lack of income could become disastrous in areas already suffering from shortages of food and medical supplies.

Personal Experiences of Sending Remittance Payments

I am among the fortunate foreign employees that have been minimally impacted by the economic downturn. Since Taiwan got a handle on the coronavirus early on, the country never went into a full lock-down. Schools and businesses shut down for two weeks following Chinese New Year, but economic activities quickly resumed. However, I did notice a few additional fees and forms each time I sent my remittance payments back to the US.

As it turns out, I am now facing a similar predicament as other migrant workers around the world. Circumstances are now bringing me back to the US with few job prospects. Those remittance payments have come to a complete halt. Therefore, my financial future relies on what I have managed to save and luck finding other revenue sources. Hopefully new banking policies and technology will offer easier access and fewer fees to send remittance payments. Many people’s lives may depend upon it.

Read More

States that Might Let You Write Off Home Office Expenses

There are several tax reforms coming into effect this year affecting people who work from home. Many people will no longer be able to claim tax deductions to write off home office expenses. This is a huge concern now that more people are working remotely under quarantine. Spending more time at home means expenses will undoubtedly rise. If you had planned to claim those deductions on your next tax return, you should make sure you are still eligible for reimbursement.

Tax Cut and Jobs Act

The tax reforms recently passed in Congress will have a huge impact on the work force. This is especially relevant since many of us now work remotely. Furthermore, an online survey reported that nearly a third of respondents said they would like to continue doing so once restrictions are lifted. This means your average worker is spending more money towards business expenses each month.

In the past, you could itemize and deduct many of these expenses on your federal tax return. However, the Tax Cuts and Jobs Act has limited who is eligible. Now, only self-employed works can claim the deduction to receive the tax break. Those who are employed by someone else are no longer considered eligible for this reimbursement.

State Deductions for Home Office Expenses

The Tax Cuts and Jobs Act went into effect 2018, meaning these changes will affect your 2020 tax return. The most substantial change is that only self-employed tax payers can claim the tax write-offs for their home office. In addition, it also eliminates you from claiming “miscellaneous itemized deductions.”

The good news is that some states have not adopted the same guidelines for state tax returns. If you live in California, New York, Alabama, Arkansas, Hawaii, Minnesota or Pennsylvania, you may still receive some reimbursement. These states allow you to claim employee business expenses as a state tax deduction. While you may not receive a full reimbursement, at least some of these states are allowing some compensation.

What Qualifies for Home Office Tax Write-Offs

According to the IRS, you can deduct any cost associated with your home workspace. However, your home office must be exclusively and regularly used for business purposes. The tax code does not explicitly state what this covers, so self-employed workers operate on the honor system. Keep in mind you will have to justify these deductions if the IRS decides to audit you.

Some of the most common deductions deal with the space itself. This includes rent or mortgage interest, property taxes, homeowners insurance, and home depreciation. In addition, you can include a percentage of your utility bills each month. For example, if your office occupies 10% of your home, then you can claim 10% of your annual utilities costs. Also remember to add the cost for any computer equipment, home repairs, or furniture specifically associated with your home office.

Important Note

If you plan to write off home office expenses, there are a few things to remember. This deduction will only benefit you if you exceed the standard deduction for itemized deductions. This threshold varies state by state, so you will need to check your local tax laws to determine the amount. If you find these changes in the tax codes complicated and confusing, you are not alone. Contact a professional tax preparer with any questions to determine how these changes will affect you.

Read More