Financial matters can be a big cause of stress on a relationship. Often times, the discussion is avoided, or minimally addressed between partners. The great news is, that it does not have to be that way. There is a new trend that is changing the game for those in a relationship. A financial date night. These date nights are a pre-set, special time, to come together and get on the same page when it comes to money matters, and you can make it fun too!
The key to setting up a financial date night is that it is a planned out, scheduled time. By pre-scheduling your night, you will be more likely to stick to the topics at hand, and your time will be more productive. This is a good time to talk about your financial goals and how you plan to achieve them.
If you and your partner somewhat regularly talk money, you may want to go more in depth with your discussions. If you are a couple that tends to minimally address money matters, then you may want to start small. Decide what is most important to you, and you both bring those topics to the date.
Once you have set a date and added it to your calendar or planner, it’s time to make the financial date night fun and interesting. Plan out a fun meal or order your favorite take out or delivery to enjoy. Set up a fun space to go over your financial topics that is comfortable. Pour a favorite drink and have your agenda ready to go. With the promise of making it a fun evening, you will be more likely to stick to your plan.
Decide how often you want to hold your financial date nights in order to meet your financial goals. Depending on how intricate your personal circumstances are, you may want to start with more frequent money talks, and once you have a clear understanding of your direction, you can have them less frequently. Topics that you can cover include:
You can choose a specific topic for each date, or touch on all the subjects. Customize your date to be just right for you and your partner! Before you know it, you will have a new confidence about your financial situation, and have peace of mind that you are on the same page.
In Notice 2021-46, the IRS recently issued additional guidance on the COBRA premium assistance provisions of the American Rescue Plan Act (ARPA).
Under the ARPA, a 100% COBRA premium subsidy and additional COBRA enrollment rights are available to certain assistance eligible individuals (AEIs) during the period beginning on April 1, 2021, and ending on September 30, 2021 (the Subsidy Period).
If your business is required to offer COBRA coverage, it’s important to mind the details of the subsidies and a related tax credit. Here are some highlights of the additional guidance:
An AEI whose original qualifying event was a reduction of hours or involuntary termination is generally eligible for the subsidy to the extent the extended COBRA coverage falls within the Subsidy Period. The AEI must be entitled to the extended coverage because of a:
This is true if the AEI didn’t notify the plan to elect extended COBRA coverage before the start of the Subsidy Period. For example, because of the Outbreak Period deadline extensions.
The subsidy ends when an AEI becomes eligible for coverage under any other disqualifying group health plan coverage or Medicare — even if the other coverage doesn’t include the same benefits provided by the previously elected COBRA coverage.
For example, though Medicare generally doesn’t provide vision or dental coverage, the subsidy for an AEI’s dental-only or vision-only COBRA coverage ends if the AEI becomes eligible for Medicare.
A state program that provides continuation coverage comparable to federal COBRA qualifies AEIs for the subsidy even if the state program covers only a subset of state residents (such as employees of a state or local government unit).
Under most circumstances, an AEI’s current or former common-law employer (depending on whether the AEI had a reduction of hours or involuntary termination) is the entity that’s eligible to claim the tax credit for providing the subsidy. If a plan (other than a multiemployer plan) covers employees of two or more controlled group members, each common-law employer in the group is entitled to claim the credit with respect to its current or former employees.
Guidance on claiming the credit is also provided for Multiple Employer Welfare Arrangements, state employers, entities undergoing business reorganizations, plans that are subject to both federal COBRA and state mini-COBRA, and plans offered through a Small Business Health Options Program.
The ARPA’s COBRA provisions have been in effect for a while now, so your company likely already has procedures in place to provide the subsidy to AEIs and claim the corresponding tax credit. Nevertheless, this guide offers helpful clarifications. Contact our firm for more information.
Recently, in Notice 2021-46, the IRS issued additional guidance on the COBRA premium assistance provisions of the American Rescue Plan Act (ARPA). Under the ARPA, a 100% COBRA premium subsidy and additional enrollment rights are available to certain assistance eligible individuals (AEIs) during the period beginning on April 1, 2021, and ending on September 30, 2021. The guidance provides helpful details on matters such as the extended coverage period, the end of an AEI’s subsidy period, and comparable state continuation coverage. The guidance also addresses how businesses and other employers can claim a tax credit related to the COBRA subsidies. Contact us for more information.
As mitigation measures related to COVID-19 ease, it will be interesting to see which practices and regulatory changes were taken in response to the pandemic remain in place long-term. One of them might be relief from a sometimes inconvenient requirement related to the administration of 401(k) plans.
In IRS extends administrative relief for 401(k) plans, the IRS recently announced a 12-month extension of its temporary relief from the requirement that certain signatures be witnessed “in the physical presence” of a 401(k) plan representative or notary public.
The original relief, which appeared in IRS Notice 2020-42, was provided primarily to facilitate plan loans and distributions under the CARES Act. However, the relief could be used during 2020 for any signature that, under regulations, had to be witnessed in the physical presence of a plan representative or notary public. This included required spousal consents. The relief was subsequently extended through June 30, 2021, under IRS Notice 2021-03.
Under the notices, signatures witnessed remotely by a plan representative satisfy the physical presence requirement if the electronic system uses live audio-video technology and meets four requirements established under the original relief:
Signatures witnessed by a notary public satisfy the physical presence requirement if the electronic system for remote notarization uses live audio-video technology and is consistent with state law requirements for a notary public.
As mentioned, IRS Notice 2021-40 further extends the relief — subject to the same conditions — through June 30, 2022. The notice also requests comments regarding whether permanent modifications should be made to the physical presence requirement. Comments are specifically requested regarding:
Comments should be submitted by September 30, 2021.
Going forward, the need for a signature may often relate to spousal consents. If your business recently established a 401(k), the plan may be designed to limit the need for spousal consents.
However, plans that offer annuity forms of distribution are still subject to the spousal consent rules. And other 401(k) plans must require spousal consent if a married participant wants to name a non-spouse as the primary beneficiary. Feel free to contact our firm for more information on the latest IRS guidance addressing employee benefits.
In Notice 2021-40, the IRS recently announced a 12-month extension (through June 30, 2022) of its temporary relief from the requirement that certain signatures must be witnessed “in the physical presence” of a 401(k) plan representative or notary public; instead, audio-video technology can be used. The relief was provided primarily to facilitate plan loans and distributions under the CARES Act, but it applies to any signature that is required to be witnessed in the physical presence of a plan representative or notary public. This includes spousal consents. Notice 2021-40 also requests comments regarding whether permanent modifications should be made. Contact us for more information.
Summer is here, but taxes never end. Here are a few recent tax questions for 2021 and updates we want you to be aware of:
If you are age 72 or older, you must take annual required minimum distributions (RMD) from traditional IRA’s and 401(K) plans. The 2020 exclusion to this rule does not apply to 2021 and going forward. Be sure to make these distributions this year.
If you are age 70 ½ or older you can transfer up to $100,000 yearly directly to qualified charitable organizations. This distribution counts towards your RMD, but they are not taxable and not included in your adjusted gross income. It’s much better to use this than to report as an itemized deduction on Schedule A of your tax return. Keep in mind the distribution must go directly to the charity. You cannot receive the distribution and then donate to charity for this to qualify. Transfers to donor-advised funds do not qualify for QCD treatment.
You’ve probably read about the possibility of increased capital gains rates. While this initially is targeted to taxpayers with incomes of $1M or more you may think this will never apply to you. But what if you are selling your company’s stock and retiring? Do you have stock options with sizable gains?
When you sell online such as PayPal or Amazon and receive $600 or more (starting in 2022) you will receive form 1099-K that reports the income to the IRS. There are slightly different rules for 2021. This income must be reported on your tax return. How does this affect you? Many people use these platforms as the new “garage sales”. An example might be if you tire of your exercise equipment and sell the equipment online. If you receive $600 or more, you will need to report the income and have tax due
This tax season we are seeing an increased number of delayed refunds, some up to several months. The IRS says they are checking amounts reported for stimulus payments and other verification measures. As preparers, we have no additional resource to check on the status of your refund other than using the IRS’s “Get your refund status” on their website. This adds even more questions to ask. We can verify the return has been electronically filed and accepted, but not as to the status of the refund.
At David Mills, CPA, LLC our experts can help answer your tax questions for 2021. Contact us online or call (309) 266-5700.
The premium tax credit (PTC) is a refundable credit that helps individuals and families pay for insurance obtained from a Health Insurance Marketplace (commonly known as an “Exchange”). A provision of the Affordable Care Act (ACA) created the credit.
The American Rescue Plan Act (ARPA), signed into law in March 2021, made several significant enhancements to the PTC. Although these changes expand access to the credit for individuals and families, they could increase the risk of some businesses incurring an ACA penalty.
Under pre-ARPA law, individuals with household income above 400% of the federal poverty line (FPL) were ineligible for the PTC. Under ARPA, for 2021 and 2022, the PTC is available to taxpayers with household incomes that exceed 400% of the FPL. This change will increase the number of PTC-eligible people.
For example, a 45-year-old single person earning $58,000 in 2021 (450% of FPL) would have been ineligible for the PTC under pre-ARPA law. Under ARPA, that individual is eligible for a PTC of about $1,250.
The PTC is calculated on a sliding scale based on household income, expressed as a percentage of the FPL. The amount of the credit is limited to the excess of the premiums for the applicable benchmark plan over the taxpayer’s required share of those premiums. The required share comes from a table divided into income tiers.
Because the required share is less under the new tables for 2021 and 2022 than it otherwise would have been, the PTC will be greater. Under pre-ARPA law, a taxpayer might have had to spend as much as 9.83% of household income in 2021 on health insurance premiums. Under ARPA, that amount is capped at 8.5% for 2021 and 2022.
More penalty exposure
As mentioned, the expanded PTC will help individuals and families obtain coverage through a Health Insurance Marketplace. However, because applicable large employers (ALEs) potentially face shared responsibility penalties if full-time employees receive PTCs, expanded eligibility could increase penalty exposure for ALEs that don’t offer affordable, minimum-value coverage to all full-time employees as mandated under the ACA.
An employer’s size, for ACA purposes, is determined in any given year by its number of employees in the previous year. Generally, if your company had 50 or more full-time or full-time equivalent employees on average during the previous year, you’ll be considered an ALE for the current calendar year. A full-time employee is someone employed on average at least 30 hours of service per week.
If your business is an ALE, be sure you’re aware of this development when designing or revising your employer-provided health care benefits. Should you decide to add staff this year, keep an eye on the tipping point of when you could become an ALE.
Our staff at David Mills, CPA, LLC can further explain the ARPA’s premium tax credit provisions and help you determine whether you qualify as an ALE — or may soon will. Contact us today.
We’ve reached 2021, but it has already been an eventful January. Tax season is in full swing, so we want to share a few things:
As you know, there is another round of stimulus payments. Many have already received them. The 2020 stimulus payments will be reconciled on the tax return. These payments are not income.
We will need to know the amount of 2020 stimulus payment you received. At this time, the IRS website only tells us if you received a payment, not how much the payment was. You may not have received the correct amount due to you. For example, if you had a child in 2020, you qualify for an additional $500. If you want to check on your stimulus payment go to this IRS website.
If you do not itemize deductions, you may qualify for a $600 charitable contribution deduction. This must be a cash donation, not a donation of goods typically given to Goodwill, etc.
Medical expense deduction starts at 7.5% of income, not 10% previously allowed. Keep in mind most people do not qualify for this deduction due to income levels or insurance payments.
Educator expenses now include protective equipment expenses. The maximum credit remains at $250.
Private mortgage insurance premiums can be deductible again for the 2020 tax season.
The standard mileage rate is .56 per mile in 2021.
Did you take a distribution from your qualified retirement plan or IRA? If so, and it was for COVID-19 reasons you will not incur the 10% early withdrawal penalty. Also, you have options on how much to report on your tax return. For example, if you withdrew $60,000 from your IRA you can report the entire amount in 2020 or spread this out over three years.
If you repay the loan within three years amended returns can be filed to refund the tax paid on the distribution. Contact us for the COVID-19 rules on this distribution.
The Coronavirus Aid, Relief and Economic Security (CARES) Act made changes to excess business losses. This includes some changes that are retroactive and there may be opportunities for some businesses to file amended tax returns.
If you hold an interest in a business, or may do so in the future, here is more information about the changes.
Deferral of the excess business loss limits The Tax Cuts and Jobs Act (TCJA) provided that net tax losses from active businesses in excess of an inflation-adjusted $500,000 for joint filers, or an inflation-adjusted $250,000 for other covered taxpayers, are to be treated as net operating loss (NOL) carryforwards in the following tax year.
The covered taxpayers are individuals, estates and trusts that own businesses directly or as partners in a partnership or shareholders in an S corporation. The $500,000 and $250,000 limits, which are adjusted for inflation for tax years beginning after calendar year 2018, were scheduled under the TCJA to apply to tax years beginning in calendar years 2018 through 2025.
But the CARES Act has retroactively postponed the limits so that they now apply to tax years beginning in calendar years 2021 through 2025. The postponement means that you may be able to amend: Any filed 2018 tax returns that reflected a disallowed excess business loss (to allow the loss in 2018) and Any filed 2019 tax returns that reflect a disallowed 2019 loss and/or a carryover of a disallowed 2018 loss (to allow the 2019 loss and/or eliminate the carryover).
Note that the excess business loss limits also don’t apply to tax years that begin in 2020. Thus, such a 2020 year can be a window to start a business with large up-front-deductible items (for example capital items that can be 100% deducted under bonus depreciation or other provisions) and be able to offset the resulting net losses from the business against investment income or income from employment (see below).
Changes to the excess business loss limits The CARES Act made several retroactive corrections to the excess business loss rules as they were originally stated in the 2017 TCJA.
Most importantly, the CARES Act clarified that deductions, gross income or gain attributable to employment aren’t taken into account in calculating an excess business loss.
This means that excess business losses can’t shelter either net taxable investment income or net taxable employment income. Be aware of that if you’re planning a start-up that will begin to generate, or will still be generating, excess business losses in 2021.
Another change provides that an excess business loss is taken into account in determining any NOL carryover but isn’t automatically carried forward to the next year.
And a generally beneficial change states that excess business losses don’t include any deduction under the tax code provisions involving the NOL deduction or the qualified business income deduction that effectively reduces income taxes on many businesses.
Because capital losses of non-corporations can’t offset ordinary income under the NOL rules: Capital loss deductions aren’t taken into account in computing the excess business loss and the amount of capital gain taken into account in computing the loss can’t exceed the lesser of capital gain net income from a trade or business or capital gain net income.
Contact David Mills, CPA, LLC with any questions you have about this or other tax matters.
There’s a new IRS form for business taxpayers that pay or receive nonemployee compensation. Beginning with tax year 2020, payers must complete Form 1099-NEC, Nonemployee Compensation, to report any payment of $600 or more to a payee.
Prior to 2020, Form 1099-MISC was filed to report payments totaling at least $600 in a calendar year for services performed in a trade or business by someone who isn’t treated as an employee.
These payments are referred to as nonemployee compensation (NEC) and the payment amount was reported in box 7.
Form 1099-NEC was reintroduced to alleviate the confusion caused by separate deadlines for Form 1099-MISC that report NEC in box 7 and all other Form 1099-MISC for paper filers and electronic filers.
The IRS announced in July 2019 that, for 2020 and thereafter, it will reintroduce the previously retired Form 1099-NEC, which was last used in the 1980s.
Payers of nonemployee compensation will now use Form 1099-NEC to report those payments. Generally, payers must file Form 1099-NEC by January 31.
For 2020 tax returns, the due date will be February 1, 2021, because January 31, 2021, is on a Sunday. There’s no automatic 30-day extension to file Form 1099-NEC. However, an extension to file may be available under certain hardship conditions.
Form 8809 is used to file for an extension for all types of Forms 1099, as well as for other forms. The IRS recently released a draft of Form 8809. The instructions note that there are no automatic extension requests for Form 1099-NEC. Instead, the IRS will grant only one 30-day extension, and only for certain reasons.
Line 7 lists reasons for requesting an extension. The reasons that an extension to file a Form 1099-NEC (and also a Form W-2, Wage and Tax Statement) will be granted are:
Need help? If you have questions about filing Form 1099-NEC or any tax forms, contact the tax experts at David Mills, CPA, LLC. We can assist you in staying in compliance with all rules.
Illinoisans are being asked to vote on a “Fair Tax” in November. Most of the information being provided is focused on taxing higher-income individuals while opponents are worried that the Illinois Fair Tax Bill opens the door for higher taxes for all.
While this is a valid concern, I think we need to ask more questions. What will the estimated $3.6 billion to be raised from the additional tax be used for? When you and I go to the bank to ask for more money, the lender wants to know how the funds will be used.
While we are not “lending” Illinois money, we certainly have a vested interest in how the money will be spent.
The largest liability the state has is underfunded pension liability. The deficit is over $137 billion, yet the Fair Tax proposal requires less than 10% of revenue to pay down this liability. Where will the other 90% be spent?
This will be toward current programs and any new programs our legislators deem necessary.
Does this mean our elected officials think there is no waste that can be eliminated or savings found in our state? Illinois has over six thousand separate taxing units, the most in the nation.
The Chicago region has more than 1,226 local governments. The New York metro area has fewer than 200. Can’t there be savings in the combination or elimination of some of these agencies? Where is the 5, 10 or 15-year plan for Illinois? We live from year to year.
The answer is always more taxes. As I have written before the state receives more than $50 million monthly in new marijuana taxes. Only 10% is earmarked for debt reduction.
Is it any surprise that any tax increase is seen with scorn, even when the increase may be justified?
If Illinois shows the bond rating companies they are serious about addressing debt and the pension under-funding borrowing interest rates could be lowered. This means less money for interest payments and more funds for state programs that need the money.
Illinois taxpayers deserve to know how additional tax money will be spent. So far neither side has addressed this issue. Tell voters how the money will be spent and then we can make an informed decision.
For more information, contact David Mills, CPA, LLC.
Does your business receive large amounts of cash or cash equivalents? You may be required to submit forms to the IRS to report these transactions.
Each person engaged in a trade or business who, in the course of operating, receives more than $10,000 in cash in one transaction, or in two or more related transactions, must file Form 8300.
Any transactions conducted in a 24-hour period are considered related transactions. Transactions are also considered related even if they occur over a period of more than 24 hours if the recipient knows, or has reason to know, that each transaction is one of a series of connected transactions.
To complete a Form 8300, you will need personal information about the person making the cash payment, including a Social Security or taxpayer identification number.
You should keep a copy of each Form 8300 for five years from the date you file it, according to the IRS.
Although many of the transactions are legitimate, the IRS explains that “information reported on (Form 8300) can help stop those who evade taxes, profit from the drug trade, engage in terrorist financing and conduct other criminal activities. The government can often trace money from these illegal activities through the payments reported on Form 8300 and other cash reporting forms.”
For Form 8300 reporting, cash includes U.S. currency and coins, as well as foreign money. It also includes cash equivalents such as cashier’s checks (sometimes called bank checks), bank drafts, traveler’s checks and money orders.
Money orders and cashier’s checks under $10,000, when used in combination with other forms of cash for a single transaction that exceeds $10,000, are defined as cash for Form 8300 reporting purposes.
Note: Under a separate reporting requirement, banks and other financial institutions report cash purchases of cashier’s checks, treasurer’s checks and/or bank checks, bank drafts, traveler’s checks and money orders with a face value of more than $10,000 by filing currency transaction reports.
Businesses required to file reports of large cash transactions on Form 8300 should know that in addition to filing on paper, e-filing is an option.
The form is due 15 days after a transaction and there’s no charge for the e-file option. Businesses that file electronically get an automatic acknowledgment of receipt when they file.
The IRS also reminds businesses that they can “batch file” their reports, which is especially helpful to those required to file many forms.
To file Form 8300 electronically, a business must set up an account with FinCEN’s BSA E-Filing System. For more information, interested businesses can also call the BSA E-Filing Help Desk at 866-346-9478 (Monday through Friday from 8 am to 6 pm EST) or email them at BSAEFilingHelp@fincen.gov.
At David Mills, CPA, LLC, we’re small business tax experts. Contact us with any questions or for assistance.