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 |  Bizink  |  American Rescue Plan Act,  ARPA,  covid-19,  IRS form 6419: Advance Child Tax Credit,  Tax Season 2022

Weekly Update – February 24th 2022

Signs are emerging that the surge driven by highly transmissible Omicron variant is fading. Across the country, cases and hospitalizations are falling from record peaks. According to data from Johns Hopkins, the seven-day average for new cases was 129,000 on February 16, drastically down from 800,000 at the peak in mid-January. Data from the CDC shows a 9% drop in deaths over the last week. While mortality rates lag behind case counts, the sharp drop in new cases and hospitalizations indicates that death rates are likely to also drastically decrease.

This is such great news especially as so many special events have been put on hold.  It will be great to go out safely and comfortably again, and not just  take a solitary walk outside even on a a beautiful temperate February morning

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and we had several this past week

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I hope you are making plans, I expect to go skiing the week of April 16th!!!

THE AMERICAN RECOVERY PLAN ACT (ARPA)

Employment Tax Credits

The pandemic stimulus programs enacted in 2020 included employment tax credits for family leave and for employee retention. Both quite complex requiring thorough situation review, calculation and documentation.

Employee Retention Credit (ERC)

It seems like it has been years rather than months of following the IRS releases, reading the laws as they pertain to this credit, discussing the expansion then redaction of this credit.  Our goal is and has been to identify eligible tax periods and quantify the results of maximizing this credit (which results in a check from the IRS) for each eligible quarter, with obtaining 100% forgiveness of PPP loans.  The calculations are quite complex, our goal of maximizing the credits means balancing payroll, time periods, sales or income figures with obtaining 100% PPP loan forgiveness.

Families First Coronavirus Response Act (FFRCA)

The extensive documentation requirements for claiming these credits are summarized in this article from The Tax Advisor. For example, claiming the family leave credits for the Families First Coronavirus Response Act (FFRCA) requires the following:

  • A written leave request from the employee that includes the dates and the reasons for leave
  • If the leave was needed to care for a child, the statement must include the name and age of the child and pertinent details about school closures
  • Documentation of the computation of the qualified wages and credits
  • Copies of Forms 941 and 7200

This documentation must be retained for at least four years after the date the tax was due or was paid, whichever is later.

Monthly Advance Child Tax Credit Payments

Parents may receive up to an additional $1,800 per eligible child when they file their 2021 tax returns. Advance payments of half of the expanded child tax credit were sent out last year to parents that the IRS identified as eligible based on their 2020 or 2019 tax returns. Parents whose financial or family situation changed since then will see an impact when they file their 2021 tax returns. Some may have to repay overpayments while some parents may receive a bigger refund.

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.

PERSONAL FINANCE

Although wages are rising, that hasn’t been enough to keep 61% of Americans from living paycheck to paycheck, according to a recent report from LendingClub. Even those with six-figure incomes are struggling to cover monthly expenses, which have risen with inflation faster than wages.

Recent retirees may be paying more for Medicare Part B and Part D premiums than they need to. If a Medicare beneficiary’s income is high enough, income-related monthly adjustment amounts or IRMAAs can kick in. Because these surcharges are calculated from the most recently filed tax return, which is generally from two years ago, they may not reflect a recent retiree’s drop in income after they stop working. If this is the situation for you, you can appeal the surcharge by filing Form SS-4 with the Social Security Administration and providing documentation for the change in income.

Saving enough for retirement is hard enough, but figuring out how to spend those retirement funds can be even harder, and more important. Four different strategies can help seniors ensure they don’t outlive their savings. For example, withdrawing 4% of an investment portfolio and either adjusting the amount upward for inflation or keeping it the same during market downturns is one simple strategy. Another strategy is to use the tables used by the IRS to calculate required minimum distributions from IRAs, 401(k)s and similar retirement accounts, but to apply the resulting percentage across the entire investment portfolio.

THE GREAT REASSESSMENT/RESIGNATION

Burnout from work can have both mental and physical symptoms. Awareness of the physical symptoms can help you address the issue before burnout becomes too severe. Insomnia, physical exhaustion, changes in eating habits, headaches, and stomachaches can all be signs of too much stress. A wise first step when you have these symptoms is to see a primary care doctor or mental health specialist to rule out other possible causes. Lifestyle choices and finding ways to reduce overall stressors can help, as can finding ways to improve the working environment.

REMOTE AND HYBRID WORK OPTIONS

Can offering onsite childcare help to lure parents back to work? Arranging for childcare has been an enduring challenge for parents, and the pandemic made it worse. Amid a growing demand, more employers are considering offering onsite childcare as a means to attract and retain scarce talent. Beyond employee retention, onsite childcare also increases productivity by alleviating the stress parents have about their children’s care and saving on commuting time.

A new study by the Pew Research Center indicates that an increasing number of people who can work remotely would prefer to keep working from home if they can. In 2020, 54% of workers surveyed said they would like to work from home all or most of the time when the pandemic is over. Now, that number has risen to 60% of workers whose jobs can be done at home. Some prefer working from home out of fear of exposure to COVID-19, but the majority (76%) simply prefer working from home. For 64% of respondents, working from home has improved their work-life balance. The downside of remote work is a loss of connection with colleagues, cited by 60% of those surveyed.

ECONOMY

Small business owners are being squeezed by inflation-driven cost increases, labor shortages, and rising wages. Wholesale prices jumped 9.7% over the last year, according to January’s producer price index, but some have seen costs more than double. Amanda Nguyen, owner of a San Francisco bakery, is paying $45 for a case of eggs, which cost just $19 last year. She compensated by raising prices by about 4% and by opening a second business that delivers her baked goods and products from other eateries to the suburbs.

As Covid cases decrease, inflation should also ease, according to Cecilia Rouse, chair of the White House Council of Economic Advisors. Inflation, which in January rose at the fastest pace in 40 years, is related to the mismatch in supply and demand that arose during the pandemic, according to Ms. Rouse. Supply chain bottlenecks reduced the supply of goods, while demand for goods rose during the pandemic. Employers have also had a hard time attracting and retaining workers due to illness and child care restraints. As the pandemic eases at home and around the world, getting people back to work should help with the supply side of the equation.

GENERAL RESOURCES

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.

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