by Pete McAllister | Accounting News, CARES Act, COVID-19, News, Relief Bill, Stimulus, Stimulus Package, Tax
President Trump recently signed a second stimulus package—called the Consolidated Appropriations Act, 2021 (Act)—into law. The legislation includes over $300 billion in aid for small businesses. Below is a breakdown of some of the business tax changes and extenders in the new COVID-19 relief bill.
Payroll Tax Credit for Paid Sick and Family Leave
The refundable payroll tax credit for paid and sick family leave, established in the Families First Coronavirus Response Act, is extended until March 31, 2021. The tax credits are modified so that they now apply to practically any payments made to workers for these purposes.
Payroll Tax Repayment
The time frame for employees to repay deferred employment taxes under the President’s executive order, which was issued in August 2020, has been extended from April 2021 to December 31, 2021.
Employee Retention Credit
The Employee Retention Credit (ERC) under the CARES Act has extended to July 1, 2021. Further, the refundable tax credit has increased from 50% to 70%, the per-employee wages limitation has increased from $10,000 per year to $10,000 per quarter, and the determination of a large employer for purposes of the ERC has increased from 100 to 500 employees.
30-Year Depreciation of Certain Residential Rental Property
The new law determines that the recovery period relevant to residential rental property placed in service before Jan. 1, 2018, and held by an electing real property trade or business, is 30 years.
Business Meal Deduction
Rather than the current 50% business expense deduction for meals, the bill temporarily allows a 100% expense deduction for meals provided by restaurants in 2021 and 2022.
Deduction for Energy Efficient Commercial Buildings
The deduction for energy-efficient improvements to commercial buildings, such as lighting, heating, cooling, ventilation, and hot water systems was made permanent. The amount will be inflation-adjusted after 2020.
Changes to the Work Opportunity Tax Credit
If employers hire workers who are members of one of more of ten targeted groups under the Work Opportunity Tax Credit (WOTC) program, they are permitted to use an elective general business tax credit. Previously applicable to hires before 1/1/2021, the TCDTR extends the credit through 2025.
Employer Payments of Student Loans
Section 127, which permits employers to provide certain educational assistance to employees on a tax-free basis, was modified under the CARES Act to authorize the payment by an employer of principal or interest on specific employee qualified education loans through December 31, 2020. The Consolidated Appropriations Act expands this through December 30, 2025. As the pandemic subsides, employers may want to consider this valuable tax-free benefit.
Health and Dependent Care Flexible Spending Arrangements
The bill allows taxpayers to roll over unused funds in their health and dependent care flexible spending accounts from 2020 to 2021 and from 2021 to 2022. This arrangement also permits employers to grant employees a 2021 midyear prospective adjustment in contribution amounts.
by Daniel Kittell | Accounting News, Fraud, IRS, News, Resources
While a majority of the population is covered by Social Security (SS) to some degree, many do not fully understand the program, resulting in frustration and confusion when it comes time to receive benefits. In an effort to curb miscommunication or misgivings, the Social Security Administration (SSA) has increased its informational output in recent years. The SSA’s 2017 fact sheet provided numerous statistics for future and current recipients, and we’ve outlined the top stats below.
- There are 171 million individuals covered by Social Security
- To qualify for benefits, you must “earn” 40 work credits in your lifetime, with the ability to collect up to 4 credits annually (valued at $1,300 per credit)
- 71% of recipients are retired workers (in 2017)
- SS payouts accumulate 8% from ages 62 to 70, so if you’re close to retirement, a great way to boost your payout is to wait to enroll
- The remaining 29% of benefits will go to the disabled and survivors
- In 2017, approximately 16% of benefits will be received by disabled workers and the remaining 13% goes to survivors of deceased beneficiaries
- In 2017, 62 million Americans will receive $955 billion in benefits
- Funding is acquired from 3 sources: interest on the program’s asset reserves, a 12.4% payroll tax on all earned income and the taxation of the benefits themselves
- 61% of seniors rely on their SS benefits for at least half their monthly income
- 48% of married seniors and 71% of unmarried retirees depend on Social Security for at least half their income
- Of unmarried seniors, 43% rely on benefits for about 90% of their income
- Close to half of single seniors look to Social Security to provide the majority of their income each month
- Most 65 year olds will live approximately 20 more years
- In 1960, the average life expectancy was 70, but it has since increased to 79, which means it is wise to factor in a longer lifespan since the program is only intended to account for 40% of wages in retirement
- By 2035, the senior population is set to grow by 65%
- Currently, those 65 and up number 48 million people, but the impending retirement of many baby boomers means that number could grow to 79 million over the next 18 years
- By 2035, the worker-to-recipient ratio will decline by 21%
- Presently, the worker-to-beneficiary ratio is 2.8-to-1, but experts estimate that ratio could drop to 2.2-to-1 in the next 18 years
- In the event of a long-term disability, about 90% of workers have protection
- While 67% of the private workplace does not offer long-term disability insurance, Social Security covers approximately 90% of workers ages 21 to 64 in the event of a work ending disability
- Of workers ages 20 to 49, about 96% do have protective insurance for survivors
- Since one in eight 20 year olds won’t live to see age 67, at least the majority of those who work in covered employment have survivors protection insurance for surviving spouses and children
- One third of workers report having nothing set aside for retirement
- With a potential 23% cut in benefits in 2034, the fact that 31% of the current working population has no money set aside, leaving them fully reliant on Social Security, is less than promising
In conclusion, although Social Security will be around for the long run, and likely covers more income than many believe, it would be wise to find secondary funding for retirement since Social Security was never intended to serve as your principal source.
by Daniel Kittell | Accounting News, Fraud, IRS, News, Resources
For years, taxpayers have been told that the IRS will never call to inquire about their taxes or collect unpaid funds. Rather, the IRS has operated under the communication policy that they will contact taxpayers by written notice only. However, immediately following this year’s tax season, in April 2017, the IRS enacted a change in their policy to begin calling individuals with overdue tax bills, but there are specifics to when or why they will contact you via phone.
Unfortunately, as many of us know, dozens and dozens of scam artists exist in today’s world, who will surely be attempting to capitalize on this new policy to con you out of your own money. With that in mind, we have assembled some information regarding the new policy to help you recognize when you’re actually being contacted by the IRS, and when you’re being scammed.
- The IRS has contracted out 4 private collection agencies: Conserve, Pioneer, Performant, and CBE Group
- These agencies will only call individuals with long overdue taxes, namely those with accounts who have not interacted with the IRS in more than 365 days. Thus, if you were a bit late on your April 2017 taxes, you didn’t receive a call in May, and won’t unless they go unpaid through April 2018.
- The IRS will still send written notices first stating your account is being turned over to a collection agency
- There are many practices or tactics used by scam artists over the phone that the IRS will never follow, even when calling though their contracted collection agencies. The IRS will NOT:
- Threaten to deport you, foreclose your property or withdraw your license
- Threaten to bring in law enforcement or other agencies to arrest you for lack of payment
- Demand payment without allowing you to inquire against or appeal the amount owed
- Request immediate payment over the phone. They will never call without sending a bill or notice via mail first
- Ask for credit or debit card numbers over the phone
- Demand a certain form of payment (i.e. a wire transfer, prepaid debit card or iTunes gift card)
If you think you have been scammed, or have an issue with one of the contracted collection agencies, the IRS suggests contacting the hotline for the Treasury Inspector General for Tax Administration at 800-366-4484, or visit tigta.gov. If you do receive a call from someone claiming to be from the IRS and are concerned with the validity of the call in any way, do not send funds. If you have questions about owing taxes or would like to confirm that a call you received is legitimate, contact the IRS directly at 1-800-829-1040.
by Pete McAllister | Accounting News, Audit and Accounting, Healthcare, IRS, News, Professional Services, Resources, Retail & Distribution, Tax Consulting, Tax Planning, Tax Planning - Individual, Tax Preparation - Individual
As the third year of the Patient Protection and Affordable Care Act (PPACA) approaches, employers need to be aware of additional fees that will be assessed on insurers and plan administrators of self-insured plans beginning in 2013. In addition, reporting health care costs to the government begins.
The new fees will increase the cost of providing group health plans for employees. They include:
- Fees to fund research on patient-centered outcomes
- Transitional reinsurance fees
- Pay or play penalties
- Cadillac tax
Fees to fund research on patient-centered outcomes
Health care reform created the Patient-Centered Outcomes Research Institute (PCORI), which is charged with promoting research to evaluate and compare the health outcomes and clinical effectiveness, risks, and benefits of medical treatments, services, procedures, and drugs. PCORI is to be funded in part by fees assessed on health insurers and sponsors of self-insured group health plans. This fee is commonly referred to as the “comparative effectiveness fee” or “PCORI fee.” The PCORI fee will be assessed at $1.00 times the average number of covered lives (employees and dependents) for the first plan or policy year ending on or after October 1, 2012. Employer plan sponsors must choose a method for calculating the average number of covered lives for their required annual fees by December 31, 2012, for calendar year plans.
Transitional reinsurance fees
The transitional reinsurance program will require health insurance issuers, as well as certain plan administrators on behalf of self-insured group health plans, to make contributions to a transitional reinsurance program for the three-year period beginning January 1, 2014. This fee is likely to result in additional costs for employer plan sponsors and – depending on whether the plan at issue is self-administered – certain additional reporting obligations.
Pay or play penalties
In 2014, large employers with fifty or more full-time equivalent employees could be subject to two potential penalties: the No Coverage Penalty and the Unaffordable Coverage Penalty. The No Insurance Penalty subjects certain employers to a $2,000 per full-time employee penalty (excluding the first thirty full-time employees) under specific conditions. The Unaffordable Coverage Penalty applies if an employer offers its full-time employees the opportunity to enroll in coverage under an employer plan that either is unaffordable (relative to an employee’s household income) or does not provide minimum value. This penalty is $3,000 for every full-time employee who receives a subsidy for coverage in a state exchange.
In some cases, the total cost of these penalties may be less than the total cost of providing coverage. CliftonLarsonAllen’s Health Insurance and Penalty Calculator provides information about the impact of reform on individual companies.
Cadillac tax
Starting in 2018, insurers of employer-sponsored plans or companies that self-insure their own plans will be subject to an excise tax if their premiums are in excess of $10,200 for individual coverage and $27,500 for family coverage. Roughly 60 percent of large employers believe their plans would trigger the tax unless they take action to avoid it, according to a 2011 survey by Mercer, a human resources consulting firm. Although the tax is to be imposed on insurers, the effects are likely to trickle down to consumers.
Many health care reform provisions will impact the cost to provide health care coverage for employees. Employers should be aware of the additional fees and reporting requirements and work with their benefits consultants to determine the financial impact of health care on their businesses. Plan sponsors should have already verified that they have the systems in place to determine and report the aggregate cost of applicable employer-sponsored coverage for 2012 on employees’ Forms W-2.
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by Brenda Eoff | Accounting News, Business Consulting, CPA, News, Professional Services, Resources, Tax
Two committees of the American Institute of CPAs (AICPA) – the Professional Ethics Executive Committee (PEEC) and the Accounting and Review Services Committee (ARSC) – have extended deadlines on exposure drafts of proposed revisions of existing requirements for nonattest services and of requirements for compilation services.
Requirements of Nonattest Services
The PEEC has agreed to extend the deadline from August 30, 2012, to November 30, 2012, for comments on an exposure draft dated June 29, 2012, of proposed revisions to Interpretation 101-3, “Nonattest Services.”
The committee is proposing that financial statement preparation and cash-to-accrual conversions performed by a CPA member for a client should be considered nonattest services and subject to the revised requirements.
Under the proposed revisions, the preparer is no longer required to perform a compilation with respect to those statements unless engaged to do so.
The exposure draft also considers the cumulative effect that providing multiple nonattest services can have on independence.
“We have extended the deadline because we want to give people additional time to understand the impact of these changes,” said Ellen Goria, senior technical manager of AICPA’s Professional Ethics Division. “We expect the major impact to be experienced by individuals who are preparing financial statements for attest clients. Their systems and processes may need to be modified so that they can be in compliance. We will be providing additional documents to explain this further,” she said.
Requirements for Compilation Services
The ARSC has extended its deadline for comment on proposed revisions to Statements on Standards for Accounting and Review Services (SSARS) to November 30, 2012. The proposed revised SSARS are AR section 70, Association with Unaudited Financial Statements, and AR section 80, Compilation of Financial Statements (Revised).
Existing SSARS require the accountant to perform a compilation engagement whenever the accountant prepares and presents financial statements to a client or third parties. Proposed revisions to SSARS would remove the preparation of financial statements from the attest function, the exposure draft says.
The AICPA stated in its announcement that the proposed SSARS would also “revise the objective of the compilation engagement and provide requirements and guidance when an accountant is associated with financial statements that were not subjected to a compilation, review, or audit engagement.”
The Exposure Draft, Association with Unaudited Financial Statements, includes the following requirements if an accountant is requested to be associated with unaudited financial statements.
The accountant should:
- Read the unaudited financial statements.
- Consider whether the unaudited financial statements appear free from material inconsistencies with other knowledge or information of which the accountant may be aware.
- If after performing the procedures in paragraphs 6a and 6b, the accountant decides to permit the use of the accountant’s name in a report, document, or written communication containing the statements, the accountant should request that the entity clearly indicate that the financial statements were not compiled, reviewed, or audited.
The proposed SSARS also addresses the accountant’s responsibilities when engaged to compile financial statements. The proposed revisions state that the objectives of a compilation engagement provide definitions and enumerate specific requirements that apply to compilation engagements.
The ARSC stated in its exposure draft that it “is supportive of proposed revisions of Interpretation 101-3 because it is in harmony with how the 2011 edition of Government Auditing Standards (the Yellow Book) treats the preparation of financial statements. The proposed clarification would also be consistent with the views of many practitioners who believe that the preparation of financial statements is a responsibility of management and an essential part of an entity’s system of internal control.”
