Month: October 2021

Preface: Parents should have received another round of monthly child tax credit payments recently. The first three payments were sent on July 15, August 15 and September 15, while the fourth payment was sent on October 15. 

American Rescue Plan: Advanced Child Tax Credit

The American Rescue Plan Act of 2021 modifies a number of tax provisions, including a third round of direct budget-bolstering tax payments, enhancements of many personal tax credits meant to benefit people with lower incomes and children, extensions of highly popular payroll tax credits for employers first instituted at the beginning of the pandemic, and changes related to retirement plan funding. This blog explains the changes to the child tax credit that may affect you.

 

The American Rescue Plan includes a significant overhaul of the child tax credit, but only for the 2021 tax year. Under prior tax laws, the amount of the child tax credit was equal to $2,000 per child, but only $1,000 of that amount was refundable (meaning that the taxpayer receives the credit even if there is an insufficient amount of taxes to be credited against). The American Rescue Plan increases the amount to $3,000 per child (or $3,600 for a child under the age of six) and makes the credit amount fully refundable. The American Rescue Plan also increases the maximum age of qualifying children to include 17-year old children.

 

The excess of the amount of the credit over the present-law $2,000 amount is phased out by $50 for every $1,000 of modified adjusted gross income in excess of the threshold amount ($150,000 for joint filers, $112,500 for head of household filers, and $75,000 for single filers). Once the excess amount is eliminated, the amount of the credit remains at $2,000 until the present law phaseout thresholds are reached ($400,000 for joint filers, $200,000 for all other filers).

 

The Treasury and IRS were directed by the American Rescue Plan to issue advance payments of half of the credit amount beginning on July 1, 2021. The advance payments are to be issued monthly, if feasible, or as frequently as possible if monthly payments are not feasible. The remaining half of the credit not paid in advance is received when filing 2021 returns, as the full amount is claimed on the return but reduced by the aggregate amount received in advance.

 

In the case of a taxpayer who received advance payments in error (for example, where a 2019 or 2020 return indicated a dependent child who is no longer a dependent in 2021), the American Rescue Plan provides a “hold-harmless” provision, protecting taxpayers from having to pay back overpayments of up to $2,000 per child. The full $2,000 amount is ratably reduced for taxpayers with income above a threshold amount ($40,000 for single filers, $50,000 for head of household filers, and $60,000 for joint filers). The $2,000 is completely eliminated for taxpayers with income double the applicable threshold amounts, and the entirety of the overpayment must be paid back.

 

Congress directed the IRS and Treasury to create a website for taxpayers to opt out of receiving advance payments, or to provide information on status changes that would impact the amount of the tax credit received.

 

If you have any questions on how the changes to the child tax credit under the American Rescue Plan affect your specific tax attributes, please call our office.

Preface: While nursing home costs can be disconcerting to many retirees and caregivers, there are some circumstances where out-of-pocket expenses may be reduced.

Nursing Home Costs and Ways to Pay

The cost of nursing home care in the U.S is prohibitive for many, and it can vary widely between regions and states, from around $5,000 per month up to a surreal $25,000 per month. How much a nursing home charges depends on its geographic location, staffing levels, the complexity of care offered and the facility’s size and quality. Additionally, there may be “à la carte” costs to contend with. For example, a facility that offers social services like financial management aid is likely to charge extra for that feature, among others.

Nursing home prices can make it tempting to look for less costly, less supportive residential care options such as assisted living. However, nursing homes should never be conflated with assisted living facilities. Knowing the difference between the two is an important part of making sure you or someone you are responsible for is getting a sufficient level of aid and supervision…….

……Regardless of how you come up with the cash for your loved one’s nursing home stay, it’s crucial to work with reputable financial institutions and to ensure that you understand all of the terms and fees involved. It’s also important to check with your skilled nursing facility about what types of care and services are included in the fees being charged, and which ones may cost extra.

…….At the other end of the nursing home spectrum is high-level inpatient medical care, referred to as skilled nursing or rehabilitation care. Under certain circumstances….For Medicare to cover this care, it must be provided in the skilled nursing facility wing of a hospital, in a stand-alone skilled nursing or rehabilitation facility, or in the skilled nursing or rehabilitation unit within a “multilevel” facility…….

Read entire article here…..Nursing Home Costs and Ways to Pay

Preface: Great businesses are built one productive person at a time – The ONE Thing

A Book Summary |  The ONE Thing

The ONE Thing — Gary Keller

Book Summary: Samuel Thomas Davies

The Book in Three Sentences

1. 1. 1. 1. The ONE Thing is the best approach to getting what you want.
         2. Success is a result of narrowing your concentration to one thing.
         3. Success is built sequentially, one thing at a time.

To achieve an extraordinary result you must choose what matters most and give it all the time it demands. This requires getting extremely out of balance in relation to all other work issues, with only infrequent counterbalancing to address them.

The Focusing Question collapses all possible questions into one: “What’s the ONE Thing I can do such that by doing it everything else will be easier or unnecessary?”

Anders Ericsson observed that “the single most important difference between {the} amateurs and the three groups of elite performers is that the future elite performers seek out teachers and coaches and engage in supervised training, whereas the amateurs rarely engage in similar types of practice.”

Achieving extraordinary results through time blocking requires three commitments. First, you must adopt the mindset of someone seeking mastery. Second, you must continually seek the very best ways of doing things. And last, you must be willing to be held accountable to doing everything you can to achieve your ONE Thing.

Accountable people achieve results others only dream of.

A Book Summary |  The ONE Thing

“If you can’t feed a hundred people, then feed just one.” — Mother Teresa

How Fiat Money Made Beef More Expensive

In 1909, there were 51.1 pounds of beef, 41.2 pounds of pork, and 10.4 pounds of chicken available per capita, for a total of 102.7 pounds of all meats per capita. In 2019 the figures were, respectively, 55.4, 48.8, and 67.0 per capita, for a total of 171.2 pounds of all meats per capita. While meat consumption had gone up, the composition of the diet had changed drastically. If we add the fact that veal and delicious lamb, minor components in 1909 at 5 and 4.4 pounds per capita, respectively, had virtually disappeared from the diet in 2019, the change becomes even more noticeable……….

………….Since investment has flown into the production of grains, pork, and poultry, productivity in these fields has increased more than in beef production, and the supply of these foodstuffs has risen while their prices have fallen relative to the supply and price of beef.

People’s food budgets are generally pretty fixed, meaning that even though incomes rise the extra income goes to the purchase of other consumer goods, not food, a generalization known as Engel’s law. Beef therefore increasingly becomes a luxury, something only regularly consumed by the well-to-do, which working-class and lower middle-class people only enjoy on special occasions. 

Read entire article here: 

 

“Remember that happiness is a way of travel, not a destination.”

2021 IRS Business Tax Expensing for Auto Mileage

For tax purposes businesses generally can deduct the entire cost of operating a vehicle when following tax rules guidance. Alternatively, they can use the business standard mileage rate, subject to some exceptions in the tax code. The mileage deduction is calculated by multiplying the standard mileage rate by the number of business miles traveled. Self-employed individuals also may use the standard rate, as can employees whose employers do not reimburse, or only partially reimburse, them for business miles driven.

Many taxpayers use the IRS business standard mileage rate to help simplify their recordkeeping. Using the IRS business standard mileage rate takes the place of deducting almost all of the costs of your auto. The IRS business standard mileage rate takes into account auto costs such as maintenance and repairs, gas and oil, depreciation, insurance, and license and registration fees.

Beginning on January 1, 2021, the IRS standard mileage rates for the use of an auto (also vans, pickups or panel trucks) is:

• • • • • 56 cents per mile for business miles driven, down from 57.5 cents for 2020

• • • • • 16 cents per mile driven for medical or moving purposes, down from 17 cents for 2020

• • • • • 14 cents per mile driven in service of charitable organizations, no change from 2020

Mileage related to unreimbursed business expenses and moving expenses are limited to certain taxpayers as a result of the Tax Cuts and Jobs Act for tax years 2018 through 2025:

Business expenses:

• • • • • • • Unreimbursed business expenses subject to a 2% floor as an itemized deduction have been eliminated.

• • • • • • • Eligible taxpayers for business mileage expenses:

• • • • • State and local government officials paid on a fee basis, and certain performing artist

The IRS standard mileage rate for business is based on an annual study of the fixed and variable costs of operating an automobile. The IRS rate for medical and moving purposes is based on the variable costs from analysis.

Taxpayers may have the option of calculating the IRS actual costs of using their autos rather than using the IRS standard mileage rates. If instead of using the IRS standard mileage rate you use the IRS actual expense method to calculate your vehicle deduction for qualifying business miles driven, you must maintain very careful records of qualifying expenses. When using this IRS method, it is vital to keep track of the IRS actual costs during the year to calculate your deductible vehicle expenses. One of the most important tools is a mileage logbook. Business with auto fleets must apply actual costs for mileage expenses.

If you have additional questions on 2021 IRS business tax expensing for auto mileage, please contact our office.