Author: Service2Client

How Cloud Accounting Helps Small Businesses Gain Competitive Edge

4 min read

Cloud AccountingIn a continuously changing business environment, small businesses have a challenge to keep up. It’s especially expensive to keep pace with ever changing technology. Luckily, with affordable cloud accounting solutions, small businesses can maintain a competitive edge.

What is Cloud Accounting

Cloud accounting involves moving your business books online. Unlike desktop accounting systems, cloud accounting permits you to access accounting software from a web browser without the need to install it on your personal computer.

Companies that offer cloud computing provide their services on remote servers and applications. For a fee, you gain remote access to the services that fit your business needs.

Cloud Accounting Benefits for a Small Business

Here are benefits offered by cloud accounting that enable small businesses to gain a competitive edge:

  • No need to invest in expensive software and hardware
    With cloud accounting, you need only subscribe to a company offering cloud accounting services. This removes the need to purchase the actual software and necessary hardware. It also means there are no extra costs for maintenance, allowing a business to focus on core business activities. 
  • Save on upgrade costs
    Software keeps changing and needs frequent patches and upgrades. This is expensive for a small business running a traditional accounting software, and most end up using outdated software.

    Subscribing to cloud accounting means the service provider takes care of the upgrades, and you have access to new features instantly.

  • No need to hire an in-house accountant or bookkeeper
    If your business is small and running on a tight budget, subscribing to a cloud accounting solution will save you the cost of hiring a person for manual accounting and other bookkeeping processes. By connecting the system with your bank account, the transactions will be updated automatically, thereby saving you time and ensuring accuracy.
  • Easy to scale
    With cloud-based services, you can easily scale your business as it grows by adding to the services you subscribe to. At the same time, if your business is experiencing a slowdown and you need to reduce expenses, you can scale down by reducing the number of subscribed services.
  • Data accessibility
    You can easily access your financial status at any time, unlike when you run a traditional desktop accounting system. This is possible from any device that has an internet connection.
  • Access to various functions, features and support
    Cloud accounting enables a small business to have access to different accounting features and functions, such as project estimates, finance, billing, invoicing, tax summary, and stocks, among others. This is because of the ability to select services depending on the needs of your business and your budget.
  • Enables remote working and collaboration
    Cloud accounting allows for remote working, which is especially important with the ongoing COVID-19 pandemic and recommendations to work from home. This enhances collaboration with your team and financial advisor because you can all work on the same system at the same time, regardless of your location. The accountant also needs not go through the trouble of importing client data.
  • Financial reports
    Cloud accounting allows for access to regular reports that include insights about the financial state of your business. This enables a business owner to have an up-to-date picture of how the business is performing anytime, whether at home, at work or on the go.
  • Data security
    Data on the cloud is more secure than data stored on a hard drive, which can be accessed if it is stolen. In the case of a natural disaster, your business productivity is not greatly affected because you can still access your data. This is because it’s the responsibility of the cloud provider to ensure data security, make regular backups, scan servers for vulnerabilities and use the latest technology.

Final Words

Cloud accounting enables small businesses to enjoy business efficiency and increased productivity while reducing costs. Businesses of all sizes, even small ones, have to keep up with changing technology. Any business that wants to maintain a competitive edge has the option to do away with traditional accounting desktop software.

Latest Stimulus Bill Provides More Relief for Americans and the Economy

3 min read

Latest Stimulus Bill Provides More Relief for Americans and the EconomyNearly one year after the COIVD-19 pandemic-driven shut-downs began the shutter the economy, Democrats pushed through another $1.9 trillion stimulus package by narrow margins, with the President set to sign the bill. The legislation is one of President Biden’s first major achievements and contains numerous provisions that impact millions of Americans. Below we’ll look at what’s inside the legislation.

Stimulus Checks

$1,400 stimulus checks are the hallmark of the legislation, but not everyone is eligible. Similar to previous stimulus packages, single taxpayers making $75,000 or less are eligible for the full amount, but the payout completely phases-out once income reaches $80,000. Married couples earning up to $150,000 will receive $2,800, but phase-out once they reach $160,000. These income-based eligibility phase-outs are much more narrow than previous packages. Taxpayers also receive an additional $1,400 per qualifying dependent, which may include college students, disabled adults, and elderly parents.

Unemployment Benefit Extension

The weekly unemployment supplement of $300 is extended through September 6th, whereas previously, the benefit was set to expire in March. Initially, House Democrats tried to increase the unemployment supplement to $400 per week, but this change didn’t make it into the final legislation.

Child Tax Credits

Previous stimulus packages increased the child tax credit from $2,000 up to $3,000 per child, including a bonus of $600 for children six years old and younger, and made the credit refundable. Making the credit refundable expanded the benefit to millions of low-income families who previously didn’t earn enough to pay enough taxes to take the full credit.

This bill extended these provisions for an additional year through 2021, with some lawmakers looking to make the changes permanent.

Money for State and Local Governments, Schools, Vaccine Distribution, and Others

Money is allocated to help fight the pandemic’s spread and impact, with $7.5 billion earmarked to fund vaccine distribution and $48 billion set aside for contact-tracing and testing efforts. Meanwhile, state and local governments have a fund of $350 billion in aid to help them cover budget shortfalls caused by the pandemic. Schools and universities received a pot of $160 billion for similar operational budget support.

Other economic assistance programs in the legislation include $22 billion for rental assistance, $39 billion for child care, $29 billion for the restaurant industry.

What Didn’t Make it Into the Bill

Initially, Democrats tried to make a $15 per hour minimum wage part of the bill; however, this didn’t make it into the final version. In order to pass the stimulus package, Democrats used a political process call reconciliation, which enabled them to skirt the 60-vote filibuster threshold in the Senate and pass it with a simple majority. However, this maneuver also limited what they could put in the bill.

Multi-employer Pension Plans

Nearly $86 billion is put into a new program, allowing the Pension Benefit Guaranty Corporation to provide assistance to beleaguered multi-employer pension plans. The aim is to ensure retirees continue to receive their pension benefits.

Conclusion and Economic Impact

The bill’s stimulus impact is expected to set the US economy off and running at the fastest growth rate in more than 40 years. The economy is expected to grow 5.95 percent compared to 4.0 percent in the fourth quarter of last year, with increased employment and rising inflation.

Some Businesses Rely on Line of Credit to Escape Damages Caused by Pandemic

3 min read

Line of Credit and Covid, Line of Credit PandemicAs businesses attempt to work their way through to a post-pandemic world, there are various means to bridge the financial gap. As recommended by the U.S. Small Business Administration (SBA), some companies can use a line of credit to reach international customers or opportunities outside the United States to make up for the damage COVID-19 caused with fewer domestic sales. How can businesses use a line of credit to increase their chance of survival and pivot to profitability as we move through 2021?

According to Debt.org, a business line of credit functions like any other line of credit that uses revolving debt. Businesses use a portion of their line of credit to meet financial obligations and repay based on the lender’s terms. Common lines of credit borrowing limits can range from $1,000 to $250,000 and are generally not secured against the business’ assets, accounts receivables, etc.

As a U.S. Bank study found, via the National Federation of Independent Businesses (NFIB), 82 percent of companies that go out of business do so because of inadequate cash flow management. The NFIB and U.S. Bank study explains that an inability to purchase inventory, satisfy employee payroll, on-board workers, or obtain some sort of financing increases the likelihood of a business failing.

However, businesses that are approved for and use a line of credit for meeting payroll, purchasing raw materials and items necessary to keep their business running (including rent or lease payments), greatly increases the business’s chance of survival. So, as revenues and profits shrink, employers can tap their line of credit to increase the chances of surviving.

Business Survivability Considerations

Continuous access to funds allows owners to have greater control over a business’s finances and helps them make better growth-driven decisions. For example, Noam Wasserman, a Harvard Business School professor, explains that oftentimes outside investors force founders out of their company – only half of founders were still the CEO three years after the business’s inception. If a line of credit gives the business enough financial flexibility, then the founders can stay in control.

Another way to leverage a line of credit is highlighted in the SBA export assistance programs due to COVID-19-related losses. Small business owners that export products directly, or indirectly to a third party that does the exporting, may be eligible.

Prior to a company completing a sale to an international client, or for prospecting for new international export markets, businesses can apply for a line of credit or a term note, up to $500,000, under the SBA’s Export Express loan program.

Through the SBA’s Export Working Capital loan program, approved applicants can obtain as much as $5 million in financing or a revolving line of credit related to the firm’s export-related business. This assistance also can help businesses better fulfill export orders as well as provide financial assistance for additional ex-U.S. sales. The financing can assist in keeping international orders through more favorable payment options for their foreign customers.

While there is never a guarantee that a business will survive, today’s companies that take advantage of different lending options, such as a line of credit, have a better chance to set themselves up for the post-COVID-19 recovery.

Sources

https://www.sba.gov/page/coronavirus-covid-19-small-business-guidance-loan-resources

https://www.debt.org/credit/lines/

https://www.nfib.com/content/resources/start-a-business/why-do-small-businesses-fail/

https://hbr.org/2008/02/the-founders-dilemma

The Impact of COVID on Life Insurance

4 min read

The Impact of COVID on Life InsuranceIf someone you know died from COVID-19 and had an existing life insurance policy, there should be no problem receiving the death benefit. The terms of a life insurance contract cannot be changed after purchase, so anyone with a policy before the pandemic will continue to be covered as long as premiums are paid.

However, the life insurance industry is in a quandary right now when it comes to new applicants applying for policies.

Some insurers have placed an age limit on applicants to whom they will sell policies. Travelers who have recently visited countries with a significant outbreak and people currently infected with the virus are generally asked to wait until after they have quarantined or recovered to apply for life insurance. While the coronavirus has had a high fatality rate among people age 65 and older, the death rate has fluctuated among demographics over the past year as the virus spread from metropolitan areas to more rural parts of the country.

With this in mind, now is probably one of the most challenging times to apply for a life insurance policy. In the past, applicants have had to answer standard questions regarding their medical history. Today, most also will have to disclose if they have been treated for COVID-19. Bear in mind that even people who did not become severely ill could suffer medical conditions in the future resulting from the infection. However, it is best to answer that question honestly, because any future claims could be denied if it is found the applicant lied about his or her COVID experience on the application.

As the data continues to be assessed, it is likely that insurers will adjust their terms and rates in response to the recent pandemic. It is possible, in fact quite probable, that data pointing to enduring effects of COVID-19 will be included in life insurance underwriting standards in the future. This could increase premiums for COVID-19 survivors – or result in denial of coverage altogether.

In the past, there were life insurers that sold low-cost, low-payout policies without a medical exam or extensive health questions. But these days, given how quickly the coronavirus can take a life, applicants age 60 and older would be hard-pressed to qualify for one of those “guaranteed issue” policies.

In fact, pre-existing health conditions such as diabetes and asthma – which are highly susceptible to the ravages of the coronavirus – may undergo more scrutiny in the future. While pre-existing conditions are no longer a qualifying issue for health insurance, they are very much a part of the life insurance underwriting process and do increase individual premiums.

There is one silver lining for life insurance applicants: Some insurers have eliminated the normally required physical exam due to social distancing restrictions. Others have opted to postpone the in-person exam but offer immediate temporary coverage with a limited death benefit. A couple of life insurers in Connecticut and Massachusetts even offer a free, three-year term life policy to frontline workers in appreciation for their work during the pandemic. Eligible applicants include in-hospital personnel and first responders who have the greatest risk of exposure to the coronavirus.

Anyone who has lost their income due to the pandemic and is in danger of not being able to pay life insurance premiums should call their carrier to see if there are options to continue coverage. Some companies have agreed to defer premiums for up to 90 days rather than cancel coverage for people likely to find employment soon. It’s a good idea to call and find out rather than miss payments and hope your insurance company chooses not to notice.

How AI Chatbots are Transforming Businesses

4 min read

How AI Chatbots are Transforming BusinessesWhen a business moves its services online, it runs the risk of losing the close connection it had with customers. This affects customer loyalty and sometimes means lost revenue. Thanks to technology, some businesses have deployed artificial intelligence (AI) chatbots to keep customers engaged in a two-way conversation. 

What is an AI Chatbot?

An AI chatbot is a piece of software powered by artificial intelligence that is placed on websites and other applications to interact with humans.

Chatbots are not a new technology, and it’s worth noting that there is a difference between AI chatbots and flow chatbots. Flow chatbots follow a pre-determined path defined by a developer; AI chatbots are self-trained, meaning they give feedback depending on the information supplied by the customer. They use natural language processing and machine learning technology to turn complex business interactions into simple conversations through text or voice.

This makes AI chatbots smarter because they learn over time.

According to a report by Markets and Markets, the conversational AI market is expected to grow from $4.8 billion in the year 2020 to $13.9 billion by 2025.   

AI Chatbots in Business

AI is no longer reserved for large enterprises only. Small businesses can now leverage conversational chatbots on applications such as Facebook.

The demand for chatbots has been driven by customers who need round-the-clock assistance from businesses. In most cases, businesses are slow to adapt to new technologies – especially because of the related costs. But the many benefits of AI chatbots make it worth adopting. Below are some of the ways that AI chatbots are being used in businesses:

  • Customer inquiries – The bots help reduce customer service workload and can serve customers outside typical working hours. This means there is no need to struggle to manually respond to inquiries as the AI chatbots can be used to automate customer feedback, including in emails. The customers also no longer have to wait a long time to connect with a customer care representative.
  • Personalizing interactions – conversational AI helps personalize interactions relevant to each user. AI chatbots learn the behavior of a client to provide personalized conversations.
  • Data analysis – Businesses have a greater understanding of their clientele once the conversational data is analyzed.
  • Sales representatives – they offer product suggestions for customers who are not sure what they are looking for.
  • Lead qualifying – instant feedback helps keep a prospect interested and eventually turn them into a paying customer.
  • Candidate vetting – Interested applicants converse with the AI chatbot, which then helps to filter for new hires.
  • Free HR staff time – for businesses that have many employees, the conversational chatbots help answer employee questions depending on their job function, geographical location and date. It’s also useful in reminding employees of tasks that need to be completed. This frees time for the HR staff to concentrate on other tasks that help improve job satisfaction and reduce staff turnover.
  • Increased engagement – the ability to answer emails and queries instantly helps keep the customer engaged. This enhances a business brand differentiation.
  • Fast information retrieval – a human can take a long time to retrieve information, especially for an e-commerce or real estate business. AI chatbots easily connect to the database and provide feedback in real-time as they serve as an internal knowledge base.
  •  Integration with other applications – AI chatbots are integrated with robotic process automation, enterprise resource planning or customer relationship management systems to carry out further tasks. Such tasks include booking appointments, filling out forms and making recommendations.
  • Easy scalability – chatbots handle multiple conversations simultaneously. This means that even when a business grows, the bots still handle large volumes of chats without affecting business costs.
  • In digital marketing – businesses are using AI chatbots to support the collection of customer data, new product launches, lead generation, and to increase brand loyalty.

Conclusion

AI technology is continuously progressing and no doubt chatbots will also keep changing.

As with every technology, there are some limitations, such as lack of emotional intelligence that affects the depth and scope of a conversation. This means that there are still complex communications that will require humans.

Nonetheless, having AI chatbots as an additional resource to run a business is a sure way to help boost revenue, improve customer experience, and provide a competitive advantage.

However, before jumping on the bandwagon, it is best to first identify areas in your business where you can deploy AI chatbots.

Securing Jobs for Cabinet and Congress Members, Inspector Generals, and Apprentices – and Honoring Capitol Police Officer Eugene Goodman

3 min read

hr35, s35, hr447, hr23, hr22,To provide for an exception to a limitation against appointment of persons as Secretary of Defense within seven years of relief from active duty as a regular commissioned officer of the Armed Forces (HR 35) – Prior to passage of this bill, a former service member could not be appointed as Secretary of Defense until separation from active duty for at least seven years. This legislation allows someone to be appointed after only four years from active duty as a commissioned officer of a regular component of the Armed Forces. The bill was introduced by Rep. Adam Smith (D-WA) on Jan. 15, passed in the House and the Senate on Jan. 22 and signed into law by President Biden on Jan. 22.

Officer Eugene Goodman Congressional Gold Medal Act (S 35) – This act authorizes awarding the Congressional Gold Medal to Capitol Police Officer Eugene Goodman for his actions to protect the Senate chamber during the Capitol security breach on Jan. 6. It passed in the Senate amid a standing ovation. In addition to Officer Goodman’s recent promotion to acting deputy sergeant-at-arms for the Senate, this medal represents the highest honor Congress can bestow. The act was introduced by Sen. Chris Van Hollen (D-MD) on Jan. 22, and passed in the Senate on Feb. 12. The House is also considering plans to honor the officer.

National Apprenticeship Act of 2021 (HR 447) – This bill was introduced by Rep. Robert Scott (D-VA) on Jan. 25. The purpose of the legislation is to amend the 1937 National Apprenticeship Act to include youth apprenticeships, and for other purposes. The legislation authorizes the establishment of criteria for quality standards, apprenticeship agreements and acceptable uses for grant funds awarded under this act. The bill passed in the House on Feb. 5 and is currently in the Senate for consideration.

Inspector General Protection Act (HR 23) – This act requires the president to notify Congress any time an inspector general is placed on nonduty status, and to nominate a new inspector general within 210 days after a vacancy occurs. Otherwise, within 30 days after the end of that period, the president must explain to Congress the reasons why there is not yet a formal nomination, with a target date for making that nomination. The bill was introduced by Rep. Ted Lieu (D-CA) on Jan. 4. It passed in the House on Jan. 5 and is currently under consideration in the Senate.

Regarding consent to assemble outside the seat of government (H.Con.Res. 1) – In light of the disruption of Congressional duties due to the coronavirus, the House passed this concurrent resolution authorizing the Speaker of the House and the Majority Leader of the Senate to assemble the House and the Senate outside the District of Columbia whenever the public interest warrants it. Introduced by Rep. James McGovern (D-MA), this bill was both presented and passed in the House on Jan. 4. It is currently under consideration in the Senate.

Congressional Budget Justification Transparency Act of 2021 (HR 22) – This bill was introduced by Rep. Mike Quigley (D-IL) on Jan. 4 and passed in the House the next day. It would require federal agencies to make budget justification materials accessible to the public on a website managed by the Office of Management and Budget. Available information should include a list of the agencies that submit budget justification materials to Congress and the dates they were submitted, with links to the actual materials. This bill is currently under review in the Senate.

5 Cities Rank as Ideal Locations for Remote Workers

4 min read

5 Cities Rank as Ideal Locations for Remote WorkersAccording to the National Bureau of Economic Research, in late spring of 2020 about half of American workers were working from home. Not surprisingly, many researchers believe that this pattern will continue after the pandemic is over. With this in mind, SmartAsset has examined the best cities to work from home in 2021 and evaluated them across seven metrics: percentage of those who worked at home; estimated percentage of those who can work at home; five-year change of percentage of those who worked at home; October 2020 unemployment rate; poverty rate; housing costs as a percentage of earnings; and percentage of residences with two or more bedrooms. Here’s what they learned:

  1. Scottsdale, Arizona. In 2019, Census Bureau data shows that about 18 percent of people worked from home, a 6.7 percent increase from 2014. This sunny city also has the fourth-highest estimated percentage of workforce who can work from home and the third-lowest 2019 poverty rate, which is 6 percent. When you’re not inside at your computer, you can enjoy the desert tranquility of the McDowell Sonoran Preserve, restaurants and shops of Old Town Scottsdale, and the largest model train display in North America at McCormick-Stillman Railroad Park.
  2. Raleigh, North Carolina. Even before COVID-19, a large percentage of people worked from home here, much like Scottsdale. In 2019, 10.5 percent of the workforce did so remotely, which is the fourth-highest for this metric. Raleigh also ranks in the top quartile for two other metrics: it has the 18th-lowest October 2020 unemployment rate (5.3 percent) and 21st-lowest poverty rate (10.9 percent). Raleigh is known as the “city of oaks,” which makes it a beautiful place to live. Even better, you can celebrate all four seasons and it’s only a few hours from the mountains. Plus, homes are some of the most affordable in the nation.
  3. Plano, Texas. Just north of Dallas, Plano ranks in the top 10 percent for three metrics: percentage of people who worked from home in 2019 (9.6 percent), estimated percentage of people who are able to work from home (35.44 percent) and 2019 poverty rate (7.5 percent). Also, Plano has the 14th-lowest October 2020 unemployment rate, at 5.2 percent. Best thing about Plano: it has all the restaurants, shops and amenities of Dallas without the traffic. And, there are numerous parks for walking, hiking, biking and swimming.
  4. Gilbert, Arizona. This locale ranks as one of the best places to buy an affordable home. In fact, data from the Census Bureau shows that 96.3 percent of apartments and homes in Gilbert have two or more bedrooms, which is the highest percentage for this metric. Additionally, it has a relatively low poverty rate (4.6 percent). Main attractions include bird watching at the Riparian Preserve at Water Ranch, holiday shows at the Hale Centre Theatre, and delicious produce at the Gilbert Farmer’s Market.
  5. St. Petersburg, Florida. As of October 2020, the greater Pinellas County unemployment rate was just 5.2 percent. That’s 1.5 percentage points below the national average. What’s more, the percentage of people working from home grew by 4.6 percent in St. Petersburg from 2014 to 2019, the third-highest increase in the study. If you love sugar-sand beaches, you’re in luck: there are many to fall in love with. But you can also enjoy cultural outings like a visit to the Dali Museum and the Chihuly Collection.

Some of the other best cities for working remotely include Durham and Charlotte, North Carolina; Colorado Springs, Colorado; Austin, Texas; and Fremont, California. These days, working from home is the rule, rather than the exception it was years ago. In these challenging, uncertain times, it’s nice to know there are places you can thrive.

Sources

https://smartasset.com/checking-account/best-cities-to-work-from-home-2021

https://www.tripadvisor.com/Attractions-g31350-Activities-Scottsdale_Arizona.html

https://www.raleighrealtyhomes.com/blog/moving-to-raleigh.html

Four Essential Questions You Should Ask Your Tax Professional This Season Related to COVID-19

3 min read

Tax Professional Question about COVID-19Good tax professionals ask the right questions to ensure they understand your situation and can help you to the best extent the law allows. Given the host of pandemic-related tax changes for 2020, it’s good to keep these four questions below in mind. If your tax preparer doesn’t ask these questions in your tax organizer or during a meeting, raise them yourself.

1. Did you receive your stimulus payment?

Not everyone received all the stimulus they were entitled to. As a result, the amount of your stimulus payments needs to be reconciled on your 2020 tax return to calculate if you qualify for the Recovery Rebate Credit.

The way the Recovery Rebate Credit works is that if you qualified for stimulus payments but didn’t receive them, then you’ll receive a credit on your 2020 tax return. On the other hand, if you received too much, there is no impact to your refund or balance due. You can’t lose here, so make sure you discuss your stimulus payments.

2. Did you work remotely? If so, when and where?

As a result of the pandemic, a lot of people worked from home for all or part of the year. If you lived in the same state you worked in, then there’s no cause for concern or further investigation. In situations where workers lived and therefore worked remotely in a different state than they normally would have commuted to when going into the office, then there could be an issue.

If you worked from another state for any part of the year, make sure you ask your tax preparer about this so you can understand the filing requirements in each state and any nexus issues. Just remember that if you are a W-2 employee, it doesn’t matter if you worked from your home, there is no home office deduction unless you’re self-employed.

3. Did you take any distributions from your retirement accounts in 2020 due to COVID-related circumstances?

Typically, early distributions from tax-advantaged retirement accounts such as 401(k) and IRAs are subject to a 10 percent penalty. There are provisions in the law that allowed penalty-free distributions in 2020 under certain circumstances related to COVID-19. Also, the income from distributions is spread over three years, which can further reduce the overall tax rate (unless you elected to tax it all in the year of distribution).

If you took distributions from a retirement account and were impacted by COVID-19, make sure your tax professional is aware of these exceptions; and ask the right questions to see if you qualify for any of the preferential treatment.

4. Are you self-employed and missed work because you were sick with the coronavirus or needed to care for someone who was ill with it?

Under the Families First Coronavirus Response Act (FFCRA), those who are self-employed can be eligible for sick and family leave credits if they or a family member had coronavirus and couldn’t work between April 1 and Dec. 31, 2020, as a result. If eligible, your tax preparer will file Form 7202 with your Form 1040 to make the claim.

Conclusion

Doing the best as a tax preparer means knowing your client’s situation and circumstances. There’s a good chance your tax professional is already on top of the COVID-19 changes, but it’s good to keep the questions above in mind just in case.

New Year-End Tax Provisions

5 min read

2020 2021 Tax Law ChangesIn late December, Congress passed the Consolidated Appropriations Act, which in addition to providing COVID-19 relief provisions also included many tax provisions and extenders. The Act contained many COVID-related tax provisions, as well as a slew of extenders ranging from one year to permanent. This article will focus on the miscellaneous tax and disaster relief provisions, which are more applicable to most taxpayers.

Miscellaneous Provisions

Charitable Contributions – For tax years 2020-2022, starting in 2020 non-itemizers can deduct $300 in charitable contributions, and starting in 2021 non-itemizer can deduct $600 for married couples filing jointly.

Full Business Meals Deduction – Typically, business meals are only 50 percent deductible; however, the new tax law provides for a 100 percent deduction for restaurant meal expenses incurred in 2021 and 2022.

Low-Income Housing Tax Credit – Starting in 2021, a 4 percent rate floor is established for calculating credits related to the acquisition of and bond-financed low-income housing developments.

Minimum Interest Rate for Certain Life Insurance Contracts – The bill ties the rates going forward for section 7702 fixed interest rates for life insurance contracts to benchmark interest rates that are periodically updated.

Minimum Age for Distributions – Certain qualified pensions can make distributions to workers who are 59½ or older and still working, with a special allowance for some construction and building trade workers, where the age is lowered to 55.

Modified Charitable Contribution Limits – An extension for one year through 2021 is given for CARES Act increased limits on deductible charitable contributions for corporations and taxpayers who itemize.

Disaster Relief

Disaster tax relief provisions are available for individuals and businesses in presidentially declared disaster areas on or after Jan. 1, 2020, up through 60 days after enactment.

Use of Retirement Funds – Residents of qualified disaster areas can take up to $100k in qualified distributions from retirement plans or IRAs, penalty-free. Taxpayers have up to three years to pay the distributions back without penalty.

Disaster Zone Employee Retention Credit – A tax credit of up to 40 percent of wages (capped at $6,000 per employee) is available to employers who are actively engaged in a trade or business in a qualified disaster zone.

Disaster Relief Contributions – Corporations are allowed qualified disaster relief contributions of up to 100 percent of their taxable income for 2020.

Tax Extenders

Aside from the miscellaneous and disaster relief provisions, the act extended numerous existing tax laws anywhere from one to five years or even permanently. Below is a list of the extended provisions. Due to the number of extender provisions, only a table is provided below.

One-Year Extensions

  • Sec. 25C 10% credit for qualified nonbusiness energy property.
  • Sec. 30B credit for qualified fuel cell motor vehicles.
  • Sec. 30C 30% credit for the cost of alternative (nonhydrogen) fuel vehicle refueling property.
  • Sec. 30D 10% credit for plug-in electric motorcycles and two-wheeled vehicles.
  • Sec. 35 health coverage tax credit.
  • Sec. 40(b)(6) credit for each gallon of qualified second-generation biofuel produced.
  • Sec. 45(e)(10)(A)(i) production credit for Indian coal facilities.
  • Sec. 45(d) credit for electricity produced from certain renewable resources.
  • Sec. 45A Indian employment credit.
  • Sec. 45L energy-efficient homes credit.
  • Sec. 45N mine rescue team training credit.
  • Sec. 163(h) treatment of qualified mortgage insurance premiums as qualified residence interest.
  • Sec. 168(e)(3)(A) three-year recovery period for racehorses two years old or younger.
  • Sec. 168(j)(9) accelerated depreciation for business property on Indian reservations.
  • Sec. 4121 Black Lung Disability Trust Fund increase in excise tax on coal.
  • Sec. 6426(c) excise tax credits for alternative fuels and
  • Sec. 6427(e) outlay payments for alternative fuels.
  • The American Samoa economic development credit (P.L. 109-432, as amended by P.L. 111-312).

Two-Year Extensions

  • Sec. 25D residential energy-efficient property credit (the bill also makes qualified biomass fuel property expenditures eligible for the credit).
  • Sec. 45Q carbon oxide sequestration credit (through 2025).
  • Sec. 48 energy investment tax credit for solar and residential energy-efficient property.

Five-Year Extensions

  • Sec. 45D new markets tax credit.
  • Sec. 45S employer credit for paid family and medical leave.
  • Sec. 51 work opportunity credit.
  • Sec. 108(a)(1)(E) gross income exclusion for discharge of indebtedness on a principal residence.
  • Sec. 127(c)(1)(B) exclusion for certain employer payments of student loans.
  • Sec. 168(e)(3)(C)(ii) seven-year recovery period for motorsports entertainment complexes.
  • Sec. 181 special expensing rules for certain film, television, and live theatrical productions.
  • Sec. 954(c)(6) lookthrough treatment of payments of dividends, interest, rents, and royalties received or accrued from related controlled foreign corporations under the foreign personal holding company rules.
  • Sec. 1391(d) empowerment zone designation.
  • Sec. 4611 Oil Spill Liability Trust Fund financing rate.
  • Sec. 1397A increased expensing under Sec. 179 and Sec. 1397B nonrecognition of gain on rollover of empowerment zone investments are both terminated for property placed in service in tax years beginning after Dec. 31, 2020.
  • The Sec. 1394 empowerment zone tax-exempt bonds and Sec. 1396 empowerment zone employment credit, which expire Dec. 31, 2020, were not extended.

Permanent Extensions

  • Sec. 213(f) reduction in medical expense deduction floor, which allows individuals to deduct unreimbursed medical expenses that exceed 7.5% of adjusted gross income instead of 10%.
  • Sec. 179D deduction for energy-efficient commercial buildings (the amount will be inflation-adjusted after 2020).
  • Sec. 139B gross income exclusion for certain benefits provided to volunteer firefighters and emergency medical responders.
  • Sec. 45G railroad track maintenance credit; however, the credit rate is reduced from 50% to 40%.

Conclusion

The Consolidated Appropriations Act passed in December 2020 not only extended many existing tax laws and instituted COVID-19 relief, but it also changes many typical tax laws (at least temporarily). Taxpayers should pay attention to these year-end tax law changes as they can significantly impact their tax situations.

How to Budget During a Pandemic

4 min read

How to Budget During a PandemicRight now with everything that’s going on, navigating your finances might feel overwhelming. However, there are some strategies that will help you manage cash shortfalls. Mariel Beasley of Duke University’s Common Cents Lab offers ways to help you manage during these trying times.

Use Mental Accounting

Translated, this means prioritizing what’s most important and cutting back in those areas that aren’t. While pretty obvious, the finer point according to Beasley is this approach will help you stick to your spending plan by reminding you of your opportunity costs — i.e. what trade-offs you might be making with each purchase. For instance, you might not be able to buy that special something you’ve had your eye on, but you will be able to buy food. Here are the three buckets she recommends for your budget:

  1. Your Bills: Non-negotiable monthly bills like rent, mortgage, utilities, child care, car payment, insurance, phone, and internet.
  2. Weekly Expenses: These costs might vary, but they include groceries, gas, food delivery, and other miscellaneous expenses.
  3. Future Expenses: What’s leftover after you pay your bills and current expenses? Even if you think you don’t have much left, set aside this cash for an emergency fund or retirement savings in high-yield saving accounts like the American Express® High Yield, or Marcus account by Goldman Sachs. Alliant Credit Union even offers a 0.55 percent interest rate on savings accounts. By comparison, the national savings average is 0.05 percent APY. Make sure your money works as hard as it can.

Try Per-Spend vs. Per Month

Instead of budgeting $200 for groceries for the whole month, decide how many times you’ll go to the supermarket during the month (five times), then stick to a per trip budget ($40). You might not spend as much as you think you will. (Tip: Buy store brands, as they’re cheaper and just as good.) Whether you work a job that pays you regularly, you’re on unemployment or you’re living on Social Security, Beasley says that this will help you stretch your money longer between paychecks.

Think Ahead

This might seem like a no-brainer, but it bears repeating. Instead of waiting until you’re at a crisis point, act now to protect yourself. Here are some ways to do this:

  1. Identify Local Food Pantries. Feeding America is a nationwide network that helps you locate a food bank near you. Organizations such as churches and charities are also pitching in, offering everything from food donations to job search assistance. Government programs such as SNAP (food stamps) and Medicaid are options, as well as HEAP (heating your home), should you need something like this.
  2. Have a Plan for Your Rent/Mortgage. If you’re concerned about eviction, understand your rights as a tenant, and most importantly, stay in communication with your landlord. One solution is to get a roommate to share expenses. If you’re running behind on your mortgage, seek out help from your mortgage broker. One way to generate income is to rent out an extra room in your home. If you have family or friends who can help, reach out to them. While the latter might feel like a last resort, you could consider bartering: provide a service to them they might usually pay for like car washes, dog walking, or house cleaning in exchange for the financial help.
  3. Talk to Your Creditors. Contact your creditors to see if you can get a reduced interest rate on any of your payments. You also might ask for discounts and deferment options. Many card issuers are offering financial hardship assistance (waived late fees, flexibility with payments, even skipped payments) during the coronavirus pandemic.

The key to all this is slowing down and focusing on the basics – getting through each week and each day. While the pandemic might feel like it will never end, it will: it’s inevitable. Until then, these tactics can help you take control and stay afloat.

Sources

https://www.cnbc.com/select/how-to-budget-during-coronavirus/

https://www.nerdwallet.com/best/banking/high-yield-online-savings-accounts

Coronavirus: Credit Card Issuers Offer Financial Assistance (cnbc.com)