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/

Congress Passes New Coronavirus Relief Package

By Benjamin Trujillo, JD, LLM – Senior Advisor and Lauren Randazzo, CPA – Advisor

Lawmakers agreed on Monday, December 20, 2020 to the terms for additional economic stimulus after months of haggling.  Congress reached an accord on approximately $900 billion dollars of relief for struggling Americans, less than half the aid provided under the original CARES Act in March.  The full text of the as-yet unnamed legislation has not yet been released, but the highlights include:

Stimulus Checks

$600 stimulus checks for adults and dependents under the age of 17.  Stimulus checks begin phasing out for adjusted gross incomes in excess of $75,000 for individuals, $112,500 for head-of-household filers and $150,000 for married couples filing jointly.

Unemployment Benefits

Congress is adding $300 to weekly unemployment benefits for 11 weeks.  Lawmakers also extended the program expanding the pool of people eligible for unemployment benefits and the duration of the benefits.

PPP Loans

The government set aside roughly $284 billion of the package for additional forgivable Payroll Protection Loans.  Small businesses may receive a second PPP loan if they have fewer than 300 employees and can demonstrate that revenue has fallen by at least 25%.  The maximum loan for a second PPP loan is capped at $2,000,000.

Expense Deductibility

Expenses paid using PPP loan proceeds will now be fully deductible.  This overrules the Treasury Department’s position that such expenses would not be deductible, which largely obviated the benefit of the initial PPP loans.   It appears that deductibility will be retroactive to cover the initial round of PPP loans as well as the second round.

Other Benefits

Additional funds have been set aside for schools ($82 billion), COVID vaccination and testing ($31 billion), and transportation ($45 billion).  Qualified families who are not able to make rent or pay off past-due rent will be getting a boost with assistance to make rent and utility payments ($25 billion).  The Supplemental Nutrition Assistance Program (SNAP) is receiving funds as well ($13 billion).

The CWCJ Team at Moneta will provide updates to this developing story as they become available.

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© 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; trademarks and copyrights of materials linked herein are the property of their respective owners. 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 Congress Passes New Coronavirus Relief Package first appeared on Moneta | Fee Only Financial Planning | Investment Advisors | Clients Nationwide.

source https://monetagroup.com/cwcj-congress-passes-new-coronavirus-relief-package/