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 |  A. Parness Company  |  American Rescue Plan Act,  ARPA,  covid-19,  Hurricane Ida,  tax advice for 2020,  tax advice for 2021

Weekly Update – October 28th 2021

On November 8, the U.S. will open borders to foreign travelers, marking a new and exciting stage in the pandemic. The Delta variant surge seems to be easing, vaccinations and boosters are available to more people, and mask mandates are being dropped. Case counts appear to be decreasing, and hospitalizations are declining in most parts of the country. However, worker shortages – particularly in restaurants – persist as a reminder that the pandemic is still not behind us.

What welcome news coming so close to thanksgiving, it’s hard to plan with so much uncertainty, I am hoping that most if not all of us will be able to share a real family and friends thanksgiving like we did in the past.  It’s hard to imagine that thanksgiving is a few weeks away with the balmy weather we are still enjoying here in the North East.  It was so windy yesterday morning after days of rain and flash flood warnings, that for the first time in months I was not able to walk barefoot on the beach (I wore my five finger vibrums, which are the next best thing) but  was covered from head to foot in fleece.

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Gotta love your windproof fleece

On the “bright” side the sun peeking through the clouds is a beautiful sight…

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clouds mirrored in the wet sand

I love how the wind and stormy weather enhances the ocean spray

THE AMERICAN RECOVERY PLAN ACT (ARPA)

Monthly Advance Child Tax Credit Payments

The advance Child Tax Credit payments are supposed to be based on a clear formula, but for the last two months, some families have seen drastic cuts in the payments they receive. One couple received $500 in July and August, then $313 in September, and hope to receive $229 for October. In some cases, the IRS seems to be adjusting payments based on recently filed 2020 tax returns, but so far, the IRS has provided only a few details.

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.

We are developing a form for our clients to use to report these payments so that we can request the balance they are entitled to when we file their 2021 tax returns.  Please remember to keep good records on this and other stimulus payments you receive.  This will cut down on the notices you receive, have to answer and information you have to provide after filing.

TAX MATTERS

Some Tax Deductions are Tied to Inflation

Many federal tax provisions are indexed for inflation, but some are not.  As we are now experiencing a period of high inflation, some taxpayers will be winners, and some will be losers. Middle-income households tend to benefit from provisions such as the standard deduction (indexed for inflation yearly), while higher-income households tend to be impacted by provisions that have not changed in years. The standard deduction for a couple filing jointly will likely increase from $25,100 to $25,900, but the $500,00 exemption from capital gains for selling a home hasn’t changed since the law was passed in 1997, even though home prices have doubled since then. Many workers will see small increases to their paychecks in January as less income tax is withheld to compensate for the increased standard deduction.

It Pays to be Charitable on Many Levels

There’s and extra benefit this year for those of you who are charitable.  Even if you are better off using the standard deduction on your federal tax return, those of you with make charitable contributions can also deduct $300 per person ($300 for single filers and $600 for married filing jointly).

Tax Filing Deadlines Extended for Victims of Hurricane Ida

October 15th has come and gone but is it really the end of tax season 2021? Not, not for those of us in designated areas of New York State and City and certain parts of New Jersey.

Although the filing deadline has been extended to January 2022, please be reminded that the IRS and most state efile portals close in mid-November.  If you have not filed plan to do so in the next few weeks or be prepared to file a paper tax return which could take months or years to process.

THE GREAT REASSESSMENT

Some companies are offering paid sabbaticals to help combat burnout  in an effort retain their employees.  For example, Synchrony Financial offers employees the option to apply for a sabbatical of up to one year at reduced pay.  The consulting firm PwC is offering a one- to six-week leave of absence at 20% of pay to their employees as an incentive to keep them. It makes sense that because most people can’t afford a pay reduction, this benefit may be of more interest to higher earners and those may be the ones these companies are most interested in keeping anyway.

Job openings are near record highs, enhanced unemployment benefits have ended, children have returned to school, and hourly pay has increased, but it is being reported that Americans are still not returning to work for at least six reasons. First, the ongoing pandemic is keeping many front-line workers away for health reasons. Early retirements have reduced the pool of available workers. While most schools have reopened, outbreaks at schools result in quarantines, which make it difficult for parents to commit to steady work. Reduced spending and pandemic stimulus payments have allowed many people to amass sufficient savings to stay out of the workforce. While wages have increased, that increase may not be sufficient to attract people back to work. Other factors, such as a mismatch between worker and company expectations and the desire of many to switch careers, will take time to resolve.

REOPENING THE OFFICE AND REMOTE WORK OPTIONS

Going back to the office after an extended period of remote work can be a rocky return. Advice from five Harvard Business School professors can make that transition a bit easier. For example, Tsedal Neeley suggests using “the office as a tool rather than a destination” to encourage workers to return when there’s a need for collaboration, connection, or creativity. Joe Fuller reminds managers that because the pandemic is still ongoing, a flexible approach can help businesses adapt to the “next normal” and to the “next normal” after that.

ECONOMY

In response to the ongoing supply chain problems, P&G joins many of the nation’s largest companies in raising prices on a broad array of consumer goods. P&G, like many other big companies, has the resources to charter its own ships or move production to other locations. P&G has also benefited from consumers with more disposable income to purchase its offerings, which tend to be more expensive than the competition. However, as consumers face price increases across the board, companies that have benefited from higher prices may be at risk.

A high school teacher had to rent a party bus – complete with neon lights and stripper poles – to take a group of students on a field trip because of a nationwide shortage of school bus drivers. Like many other low-wage workers who were sidelined during the pandemic, many are not returning quickly to their jobs. Bus drivers tend to be older than most workers and are also at a greater risk of COVID infection because they spend time in an enclosed area with many unvaccinated students. Their split schedule also makes it challenging to take on another job. Companies like Amazon have been luring drivers with the promise of better pay, more hours, and freedom from the need to keep rowdy kids under control.

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!

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

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