Weekly Update – July 8th 2021
While pandemic restrictions are easing in the U.S. as vaccination rates rise and infection rates fall, whether that trend will continue may depend on the interaction of three principles. First, thank goodness current vaccines still seem to be effective against the variants. Per the CDC and current research, those who have been fully vaccinated with any of the vaccines are not as likely to get as sick or to be hospitalized, but they may still be able to transmit the virus to unvaccinated people. Additionally, variants are hitting unvaccinated people harder. The Delta variant is more contagious and is spreading aggressively through regions with large unvaccinated populations and per this recent article in one of my on-line medical newsletter it accounts for more than half of the US cases. Finally, the longer that variants spread among unvaccinated people, the less likely it will be that the current vaccine will protect against other variants. Each time the virus infects a new person, a few mutations creep in, which over time can help the virus spread more easily or slip past immune system defenses more readily. This means that booster shots against the new variants will most likely be needed.
I am grateful each day that most of my family, staff, friends and I, were able to get one of the main vaccines which we are told will have a lasting effect and help reduce the severity of the virus, should we get infected. Last week and through this Friday my remote staff members are on site, and we feel safe being together. It has been wonderful to work together on some difficult projects as well as enjoy bar-b-q lunches together.
I love that we can pick lettuce from my garden and enjoy a salad together
It seems that we do love to eat and gossip!
We are making plans for our next quarterly meeting at summer’s end…
THE AMERICAN RECOVERY PLAN ACT (ARPA)
Monthly Child Tax Credit Payments
The IRS has added the ability to change banking information to its portal for the advance Child Tax Credit. According to a news release from the IRS, any updates by August 2 will apply to the August payment. The deadline for updates for the July 15 payment was June 28. At this point, the portal only allows parents to verify enrollment to receive advance payments; to unenroll in the program; and to update banking information. Payments cannot be split between bank accounts. Families who are already enrolled but who have not provided direct deposit information will receive a paper check. For more information, taxpayers should consult the IRS webpage for this credit.
This weekend IRS is also planning to host events in cities around the country to help people register for the monthly advance child tax credit payments. Read more about this by clicking through.
IRS AND TAX MATTERS
The IRS ended the 2021 tax filing season with more than 35 million unprocessed tax returns, more than four times the amount at the end of the 2019 filing season, prior to the pandemic. According to IRS Commissioner Charles Rettig, a contributing factor is the difficulty of reconciling stimulus payments received by taxpayers with stimulus payments reported on tax returns. This backlog means that millions of taxpayers are still waiting for refunds.
More information on the IRS’ performance can be found in a report from the Taxpayer Advocate Service. According to that report, over half of the backlog comes from returns filed on paper, some of which are 2019 tax returns. The IRS Where’s My Refund tool provides only limited information about the status of tax refunds. Taxpayers do not receive information on the reason for a delay, what information the IRS needs from the taxpayer or an estimate of when the refund will be paid.
The Internal Revenue Service is hiring thousands of new auditors as it gears up for a potentially massive tax-enforcement push if Congress is able to pass an infrastructure plan that includes $40 billion to expand audits on the wealthy. As part of our proactive approach we continue to recommend: document, document, document so that if you are called in to support your filing you have the documents ready.
TAX INCREASES DUE TO CAPITAL GAINS TREATMENT
The Biden proposal is looking to change the rules for investors whose income is over One Million dollars as a way to fund the American Families Plan. Currently the top capital gains rate is 20%, the proposal will subject those making over $1 million to a tax rate in line with the top income tax rate of 37%. However, it’s worth noting that along with the increase in capital gains tax, Biden also plans to increase the top income tax bracket to 39.6%. This will result in an overall 19.6% increase in the tax investors will face under the administration. The proposal has left us with concerns and of course opportunities to review and update tax minimization plans.
Every year, the IRS releases a list or its “Dirty Dozen” tax scams, and this year’s list contains an entire category devoted to pandemic-related scams. Economic impact payments (stimulus checks) were especially inviting to thieves, who sent emails, text messages, and made phone calls in an effort to get banking information so they could intercept payments. As a reminder, the IRS never initiates contact by phone, email, text, or social media asking for personal information such as Social Security numbers or banking information. Many scammers also took advantage of the flood of unemployment claims by filing fraudulent claims. Anyone who receives a 1099-G reporting unemployment benefits that were not actually received should report their state unemployment agency.
REOPENING THE OFFICE
Where Have All the Workers Gone – a scary headline in this recent article. With the opening of the economy, it was expected that those sidelined would be returning to jobs and office, but instead, as many as 95% of workers may take part in what’s being called the “Great Resignation.” In April, a record 4 million people quit their jobs. After working from home for more than a year, many employees want to continue working remotely, and are willing to quit their jobs if their employer requires in-office work. Others are taking advantage of a record number of job openings, while some people are burned out from a year of working long hours while juggling childcare and home schooling. A recent U.S. Chamber of Commerce poll found that one in three unemployed workers do not expect to return to work in 2021 and some may not return at all.
For employers concerned about losing key employees, there are signs that an employee might quit soon. For example, changes in work behavior from working hard to just getting the minimum done or being less willing to satisfy a boss are both signs that an employee is considering quitting. Being alert to these signs can give employers the opportunity to keep those people. More money can help, but generally only makes a big difference if the employee can’t make ends meet with their current pay. Weekly one-on-one meetings with a manager can also help solve problems with workload and obstacles that prevent them from completing their assigned tasks. However, that manager might be the problem, since many people don’t leave a job, they leave a manager. Identifying those managers requires looking for patterns in retention.
Early in the pandemic, many shippers made decisions in line with earlier recessions: as incomes go down, demand also goes down, and accordingly, they cut orders. However, as the economy comes roaring back, those early decisions are tangling global supply lines. While prices for some staples such as lumber have already dropped significantly in response to supply and demand, the impacts of multiple supply line disruptions are converging on the prices of complex items such as automobiles. New cars, which normally sell for $2,000 to $3,000 below manufacturer’s suggested retail price, are selling at or just below that suggested price. Used car prices are also increasing and were a chief source of inflation this last spring. In time, as congestion in global supply lines eases, prices and inflation should also normalize.
Cutting off the federal boost of $300 per week in unemployment benefits so far has not spurred additional job searches according to data from job-hunting sites. However, states began ending pandemic-related unemployment in mid-June at the earliest, so it may be too soon to measure any impact. Some people may not be ready to return to work for health reasons. Childcare continues to be a challenge, with many day care centers closed.
- 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.