Approximately 70 million Americans will see a 1.3 percent increase in their Social Security benefits and Supplemental Security Income (SSI) payments in 2021. Federal benefit rates increase when the cost-of-living rises, as measured by the Department of Labor’s Consumer Price Index (CPI-W).
The CPI-W rises when inflation increases, leading to a higher cost-of-living. This change means prices for goods and services, on average, are a little more expensive, so the cost-of-living adjustment (COLA) helps to offset these costs.
The Social Security Administration will mail COLA notices throughout the month of December to retirement, survivors, and disability beneficiaries, SSI recipients, and representative payees. But, if you want to know your new benefit amount sooner, you can securely obtain the Social Security COLA notice online using the Message Center in your my Social Security account. You can access this information in early December prior to the mailed notice.
If you prefer to access your COLA notice online instead of receiving the mailed notice, you can log in to your personal my Social Security account to opt out of a mailed COLA notice and any other notices that are available online by updating your Preferences in the Message Center. You can also choose to receive a text or email alert when there is a new notice. That way, you always know when we have something important for you – like your COLA notice. If you don’t have an account yet, you must create one by November 18, 2020 to receive the 2021 COLA notice online.
January 2021 marks other changes that will happen based on the increase in the national average wage index. For example, the maximum amount of earnings subject to Social Security payroll tax in 2021 will be higher. The retirement earnings test exempt amount will also change in 2021.
Be the first to know! Sign up for or log in to your personal my Social Security account today. Choose email or text under “Message Center Preferences” to receive courtesy notifications.
You can find more information about the 2021 COLA here.
WASHINGTON — The Internal Revenue Service announced today that the deadline to register for an Economic Impact Payment (EIP) is now November 21, 2020. This new date will provide an additional five weeks beyond the original deadline.
The IRS urges people who don’t typically file a tax return – and haven’t received an Economic Impact Payment – to register as quickly as possible using the Non-Filers: Enter Info Here tool on IRS.gov. The tool will not be available after November 21.
“We took this step to provide more time for those who have not yet received a payment to register to get their money, including those in low-income and underserved communities,” said IRS Commissioner Chuck Rettig. “The IRS is deeply involved in processing and programming that overlaps filing seasons. Any further extension beyond November would adversely impact our work on the 2020 and 2021 filing seasons. The Non-Filers portal has been available since the spring and has been used successfully by many millions of Americans.”
Special note: This additional time into November is solely for those who have not received their EIP and don’t normally file a tax return. For taxpayers who requested an extension of time to file their 2019 tax return, that deadline date remains October 15.
To support the ongoing EIP effort, many partner groups have been working with the IRS, helping translate and making available in 35 languages IRS information and resources on Economic Impact Payments.
To help spread the word, the IRS sent nearly 9 million letters in September to people who may be eligible for the $1,200 Economic Impact Payments but don’t normally file a tax return. This push encourages people to use the Non-Filers tool on IRS.gov.
“Time is running out for those who don’t normally file a tax return to get their payments,” Rettig added. “Registration is quick and easy, and we urge everyone to share this information to reach as many people before the deadline.”
While most eligible U.S. taxpayers have automatically received their Economic Impact Payment, others who don’t have a filing obligation need to use the Non-Filers tool to register with the IRS to get their money. Typically, this includes people who receive little or no income.
The Non-Filers tool is secure and is based on Free File Fillable Forms, part of the Free File Alliance’s offering of free products on IRS.gov.
The Non-Filers tool is designed for people with incomes typically below $24,400 for married couples, and $12,200 for singles who could not be claimed as a dependent by someone else. This includes couples and individuals who are experiencing homelessness.
Anyone using the Non-Filers tool can speed the arrival of their payment by choosing to receive it by direct deposit. Those not choosing this option will get a check.
Beginning two weeks after they register, people can track the status of their payment using the Get My Payment tool, available only on IRS.gov.
During an election year, there are many opinions and proposals announced from the presidential candidates. We are not expressing any political opinion as to the presentation of either political parties platform as it relates to taxes for the upcoming election. The following is being presented for information purposes only. It is still important that all Americans become educated on the issues, watch the debates and most important of all – VOTE! And always, if you have any questions or concerns, please do not hesitate to reach out to the office.
Seven tax brackets: 10%, 12%, 22%, 24%, 43%, 35% and 37% applicable to tax years beginning after December 31, 2017 and before January 1, 2026.
Considering 10% middle class tax cut. Otherwise, Fiscal Year 2021 Budget would extend the 2017 Tax Cuts and Jobs Act (TCJA) provisions past 2025, making the rates permanent.
Increase the top rate to 39.6% for taxpayers making more than $400,000 which would result in a tax increase.
The top rate is 20% for long term capital gain and qualified dividends. Other rates for taxpayers below 12% tax bracket pay 0% and all other taxpayers pay 15%.
Seeks to cut the capital gains rate by executive order, would reduce the maximum long term capital gains rate to 15%.
Tax at top ordinary income rate (39.6%) for taxpayers with over $1 million in income. Would also reform the benefits for the opportunity zone.
No taxation on accumulation of wealth, may be subject to estate tax liability
No wealth tax
Generally, does not support a wealth tax
Earned Income Tax Credit (EITC)
Refundable credit for any eligible individual who meets certain criterial. A portion of the credit can be refundable.
Would extend the expanded provision for eligibility of the credit. A valid Social Security number (eligible for work) would be required to claim the credit.
Expand the EITC to older workers. Extend dependent care credit to $8,000 and part will be refundable. Provision for 50% to be reimbursed for families making less than $125,000.
The itemized deduction for state and local taxes (SALT) is capped at $10,000
Extend the current legislation due to expire in 2025
Cap itemized deductions at 28%. Restore the PEASE limitation for incomes above $400,000. End the SALT cap of $10,000
Loan forgiveness is includable in income unless the student is permanently disabled or deceased. Also, certain exceptions for specific professions in underserved areas.
Supports the passage of school choice legislation that would spend $5 billion a year on tax credits for donations to private school scholarships
Student loans will be cancelled, tax-free, after borrowers have been enrolled in the income-based repayment plan for 20 years.
Treated as property for tax purposes and taxpayers are required to report on Form 1040 if they own virtual currency
Has indicated “not a fan” of cryptocurrencies
No specific plan announced
Employee Qualified Retirement Plans
Eligible employees can contribute a portion of their salary, tax deferred, into a qualified retirement plan. Minimum distributions required when the taxpayer turns 72
Would extend the provisions due to expire in 2025
Create “automatic 401(k)” for workers without access to a qualified plan. Allow 401(k) plans to offer hardship withdrawals for survivors of domestic violence or sexual assault penalty-free (still subject to ordinary income tax). Offer tax credits to small businesses to offset the cost of starting or maintaining a retirement plan.
Premium Tax Credit
Tax credits to lower income taxpayers to help pay premiums when purchasing health insurance through the Exchange.
Would repeal the Affordable Care Act.
Eliminate the 400% income cap on eligibility for the premium tax credit. Create a $5,000 tax credit for using informal caregivers, including family members.
Corporate Tax Rate
Currently 21% for all C Corporations
28% tax rate with a minimum of 15% for companies reporting more than $100 million in the U.S. but paid no federal income taxes.
A 10% “Made in America” tax credit for companies that create jobs for American workers. It would also apply when a company is increasing wages above the pre-COVID baseline for jobs paying less than $100,000
Qualified Business Income Deduction (QBID)
Taxpayers, other than corporations, may be eligible to deduct up to 20% of qualified business income from a partnership, S Corporation, or sole proprietor
No change to current law
End special qualifying rules, including those for real estate investors. Allow deduction for all taxpayers making $400,000 or less
Exemption amount of $11.58 million in 2020. Assets transferred at death receive a step-up in basis to the fair market value on the date of death. The increased exemption amount reverts back to $5 million after 2025
The increased exemption amount would be extended beyond 2025
Eliminate the stepped-up in basis rule that allows people to pass capital gains onto their heirs with no tax after death.
Tax compliance is operated on a voluntary system requiring taxpayers to file annual tax returns. The tax gap, the difference between what is estimated to be owed and what the IRS collects, is approximately $440 billion per year
The federal budget would ensure that taxpayers comply with their obligations and that tax refunds are only paid to those who are eligible. This includes improving the oversight of paid tax preparers, giving the IRS increased authority to correct errors on tax returns, requiring a social security number to claim certain credits, and increasing wage and information reporting
A big THANK YOU to all of our local supporters for voting us #1 again in the Wicked Local Readers Choice Awards. This year we have again, won #1 Favorite Accountant in Wrentham and #1 Favorite Financial Planner in Wrentham. We also brought home the Bronze Award for Regional Favorite in the Accountant category. It means a tremendous amount to us that we continue to have this support. So, THANK YOU!
While many schools are switching to hybrid or remote learning models, teachers and other educators should remember that they can still deduct certain unreimbursed expenses such as classroom supplies, training, and travel. Deducting these expenses helps reduce the amount of tax owed when filing a tax return.
To qualify for the deduction, the taxpayer must be a kindergarten through grade 12 teacher, instructor, counselor, principal, or aide. They must also work at least 900 hours a school year in a school that provides elementary or secondary education as determined under state law.
Teachers and other educators can also take advantage of various education tax benefits for ongoing educational pursuits such as the Lifetime Learning Credit or, in some instances depending on their circumstances, the American Opportunity Tax Credit.
How the Educator Expense Deduction Works
Educators can deduct up to $250 of unreimbursed business expenses. If both spouses are eligible educators and file a joint return, they may deduct up to $500, but not more than $250 each. The educator expense deduction is available even if an educator doesn’t itemize their deductions. To take advantage of this deduction, the taxpayer must be a kindergarten through grade 12 teacher, instructor, counselor, principal or aide for at least 900 hours during a school year in a school that provides elementary or secondary education as determined under state law.
Those who qualify can deduct costs of books, supplies, computer equipment, and software, classroom equipment, and supplementary materials used in the classroom. Expenses for participation in professional development courses are also deductible. Athletic supplies qualify if used for courses in health or physical education.
Keep Good Records
Educators should keep detailed records of qualifying expenses noting the date, amount, and purpose of each purchase. This will help prevent a missed deduction at tax time. Taxpayers should also keep a copy of their tax returns for at least three years. Copies of tax returns may be needed for many reasons. A tax transcript summarizes return information and includes adjusted gross income and available free of charge from the IRS.
Don’t hesitate to call if you have any questions about tax deduction available to educators including teachers, administrators, and aides.