Ask the CFP: When will Social Security run out?

 

 

Hello everyone and welcome to this month’s Ask the CFP segment. This month’s question is, “When will Social Security run out?” According to the Social Security Board of Trustees, as of April of 2020, the retirement portion of Social Security, which is different than the disability side, is expected to be depleted by the year 2034. However, this doesn’t take into account the effects of COVID, which significantly reduced revenue into the Social Security trust from so many lost jobs. This means if Congress doesn’t take action sooner, the trust fund for retirees could be depleted before 2034.

A common misconnection about Social Security is that it will be gone once the trust funds are exhausted. Social Security income would still be available for retirees, but it’s expected to be reduced to 76% of what has been promised. This means Social Security income would still continue, but with a “pay cut.” As you can imagine, this topic is something few politicians have wanted to deal with because it isn’t an easy problem to solve.

At the end of the day, fixing Social Security is a math problem. Congress may decide to increase taxes on workers, decrease benefits on retirees, or both. What’s more likely to happen is some workers with higher incomes may pay more into the system and some retirees with higher incomes may receive less from the system. Also, we’ll likely see the normal retirement age extended further, especially since Social Security was originally meant to help people that lived past life expectancy, not to be a source of income for people that want to retire as soon as possible. We might also see Congress change the annual cost of living adjustment for all or some Americans. It won’t be easy, but Congress will need to take action one day to solve this. I have a feeling it will be the same the trust will be exhausted.

If you have a question about this topic or have a question for next month’s video, please send it to TFreeman@MonetaGroup.com. Thanks for watching and we’ll see you next month.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. Please speak with a qualified tax or legal professional before making any changes to your personal situation.

© 2021 Moneta Group Investment Advisors, LLC. All rights reserved. These materials were prepared for informational purposes only based on materials deemed reliable, but the accuracy of which has not been verified. You should consult with an appropriately credentialed professional before making any financial, investment, tax or legal decision. Past performance is not indicative of future returns. These materials do not take into consideration your personal circumstances, financial or otherwise.

The post Ask the CFP: When will Social Security run out? first appeared on Moneta | Fee Only Financial Planning | Investment Advisors | Clients Nationwide.

source https://monetagroup.com/ask-the-cfp-when-will-social-security-run-out/

Tax Planning: What to expect if you reversed RMDs under the CARES Act in 2020

By Brighton Samet, Moneta Tax Planning Consultant

Under guidance from the Internal Revenue Service (IRS), anyone who already took a required minimum distribution (RMD) in 2020 from certain retirement accounts had the opportunity to roll those funds back into a retirement account following the CARES Act RMD waiver for 2020. Instead of the normal 60-day limit, taxpayers had until August 31, 2020 to complete the rollover.

If you properly rolled over some or all of your IRA distributions, you may be wondering how the tax reporting will work. Your Form 1099-R will show the gross distributions for the year in Box 1. Unfortunately, you will not see the rollover reflected on this form. By May 31, you should receive a Form 5498 that will include documentation for the rollover that is also sent to the IRS. When preparing your tax return, the IRS instructions for Form 1040 (page 25) direct you to include the total distribution on Line 4a and to enter “Rollover” next to line 4b. The instructions also note that you may subtract the rollover amount when determining the taxable amount included on Line 4b. https://www.irs.gov/instructions/i1040gi

Since the Form 5498 may arrive after the tax filing deadline of April 15, we recommend you inform your tax preparer about any 2020 IRA rollovers so your distributions can be properly reported on the tax return.

While we hope you find it beneficial, this information is for informational purposes only and is not intended as tax advice.  Please consult your personal tax advisor or other appropriately credentialed professional for advice about your specific situation.

© 2021 Moneta Group Investment Advisors, LLC. All rights reserved. These materials were prepared for informational purposes only. You should consult with an appropriately credentialed professional before making any financial, investment, tax or legal decision. Past performance is not indicative of future returns. These materials do not take into consideration your personal circumstances, financial or otherwise.

The post Tax Planning: What to expect if you reversed RMDs under the CARES Act in 2020 first appeared on Moneta | Fee Only Financial Planning | Investment Advisors | Clients Nationwide.

source https://monetagroup.com/tax-planning-what-to-expect-if-you-reversed-rmds-under-the-cares-act-in-2020/

The Expanded and Enhanced Employee Retention Credit

ERC is a refundable payroll tax credit available to businesses for wages paid to employees

We have all heard in exhaust about the Payroll Protection Program (PPP), which was rolled out as part of the CARES Act during the pandemic’s early stages. When PPP was introduced, there was (and still is) a plethora of media coverage. Numerous Treasury Releases and IRS Notices subsequently followed to provide further clarity.

However, another stimulus is available for businesses which can also be extremely beneficial – the Employee Retention Credit (ERC). The CARES Act also introduced the ERC, and at that time if a business received PPP, it was ineligible to claim the ERC. However, this limitation was recently retroactively eliminated under the Consolidated Appropriations Act, 2021 signed into law on December 27, 2020.

So, what is the ERC? Simply put, the ERC is a refundable payroll tax credit available to businesses for wages paid to employees. But since nothing is as simple as it may seem in today’s world, we have prepared the following overview of the ERC’s main provisions and a few key items to consider:

Eligible Employers

All employers, including tax-exempt organizations, are eligible if they meet one of the following requirements (see below: eligible wages are calculated differently for small businesses):

1. The business had to fully or partially close during any calendar quarter because of governmental orders limiting commerce, travel, or group meetings due to COVID-19.
2. The business had a significant decline in gross receipts. The gross receipts are looked at on a quarterly basis and compared to 2019 (for 2020 and 2021).
   1. Significant Decline for 2020:  Gross receipts had to decline more than 50% compared to the same 2019 calendar quarter.
   2. Significant Decline for 2021:  Gross receipts had to decline more than 20% compared to the same 2019 calendar quarter.

Eligible Wages

Eligible wages are defined as employee wages and health care expenses paid during the applicable period up to a maximum of $10,000 per employee. Healthcare expenses are retroactively eligible to be included as wages for all employees, even if they did not receive any other wages (for example: furloughed employees). Note that wages used in calculating PPP loan forgiveness cannot be used toward calculating the ERC (no double-dipping). Therefore, to receive the ERC, a business will need to have paid qualified wages above the amount of the forgiven PPP loan used to pay other wages.

Wages are classified differently for small businesses and non-small businesses:

1. For small businesses (100 or fewer employees for 2020; 500 or fewer employees for 2021) – all wages are included in the calculation.
2. For larger employers (more than 100 employees in 2020 and more than 500 employees in 2021) – only wages paid to employees who were being paid and not providing services (i.e., not working) are included.

Calculating the Credit

The Consolidated Appropriations Act, 2021 enhanced the ERC by increasing the number of credits allowable and how often a business can claim them. For businesses receiving the ERC in 2020, the credit is equal to 50% of eligible wages up to $10,000 (or $5,000 of credit) per employee. For 2021, the enhanced credit is equal to 70% of eligible wages up to $10,000 (or $7,000 of credit) per employee, per quarter. Since the credit is available through June 30, 2021, this means a qualifying business can claim the ERC two times in 2021 for a total of $14,000 per employee!

As you can see, the second round of economic stimulus has dramatically enhanced and expanded the ERC, primarily by eliminating the rule that a business cannot benefit from both the PPP and the ERC. Employers should review their employee counts and operations to determine the extent to which they may be eligible for enhanced and/or increased ERC either in 2021 or by filing amended employment tax returns for qualified wages paid in 2020.

Compardo, Wienstroer, Conrad & Janes will continue to analyze this legislation and provide updates relevant to our clients. Our staff of diverse professionals stays informed to help you make better financial decisions. We serve Family Office, Professional Athletes and Family CFO clients. You can visit our website here.

© 2021 Moneta Group Investment Advisors, LLC. All rights reserved. These materials were prepared for informational purposes only based on materials deemed reliable, but the accuracy of which has not been verified. Given the dynamic nature of the subject matter and the environment in which these materials were prepared, they are subject to change as additional legislation and government analysis come forth. This is not an offer to sell or buy securities, nor does it represent any specific recommendation. You should consult with an appropriately credentialed professional before making any financial, investment, tax or legal decision. These materials do not take into consideration your personal circumstances, financial or otherwise.

 

The post The Expanded and Enhanced Employee Retention Credit first appeared on Moneta | Fee Only Financial Planning | Investment Advisors | Clients Nationwide.

source https://monetagroup.com/cwcj-the-expanded-and-enhanced-employee-retention-credit/

Key Details of The Consolidated Appropriations Act, 2021

While there are many similarities to the original PPP, the CRRSAA introduces some important changes.

On Sunday, December 27, 2020, President Trump signed the Consolidated Appropriations Act, 2021. The bulk of the provisions within this $2.3 Trillion, 5,000 plus page package are part of an annual omnibus spending bill of approximately $1.4 trillion. The remaining estimated $900 Billion is designated for the second round of COVID stimulus, referred to as the “Coronavirus Response and Relief Supplemental Appropriations Act of 2021” (CRRSAA).

This legislation is a giant piece to unpack and will require further review. Before diving into the relevant details of the legislation, it is important to note a few items that were left out:

1. While previous COVID relief suspended Required Minimum Distributions (RMDs) in 2020, there is no such relief in 2021, and you can expect RMDs as usual.
2. No additional rollover relief for unwanted 2020 RMDs. Notice 2020-51 provided relief for rollovers through August 31, 2020. There was no additional reprieve added.
3. While initial student loan relief provided in the CARES Act was extended through January 31, 2021, no additional student loan relief was granted under the CRRSAA.

Key provisions:

Stimulus Checks

A refundable tax credit of $600 will be issued for each eligible taxpayer and dependent under age 17. Parents will not receive stimulus for dependents 17 and over, as they are not considered qualifying children. Furthermore, dependents 17 and older will not receive a stimulus check. For example, a 19-year-old college student is claimed by their parents as a dependent. Neither the parents nor the student will receive a stimulus check.

The phaseout will be the same as the CARES Act. The Adjusted Gross Income (AGI) thresholds are:

• $75,000 for single filers
• $112,500 for heads of households
• $150,000 for married filing joint

The phaseout is $5 of credit for every $100 above the indicated AGI figures above.

Payroll Protection Program (PPP)

While there are many similarities to the original PPP, the CRRSAA introduces some important changes, most of which are retroactive:

1. Expenses paid with PPP funds are now tax-deductible whether the loan is forgiven or not; this applies to all PPP loans.
2. For all PPP loans, recipients may choose an 8 or 24 week covered period, no matter when they received their PPP funds.
3. Eligible payroll costs are expanded to include group insurance benefits for life, disability, dental, and vision. This clarification will help many businesses in meeting the 60% payroll threshold for loan forgiveness.
4. Four new categories of expenses are introduced to cover items specifically related to the additional expenditures or losses for coronavirus related items (operational expenditures, property damage costs, additional supplier costs, and employee protection expenditures). These expenses fall into the 40% non-payroll related expense category for loan forgiveness.
5. A simplified forgiveness form was created for loans under $150,000. The bill specifically states the new form will not be longer than one page, and not require substantiating documentation when filed. The SBA will need to have the form available within 24 days of the bill being signed into law.
6. A second round of PPP is being offered. This round is being referred to as PPP2 or second draw loans. To qualify, the business must have received PPP in the first round and spent all said funds. The window for businesses to apply for their first round of PPP will be reopened. Those who did not apply or who might have returned the funds will have the opportunity to re-apply. Changes to PPP2 from the CARES Act include:
   1. Reduction in employees for most businesses to 300 (previously 500).
   2. A business must have experienced more than a 25% decline in revenue in any one quarter in 2020 compared to the same quarter in 2019 (new requirement).
   3. Reduction in max PPP2 funds to $2 Million (previously max $10 Million).

 

Unemployment Benefits

Unemployment benefits are extended for an additional 11 weeks with a federal supplement of $300 per week ($600 with the CARES Act). The CRRSAA also extended the Pandemic Unemployment Assistance (PUA) Program which covers non-traditional workers not typically eligible for unemployment, such as self-employed individuals.

Employee Retention Credit

The Employee Retention Credit was expanded and improved and can now be taken through June 30, 2021. The total amount of eligible wages per employee increased from $10,000 for the year to $10,000 per quarter. The credit was also increased from 50% to 70% per eligible employee. The CRRSAA also provided less significant hurdles for businesses to qualify for the benefit by decreasing the year-over-year gross receipts decline from 50% to 20% and increasing the number of employees counted from 100 to 500.

This bill also contains retroactive provisions allowing employers who received PPP funds also to be able to utilize this credit for wages not covered by PPP. Also, group health plans can now be considered wages when paid to eligible employees even when no other wages are paid.

Charitable Deductions

Above the line charitable deductions that were introduced by the CARES Act were expanded. For 2020, the $300 deduction is still available. However, the benefit was expanded in 2021 to remove the marriage penalty, allowing for joint filers to deduct $600 of cash contributions if they do not itemize their deductions.

The bill extends the ability to deduct 100% of cash contributions to qualified 501(c)3 organizations in 2021, removing the 60% AGI limitation set by the Tax Cuts and Jobs Act.

Please note this provision does not apply to cash contributions to donor-advised funds.

Business Meal Deduction

The bill provides for a 100% deduction for certain meal expenses for businesses in 2021 and 2022 provided by restaurants. The goal of this provision is to provide more stimulus to restaurants and is not retroactive to 2020. Expect additional guidance from the IRS on how this deduction will be implemented.

Student Loans

As discussed above, there is no additional reprieve for student loan payments at an individual level. However, the preferential treatment for student loans paid by employers (up to $5,250 per year) has been extended through 2025. Such payments are not included as a payroll expense and are not included as income to the employee, though it is still deductible by the employer.

Flexible Spending Accounts

There is additional relief for Flexible Spending Accounts (FSAs). This relief applies for both medical FSAs and Child Care FSAs. The relief is available in a few different ways. However, it is up to the employer to adopt how they will enact these available changes within their plans. The most generous option is to roll unused funds into 2021, and unused 2021 balances forward to 2022. Another option employers have permits a 12 month grace period in 2020 and/or 2021. Also, in 2021 employers may provide participants with the option to amend their contributions to the FSA plans.

Medical Deductions

The AGI limitation for Medical Expense Deductions has been permanently set to 7.5%.

Conclusion

Compardo, Wienstroer, Conrad & Janes will continue to analyze this legislation and provide updates relevant to our clients. Our staff of diverse professionals stays informed to help you make better financial decisions. We serve Family Office, Professional Athletes and Family CFO clients.  You can visit our website here.

© 2021 Moneta Group Investment Advisors, LLC. All rights reserved. These materials were prepared for informational purposes only based on materials deemed reliable, but the accuracy of which has not been verified. Given the dynamic nature of the subject matter and the environment in which these materials were prepared, they are subject to change as additional legislation and government analysis come forth. This is not an offer to sell or buy securities, nor does it represent any specific recommendation. You should consult with an appropriately credentialed professional before making any financial, investment, tax or legal decision. These materials do not take into consideration your personal circumstances, financial or otherwise.

The post Key Details of The Consolidated Appropriations Act, 2021 first appeared on Moneta | Fee Only Financial Planning | Investment Advisors | Clients Nationwide.

source https://monetagroup.com/cwcj-key-details-of-the-consolidated-appropriations-act-2021/

Five Money Moves to Make in January

By Moneta Advisor Lauren Hunt

1. Review your withholdings

If you discover that you withheld too much or too little the previous year and you expect your circumstances to be similar for the current year, you may want to submit a new IRS Form W-4. If your prior year withholdings were too low, the “Other Adjustments” section allows you to tell your employer to withhold additional taxes from each paycheck so that does not happen. The IRS provides a free online tax withholding calculator to help you complete a new Form W-4: irs.gov/individuals/tax-withholding-estimator

2. Adjust your retirement plan savings

In 2021, you can contribute up to $19,500 in a 401(k), 403(b) or other employer-provided retirement plan plus $6,500 in catch-up contributions if you are age 50 or older. Once you have decided how much you would like to contribute to the plan this year, calculate your contribution percentage by taking the contribution amount divided by your annual salary. For example, if you want to contribute $10,000 this year and your salary is $100,000, your contribution percentage would be 10%. Most employer-provided plans allow you to adjust your contribution percentage amount online. Setting your contribution amount at the beginning of the year can help keep you on track throughout the year.

3. Check your credit

The Fair Credit Reporting Act (FCRA) requires each of the nationwide credit reporting companies – Equifax, Experian, and TransUnion – to provide you with a free copy of your credit report, at your request, once every 12 months. It is important to review your credit report to make sure the information is accurate and to help guard against identify theft. To order, visit annualcreditreport.com, call 877-322-8228, or complete the Annual Credit Report Request Form by mail. You may order one, two, or all three reports at the same time, or you may stagger your requests.

4. Automate your savings plan

One of the easiest strategies to save money is to make it automatic. When you automate your savings in January, you are more likely to make saving a consistent priority throughout the year, reducing the temptation to spend those funds without planning ahead. Have you recently received a bonus or pay raise? Make sure you are increasing your savings to adjust for the higher income.

5. Get organized for tax time

You should begin receiving tax documents such as W-2s, 1098s, and 1099s in January, though others may arrive over the next couple months. Whether you use an electronic filing system, folders or paper clips, decide on how you are going to physically group and hold together important paperwork and documents. Gather all receipts for charitable gifts, medical bills, property taxes, and interest payments so that you can remove stress involved with the April 15 tax filing deadline.

© 2021 Moneta Group Investment Advisors, LLC. All rights reserved. These materials were prepared for informational purposes only. You should consult with an appropriately credentialed professional before making any financial, investment, tax or legal decision. Past performance is not indicative of future returns. These materials do not take into consideration your personal circumstances, financial or otherwise.

The post Five Money Moves to Make in January first appeared on Moneta | Fee Only Financial Planning | Investment Advisors | Clients Nationwide.

source https://monetagroup.com/five-money-moves-to-make-in-january/

One of the Largest Spending Bills Ever is Enacted as IRS Issues Second Round of Stimulus Payments

By Brighton Samet, Moneta Tax Planning Consultant

The IRS and the Treasury Department began issuing a second round of Economic Impact Payments, often referred to as stimulus payments. The direct deposit payments may take several days to post to individual accounts. Paper checks also began going out and will continue to be sent through January. Some people will be mailed debit cards in January, and the IRS urges people to carefully check their mail.

The “Get My Payment” tool is available to check on the status of your payment and to find out how you will be receiving the payment. It has been updated for the second round of payments.

On Sunday, December 27, President Trump signed the Consolidated Appropriations Act, 2021 (CAA, 2021) into law. The bill combines a $1.4 trillion annual spending bill to avert a government shutdown and $900 billion in pandemic-related support. The $2.3 trillion total exceeds that of the $2.2 trillion CARES Act passed in March.

The CAA, 2021 is the result of months of negotiations in Congress and President Trump’s six-day delay in signing it. It was overwhelmingly passed in both houses of Congress. There was pressure to get the bill signed to avoid a government shutdown and the lapse of unemployment benefits, as well as getting the next round of stimulus payments to individuals.

Highlights of the 5,500-page bill include many tax-related and pandemic-related provisions:

New Stimulus Payments

The Consolidated Appropriations Act includes “additional 2020 recovery rebates.” This program is an additional $600 per taxpayer ($1,200 for married filing jointly), in addition to $600 per qualifying child under age 17. Just like the first round, the payments are subject to phase-outs beginning at $75,000 of modified adjusted gross income (AGI) ($112,500 for heads of household and $150,000 for married filing jointly). The rebates are reduced $5 for every $100 over the threshold AGI amount.

Like the first round of payments, these rebates are also an advance on a credit that will be calculated on your 2020 tax return. The actual credit amount will be determined when you file your 2020 return.

• If you do not qualify for a payment based on your 2019 tax return, but become eligible in 2020 as a result of the COVID-19 coronavirus outbreak, you will instead receive a tax credit for the appropriate amount on your 2020 tax return.
• Conversely, if you qualify for a payment based on your 2019 tax return but earn income in excess of the phaseout thresholds in 2020, you will not be required to pay it back.

Deductibility of PPP-funded Expenses and Second Round of Forgivable PPP Loans

Expenses paid with Paycheck Protection Program (PPP) funds are now tax deductible. The original CARES Act made PPP forgiven loans not taxable and therefore expenses paid for with forgiven loans were not deductible. The CAA, 2021 law corrects the tax treatment to match the original intent of Congress, so that expenses paid with forgiven PPP funds are tax deductible for all borrowers.

Other changes to the PPP include reopening the program to new borrowers, added expense categories eligible for forgiveness, a second round of forgivable loans for small employers with a 25% drop in gross receipts and streamlined forgiveness for borrowers with loans under $150,000.

Extended Unemployment Benefits

The original expanded unemployment programs were set to expire December 31, 2020. The CAA, 2021 bill provides an additional $300 per week through March 14, 2021. The Pandemic Unemployment Assistance (PUA), providing unemployment benefits to individuals such as the self-employed not normally eligible for unemployment, is extended 11 weeks as well. Without this extended coverage, an estimated 14 million people would have lost all unemployment benefits according to The Wall Street Journal’s article “What to Know About Unemployment Benefits in Covid-19 Aid Package” from December 29, 2020.

Full Deduction for Business Meals from Restaurants

To support the restaurant industry, business meals provided by a restaurant will be 100% deductible to that business for 2021 and 2022. Normally business meals are limited to a 50% deduction.

Charitable Deductions Expanded for 2021

Charitable deductions of up to $300 for qualifying cash contributions will be deductible for those that take the standard deduction in 2020 and 2021. The maximum amount is increased to $600 for married couples filing jointly (for 2021 only).

For taxpayers who do itemize deductions, the legislation extended an increase of the allowable limit of qualifying cash charitable contribution deductions through 2021.

The limitation on qualifying cash charitable deductions (generally limited to 60% of AGI) will be suspended for 2020 and 2021.

Permanent Reduction in Medical Expense Deduction Floor

In 2020 and recent years, individuals could claim an itemized deduction for unreimbursed medical expenses that exceeded 7.5% of AGI; however, each year that threshold had to be renewed to prevent the threshold rising to 10%. The CAA, 2021 makes the 7.5% threshold permanent.

We will continue to analyze this bill so we can stay ahead of its potential impacts on your portfolio. If you have questions in the meantime, please don’t hesitate to reach out to your Moneta advisor team.

© 2021 Moneta Group Investment Advisors, LLC. All rights reserved. These materials were prepared for informational purposes only. You should consult with an appropriately credentialed professional before making any financial, investment, tax or legal decision. Past performance is not indicative of future returns. These materials do not take into consideration your personal circumstances, financial or otherwise.

The post One of the Largest Spending Bills Ever is Enacted as IRS Issues Second Round of Stimulus Payments first appeared on Moneta | Fee Only Financial Planning | Investment Advisors | Clients Nationwide.

source https://monetagroup.com/one-of-the-largest-spending-bills-ever-is-enacted-as-irs-issues-second-round-of-stimulus-payments/

How will the 2020 Election Results Affect Tax Policy and the Economy?

The Democratic Party took control of Congress and the White House for the first time in a decade as Electoral College votes were officially counted while two runoff elections for Georgia’s Senate seats were also completed.

The Electoral College confirmed Joe Biden as the President elect by ratifying his victory in the November election with 306 electoral votes to Donald Trump’s 232.

In Georgia, Jon Ossoff and Rev. Raphael Warnock each won runoff elections for Senate seats, creating a 50-50 split between Democrats and Republicans. Vice President-elect Kamala Harris will break tied votes, giving Democrats the advantage.

The Democratic Party had already won control in the House of Representatives with 222 seats compared to 211 for the Republicans.

At Moneta, we began preparing for the possibility of a power shift in Washington before the elections began. To help you navigate the potential financial and economic impact of these results, we created a resource page with insights from our internal experts on tax policy, investments and estate planning.

We will continue to analyze any developments in our government’s economic policy so we can stay ahead of its potential impacts on your portfolio. If you have questions, please don’t hesitate to reach out to your Moneta advisor team.

© 2021 Moneta Group Investment Advisors, LLC. All rights reserved. These materials were prepared for informational purposes only. You should consult with an appropriately credentialed professional before making any financial, investment, tax or legal decision. Past performance is not indicative of future returns. These materials do not take into consideration your personal circumstances, financial or otherwise.

The post How will the 2020 Election Results Affect Tax Policy and the Economy? first appeared on Moneta | Fee Only Financial Planning | Investment Advisors | Clients Nationwide.

source https://monetagroup.com/how-will-the-2020-election-results-affect-tax-policy-and-the-economy/

IRS Begins Issuing Second Round of Economic Stimulus Payments

By Brighton Samet, Moneta Tax Planning Consultant

The IRS and the Treasury Department began issuing a second round of Economic Impact Payments, often referred to as stimulus payments. The direct deposit payments may take several days to post to individual accounts. Paper checks also began going out and will continue to be sent through January. Some people will be mailed debit cards in January, and the IRS urges people to carefully check their mail.

The “Get My Payment” tool is available to check on the status of your payment and to find out how you will be receiving the payment. It has been updated for the second round of payments.

On Sunday, December 27, President Trump signed the Consolidated Appropriations Act, 2021 (CAA, 2021) into law. The bill combines a $1.4 trillion annual spending bill to avert a government shutdown and $900 billion in pandemic-related support. The $2.3 trillion total exceeds that of the $2.2 trillion CARES Act passed in March.

The CAA, 2021 is the result of months of negotiations in Congress and President Trump’s six-day delay in signing it. It was overwhelmingly passed in both houses of Congress. There was pressure to get the bill signed to avoid a government shutdown and the lapse of unemployment benefits, as well as getting the next round of stimulus payments to individuals.

Highlights of the 5,500-page bill include many tax-related and pandemic-related provisions:

New Stimulus Payments

The Consolidated Appropriations Act includes “additional 2020 recovery rebates.” This program is an additional $600 per taxpayer ($1,200 for married filing jointly), in addition to $600 per qualifying child under age 17. Just like the first round, the payments are subject to phase-outs beginning at $75,000 of modified adjusted gross income (AGI) ($112,500 for heads of household and $150,000 for married filing jointly). The rebates are reduced $5 for every $100 over the threshold AGI amount.

Like the first round of payments, these rebates are also an advance on a credit that will be calculated on your 2020 tax return. The actual credit amount will be determined when you file your 2020 return.

• If you do not qualify for a payment based on your 2019 tax return, but become eligible in 2020 as a result of the COVID-19 coronavirus outbreak, you will instead receive a tax credit for the appropriate amount on your 2020 tax return.
• Conversely, if you qualify for a payment based on your 2019 tax return but earn income in excess of the phaseout thresholds in 2020, you will not be required to pay it back.

Deductibility of PPP-funded Expenses and Second Round of Forgivable PPP Loans

Expenses paid with Paycheck Protection Program (PPP) funds are now tax deductible. The original CARES Act made PPP forgiven loans not taxable and therefore expenses paid for with forgiven loans were not deductible. The CAA, 2021 law corrects the tax treatment to match the original intent of Congress, so that expenses paid with forgiven PPP funds are tax deductible for all borrowers.

Other changes to the PPP include reopening the program to new borrowers, added expense categories eligible for forgiveness, a second round of forgivable loans for small employers with a 25% drop in gross receipts and streamlined forgiveness for borrowers with loans under $150,000.

Extended Unemployment Benefits

The original expanded unemployment programs were set to expire December 31, 2020. The CAA, 2021 bill provides an additional $300 per week through March 14, 2021. The Pandemic Unemployment Assistance (PUA), providing unemployment benefits to individuals such as the self-employed not normally eligible for unemployment, is extended 11 weeks as well. Without this extended coverage, an estimated 14 million people would have lost all unemployment benefits according to The Wall Street Journal’s article “What to Know About Unemployment Benefits in Covid-19 Aid Package” from December 29, 2020.

Full Deduction for Business Meals from Restaurants

To support the restaurant industry, business meals provided by a restaurant will be 100% deductible to that business for 2021 and 2022. Normally business meals are limited to a 50% deduction.

Charitable Deductions Expanded for 2021

Charitable deductions of up to $300 for qualifying cash contributions will be deductible for those that take the standard deduction in 2020 and 2021. The maximum amount is increased to $600 for married couples filing jointly (for 2021 only).

For taxpayers who do itemize deductions, the legislation extended an increase of the allowable limit of qualifying cash charitable contribution deductions through 2021.

The limitation on qualifying cash charitable deductions (generally limited to 60% of AGI) will be suspended for 2020 and 2021.

Permanent Reduction in Medical Expense Deduction Floor

In 2020 and recent years, individuals could claim an itemized deduction for unreimbursed medical expenses that exceeded 7.5% of AGI; however, each year that threshold had to be renewed to prevent the threshold rising to 10%. The CAA, 2021 makes the 7.5% threshold permanent.

We will continue to analyze this bill so we can stay ahead of its potential impacts on your portfolio. If you have questions in the meantime, please don’t hesitate to reach out to your Moneta advisor team.

© 2021 Moneta Group Investment Advisors, LLC. All rights reserved. These materials were prepared for informational purposes only. You should consult with an appropriately credentialed professional before making any financial, investment, tax or legal decision. Past performance is not indicative of future returns. These materials do not take into consideration your personal circumstances, financial or otherwise.

The post IRS Begins Issuing Second Round of Economic Stimulus Payments first appeared on Moneta | Fee Only Financial Planning | Investment Advisors | Clients Nationwide.

source https://monetagroup.com/irs-begins-issuing-second-round-of-economic-stimulus-payments/

Changing Jobs? Four 401(k) Options to Consider

By Lauren Hunt, Moneta Advisor

If you have a 401(k) plan, you are familiar with the benefits afforded by these popular retirement accounts. They are a great way to set aside earnings into investments that can grow over the years, especially if your employer matches your contributions. Employees who leave their companies have several options when it comes to their 401(k) plans, and each option has advantages and disadvantages.

1. Keeping your existing plan where it is with your former employer
2. Moving your assets to a new employer’s 401(k)
3. Moving your assets to a Rollover IRA or Roth IRA
4. Cashing it out completely

Keep your old 401(k) where it is and start another one at your new job

This option is easy; you do not have to do anything so long as your plan balance is more than $5,000. You will avoid the possibility of taxes and penalties, and you are likely already familiar with the investment options within the plan.

Leaving your old 401(k) in place can be a good option if you are between the ages 55 and 59 ½. If you leave your job during or after the calendar year in which you turned 55, you can take penalty-free withdrawals (although you will still pay ordinary income taxes on all pre-tax distributions).

Before making any decision, ask your former employer if there are any restrictions or additional fees associated with the plan once you leave the company. It should also be noted that a possible drawback to having two accounts is just that— there will be two sets of records to track.

Close your existing account and move your assets to your new employer’s 401(k)

Many companies permit a simple transfer of assets from one 401(k) to another. One benefit of this option is that you will incur no taxes or penalties. The record keeping aspect of this option is especially attractive as you will have one account to track and manage.

It should be noted that while some companies allow new employees to transfer the money right away, others require you to wait a period of time before becoming eligible to enroll. Additionally, the new plan may offer different or fewer investment options that may or may not meet your needs.

Roll over existing 401(k) assets to a Rollover IRA or Roth IRA and start another 401(k) at your new job

This approach has one important potential advantage: Your investment choices may be broadened significantly since IRA assets are not attached to an employer and can be invested in thousands of individual securities or mutual funds. By contrast, many 401(k) plans offer only a small specific menu of options.

Within an IRA, you will also have greater freedom to name beneficiaries. The beneficiary of your 401(k) plan, by law, must be your spouse; you must obtain a signed release from him or her if you want to name anyone else. With an IRA, you can name any beneficiary you wish.

There are, however, some potential disadvantages to rolling over your existing plan:

• You cannot borrow against money in an IRA the way you can with many 401(k) plans.
• You will have to monitor two separate accounts.

Also, keep in mind that, if you choose this option, the money should be rolled over directly from the 401(k) to the IRA as a trustee-to-trustee transfer to avoid the mandatory 20% federal tax withholding.

Cash out the account

It is quite tempting to take a 401(k) distribution in cash but cashing in a 401(k) carries serious consequences and is not a good option for most people.

If you are under 59 ½, all pre-tax contributions that you take as a distribution will be subject to ordinary income taxes—federal, state, and local—and potentially a 10% IRS early-withdrawal penalty. If you left your job during or after the calendar year in which you turned 55, you will not owe the early-withdrawal penalty.

For most people, the best option is to move your savings into an IRA, which gives you the most freedom and control over your money. Because each plan is written differently, it is important that you consult with your employer and your tax advisor to find out what the best options may be for your situation.

© 2020 Moneta Group Investment Advisors, LLC. All rights reserved. These materials were prepared for informational purposes only based on materials deemed reliable, but the accuracy of which has not been verified. Examples contained herein are for illustrative purposes only, based on generic assumptions. This is not an offer to sell or buy securities, nor does it represent any specific recommendation. You should consult with an appropriately credentialed professional before making any financial, investment, tax or legal decision. Past performance is not indicative of future returns. These materials do not take into consideration your personal circumstances, financial or otherwise.

The post Changing Jobs? Four 401(k) Options to Consider first appeared on Moneta | Fee Only Financial Planning | Investment Advisors | Clients Nationwide.

source https://monetagroup.com/changing-jobs-four-401k-options-to-consider/

CWCJ Newsletter Q4 2020

The post CWCJ Newsletter Q4 2020 first appeared on Moneta | Fee Only Financial Planning | Investment Advisors | Clients Nationwide.

source https://monetagroup.com/cwcj-newsletter-q4-2020/