The Securing a Strong Retirement Act, a bill originally pushed in 2021 but which may finally pass this year, would push the starting point for required minimum distributions (RMDs) to 74 and 75 years of age. That means retirees could stave off being required to tap into their tax-deferred retirement accounts like 401(k)s and preserve their nest eggs for more years.

This is on top of the news from earlier this month that the IRS is adjusting its actuarial tables on RMDs for the first time in 20 years. In response to longer projected life spans, that means retirees can take out less money at 72, under the current RMD starting age. The recent lowering of RMDs and the proposed delay of the RMD starting age are part of a trend to account for longer retirement periods and help retirees preserve their coffers throughout their golden years.

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While the agency has yet to identify how many people were mailed inaccurate letters, the mistake is understood to be limited to a small subset of taxpayers who recently relocated or changed bank accounts in December.

The mistake is causing confusion and frustration for folks doing their taxes. Taxpayers have been told to keep an eye out for the IRS Letter 6419 and 6475, and now we’re discovering that a small number of them had an error
in the amount.

There is however away a way to rectify this if you take a look online.

If you find a mistake

If you suspect there is a discrepancy on your Letter 6419, access your IRS.gov account through the IRS CTC portal. The account will report the actual amount of advanced CTC that the family received.

If you use the amount reflected on your Letter 6419 without checking the accuracy, the IRS will likely make an automatic correction to the return if the amount is incorrect.

As we are in the midst of the beginning of tax season it is important to confirm the accuracy of your tax forms and ask your tax professional any questions you may have.

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Lenders and services of most student loans should not file Form 1099-C, Cancellation of Debt, for loans in 2021 through 2025. On Tuesday, The IRS stated that borrowers do not have to include these forgiven amounts as income for tax purposes.

Additionally, the guidance in Notice 2022-1 (https://www.irs.gov/pub/irs-drop/n-22-01.pdf) pertains to a provision of the American Rescue Plan Act (ARPA), P.L 117-2, passed in March 2021. ARPA also added a special rule in Sec. 108(f) (5) providing that taxpayers’ gross income does not include any amount discharged after Dec. 31, 2020. or before Jan. 1, 2026. This pertains to certain loans provided for postsecondary educational expenses, whether through an educational institution or directly to the borrower. 

Furthermore, the covered loans are those made, insurer, or guaranteed by the United States or its instrumentalities or agencies; a state, territory, or possession of the United States or the District or any of their political subdivisions; or made by an eligible educational institution, as defined in Sec. 25A. Provisions made by educational organizations and private lenders cover certain student loans.

Ultimately, the notice advises lenders and servicers of these loans. They are not required to, and should not, file information returns or payee statements (i.e., Form 1099-C). Reporting an applicable discharge of student debt to the IRS or to the borrower could cause the IRS to erroneously issue a notice of underreported income and confuse the borrower. 

   

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Premium Increases

With a 14.5% increase, the Part B premium for a single individual — with income less than $91,000 — is slated to rise from $148.50 in 2021 to $170.10 in 2022. Since Medicare premiums increase with income, individuals with income of $170,000 to $500,000 will see their premium increase from $475.20 to $544.30. (See Table 1 for 2022 premiums.)

How did this happen when healthcare costs grew by only 0.4% in the past year ? And the announced COLA increase was also higher than the 6.7% predicted by the CMS Trustees in August. 

Factors

Apparently, the increase was due to three factors: 1) projected rising prices and increases in intensity of care; and 2) making up for a cap in Part B premium increases in 2020. 3.) relates to Aduhelm, the new Alzheimer’s drug estimated to cost $56,000 a year. The process is still under way to determine whether and how Medicare will cover Aduhelm. CMS decided to increase “contingency reserves” to cover possible higher expenditures in the future.

Effects

Aduhelm falls under Part B instead of Part D. It is administered in physicians’ offices rather than purchased at a pharmacy. One implication of being under Part B is that traditional enrollees have to pick up 20% of the cost of most Part B medications, which would translate into about $11,200 in out-of-pocket costs for those prescribed Aduhelm.  

So where does this increase in premiums leave Social Security beneficiaries after they pay the higher premium? An individual currently receiving $1,600 a month (the approximate average retiree benefit) will see benefits go up by $94 from the COLA. However, they will pay $22 more in Medicare premiums. Resulting in a net increase of $72 or 4.5% of the original benefit amount. Thus, while the Part B increase does not eliminate the COLA, it erodes its inflation protection.   

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Employees who are 50 years of age or older will benefit from the 401k 2022 limit because their catch up is $6,500. This means that they can add money to their retirement fund as they surpass the retirement contribution limit that employees 50 and under have. Each type of worker will be affected differently in 2022. For example, small business owners and self employed individuals 401(k) savings contribution limit increases from $58,000 to 61,000. Employees whose companies grant aftertax 401(k) contributions will receive a higher limit than in 2021. For people with Simple Retirement Accounts they will see a $500 increase in 2022. Individuals on a Defined Benefit Plan will benefit from a slight increase in retirement contribution limits. 

Although IRA’s are not projected to change in 2022 there will be changes to tax deductions and income based phaseouts. These phaseouts affect taxpayers  eligibility to receive tax credit. People who have retirement plans with their employer and file taxes as the head of the household or single will have a deduction if their income bracket is $68,000-$78,000. Married couples filing jointly with one spouse who has a workplace retirement account and makes an IRA contribution, will have a deduction phase out at the adjusted gross income of $109,000-$129,000. For married couples with no workplace retirement plan and filing jointly the phaseout interval is $204,000-$214,000. Taxpayers with Roth IRA accounts will also benefit from inflation in 2022. For couples married and filing jointly their phaseout income level is now $204,000-$214,000. For single or head of the household their phaseout range is $129,000-$144,000. 

Saver’s Credit is a retirement plan for low and moderate income workers. With this tax credit the income limit for married couples filing jointly is $68,000. For the heads of households the limit is $51,000. For individuals filing taxes as single the income limit is $34,000. Qualified Longevity Annuity Contracts limit is now $145,000, a $10,000 increase from 2021. 

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The price increase will go into effect on July 15th for all new subscribers. If you are on a wholesale account and are billed directly from QuickBooks, you will receive a notice on July 1st with your new rate to take effect in August. If you are on a wholesale account billed through a provider, your price will increase depending on the type of QuickBooks account you are currently using and this price change will go into effect on September 1st. Please contact your provider for more information on your specific price increase. If you are interested in more information regarding a QuickBooks Online subscription, please contact us before July 15th.

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While the program has been a lifeline for many small businesses, many of its rules were unclear. One of the many challenges was how to account for federal, state and local taxes. Some lenders under-accounted for payroll taxes leading to a leaner loan total. Others over-accounted, meaning, depending on the company you received your loan through, you may have been shorted.

Due to the amount of loan applications received, many lenders were scrambling to keep up with the ever-changing rules and regulations. Including over 300,000 applications through one lender alone. It remains unclear whether these lenders will face any penalties.

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The changes in the economic relief law are many, so the following is just a brief overview of a dozen key changes contained within:

1. Economic stimulus payments: The new law authorizes a second round of economic stimulus payments. As before, there’s no current tax liability, because these are technically advance payments of a refundable credit. The payment is $600 for each individual, plus $600 for each qualified child, but begins to phase out at an adjusted gross income (AGI) of $75,000 for single filers and $150,000 for joint filers.

2. PPP loans: The massive Paycheck Protection Program (PPP) has been extended and modified, but loans still may be forgiven without any tax consequences if certain requirements are met. In addition, undoing an IRS Notice issued last year, the new law clarifies that a business may actually deduct expenses paid with PPP loan proceeds.

3. Charitable deductions: The CARES Act established a brand-new deduction for monetary charitable donations made by non-itemizers, up to a maximum of $300 per filer, for 2020. The new law extends this above-the-line deduction for donors through 2021 and doubles the maximum to $600 for joint filers.

4. Employee retention credits: Under the CARES Act an employer could claim an employee retention credit (ERC) for 50 percent of the first $10,000 of qualified wages paid in 2020, for a maximum $5,000 credit per employee. The new law extends the ERC and increases the maximum credit to $14,000 for qualified wages paid in the first two quarters of 2021.

5. Medical expense deductions: In the past, a taxpayer could deduct unreimbursed medical expenses in excess of 10 percent of AGI. This threshold was temporarily lowered to 7.5 percent of AGI, but the lower threshold was set to expire after 2020. Now the new law extends it through 2021 and thereafter. Best of all, this change is permanent.

6. Education tax breaks: The tuition-and-fees deduction, scheduled to expire after 2020, has been repealed. But there’s a trade-off: Beginning in 2021, the new law increases the phase-out ranges for the Lifetime Learning Credit (LLC) to match the ranges for the American Opportunity Tax Credit (AOTC).

7. Flexible spending accounts: Previously, rollovers of unused funds in flexible spending accounts (FSAs) used for qualified health care expenses were limited and not available at all for dependent care FSAs. The new law allows participants in both types of FSAs to roll over funds from 2020 to 2021 and again from 2021 to 2022.

8. Family and medical leave credit: The Families First Coronavirus Response Act (FFCRA)—passed soon after the CARES Act—provided employers with a tax credit in 2020 for offering paid family and medical leaves resulting from the COVID-19 pandemic. This credit has been extended, with modifications, through March 31, 2021.

9. Business meals: Under prior law, deductions for business meals claimed by employers were limited to 50 percent of the cost. The new law increases the deduction to 100 percent of the cost for the next two years—2021 and 2022.

10. Payroll tax deferral: Based on an executive order in August, an employer had the option of deferring the employee portion of the Social Security tax component of payroll tax due for the last four months of 2020. The initial deadline was April 30, 2021. Now the new law extends the due date to December 31, 2021.

11. Family tax credits: The new law permits taxpayers to refer to “earned income” on their 2019 returns for purposes of determining the earned income tax credit (EITC) and the refundable portion of the child tax credit (CTC) for the 2020 tax year.

12. Tax extenders. The new law also extends numerous provisions that were set to expire after 2020. Among others, this includes five-year extensions for the Work Opportunity Tax Credit (WOTC), the tax exclusion for mortgage forgiveness and tax incentives for empowerment zones. Various other provisions were extended for one or two years.

More details will likely be provided about the tax provisions in the new economic relief law in the coming weeks so stay tuned. For more information visit: https://www.accountingweb.com/tax/irs/new-irs-stimulus-tax-breaks-and-economic-relief

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Thanks to sophisticated brute-force-attack software readily available online, hackers can try tens of millions of possible password combinations per second. For example, hacking software can guess a five-character password in under three hours. If you only use lowercase letters, it’s 11.9 seconds.

You need to have a strong password if you have any hope of keeping hackers out, but what does a “strong” password mean?

A good password should be at least eight characters long (or longer!) and have a combination of uppercase and lowercase letters, numbers, and symbols that are hard to guess. Don’t use dictionary words with proper capitalization because even though a password like; Password123# meets the requirements, it’s easily hacked.

It can be hard to keep track of the many different and complex passwords, so we recommend using a password manager.  Consider one that stores usernames and the website URL, as well as the password.  This simplifies the login process, so with a click of a button you are on the site and ready to go.  

Cybercrime is a constant threat, and hackers are targeting small and medium businesses who are “low hanging fruit.” Don’t be their next victim! 

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