Economic Impact Payments Belong to Recipient, Not Nursing Homes or Care Facilities

Economic Impact Payments Belong to Recipient, Not Nursing Homes or Care Facilities

WASHINGTON – The Internal Revenue Service today alerted nursing home and other care facilities that Economic Impact Payments (EIPs) generally belong to the recipients, not the organizations providing the care.

The IRS issued this reminder following concerns that people and businesses may be taking advantage of vulnerable populations who received the Economic Impact Payments.

The payments are intended for the recipients, even if a nursing home or other facility or provider receives the person’s payment, either directly or indirectly by direct deposit or check. These payments do not count as a resource for purposes of determining eligibility for Medicaid and other federal programs for a period of 12 months from receipt. They also do not count as income in determining eligibility for these programs.

The Social Security Administration (SSA) has issued FAQs on this issue, including how representative payees should handle administering the payments for the recipient. SSA has noted that under the Social Security Act, a representative payee is only responsible for managing Social Security or Supplemental Security Income (SSI) benefits. An EIP is not such a benefit; the EIP belongs to the Social Security or SSI beneficiary. A representative payee should discuss the EIP with the beneficiary. If the beneficiary wants to use the EIP independently, the representative payee should provide the EIP to the beneficiary.

The IRS also noted the Economic Impact Payments do not count as resources that have to be turned over by benefit recipients, such as residents of nursing homes whose care is provided for by Medicaid. The Economic Impact Payment is considered an advance refund for 2020 taxes, so it is considered a tax refund for benefits purposes.

The IRS noted the language in the Form 1040 instructions apply to Economic Impact Payments: “Any refund you receive can’t be counted as income when determining if you or anyone else is eligible for benefits or assistance, or how much you or anyone else can receive, under any federal program or under any state or local program financed in whole or in part with federal funds. These programs include Temporary Assistance for Needy Families (TANF), Medicaid, Supplemental Security Income (SSI), and Supplemental Nutrition Assistance Program (formerly food stamps). In addition, when determining eligibility, the refund can’t be counted as a resource for at least 12 months after you receive it.”

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Changes to The PPP Loan Program Under the New PPPFA

Changes to The PPP Loan Program Under the New PPPFA

Big changes to the PPP loan program happened quickly, and last week’s changes brought a lot of new forgiveness deadlines. This information is based on the PPPFA (Paycheck Protection Program Flexibility Act) updates as of June 5th when the President signed the final ruling into law.

1)  8 Week Covered Period is Extended to 24 Weeks

Borrowers can choose to extend the eight- week period to 24 weeks, or they can keep the original eight-week period. New PPP borrowers will have a 24-week covered period, and in all cases, the covered period can not extend beyond Dec 31, 2020.

2) The Deadline to Apply For a PPP Loan is June 30th 

There are still funds available and the deadline to apply is now set at June 30th. So if anyone was not applying thinking they did not have time to spend the funds they should act quickly and apply before this month ends.

* There are conflicting reports on this loan deadline, the house version had December 31st, and a Senator demanded the program stop lending new funds on June 30th.

3) 75% Rule Reduced to 60%

Now borrowers must spend at least 60% on payroll, not the 75% in the original bill. However, there was a cliff provision meaning borrowers must spend at least 60% on payroll or none of the loan will be forgiven. However, this has already been updated just a few days after it was passed.

Due to the 24 week covered period, this rule should not be a problem. This along with the other changes should make it easier to achieve 100% forgiveness.

4) Rehire Date Moved From 6/30/20 to 12/31/20

Businesses now have until 12/31/20 to rehire employees back to the 2/15/20 level.

Due to the 12/31/20 rehire date, most typically won’t be filing forgiveness applications until January 2021 at the earliest.

5)  Required FTE Goal For The Rehire Exemption is Reduced If You Are Unable To Rehire People or Business Has Declined Due to HHS, CDC, or OSHA Requirements Regarding COVID-19

The legislation includes two new exceptions allowing borrowers to achieve full PPP loan forgiveness even if they don’t fully restore their workforce. Previous guidance already allowed borrowers to exclude from those calculations employees who turned down good faith offers to be rehired at the same hours and wages as before the pandemic. The new bill allows borrowers to adjust because they could not find qualified employees or were unable to restore business operations to Feb. 15, 2020, levels due to COVID-19 related operating restrictions.

We will need guidance to clarify the inability to restore business operations, but overall this is helpful to increase Safe Harbor and obtain full forgiveness.

6) New PPP Loans Will Have a Minimum Maturity of 5 Years

New borrowers now have five years to repay the loan instead of two. Existing PPP loans can be extended up to 5 years if the lender and borrower agree. The interest rate remains at 1%.

7) Allow Payroll Tax Deferral

Allow small businesses to take a PPP loan and also qualify for a separate, recently enacted payroll tax deferral, currently prohibited to prevent “double dipping.”

8) Extend Loan Forgiveness Period

Extend the period for when a business can apply for loan forgiveness, from within six months to within 10 months of the last day of the covered period, before it must start making interest and principal payments. Under the new bill, PPP loan interest and payment of principal and fees will be deferred until the loan is forgiven by the lender.

Here Are Some Indirect Changes to The PPP Loan Program: 

  • We assume the $15,385 per person payroll limit will be increased to $46,154 but need confirmation from the SBA.
  • The forgiveness application will be completely changed.
  • Although utilities, health insurance, SUTA, and other small costs are still eligible, they become less important. Rather than worry about tracking small receipts, we are recommending focusing on the big items that are easy to show to the lender that’ll review the forgiveness application – payroll and rent.

We will continue to keep you updated as we get additional guidance.

Help Your Children Get The Most Out Of Their First Post-College Job

Help Your Children Get The Most Out Of Their First Post-College Job

Your child finally graduated from college and is starting her first job. College probably did a great job preparing her for the technical aspects of her new career. But she may not be thinking about the softer skills of the work world like accepting feedback from her boss, networking with peers or taking best advantage of employee benefits.

Not all adult children welcome advice from their parents, but if your kids are open to your guidance, here are a few tips to share:

Learn your boss’s style. A good relationship with your leader is key to getting the most out of your first job. Find out your boss’s preferences and expectations, provide him or her with frequent updates on your projects, ask for occasional feedback if your boss doesn’t provide it and respond positively to constructive criticism.

Be professional. In college you may have been used to sliding into class a few minutes late or wearing yoga pants every day. But once you enter the work world, a professional approach can go a long way. Pay attention to your office’s culture and follow your boss’s and coworkers’s leads regarding start and end times, lunch breaks and your wardrobe and overall appearance. Be mindful not to overuse your personal cell phone — and if you feel compelled to check social media or text a friend, try to do so in a private space away from your desk.

Network. Set up brief meetings with each member of your department to find out what their role is, what they’re working on, how you might be able to help them and what they’re interested in outside of work. Also seek out mentors — people with more experience who can help guide you toward success.

Create a professional development plan with concrete goals and action steps. Many companies will provide you with a development plan framework, but if yours doesn’t, create your own plan. Talk to Human Resources, your leader and others in your field to find out what certifications, courses, degrees or professional groups might help you advance your career.

Make the most of your company’s benefits and compensation package. (Parents, here’s an area where your guidance can be invaluable, especially if you’ve footed the bill in the past and your kids haven’t had to think much about finances.) Here are a few key things to keep in mind:

  • Know what to expect from your paycheck. If you haven’t started your new job yet, be aware of the deductions that will be taken from your paycheck. Deductions will include federal income tax, federal and state insurance taxes, Medicare taxes, state income taxes, contributions to your 401(k) and benefits such as health insurance or disability insurance. If you want to know approximately how much your first paycheck will be, here’s a helpful Paycheck Calculator.
  • Save for your future goals and your future self (retirement) — contribute to your 401(k) or other employer-sponsored savings plan. A specific percentage of your salary will be automatically withheld from your paycheck using pre-tax dollars. About 75 percent of employers offer a matching program, with a typical employer match of 50 percent of your contribution, up to 6 percent of your salary. Be sure to take advantage of this free money! Your 401(k) will grow tax deferred until you withdraw it in retirement.

    When you’re still paying off student loans and have other expenses to think about, it can be hard to prioritize saving for retirement. But start saving now while time is on your side! For example, if you save 6 percent of a $45,000 salary at age 22 with a 50 percent employer match (3%), you’ll retire with more than a million dollars at age 65. But if you don’t start saving until age 35, your retirement savings will likely be less than half that amount! To figure how much you should save, try a 401(k) calculator.

  • Enroll in employer health insurance. If your employer doesn’t offer health insurance, federal law allows you to be insured as a dependent on your parents’ health insurance plan until age 26. If your employer does offer health insurance, they’ll usually pay a percentage of the monthly premium. Employers pay an average of 82 percent of the monthly premium for single coverage, and deduct the rest from your paycheck.

    If your employer offers multiple health insurance options, consider the following about the various plans: What services are covered (especially important if you have a health condition)? What providers are covered? How much will it cost, considering both your monthly contribution toward your premium, as well as any deductible and copayment amounts you pay out-of-pocket toward your care?

  • Take advantage of education assistance. More than 90 percent of employers offer some level of tuition assistance for advanced studies that will help you in your job. Some employers will even help employees pay back their existing student loans.
  • Use employee discounts. Many employers offer discounts toward things like cell phone plans, gym memberships, tickets to local sporting events or company products.

Need a little extra help? Here’s a useful checklist to help them stay on track. And do not hesitate to call the office for any assistance with any of your financial needs.

This information is brought to you by Athene — where unconventional thinking brings innovative annuity solutions that can help make your retirement dreams a reality.

Reminder: Deadline Postponed to July 15 For Those Who Pay Estimated Taxes

Reminder: Deadline Postponed to July 15 For Those Who Pay Estimated Taxes

WASHINGTON – The Internal Revenue Service reminds taxpayers that estimated tax payments for tax year 2020, originally due April 15 and June 15, are now due July 15. This means that any individual or corporation that has a quarterly estimated tax payment due has until July 15 to make that payment without penalty.

In response to the COVID-19 outbreak, the Treasury Department and the Internal Revenue Service are providing special tax filing and payment relief to individuals and businesses. This relief applies to federal income tax returns and tax payments (including tax on self-employment income) otherwise due April 15, 2020. This relief does not apply to state tax payments or deposits or payments of any other type of federal tax.

Who needs to pay quarterly?

Most often, self-employed people, including many involved in the sharing economy, need to pay quarterly installments of estimated tax. Similarly, investors, retirees and others often need to make these payments. That’s because a substantial portion of their income is not subject to withholding. Other income generally not subject to withholding includes interest, dividends, capital gains, alimony and rental income.

Special rules apply to some groups of taxpayers, such as farmers, fishermen, casualty and disaster victims, those who recently became disabled, recent retirees and those who receive income unevenly during the year.

Taxpayers can avoid an underpayment penalty by owing less than $1,000 at tax time or by paying most of their taxes during the year. Generally, for 2020 that means making payments of at least 90% of the tax expected on their 2020 return.

Taxes are pay-as-you-go

This means taxpayers need to pay most of their taxes owed during the year as income is received. There are two ways to do that:

  • Withholding from pay, pension or certain government payments such as Social Security; and/or
  • Making quarterly estimated tax payments during the year.

Tax Withholding Estimator

If a taxpayer receives salaries and wages, they can avoid having to pay estimated tax by asking their employer to withhold more tax from their earnings. To do this, they would file a new Form W-4.

If a taxpayer receives a paycheck, the new and improved Tax Withholding Estimator can help them make sure they have the right amount of tax withheld from their pay. The tool is now more mobile friendly and replaces the Withholding Calculator on IRS.gov. The Tax Withholding Estimator offers workers, as well as retirees, self-employed individuals and other taxpayers a clear, step-by-step method for effectively checking their withholding to protect against having too little tax withheld and facing an unexpected tax bill or penalty at tax time next year.

How to pay estimated taxes

Form 1040-ES, Estimated Tax for Individuals, includes instructions to help taxpayers figure their estimated taxes. They can also visit IRS.gov/payments to pay electronically. IRS offers two free electronic payment options where taxpayers can schedule their estimated federal tax payments up to 30 days in advance with Direct Pay or up to 365 days in advance with the Electronic Federal Tax Payment System (EFTPS).

Need assistance?

Feel free to contact the office for help in calculating and paying your estimated taxes.

 

Considering an Early Retirement Withdrawal? CARES Act Rules and What You Should Know.

Considering an Early Retirement Withdrawal? CARES Act Rules and What You Should Know.

If you’re out of work and need income, you might be considering withdrawing from your retirement savings. Normally, if you withdraw money from traditional Individual Retirement Accounts (IRA) and employer-provided accounts before reaching age 59 ½, you have to pay a 10 percent early withdrawal penalty.

Furthermore, withdrawals from your current employer-provided plans are limited to an amount needed to meet a limited set of approved hardships, like avoiding foreclosure, home repairs after a disaster, or medical expenses.

If you’ve experienced hardship as a result of the pandemic, temporary changes to the rules under the CARES Act may give you more flexibility to make a withdrawal from tax-deferred retirement accounts during 2020.

Please note that this blog discusses withdrawals from retirement plans—not retirement plan loans. You may want to spend some time weighing the risks and benefits to withdrawing money versus taking a loan. Learn more about taking a loan from your retirement accounts .

What tax-deferred accounts are affected by the changes?

  • a traditional IRA
  • an employer-provided retirement plan such as a 401(k) or 403(b) or other types of defined contribution plans.

Please note that employers and plan sponsors have to opt in by agreeing to follow the CARES Act provisions. Many employers are not offering the option.

How do I qualify for the exemption?

  • You, your spouse, or dependent was diagnosed with COVID-19 by a CDC-approved test , OR
  • You experienced adverse financial consequences as a result of certain COVID-19-related conditions, such as quarantine, lay off, furlough, reduction in hours, the closing or reduction of your business, an inability to work due to lack of childcare, or other factors identified by the Department of Treasury .

coronavirus-related distribution  is one that meets this criteria and is made from an eligible retirement plan to a qualified individual from January 1, 2020, to December 30, 2020.

How much can you withdraw without penalty?

You are allowed withdrawals of up to $100,000 per person taken in 2020 to be exempt from the 10 percent penalty. If you have more than $100,000 in one of these retirement accounts, note that it is $100,000 per person and not per account. You can’t take out more than $100,000 total from all of your accounts. Withdrawals from an employer-based account are only possible if the employer agrees to this option under the CARES Act.

Please note that the CARES Act eliminates the 20 percent automatic withholding that is used as an advance payment on the taxes that you may owe on employer-provided plans like your 401(k). This 20 percent withholding is not a requirement when you cash out or withdraw from a traditional IRA plan. So, you may not want to spend the full amount you withdraw because you might owe some of that money in taxes later.

Will the full balance be available to you?

If you are withdrawing from an employer-based account and are relatively new to your job and are not considered fully-vested for retirement purposes, the portion of the funds that were contributed by your employer may not be available to you. Even if you are fully vested, your employer may not allow you to access that portion of your account. Remember, you can’t take out more than $100,000 total.

How long will it take to get the money you withdrew from your accounts?

Regardless of how much you can access, you should know that withdrawing money from a retirement account is not as simple as transferring money from a savings to a checking account. The process could take several weeks. If you need the money for something time-sensitive, give yourself at least a two-week buffer in case paperwork gets delayed or is lost. Many companies are struggling to provide customer support via phone or online, and their ability to handle transactions may be limited as well. Talk to your plan provider or administrator about the steps and ask for an estimated timeline.

Is it better to withdraw from my retirement account now, or let it grow?

You may be withdrawing from a fund that has lost value during the COVID-19 pandemic. When you withdraw money from an investment portfolio in a “low” market, you are limiting its ability to grow and regain its value when the market rebounds. A $100,000 withdrawal today, at a growth rate of 5 percent, would grow to about $160,000 in 10 years without any additional contributions.

Possible tax consequences and ways to deal with them

There are possible tax consequences and different ways to deal with them. While the Act protects you from the 10 percent early distribution penalty, it does not exempt the withdrawn amount from taxes. The amount will be added to your annual income and taxed as such. If you don’t ask to have a percentage of the amount set aside for taxes when you withdraw, you could end up owing a lot when you file your 2020 taxes. The CARES Act distributes the tax burden over a period of up to three tax years, unless you choose not to, and lets you re-contribute some or all the funds that you withdrew by the third year. You may need to hire a tax professional to help you file. We are here to help, contact our office for assistance.

IRS Sending Out New Coronavirus Stimulus Debit Cards Instead of Checks

IRS Sending Out New Coronavirus Stimulus Debit Cards Instead of Checks

The U.S. Treasury Department has announced that the IRS will begin sending out four million stimulus payments on prepaid debit cards this week instead of mailing paper checks. With these so-called “Economic Impact Payments” (EIP) cards, clients can make purchases, get cash from in-network ATMs and transfer funds to their personal bank account without incurring any fees. They may also check their card balance online, by mobile app or by phone at no cost.

The EIP cards can be used online, at ATMs or at any retail location where Visa is accepted. This free, prepaid card also provides consumer protections available to traditional bank account owners, including protections against fraud, loss and other errors. It will include instructions on how to activate and use the cards.

“Treasury and the IRS have been working with unprecedented speed to issue Economic Impact Payments to American families. Prepaid debit cards are secure, easy to use, and allow us to deliver Americans their money quickly,” said treasury Secretary Steven T. Mnuchin in a press release. “Recipients can immediately activate and use the cards safely.”

The standard stimulus payment is $1,200 for single filers or $2,400 for joint filers. In addition, parents may receive $500 for each qualified child. But these amounts are phased out based on income levels.

EIP cards will be available to taxpayers who don’t have bank account information on file with the IRS. Currently, they are being distributed to those who had tax returns processed by either the Andover or Austin IRS Service Centers. If this applies to clients, give them a head’s up that that the debit cards are coming. They will likely appreciate this timely information.

The IRS began distributing economic stimulus payments in April via direct deposit to taxpayers who had up-to-date information on file. It followed up with payments by paper check starting in mid-May. However, the agency estimated it might take as long as four to five months to mail out the millions of remaining checks. Now it says that sending four million prepaid debit cards will cut down on the time.

The U.S. Treasury has already delivered more than 140 million payments worth $239 billion to taxpayers by direct deposit to accounts at financial institutions, Direct Express card accounts and by check.

EIP Cards are part of the Treasury’s U.S. Debit Card program providing prepaid debit card services to federal agencies for the electronic delivery of non-benefit payments. MetaBank was selected as the Treasury’s financial agent for the U.S. Debit Card program in 2016 following a competitive selection process conducted by the Bureau of the Fiscal Service.

Finally, be aware that some are viewing the use of the EIP cards as a test for future stimulus payments, if any are forthcoming. If all goes well, this might be a simpler and faster approach to distributing money to taxpayers.