The Coronavirus Aid, Relief, and Economic Security (CARES) Act recently signed into law provides a one-time payment, among other items, to individuals to help ease the economic strain caused by the coronavirus epidemic.
Here are the details of the stimulus payment initiative.
WHO QUALIFIES TO RECEIVE A PAYMENT? A one-time payment of $1,200 will be sent to most adults. For every qualifying child under age 17, families will receive an additional $500. Retirees and people on disability are also eligible to receive a payment.
WHEN WILL I GET MY PAYMENT? The IRS hopes to get the first batch of payments out the week of April 6. It may take up to a month for everyone to get their checks, assuming everything goes as planned.
HOW ARE PAYMENTS BEING MADE? If you included your bank account and routing information on your 2019 tax return, you will receive your stimulus payment via direct deposit. If you haven’t filed your 2019 tax return, the IRS will use information from your 2018 tax return. If you did not include your bank account and routing information on either your 2019 or 2018 tax returns, the IRS will allow you to request direct deposit from a screen (under development) from their website. All others will receive their payment via a check in the mail.
Alert! Invalid bank information. If you have not filed your 2019 tax return AND the direct deposit information on your 2018 tax return is no longer valid (i.e. you opened a new bank account), you will need to take action immediately! If you do nothing, the bank deposit will, hopefully, be rejected and you will receive your check in the mail. Expect a delay, however, as it may take several months to receive a check by mail. You can also try calling the IRS to update your information.
WILL I GET THE ENTIRE AMOUNT? As with other government programs, there is an income phaseout. Here are the thresholds:
Single adults with income of $75,000 or less get the full $1,200. The $1,200 payment is reduced by $5 for every $100 in income above $75,000. Full income phaseout is $99,000.
Married couples with income of $150,000 or less get the full amount of $2,400. The payment is reduced by $5 for every $100, making the full payment phased out at $198,000.
Head of Household adults (normally single adults with children or other dependents) will receive the full $1,200 payment if they earn less than $112,500. Reduced amounts will go out to Head of Household adults who earn up to $136,500.
HOW WILL MY INCOME BE CALCULATED? Your 2019 tax return will be used to determine your income for purposes of whether you receive the full amount of the stimulus check and how many qualifying children you have. If you haven’t filed your 2019 tax return, your 2018 tax return will be used.
Alert! Don’t use my current situation. It may make sense to get your 2019 tax return in immediately OR DELAY IT. Figure out which tax return gives you the best payment! if phaseouts using last year’s information lowers your payment amount get your 2019 tax return filed. If your 2019 return lowers the payment, delay filing it. So pull out last year’s return NOW and take a look!
ARE THE PAYMENTS TAXABLE? No. These payments are not taxable.
Remember, this is only one of the many relief components in recently passed legislation. There are also unemployment benefits, small business benefits and much more to come.
As part of your 2020 planning, now is the time to review funding your retirement accounts.
By establishing your contribution goals at the beginning of each year, the financial impact of saving for your future should be more manageable. Here are annual contribution limits:
Retirement Plans
2019
2020
Change
Age 50 or older catch up
IRA: Traditional
$6,000
$6,000
none
add: $1,000
IRA: Roth
$6,000
$6,000
none
add: $1,000
IRA: SIMPLE
$13,000
$13,500
+$500
add: $3,000
401(k), 403(b), 457 plans
$19,000
$19,500
+$500
add: $6,500
Take action
If you have not already done so, please consider:
Reviewing and adjusting your periodic contributions to your retirement savings accounts to take full advantage of the tax advantaged limits
Setting up new accounts for a spouse or dependent(s)
Using this time to review the status of your retirement plan
Reviewing contributions to other tax-advantaged plans including flexible spending accounts and health savings accounts
Extraordinarily low interest rates and a rapidly evolving business climate has made inventory management a lost art. Other business initiatives may seem to be more urgent and impactful, but in reality, mastering inventory levels is a key to most successful and growing businesses. Here are reasons why prioritizing your inventory management is a must:
Less shrink. Shrinkage represents cash that goes to waste because inventory is damaged or past sell date. It is a sign of a weakness in the inventory control process. Adding quality control practices that account for climate control and other factors can help avoid damaging valuable stock and catch defective purchases before they make it into your warehouse. Tightening up your inventory controls equals less stuff to throw away which means less money wasted.Action: Create a shrink scorecard. Note all product that is non-saleable, and track units tossed, their dollar value, and who supplied it. Compare waste to prior year and against your goals.
More cash. In a perfect world, you receive your inventory as soon as it is sold. Material or product that sits in the warehouse adds storage costs and risks turning into unsaleable product. Aligning your inventory operation with your sales cycle plays directly with improving your cash flow. Understanding sales trends will allow you to optimize your stock levels and save money in the process. When you spend less on unnecessary inventory costs you have more cash to invest into marketing, new product initiatives or capital equipment that can bolster your bottom line.Action: Implement just in time (JIT) with key suppliers. Explore ways to deliver product when you need it versus purchasing a larger amount and then storing it.
Improved forecasting. The old saying garbage in, garbage out applies perfectly when trying to forecast inventory demand. If you can’t trust your inventory process, it’s impossible to accurately predict future output. This leaves you flying blind when budgeting and preparing for future expenditures. With a firm grip on your inventory needs and procurement-to-sales cycle, your forecasting will become more accurate.Action: Create a rolling 12-month forecast of sales. The forecast should provide details on major product lines. Translate this forecast into lead times for your inventory procurement.
Better customer relations. Once you’ve optimized your operation, the quality of your customers’ experience increases exponentially. You can cut prices without sacrificing margin, improve lead times, and add new product lines with your extra cash. While the effective inventory process you built is humming along, you can focus your attention on improving your products to better match the needs of your target market. This will help boost your sales!Action: Set inventory targets to shorten lead times. Measure how many back orders you have and note how often products are returned as defective. If your inventory management is improving you should see positive results in both areas.
Inventory management will not take care of itself. Giving your inventory system the attention, it deserves will pay major dividends both now and in the future.
Washington – Following President Donald J. Trump’s
emergency declaration pursuant to the Stafford Act, the U.S. Treasury
Department and Internal Revenue Service (IRS) today issued guidance allowing
all individual and other non-corporate tax filers to defer up to $1 million of
federal income tax (including self-employment tax) payments due on April 15,
2020, until July 15, 2020, without penalties or interest. The guidance
also allows corporate taxpayers a similar deferment of up to $10 million of
federal income tax payments that would be due on April 15, 2020, until July 15,
2020, without penalties or interest. This guidance does not change
the April 15 filing deadline.
“Americans should file
their tax returns by April 15 because many will receive a refund. Those
filing will be able to take advantage of their refunds sooner,” said Treasury
Secretary Steven T. Mnuchin. “This deferment allows those who owe a
payment to the IRS to defer the payment until July 15 without interest or
penalties. Treasury and IRS are ensuring that hardworking Americans and
businesses have additional liquidity for the next several months.”
Today’s guidance will
result in about $300 billion of additional liquidity in the economy in the near
term. Treasury and IRS will issue additional guidance as needed and
continue working with Congress, on a bipartisan basis, on legislation to
provide further relief to the American people.
GA DOL Establishes Emergency Unemployment Claims
Process – Employers Must Take Action
The Georgia Department of Labor (GDOL) has adopted an emergency
Rule 300-2-4-0.5 Partial Claims, effective March 16, 2020. The rule
mandates all Georgia employers to file partial claims online on behalf of their
employees for any week during which an employee (full-time/part-time) works
less than full-time due to a partial or total company shutdown caused by the
COVID-19 public health emergency. Any employer found to be in violation of this
rule will be required to reimburse GDOL for the full amount of unemployment
insurance benefits paid to the employee. Download the How
Employers File Partial Claims Desk-Aid found on the GDOL Alert Page and
follow the step-by-step instructions.
Filing partial claims results in your employees
receiving unemployment insurance (UI) benefit payments faster, usually within
48 hours for claims filed electronically. Employees for whom you file a partial
claim are NOT required to report to a Georgia Department of Labor career
center, register for employment services, or look for other work.
Please continue to monitor the Georgia DOL website at gdol.ga.gov for any updates to these
guidelines.
Often if you are in dire need for money the most tempting area to look is your IRA, 401(k), and other qualified retirement accounts. These funds, set aside for your retirement, may seem to be the answer to your financial woes.
Should I take an early withdrawal?
Is it a good idea to tap into retirement account funds prior to reaching age 59½? Here are some things to consider:
The penalty. Retirement funds taken out for non-qualified use are not only subject to regular income tax, but are also subject to a 10% early withdrawal penalty.
Debt collectors love it. Debt collectors are commonly prohibited from access to your retirement accounts. So if you are using the funds to put off debt collectors, be aware that you may be using funds that might be protected if you became insolvent.
There is an opportunity cost. Currently the funds in your traditional IRA, 401(k), and similar retirement plans grow tax deferred. So a dollar today will compound until you withdraw the funds at retirement. This growth is lost with early withdrawals.
Not for your kids. It is usually not a good idea to use early withdrawals to help pay a child’s debt or school costs. There are better ways to help children financially than to pay the stiff penalty on your early withdrawal.
If you still need to make the early withdrawal
Withdraw “after-tax” contributions first. This can be Roth IRA contributions or other after-tax contributions. Why? Since these funds have already been taxed, there is often no additional tax burden or early withdrawal penalty.
Certain withdrawals from qualified plans are allowed. This includes hardship withdrawals for qualified medical expenses, qualified educational expenses, and up to $10,000 to purchase a first time home.
Consider taking out a loan from your employer-provided 401(k). You will then repay this loan to your retirement account with interest. But be careful, you are required to repay any outstanding balance when you leave your job.
Look into substantially equal payments. Look into taking the distributions as part of a series of substantially equal periodic payments over your life expectancy. If done right, this can help avoid the 10% early withdrawal penalty.
While it is never a great idea to tap into funds that are specifically set aside to make your retirement stress-free, if you must do so it is worth being thoughtful about how you go about the withdrawal.
There is still time to make a contribution to a traditional IRA or Roth IRA for the 2019 tax year. The annual contribution limit is $6,000 or $7,000 if you are age 50 or over.
Prior to making a contribution, if you (or your spouse) are an active participant in an employer’s qualified retirement plan (a 401(k), for example), you will need to make sure your modified adjusted gross income (MAGI) does not exceed certain thresholds. There are also income limits to qualify to make Roth IRA contributions.
Maximum 2019 IRA Contribution amounts: $6,000 or $7,000 (with age 50+ catch-up provision)
Note: Married traditional IRA limits depend on whether either you, your spouse or both of you participate in a qualified employer-provided retirement plan. If married filing separate and either spouse participates in an employer’s qualified plan, the income phaseout to contribute is $0-10,000.
If your income is too high to take advantage of these IRAs you can always make a non-deductible contribution to an IRA. While the contributions are not tax-deferred, the earnings are not taxed until they are withdrawn.
Your credit score is more important than ever. Once viewed as a necessity when applying for a mortgage, it now factors into renting an apartment, paying for utilities, buying a cell phone, and determining the amount you pay for home and auto insurance! Here are tips to help you improve and maintain a good credit score:
Know which bills must be paid on time. One bill that goes more than 30 days past its due date can drop your credit score 40 points and can stay on your credit report for seven years! If you are in a cash pinch and can’t pay all your bills on time, prioritize mortgage, car loan and credit card bills that report late payments to credit agencies. Utilities and medical organizations generally don’t report a delinquency until your account is sent to a collection agency.
Watch revolving credit balances. Each credit card has a credit ceiling. This credit limit is compared to how much of it you use. The higher amount of the credit limit you use, the lower your credit score. Even if you pay the bill in full each month! Ideally, try to keep the spending balance less than 20 percent of your credit limit. If your routine spending is higher than this, consider requesting a higher line of credit, but do not use it. The sole purpose of this request is to create a higher credit score.
Pay off debt. Current debt balances account for as much as 30 percent of your credit score. When you consider this and the high interest rates that come with debt, it’s important to get those balances to zero as soon as possible. Your debt-to-income ratio (total debt divided by your total income) doesn’t directly affect your credit score, but it’s a key metric used by underwriters when determining loan eligibility and interest rates.
Add new debt only when necessary. Adding new debt can reduce your credit score in a few different ways: your debt profile increases, your debt-to-income ratio rises, and even the credit inquiry itself can take a chunk out of your score. If you have a relatively short credit history, too many credit inquires will affect you even more.
Consider keeping dormant credit cards open. Have an open credit card that you’ve paid off or have never used? Your instinct might tell you to close the account, but keeping it open may actually help your credit score. An active credit card in good standing for a long period of time helps your credit score. Plus, the additional unused credit limit on your books lowers the ratio of spending to total credit limit and improves your score.
Actively monitor your credit reports. You can get a free credit report from each reporting agency every 12 months on the Annual Credit Report website. These reports tell you everything you need to know about items impacting your credit score. Reviewing these items on a routine basis is an important exercise to ensure a correct report. If you find a mistake, you can work to get it removed and improve your score.
Your credit score is too important to ignore. Taking an active role by implementing some of these smart tactics is a great way to improve your score and overall credit health.
Every year is an election year when it comes to making decisions on your annual income tax return. Here are four common examples that can create tax savings opportunities if you elect the correct option.
Tax filing status. Typically, filing a joint tax return instead of filing separately is beneficial to a married couple, but not always! For instance, if one spouse has a high amount of medical expenses and the other doesn’t, your total medical deduction may be greater filing separately due to the 7.5% of adjusted gross income (AGI) threshold before you can deduct these expenses.
Higher education expenses. Thanks to new legislation, many parents of college students again face a decision: Whether to take one of the two credits for higher education expenses or the tuition and fees deduction. The tuition and fees deduction, once expired, is now extended through 2020. To complicate matters, the credits and the deduction are all phased out based on different modified adjusted gross income (AGI) levels. Before you elect which tax benefit makes the most sense, you will need to evaluate all options.
Investment interest. Investment interest expenses can be deducted up to the amount of net investment income for the year. This income does not usually include capital gains, because of favorable tax treatment of this type of gain. However, you can elect to include capital gains to help you deduct your interest expense. You can even cherry-pick which capital gains to use for this deduction. If you take this election you forego the favorable tax rate for long-term gains.
Installment sales. If you sell real estate or other assets in installments over two or more years, the tax liability is spread over the years that payments are received. Thus, you may be able to postpone the tax due. This technique can reduce the total tax paid depending on your effective tax rate each year. However, you can also elect out of installment sale treatment by paying the entire tax in the year of the sale. You may wish to take this election if your income is lower in the year of the sale.
Thankfully there is help navigating these key tax elections. Simply call with any questions.
If you have employees, you know how important health insurance is for your benefits package. It also takes a big bite out of your budget. Selecting the right insurance for your company is extremely important for employee retention and maintaining your bottom line. Here are tips to help you find the best health insurance for your business:
Know the size of the network. A popular way to lower insurance costs is opting for a smaller network of health care providers. Known as narrow provider networks, coverage is limited to a much smaller group of clinics and hospitals than traditional plans. But while the cost savings are nice, employee satisfaction is likely to decline as some of them will have to change doctors to stay in network. When researching insurance options, be sure to compare the network size to industry averages.
Watch for coverage limits. Lifetime and annual dollar limits for essential health benefits were banned in 2014, but limits still appear in other ways. Dental services, for example, are exempt from the dollar limits and often have annual and lifetime coverage limits. Another way insurance providers hedge their risk is by limiting the number of a certain type of visits, like for chiropractic care or physical therapy.
Don’t forget prescription coverage. Many health insurance programs don’t include full coverage for prescription drugs, so you may need to add supplemental insurance. Pay special attention to the coverage differences between brand name and generic drugs. Also review any deductibles and other limits. Another type of coverage available is a prescription discount program. Discount plans simply charge you a subscription cost that allows you to use a contracted discount.
Understand what isn’t covered. When trying to sell you on their plan, insurance providers do a good job showing you what they cover. What can be harder to figure out is what they don’t cover. Some of the types of services that may not be covered are vision care, nursing home care, cosmetic surgery, alternative therapies like massage therapy or acupuncture, and weight-loss procedures.
Be prepared to provide employee data. The process of obtaining a quote for health insurance can be an overwhelming task. Health insurance companies will want, at a minimum, a list of employees with some pertinent details like age, sex, coverage details (self, spouse and other dependents), and home zip code. They will want the forms filled out by all employees, even those that are opting out of insurance coverage. If you are working with a benefits broker, they can help you prepare what will be needed in advance to speed up the process.
Shopping for health insurance for your business is complicated. Taking the appropriate time to understand each coverage option and the associated costs will benefit both your business and your employees’ wellbeing.
