by NFS | Oct 5, 2020 | Archives, Blog Posts
TAX PLAN COMPARISION: AN ELECTION PREVIEW
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.
| TAX MATTER |
CURRENT LAW |
REPUBLICAN |
DEMOCRATIC |
| Tax Rates |
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. |
| Capital Gains |
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. |
| Wealth Accumulation |
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. |
| Itemized Deductions |
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 |
| Student Loans |
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. |
| Virtual Currency |
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 |
No change |
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. |
| Business Credit |
None |
None |
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 |
| Estate Tax |
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 |
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 |
No specific plan announced |
by NFS | Sep 28, 2020 | Archives, Blog Posts, In The Community, In The News
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!
by NFS | Sep 23, 2020 | Archives, Blog Posts
Over the last several months, COVID made clear the fragility of life and how uncertain financial stability can be. In recognition of Life Insurance Awareness month, here are some important reminders to consider.
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Are your beneficiaries updated? |
| Any life changes such as a marriage, divorce, or loss of a loved one may necessitate the need to adjust your beneficiaries. |
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Did you know… insurance companies typically only offer a 30-day grace period if you’re late on a premium payment? |
| Unfortunately, if someone is going through a health challenge, their premium due dates may get away from them. Offering to track a loved one’s payment schedule may prove to be one of the most valuable things you can do for them and their family. |
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Is your life insurance policy going to attract state or federal estate taxes? |
| Ownership and beneficiary designations should be reviewed for maximum tax efficiency. |
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Does your current life insurance policy qualify for a long-term care rider? |
| Many newer, hybrid policies can offer benefits while living or upon death. |
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Do you have a charitable cause that is important to you? |
| Existing or new life insurance policies can be a tremendous asset to leave to your favorite charities. |
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If you are a business owner, have your business life insurance policies been reviewed? |
| Businesses are subject to various rules and regulations around corporate owned life insurance policies. If they haven’t been reviewed recently, life insurance awareness month may be a great time to request a review. |
If any of the above situations have you wondering how you may be affected, please do not hesitate to reach out to the office for a consultation.
by NFS | Sep 10, 2020 | Archives, Blog Posts
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.
Questions?
Don’t hesitate to call if you have any questions about tax deduction available to educators including teachers, administrators, and aides.
by NFS | Sep 2, 2020 | Archives, Blog Posts
The sluggish economy continues to put financial strain on many of us. So it just makes sense to examine our budgets and look for ways to trim the fat from our monthly expenses and put more into savings, if possible.
That’s a great way to help stabilize your finances, but it’s also important that you have a financial safety net in place in case something were to happen to you. Life insurance is one of the few guarantees your family could rely on to maintain their quality of life if you were no longer there to provide for them.
There are 95 million adult Americans without life insurance, according to LIMRA, an insurance industry research group. The fact is, the vast majority of Americans need life insurance and, sadly, most people either have none or not enough. If someone depends on you financially, you need life insurance. It’s that simple.
September is Life Insurance Awareness Month, making it the perfect time to take stock of your life insurance needs. And there are three additional reasons why now is the best time to look into getting life insurance.
You’ll never be younger than you are now. While that may sound obvious, youth is on your side when it comes to life insurance. It makes good financial sense to get coverage when you’re young and healthy, as premiums are based on your age and health. For most policies, your premiums will be locked in at that rate over the life of the policy, and can’t be raised due to a change in your health status.
It’s affordable, with rates near historic lows. People overestimate the cost of life insurance by nearly three times, according to a recent study conducted by LIMRA and the LIFE Foundation, a nonprofit insurance education organization. In fact, life insurance rates remain near historic lows; the cost of basic term life insurance has fallen by nearly 50 percent over the past decade. For example, a healthy 30-year-old can buy a 20-year, $250,000 level-term policy for about $13 per month.
Life happens. One day life is going along smoothly, and the next, you’re thrown a curve ball. No one knows what the future holds. None of us expect to die prematurely, but the truth is roughly 600,000 people die each year in the prime of their lives. That’s why today is always the best day to take care of your life insurance needs.
Life Insurance Awareness Month is the ideal time for a life insurance review. I urge everyone to take a few minutes out of their busy schedules to make sure they have adequate life insurance protection.
Consumers can get a general sense of their life insurance needs by going to www.lifehappens.org/lifecalculator and using the online calculator offered by the LIFE Foundation. The next step should be to contact a local insurance professional, who can conduct a more comprehensive needs analysis and help you find the right products to fit your specific needs and budget.
Held each September, Life Insurance Awareness Month is an industry-wide effort that is coordinated by the nonprofit LIFE Foundation. The campaign was created in response to growing concern about the large number of Americans who lack adequate life insurance protection. Roughly 95 million adult Americans have no life insurance, and most with coverage have less than most insurance experts recommend. For more information on life insurance, visit LIFE’s website at www.lifehappens.org.
Call us at 800-560-4637 and we can help you through the entire life insurance process!
by NFS | Aug 25, 2020 | Archives, Blog Posts
Receiving a tax refund might be the only thing people like about filing their return, and it looks like some taxpayers are getting just a little more money from the Department of Treasury.
The Internal Revenue Service announced last week that it “will send interest payments to about 13.9 million individual taxpayers who timely filed their 2019 federal income tax returns and are receiving refunds.” As with seemingly everything else in 2020, this is a direct result of the coronavirus pandemic.
Why are 13.9 million taxpayers receiving a tax refund interest payment?
Federal law requires the IRS issue interest payments to taxpayers who file on time after a disaster postpones the filing deadline. In this case, the obvious culprit is COVID-19 pushing Tax Day back to July 15, 2020. But before people start exchanging socially distanced air high fives, there are a few things they’ll need to know:
- Interest payments will not be issued to businesses nor taxpayers who received their refund before April 15
- The interest payment will in most cases not arrive at the same time as the refund payment
- The average interest payment is $18
- The interest payment is taxable if it’s $10 or more
The longer it takes for a timely filed tax refund to arrive after the original deadline (April 15, 2020), the more interest the IRS will owe. And since the interest is calculated using the adjusted quarterly rate (compounded daily), that can sometimes result in using a blended rate for refunds that “span quarters.”
Here are the rates specifically cited by the IRS:
- 5% for the second quarter
- 3% for the third quarter
Interest payments affected by the blended rate will be calculated using “the number of days falling in each calendar quarter.” Perhaps making it a little easier to report a taxable interest payment, the IRS will send letters containing Form 1099-INT at the beginning of next year.
How are these tax refund interest payments being issued?
Taxpayers should generally expect to receive their tax refund interest payment the same way they received their tax refund: “In most cases, taxpayers who received their refund by direct deposit will have their interest payment direct deposited in the same account …. [and] everyone else will receive a check.”
If you have any questions about the amount you received, please do not hesitate to contact the office.
