Tax-Free Employer Contribution to Student Loan Debt Incentive
Mar 23, 2021
Statistics show that a mere 8% of employers offer some kind of student loan repayment option. While this is not a new phenomenon, bigger corporations like Google and Hulu recognize the value-add of such offering to attract and retain top talent. Recent changes to a CARES Act provision providing employers tax incentives if they offer student loan repayments has been making news. Similar to employer-sponsored retirement and health care plans, employers can contribute up to $5,250 toward an employee’s student loan balance (principal or interest) and the payment will be free from payroll and income tax under Section 2206 of the CARES Act. This temporary tax-free provision has now been extended for at least five years, and employers are starting to take notice.
Due to the pandemic, many employers are focusing efforts on employee wellbeing and financial stability. This opportunity benefits both sides: the employee doesn’t have to pay income tax on the $5,250 and the employer gets a tax deduction. Some employers have evaluated the benefit of providing annual raises or offering a contribution to student loan debt. Given the economic impact of the pandemic, some may prefer the latter. Especially with student loan interest suspended until September of this year.
If you are interested in taking advantage of this tax-free provision, employers who already maintain an educational assistance program will need to amend their program, and employers who do not already maintain such a program will need to adopt one. Developing a written plan that outlines: 1) how to notify employees of the program, 2) eligibility and, 3) benefits is a good place to start. If you have questions, please contact your William Vaughan Company advisor today.
Categories: COVID-19, Tax Planning
IRS Tax Filing Deadline Moved to May 17
Mar 18, 2021
Yesterday, the U.S. Internal Revenue Service (IRS) extended the federal income tax filing due date for individuals for the 2020 tax year to Monday, May 17, 2021. “This continues to be a tough time for many people, and the IRS wants to continue to do everything possible to help taxpayers navigate the unusual circumstances related to the pandemic, while also working on important tax administration responsibilities,” said IRS Commissioner Chuck Rettig.” While the deadline has been extended, there are some items worth noting:
- The delay applies to individuals filing Forms 1040 and 1040-SR.
- The postponement does NOT apply to first-quarter estimated tax payments for 2021. The deadline for such remains April 15. After that date, interest and penalties on unpaid amounts will apply.
- The extension also does NOT include fiduciary (trust) income tax return
- It does NOT change the deadlines for corporate, partnership, or nonprofit tax returns.
- The deadline to file the 2020 tax return remains Oct. 15 for taxpayers who file Form 4868 to request an automatic extension. The deadline to submit this form is now May 17, not April 15.
- Recent law changes allow an exemption of up to $10,200 of unemployment compensation. If you received unemployment compensation last year and already have filed your 2020 tax return, the IRS strongly urges you not to file an amended return from federal tax but the IRS hasn’t announced what steps to take but plans to do so soon. For those who haven’t yet filed their 2020 returns, the IRS released guidance on March 16 that includes a worksheet and instructions to claim the exemption
Some state agencies have followed suit in extending the deadline. We expect more states to push back their tax filing deadlines but recommend each taxpayer check with their state agency for any state tax deadline extensions.
Finally, while the deadline has been extended, we highly recommend taxpayers get their documents to their CPA and file as soon as possible, especially those who are owed refunds. Filing electronically with direct deposit is the quickest way to get refunds, and it can help some taxpayers more quickly receive any remaining stimulus payments they may be entitled to. If you have any questions, please reach out to your William Vaughan Company advisor at 419.891.1040 or check out the IRS news release here.
Categories: Tax Compliance, Tax Planning
$1.9 trillion American Rescue Plan Relief Bill Signed Into Law
Mar 11, 2021
Today, President Biden signed into law the American Rescue Plan, a $1.9 trillion stimulus package that allocates federal funding to a variety of matters, including aid for vaccinations and testing, state and local governments, schools, rental assistance, restaurants, and the airline industry. It also includes several tax-related provisions and additional business relief.
Here are some of the key individuals and businesses provisions:
Individuals
Stimulus Checks – Funding has been allocated for a third round of stimulus checks. Notable changes include the income cutoff at which payments phase out from $100,000 to $80,000 for individuals and $200,000 to $160,000 for couples filing jointly. Those who qualify will receive the full direct payment of $1,400 per person. Individuals will also receive an additional $1,400 payment for each dependent claimed on their tax returns. Dependents over the age of 17 and qualifying relatives who are claimed as dependents also now qualify.
Unemployment Benefits – Unemployment benefits previously set to expire on March 14 have now been extended almost 6 months to September 6, 2021. In addition, recipients will receive an extra $300 per week through the fall deadline along with making the first $10,200 of benefit payment nontaxable for households with incomed below $150,000. The 10,200 exclusion only applies to benefits received last year, 2020.
Child Tax Credit – A temporary expansion of the existing child tax credit with significant adjustments including those noted below.
- 17-year-old- children are now able to qualify.
- Increase of the credit to $3,000 per child ages 6 to 17 or $3,600 per child under the age of 6
- Removal of the $2,500 earning floor
- Credit is now fully refundable
- A 50% credit advancement by the IRS paid in periodic payment from July 2021 to December 2021
Low-Income Support – In an effort to target low-income families afflicted by the pandemic, $4.5 billion has been set aside for the Low Income Home Energy Assistance Program, or LIHEAP, to help families with home heating and cooling costs.
Businesses
Employee Retention Tax Credit (ERTC) – The expanded ERTC provisions under the Consolidated Appropriations Act (CAA) were set to expire on July 1 which has now been extended through December 31, 2021, for eligible employers. In addition, eligibility has been expanded to include start-up businesses established after February 15, 2020, with annual gross receipts of up to $1 million.
Paycheck Protection Program (PPP) – Provides an additional $7.25 billion for the Paycheck Protection Program (PPP) and expands eligibility to include nonprofit entities. Importantly, eligible nonprofit organizations would now qualify for a PPP loan as long as they employ not more than 500 employees per physical location (300 per physical location for Second Draw loans) and meet all other criteria.
Economic Injury Disaster Loan (EIDL) – The new law also includes an additional $15 billion in funding for targeted EIDL advances. One-third of this EIDL funding is earmarked for businesses that suffered a revenue loss of greater than 50 percent and employ fewer than 10 people.
Families First Coronavirus Response Act (FFCRA) Paid Leave Credits – The new law also extends these tax credit provisions through September 30, 2021. However, adjustments have been made for wages paid between April 1, 2021, and September 30, 2021, including increasing eligible wages to $12,000 per employee (up from $10,000 in 2020), expanding types of leave to include vaccination, and covering as many as 60 days of paid family leave for self-employed individuals (instead of 50 days under previous law).
Industry-Specific Funding
- Restaurants – A $25 billion Restaurant Revitalization Fund has been established for 2021. Grant amounts will be limited to a restaurant’s pandemic-related revenue loss (measured as the difference in gross receipts in 2020 compared to 2019) up to $10 million and limited to $5 million per physical location. For more details on this U.S. Small Business Administration (SBA) administered program, check out our blog.
Categories: COVID-19
The Fourth Industrial Revolution: Industry 4.0
Mar 10, 2021
While many industries experience change and opportunity, manufacturing companies are embracing one in particular: Industry 4.0. This initiative joins Information Technology (IT) with Operational Technology (OT) to improve processes, increase automation, and support data exchange.
Industry 4.0 is often used interchangeably with the notion of the fourth industrial revolution. It is characterized by, among others, 1) more automation than in the previous revolution, 2) the linking of the physical and digital world through cyber-physical systems, enabled by Industrial IoT, 3) a shift to smart products and automation to define production steps, 4) closed-loop data models and control systems and 4) customize data and dashboards
Industry 4.0 is comprised of eight technology sectors that inspire new ways of thinking and working, Additive Manufacturing & Advanced Materials, Artificial Intelligence (AI), Big Data, Cloud Computing, Cyber Security, Modeling, Simulation, Visualization & Immersion, Robotics, and the Industrial Internet of Things (IoT) are the key aspects of Industry 4.0.
There are numerous advantages to entering the fourth industrial revolution, each of which can have a great impact on your business. The pursuit of more efficient, customer-centric processes paired with Industry 4.0 pushes past optimization and leads to new opportunities and innovation.
Here are some insights into a few of the benefits of Industry 4.0:
- Enhanced Productivity – Optimization and automation will lead to saved costs, increased profitability, limited waste, reduced opportunity for delays and errors, faster production, and overall improved function of the value chain.
- Real-Time Optimization – Customers at every step of the value chain expect good products produced fast. By increasing automation, production increases to real-time operation leading to satisfying increased expectations while keeping the process moving forward.
- Increased Business Continuity – Predictable and preventive maintenance as a result of digital technology means less downtime and fewer expenditures
- Higher Product Quality – Cross-collaboration between departments and the ease of data sharing means improvement and modifications are made quickly which results in a higher quality of product
- Lower Costs – Automation and system integrations also mean a reduction in waste, efficient use of resource and materials, reduction of downtime which ultimately leads to lower overall operating costs
- Improved Agility – With real-time data available at your fingertips, being able to forecast and pivot become much easier
- Innovation – Increased visibility across production lines, distribution chains, and supply chains allow for innovation and improvement whether it be for process enhancement or new product development.
There’s no doubt Industry 4.0 has enabled manufacturers to increase operational visibility, reduce costs, expedite production times, and deliver exceptional customer support. Over the coming months, William Vaughan Company is going to explore various topics involving the importance of this new era, strategies to implement, and ways to leverage Industry 4.0 to help you lead in the markets where you compete. Stay tuned for more on Industry 4.0.
Categories: Manufacturing & Distribution
IRS Clarifies Cryptocurrency Reporting Rules
Mar 08, 2021
The growing popularity of cryptocurrency has resulted in the IRS including a new question on the 1040 Form which asks: “At any time in 2020, did you receive, sell, send, exchange, or otherwise acquire any financial interest in any virtual currency?” This left many confused as to whether purchasing cryptocurrency via the US dollar would require them to check ‘yes’. For some taxpayers there was also the concern over being taxed on their crypto assets if they checked ‘yes’ or on the flip side, being penalized for falsified reporting if they marked ‘no’.
Earlier this week, the US Internal Revenue Service issued updates to its Frequently Asked Questions (FAQs) page providing clarity around cryptocurrency indicating that buying and holding of such virtual currency, if purchased with real government-issued money, does NOT need to be reported on a 1040 Form.
It should be noted, this new ruling only applies to cryptocurrency purchased with Fiat money (or fiat currency) which is a currency a government has declared to be legal tender. If you purchase cryptocurrency using other virtual currency, you are required to check ‘yes’ which may trigger a taxable event.
Should you have questions regarding your cryptocurrency tax liability, please connect with one of William Vaughan Company’s tax advisors today.
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Categories: Tax Compliance