Weekly Update – January 27th 2022

It is being reported that the rapidly spreading Omicron variant is causing worker shortages across the entire economy as employees are out sick or quarantining. At Delta Airlines, 8,000 employees contracted COVID-19 recently, contributing to more than 2,200 cancelled flights. Grocery stores and many other businesses are cutting back on their product lines. A shortage of truck drivers means shipments are delayed, so store shelves are empty. Children are taking public buses to school because there are not enough school bus drivers. Fortunately, some signs suggest that this latest wave may be easing around the world and across the county.

For myself and some friends and family members who were vaccinated (most with the booster as well), we have found that although we tested positive we had relatively mild cold-like symptoms and able to continue to work remotely.

I am fully recovered and back out on the beach with the seagulls in 19 degree weather.  No comments on being crazy please…

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January 27th Sunrise

Tax season 2022 has begun with some weekend work days.  It was great to see Ramona in person after so many months even though we wore masks…

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Together again-for a tax season weekend

January 31st filing deadline for 1099-NEC filings are approaching; the silver lining was Elizabeth’s trip to NYC to work on these on site.

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We took the opportunity to take a selfie during our working office lunch -following 2022 guidelines we ordered in from a local restaurant and have a 100% deductible meal.  Good tax planning!

THE AMERICAN RECOVERY PLAN ACT (ARPA)

Monthly Advance Child Tax Credit Payments

In December, the IRS began sending out Letter 6419, which contains information on the amount of payments sent out and the number of children that the IRS based their calculations on. However, according to an announcement from the IRS, those letters may not be correct.

As promised we have created a reconciliation check list and have these suggestions:

  • check your monthly bank statements for the direct deposit payments
  • compare that amount to form 6419
  • visit the IRS Child Tax Credit Update Portal, which should contain the correct information
  • discuss any differences with your accountant and decide how to address when filing
  • prepare to add the documentation to any correspondence with the IRS to reconcile the differences noted (if any)

For more information on the expanded child tax credits see the IRS FAQs and/or the IRS Child Tax Credit website .

TAX MATTERS

IRS Commissioner Chuck Rettig Discussed and Warned About the Challenges Expected for Tax Season 2022

The Internal Revenue Service opened tax season Monday as the e-file portal went back on line.  The IRS still has a backlog of millions of unprocessed 2019 and 2020 tax returns.  They asked that taxpayers and tax preparers be patient, file electronically and accurately, and request direct deposit of tax refunds.   We have been following those guidelines for years and are happy that the Hurricane Ida filing deadline was extended to February 15th so these can be e-filed and not add to the backlog.

“This filing season is a unique one,” IRS Commissioner Chuck Rettig said Monday during a conference call with reporters. “There have been many issues tied to the pandemic with processing centers having closed down, and a larger share of our workforce unable to work for reasons of health and safety. As you know, we received quite an array of new responsibilities during the course of the past year or so. I will say, speaking from the commissioner’s perspective, it has been a privilege to be on this journey with so many dedicated individuals during the pandemic, and to be involved with the delivery of stimulus payments and advance Child Tax Credit payments to millions and millions of Americans in need. Beyond the obvious economic benefits, there are emotional benefits as well. The IRS was front and center in delivering a lot of that.”

He warned that this tax season could be a big challenge for taxpayers and practitioners. “The Treasury has previously announced that this could be a very frustrating filing season for both taxpayers and tax professionals,”

IRS Tax Transcript System Update

Starting in summer 2022, taxpayers will need to create an account with the third-party identification company ID.me to access certain information on the IRS website. To verify your identity, you’ll need to provide a government document with a photo such as a driver’s license or passport and take a selfie with your phone or computer. If you already set up an IRS account, it will work until summer, but after that, you will need an account through ID.me to access the Child Tax Credit Update Portal or get your tax transcripts. Identification verification will not be required to file a tax return or to make tax payments. Here’s how to set up your IRS ID.me account.

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.

In order to complete the process you will need to create an account with the third-party identification company ID.me  following the same steps outlined above.  I tested the system last week and found that it takes approximately a half hour to create the account and obtain the unique number, time well spent.

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.  Again we have created a worksheet with additional guidance to help you gather the necessary information.

Tax Breaks When Caring for Relatives

Are you caring for an aging parent or other relative? If your relative earned less than $4,300 for the year, you may be able to claim them as a dependent. You may also be able to take a deduction for their medical expenses, and you may also receive a tax credit for any dependent care you paid for.  This article from Nerdwallet outlines some great potential benefits, something to consider mentioning to your accountant during your tax appointment this year.

Accounting for Cryptocurrency

If you invest in bitcoin or other cryptocurrencies, you may be able to take advantage of a special accounting method to reduce your taxable gains. Unlike regular currencies, the IRS considers cryptocurrency to be property, which means that any time you transact in it, you have a taxable event. The IRS allows a little-known method known as HIFO, or highest in, first out for accounting for your crypto transactions. This method allows you to choose the unit with the highest cost as the basis for your transaction and can significantly cut your tax bill. However, using this method requires careful record keeping.

PERSONAL FINANCE

The news continues to highlight the supply chain disruptions and increasing labor costs and they translate to the higher food prices we are seeing at our grocery stores (as well as other goods and services). Prices for meats, poultry, fish, and eggs increased by 12.5% over the last year. It’s so funny, this Wall Street Journal article lists a few strategies can help you ease the pinch on your budget; my mom taught us how to shop years ago with these same tips …

  • Plan out your meals for the week before you shop so you only buy what you need
  • Be willing to substitute if a particular ingredient is too expensive or is not available
  • Stock up your pantry with canned goods and shelf-stable foods such as rice and dried beans. These items are not as sensitive to inflation as fresh produce.
  • Cook at home as much as possible.
  • Check the weekly circular and make your list before leaving for the store
  • Don’t shop on an empty stomach (you tend to buy more or add impulse purchases

 THE GREAT REASSESSMENT/RESIGNATION

While many workers in the Great Resignation are moving to jobs that pay more, a new study by the MIT Sloan Management Review says that toxic workplace culture is the biggest reason people are quitting their jobs. This study found that toxic workplace culture is 10 times more important than pay in predicting workplace turnover. While people may grumble about other workplace issues such as bureaucracy or being siloed, those problems don’t generally cause people to quit their jobs.

REMOTE AND HYBRID WORK OPTIONS

Onboarding new employees in a remote world has been cited as the second biggest challenge for companies, just behind employee burnout. This article on B2C outlines several strategies to make remote onboarding easier. For example:

  • Don’t wait until the employee’s first day to make sure tech and software are in place.
  • Encourage new hires to ask as many questions about their roles and informal protocols at work as they need to feel comfortable.
  • Invite them in for a visit to see if they are a good fit with the rest of the staff.
  • Communicate your expectations and understand theirs.

A sign of the changing workplace is the increase in LinkedIn job titles that reference remote or hybrid work. As organizations increase their remote workforce, they are finding a need to create roles to support their teams. For some companies, this role may involve developing a strategy for the future of work, while in other companies, this role may help employees navigate tax issues when they work and live in different states. Such roles have been common in the tech field for years, but with the pandemic, more companies are adding these roles.

ECONOMY

Even when COVID-19 transitions from pandemic to endemic, the virus will likely still take a toll on health, work, and finances. As epidemiologists warn, endemic does not mean low rates of infection, but rather that a stable state has been achieved, which may still mean high levels of infections, and consequently, high numbers of workers out sick. Workplace disruptions may lead to long-term and widespread reductions in global output. Overworked employees are less satisfied with their current wages, but even boosting pay has not been enough to overcome staff shortages.

An unexpected increase in jobless claims for the week ended January 15 may be a sign that the Omicron surge is impacting the labor front. This jump in jobless claims may be a short-term trend as most employees struggle to retain their workers. Even though unemployment has fallen to 3.9%, 2.9 million fewer people are now working than in February 2020, just before the pandemic.

Sick workers across the entire food supply system are making it harder for grocery stores to keep their shelves stocked. Food processers are cutting production levels. A shortage of drivers and distribution center workers means fewer truckloads are reaching stores, and stores may not be receiving everything they ordered. Supplies of sports drinks, frozen cookies and refrigerated dough are in the 60-70% range of normal.

One of the few blessings of the pandemic has been an increase to bargaining power for workers. Wages are rising and if an employee quits a job, it’s likely that a new job at higher pay can be found. This new bargaining power for workers is not expected to abate any time soon. The biggest percent increases are going to workers in the lowest-earning levels, the youngest workers, and to those with the least education. However, rising inflation means that those wage gains may not be keeping up with price increases. Economists at the Conference Board expect that blue-collar and manual services jobs will likely continue strong growth into 2023.

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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