Weekly Update – February 17th 2022
It feels like prices are increasing faster than the inflation index shows; we are experiencing “sticker shock” daily as we shop for personal and business needs. Some businesses increase their prices in ways that may not seem so obvious; have you noticed those ice cream containers are shrinking or that services are reduced? The Labor Department’s consumer-price index measures how much consumers pay for goods and services and includes some of the price increases, such as smaller packages or additional fees for hotels or car rentals, but it doesn’t cover some of the hidden ways that businesses increase the effective costs for consumers. Harley-Davidson motorcycles is adding a mandatory materials surcharge, which makes it easier to adjust the prices consumers pay as the company’s own costs fluctuate. Some restaurants are adding Covid surcharges or cutting back on free items.
I am so glad that some of the best things in life are still free, like a walk in your local park or on my local beach at sunrise…
and it’s even great to get outside after a snow storm
Depending on the day this last week it felt like spring, then winter, then spring again, like today…
THE AMERICAN RECOVERY PLAN ACT (ARPA)
Paycheck Protection Program (PPP)
If your business received a PPP loan but was denied full forgiveness, the SBA has created a new process for appealing the lender’s decision. Companies must submit their request within 30 days from receipt of notification from the lender of the amount forgiven. If that time has already passed, lenders have 30 days from January 27, 2022 – the date of the SBA’s procedural notification – to notify borrowers who did not receive full forgiveness that they have 30 days to appeal the lender’s decision. Companies must continue to make payments on any unforgiven portions of their loans while their decision is being appealed.
Recovery Rebate Credits and Economic Impact Payments
Did one or more of your economic impact payments (EIP) – aka stimulus checks – go astray somewhere? The IRS has published a new Fact Sheet with updates to its FAQs for tracing EIPs. Detailed instructions can be found under the answer to Q F8, which explains how to start a payment trace with the IRS, and the separate procedures if the IRS determines that the check was not cashed or if the IRS determines that the check was cashed.
Tax Benefits Under ARPA
Another fact sheet from the IRS discusses various tax benefits included in ARPA. These include expanded tax credits for families with children, the expanded earned income tax credit for childless workers, and changes to deductions for charitable contributions. The fact sheet also explains the process for people who did not receive the third round of stimulus payments to receive the third payment as a Recovery Rebate Credit on their tax returns.
We have created new check lists to help us determine if you can request missed stimulus payments and advance child credits when you file your 2021 tax return, make sure to include them with the tax document to send us.
Monthly Child Tax Credit Payments
If you received monthly advance Child Tax Credit payments in 2021, your tax refund may be smaller than usual when you file your 2021 tax return. Those advance payments should equal half of the amount that would normally be claimed on a tax return, reducing the amount of your tax refund. Divorced parents who share custody of their children, or who earned more in 2021 than in 2020, may have to repay some or all of the Child Tax Credit payments they received.
Before filing your tax return, be sure the verify that the letter you received from the IRS – Letter 6419 – has the correct amount of payments. If the amount does not match, check your IRS Online Account and compare that amount with the payments you received. If that matches, use the amount from the online account when you file your tax return, not the number in Letter 6419. If the online account amount does not match the payments you received, you should request that the IRS trace the missing payment or payments.
Using the correct amount will help ensure that refunds are paid promptly within 21 days. As a reminder, couples who filed Married Filing Joint will each receive a letter reporting half of the payments received. When filing 2021 tax returns, married couples will need to combine both amounts when they file their joint return. For more information on the expanded child tax credits see the IRS FAQs.
The IRS Intends to Provide Transition Relief for K-2 and K-3 Reporting for Certain Domestic S-corporations and Partnerships
This Tuesday evening the IRS issued the following statement by the National Public Liaison’s office via n-21-39:
“The IRS intends to provide certain additional transition relief for this year from the Schedule K-2 and K-3 reporting for certain domestic partnerships and S corporations with no foreign activities, foreign partners, or shareholders, and without knowledge of partner or shareholder need for information on items of international relevance. For 2021, these qualifying domestic partnerships and S corporations will not have to file the new schedules. We are taking this step in response to feedback we received from the tax community and our stakeholders. The IRS will provide full details of this relief soon.”
Their statement seems to imply full compliance will be required for 2022 returns. The implementation delay is great news as this requirement is far reaching and technically challenging requiring more supporting documentation to ensure compliance. Having additional time to study the requirements then inform our staff and clients will help us avid unintended consequences.
Taxpayer Identity Confirmation/Protection
The IRS reversed its prior decision that would have required taxpayers to set up an account through the third-party provider ID.me starting this summer. That system relied on facial recognition to verify identities of users. Due to privacy concerns and issues where ID.me incorrectly failed to verify the identities of many individuals, the IRS is transitioning away from the use of this third-party process.
We were excited abut this new ability for taxpayers to obtain an Identity Protection PIN (IP PIN) on line, even when one is not issued by the IRS. The 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.
Recent reports show that the IRS backlog of 24 million unprocessed tax returns and other pieces of paper correspondence is much larger than previously thought. It is anticipated that this will further slow processing of tax returns for the current tax filing season. This backlog arose through a perfect storm of problems: IRS workers who were forced to work at home during the pandemic; federal stimulus measures and advance child tax credit payments which added to the agency’s workload; an older and retiring IRS workforce; inability to recruit new employees to the IRS; and outdated equipment. Paper tax returns are taking 10 months or more to process.
The IRS Has Paused Automated Notices…For Now
The IRS has put a pause on sending out many of the automated notices and letters until it works through its backlog. This step is being taken as many of these notices are automatically generated when the IRS has no record of tax returns being filed or has not received a payment. Many of these tax returns and payments were actually submitted but have not yet been processed.
Phishing scams involving Microsoft 365 that exploit an old trick are on the rise, according to an email security company. The technique, known as the right-to-left override attack, tricks users into clicking on a file by hiding its extension. For example, a file with a .exe extension, which is an executable file, might be disguised as a .txt file. In the current wave of attacks, users are being tricked to open a voicemail file with the .mp3 extension which actually takes users to a webpage where they are asked to enter their credentials. Email security does not always identify these phishing attempts, so users need to be aware of this trick so they do not click on malicious files.
A large source of your retirement funds may be your Social Security benefits. Using the optimal strategy for claiming those benefits can make a big difference to your family’s finances. While benefits can be claimed as early as age 62, waiting until age 70 can boost your monthly benefit by about 8% per year. However, for some people, claiming benefits at their full retirement age of 65 or 66 may make the most sense. Doing your own research or using independent Social Security software can help you make the best decision.
REMOTE AND HYBRID WORK OPTIONS
As we look forward to pandemic restrictions easing, many people still prefer remote and hybrid options, so how do we keep connected? This article in the Wall Street Journal highlights the corporate culture at Salesforce and their use of a 75 acre retreat in Scotts Valley, CA to bring their approximately 70,000 person staff together. Even before the pandemic, when only a few of us were working remotely, our office held 1 and 2 day retreats in the. We discussed and implemented new ideas and solidified our relationships. The key is to set an agenda and goals and build some unstructured or alone time as well.
Inflation may be costing you an extra $276 per month, according to analysis by Moody’s Analytics. According to the Labor Department, inflation for January hit 7.5%, a four-decade high. However, the impact of inflation on your monthly spending depends a great deal on your household income, where you live, whether you rent or own your home, and how you get around. For example, middle-class households tend to spend more of their income on gasoline and used cars, whose prices have been increasing at a faster pace than inflation. In contrast, higher-income households tend to spend more on dining out and recreation, whose prices have been climbing at a slower pace. This means that middle-class households may feel a bigger impact than higher-earning households.
Household debt increased by $1 trillion across the U.S. during 2021, according to data from the Federal Reserve Bank of New York. Mortgage debt and auto loans were the biggest drivers of this increase, as low rates encouraged people to buy new homes, and rising prices for new and used cars forced people to borrow more to buy a vehicle. A silver lining is that student loan balances dropped by $8 billion in 2021. Some of this drop was because interest on federal student loans did not accrue while loan payments were in forbearance during the pandemic, but many borrowers continued to make payments.
- 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!
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.