Weekly Update – November 18th 2021
Just a few weeks ago, it appeared that the Delta variant was on the wane in the US. However, cases are climbing, in pockets of the Midwest, Southwest, and Northeast, and just ahead of the holiday travel season. Minnesota is experiencing its highest average daily case counts since April, at 3,500 per day, overwhelming some hospitals. In response, Minnesota Governor Tim Walz has enlisted the National Guard to staff temporary sites and care for patients. Even though most serious cases are among the unvaccinated, it appears that immunity is waning among those who first received the vaccine.
I’ve recently spoken to some who have contracted mild cases, even after receiving their booster. So scary, I am grateful that my husband and I got our boosters this weekend and only had mild reactions. We are planning to visit family and friends in Michigan and Ohio for the holidays and then I fly out to Nashville for a conference at the beginning of December.
Totally off topic, I just wanted to share another beautiful beach sunrise photo with you and maybe help put a smile on your face.
Amazing how the clouds can enhance the sunrise.
THE AMERICAN RECOVERY PLAN ACT (ARPA)
Monthly Advance Child Tax Credit Payments
The IRS recently released a Fact Sheet that includes the latest updates to FAQs on the 2021 Advance Child Tax Credit Payments. New FAQs under Topic F explain how to update your income if that has changed substantially for 2021 compared to 2020 or 2019.
As a reminder, if you want to opt out of future payments, you must opt out 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.
Keep an eye out for IRS form 6419 which will be sent to taxpayers who received advance child tax credit payments. You will need this information in order to reconcile your tax credits when you file your 2021 tax returns.
Infrastructure Investment and Jobs Act
The Infrastructure Investment and Jobs Act (H.R.3684) was signed into law by President Biden on Monday afternoon…
Some key provisions:
- Cryptocurrency. The act expands cryptocurrency reporting requirements in an effort to stem underreporting of cryptocurrency transactions. These provisions have raised some concerns that the reporting requirements are so broad that they apply to people who generate cryptocurrency and to people who do not have the information needed to comply with the reporting requirements.
- The Employee Retention Credit. The American Rescue Plan Act of 2021 extended the Employee Retention Credit to Dec. 31, 2021. The Infrastructure Investment and Jobs Act legislation eliminates the credit for wages paid after Sept. 30, 2021. However, with the enactment after the start of the fourth quarter of 2021, some concern has been expressed about the retroactive application of the elimination of the credit.
- Employer-sponsored retirement plans. The relaxation of minimum funding requirements for employer-sponsored retirement plans is further extended, adding to tax revenue projections as funding requirements are decreased.
- Disaster relief. Some disaster-related tax deadlines are extended.
- Tax deadlines. The types of tax deadlines that are extended due to service in a combat zone are expanded.
Build Back Better Act
The Build Back Better Act (H.R.5376) is still being debated, we are looking forward to resolutions and a possible vote in the next few weeks so we can start on our updated tax minimization planning for 2021 and beyond
IRS Annual Inflation-Based Tax Brackets Changes
The IRS has released its annual inflation-based changes to tax brackets and various other tax attributes for 2022 returns, to be field in 2023. The standard deduction will increase to $25,900 for married couples filing jointly and to $12,950 for single filers. For 2021 returns that will be filed in 2022, the standard deduction for joint filers will be $25,100, and $12,550 for single filers.
IRS Form 6475: 2021 Stimulus Payment
The IRS has created form 6475 which will provide you with your 2021 stimulus payment. We will be asked to reconcile your eligible amount with the advance payments you may have received during mid-2021. This is a similar process with what we were asked to do when submitting our 2020 tax returns.
NYS Has “Sticky Fingers”
It’s been reported that the NYS tax department has issued approximately 149,000 residency notices. Remember we warned that NY has “sticky fingers” in order to change your domicile you must leave and land. Many thought they had done so and reported the move on their 2020 tax returns, now it’s time to show proof.
IRS Identity Theft Protection Identification Numbers
A long awaited and requested process is finally here, for those who have been plagued by tax return identity theft can now apply for a special ID# the IP PIN through this special IRS Portal.
An Identity Protection PIN (IP PIN) is a six-digit number that prevents someone else from filing a tax return using your Social Security number or Individual Taxpayer Identification Number. The IP PIN is known only to you and the IRS. It helps verify your identity when you file your electronic or paper tax return. Even though you may not have a filing requirement, an IP PIN still protects your account.
THE GREAT REASSESSMENT
According to research from Goldman Sachs, approximately one half of the 5 million people who left the labor force during the pandemic may not be returning because they have retired. Of the people who left the labor force, 3.4 million are over 55, and about 1.5 million of those took early retirements and another one million took normal retirement. This leaves a “hole” of about 2.5 million people who most likely will not return to the labor force. The number of people taking early retirement is consistent with an earlier study from the Federal Reserve Bank of Kansas City which found approximately 1.5 million more people retired than expected.
Some people who left their jobs during the pandemic may receive offers from their former workplaces, trying to lure them back as “boomerang employees.” If this happens to you, it’s important to weigh that offer carefully. If the reason for departing was your manager, and this person has since left, returning may be a great opportunity. Turnover may have resulted in a completely different team of people, new workflows, and extra work for the remaining employees.
For employers like me, who have an amazing and dedicated staff, we would rather retain our employees than see them join the “Great Resignation,” five strategies may be helpful:
- Promote existing employees and increase their compensation
- Invest in employee education and training
- Assist those parents with children with childcare alternatives. These may be in the form of a subsidy, flexible work hours, or working with a child care provider. In the post-pandemic era, flexibility is no longer a nice-to-have, but a necessity.
- Recognize, acknowledge and reward those people doing a great job. Make sure they know how much you and your clients appreciate them
As of November 5th, there were an estimated 11.2 million job openings, but only about 7.4 million workers seeking jobs; people are quitting jobs at a record-breaking rate. Before the pandemic, the previous peak of job openings was 7.5 million in November 2018. Many of the current job openings are in warehousing, shipping, and retail. With more openings than workers, employers are offering bonuses and higher wages. Some employers who would usually offer jobs to those unemployed have shifted their strategy to enticing people to leave their current jobs for better pay.
Officials have been arguing that pandemic-caused inflation would cool as soon as the economy heals. However, four charts from the Washington Post reveal the ways that inflation today is different from previous waves of inflation. In short, supply chain backlogs and the spread of the delta variant are causing this wave of rising prices to persist longer than anticipated. It is being reported that the spread of the delta variant is one of the causes of the 6.2% increase to the consumer price index for October. These price increases are broad-based, and include increases in prices for energy, food, shelter and used cars.
New claims for unemployment fell to a pandemic low of 267,000, nearing the normal pre-pandemic level of 220,000. New claims, which serve as a proxy for layoffs, have been dropping for six straight weeks. However, the economy is still more than 4 million jobs short of its pre-pandemic level in February 2020.
While job openings are at near record levels and wages are increasing, the percentage of people participating in the workforce remains well below the rate before the pandemic. Of particular concern to economists is that people in their prime working years are only slowly returning to work. About 1.4 million fewer people between the ages of 25 to 54 are working or looking for a job than before the pandemic. This slow return may have lasting implications for the health of the economy, possibly resulting in sustained inflation. As personal savings diminishes, some may return, but others may be opting out of work due to family obligations.
Let’s keep watching and remember that no matter what situation you are handed, keeping a close watch on cash flow and processes is always “good business” and important for you as an individual, business owner, retiree, student, etc.
- IRS resources for stimulus payments:
- IRS information about the Advance Child Tax Credit 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
- Entrepreneur put together a listing of free tech resources for remote work
- The Consumer Financial Protection Bureau has warnings about COVID-related scams
- 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.