Weekly Update – July 22nd 2021
Three weeks ago, new COVID-19 cases were averaging about 11,300 new cases a day, but that rate has now doubled to 23,000 cases per day. According to the CDC, nearly all recent COVID-19 cases and deaths have been among unvaccinated people. The more contagious Delta variant is now the dominant strain in the US, and appears to be more severe. A Scottish study found that the hospitalization rate is about 85% higher for the Delta variant than the Alpha variant, which was the dominant US strain last winter. According to experts, the Delta variant poses a low risk to fully vaccinated people. With only about half of the US population fully vaccinated, and as people travel more and as restrictions are lifted, we may see an increase in local cases, as is happening now in Missouri, where some hospitals have more cases and more severe cases now than at any previous point in the pandemic.
I am so grateful that so many of us are now double vaccinated and can enjoy being together with neighbors, friends and family we’ve been apart from for far too long. This last week my fig tree went crazy with huge first harvest figs ripening daily. How nice to text photo’s our my daily harvest and invite neighbors over to share the bounty…
It was also fun to google recipes; I grilled a batch of figs with fetta and prosciutto and served an afternoon snack with my in-office staff…
To borrow a quote from CapitalOne Bank “what’s in your garden” and how are you cooking those fruits and veggies up?
THE AMERICAN RECOVERY PLAN ACT (ARPA)
Monthly Child Tax Credit Payments
Last week, the first advance Child Tax Credit payments began landing in bank accounts. While this temporary expansion of the Child Tax Credit will be a welcome relief for many, for others this may be an unpleasant surprise at tax time. Payments are based on information from 2020, or in some cases, 2019, tax returns, so if your income will be different in 2021 than in 2020, during the pandemic, you may want to opt out of receiving payments. These payments are advances on the Child Tax Credit that will be claimed on your 2021 tax return, so if you receive more than you will be entitled to, you may have to pay the excess back, or you may receive a smaller refund than normal. If you’re in one of these situations, you might consider unenrolling from the automatic payments:
- Taxpayers whose income will be higher in 2021 and who will exceed the phase-out thresholds.
- Families with children who will turn 18 by the end of 2021.
- Anyone who generally owes tax when they file their tax returns.
- Recently divorced couples who filed a joint return in 2020 or 2019.
- Divorced couples with split custody arrangements who claim their children in alternating years.
If you want to opt out of future payments, you must use the IRS portal for the advance Child Tax Credit by the deadline for the next month’s payment. Check out the IRS FAQs where you’ll find everything you need to know about opting out in Section J.
At present, the portal only allows taxpayers to verify enrollment status, update banking information and to unenroll from payments. Eventually, taxpayers will also be able to update marital status, dependents, and income for 2021 and to re-enroll if they have previously unenrolled. Both spouses must separately unenroll if they file jointly. For more information, taxpayers should consult the IRS webpage for this credit.
Unemployment Compensation Exclusion
Under ARPA, the first $10,200 of unemployment benefits received in 2020 are exempt from federal income tax. Starting last week, the IRS began sending out refunds to taxpayers who filed their tax returns before the law passed and who consequently overpaid on their 2020 taxes. Most taxpayers in this situation do not need to file an amended return or take any action to receive this additional refund. However, as the IRS explains in this news release, taxpayers who are now eligible for additional tax credits due to the decrease in taxable income should file an amended return. These credits include the Additional Child Tax Credit, Recovery Rebate Credit, Earning Income Credit and the Advance Premium Tax Credit. Additional information about this exclusion can be found in the IRS FAQs.
Here in New York are still hopeful that NYS Legislative bill S512A which is still active would exclude up to $10,200 of unemployment insurance benefits earned by NYS residents and not just for 2020, forever (or until they change the law again). We have put the tax returns for those clients affected by this law on extension and hope to be able to finalize and submit these returns with a lower New York State tax liability if the law passes.
Paycheck Protection Program (PPP)
The purpose of the Paycheck Protection Program (PPP) was to help small businesses with payroll, rent, utilities, and other targeted, eligible expenses. Forgiveness for loans under $150,000 was streamlined to a single page form, Form 3508S, and was supposed to be a slam-dunk. However, several recipients are finding that their loans will not be entirely forgiven and they will have to repay some of the money they received. Some businesses have been told by their bank or the SBA or both that a closer examination of their loan application documents indicate that they received a higher loan amount than they were eligible for, and will have to repay the difference. We have also heard that others did not provide the appropriate documentation or did not spend the funds on approved expenses.
Paycheck Protection Program vs Employee Retention Credit
We love the initials and the balancing act: PPP vs ERC. Our firm members and I spent hours learning the finer points of the laws and then creating individual excel spread sheets to determine PPP loan forgiveness eligibility and ERC eligibility. As we interview our clients and then comparing salaries, eligible expenses, eligible time periods, government regulations, we are seeing that all the time was well worth it. As we wait for additional guidance we are working through various scenarios, our goal full PPP forgiveness and maximum ERC. The balancing act comes in when the periods overlap as we cannot use the same expenses for both!
IRS AND TAX MATTERS
Did you borrow from “The Bank of M & D” (mom and dad) for your first home? It seems a new bank has sprung up recently “The Bank of Me”. With the gains in the stock market, many investors have seen their portfolios grow, but are not yet ready to cash in on those capital gains. This recent article from AccountingToday, highlights the recent shift from bank financing for cars, vacation homes and other luxury items via their brokerage accounts. In many cases, the rates are lower and there is no capital gains tax!
Do your remote workers have a steady home base, or are they part of the growing group of digital nomads? You may need a separate set of policies for your digital nomad employees because they may open your company to tax, compliance and regulatory risks. In the past, most digital nomads were freelancers or other independent workers. But in 2020, the number of digital nomads with traditional jobs nearly doubled, from 3.2 million in 2019 to 6.3 million. The laws and regulations that apply to these workers are generally those in the jurisdiction where the work is performed, so some companies may unwittingly breaking those local employment laws. Some companies are limiting the time that nomads can spend in any one location, and declaring some areas with complex rules and regulations to be off-limits. Because many digital nomads are in professions facing talent shortages, developing programs to attract, retain, and reward this group can help your company attract the best of the best.
REOPENING THE OFFICE
Workers have been threatening to quit in a “Great Resignation,” but according to a recent survey, employers expect that only about 8% of employees will actually follow through on that threat. However, those employers may be in for a surprise, as some experts believe that between 8% and 41% of employees will quit.
As employees begin to return to the office, they may be returning to a workplace that looks different from before. Some employers are adopting a “hoteling” model, where workstations are reserved by employees who spend some time in the office and some time working remotely. This model will allow employers to reduce the amount of space they need as shared desks and workstations become more common. However, the hoteling model means that workers will have fewer of the personal touches, such as family photos or a favorite office chair, that many find comforting.
In 2022, Social Security beneficiaries may see the biggest increase to their benefits in decades as inflation pushes the Consumer Price Index up 5.4% since last year. The annual increase to Social Security benefits has been tied to the Consumer Price Index for years, and the projected increase of 6.1% to 2022 benefits has prompted some to push for a better way to calculate the annual increase to benefits to more accurately reflect the kinds of expenses that seniors typically have.
While consumer demand continues to strengthen – and with it the economy – but some of that growth has been tempered by continuing shortages in materials and labor. Supply chains have not yet recovered, leading to delivery delays, and the labor shortages, particularly for low-skilled positions, continue to hamper the ability of some businesses to operate.
- IRS resources for stimulus payments:
- The best source for up-to-date and accurate health information is the Center for Disease Control (CDC)
- Our Covid-19 Resource Center with relevant blog posts, videos and prior weekly newsletters
- Payroll, HR and benefits company Gusto has put together An Employer’s Guide to Navigating the Coronavirus
- Accounting Today has a special page for articles on COVID-19
- Intuit QuickBooks has a dedicated page to help small businesses
- The Consumer Financial Protection Bureau has warnings about COVID-related scams
- Entrepreneur put together a listing of free tech resources for remote work
- Fast Company has a listing of the best productivity apps for 2020
- The New York Times has an online newsletter on K-12 and higher education
- The Wall Street Journal has a collection of articles on education
- The Louvre has digitized 482,000 artworks from its collection
- PC Magazine explains how to carry your vaccination card on your phone
- How to create a strong password
We sincerely hope that you and your family are well and remain well. If you have any questions or concerns, don’t hesitate to reach out to us. We are all in this together!
Complementary Discovery Session
If you need help with your accounting, want to create a tax minimization plan, want to discuss your business growth plan or your finances, are concerned about retirement goals or need to be held accountable for your 90 day action plan, contact us for a complimentary discovery session or an appointment to just get started.