As if another year of the COVID-19 pandemic wasn’t enough to produce an unusual landscape for year-end tax planning, Congress continues to negotiate the budget reconciliation bill. The proposed Build Back Better Act (BBBA) is certain to include some significant tax provisions, but much uncertainty remains about their impact. While we wait to see which tax provisions are ultimately included in the BBBA, here are some year-end tax planning strategies to consider to reduce your 2021 tax liability.
Last October, new legislation titled Securing a Strong Retirement Act of 2020 was introduced in the House of Representatives. Commonly referred to as the SECURE Act 2.0, this legislation contains a number of provisions designed to increase retirement saving opportunities for Americans as well as ease plan administrative burdens for employers.
Here’s a summary of some of the proposals:
On March 17, 2021 the IRS announced an extension of the tax deadline for Individual Income Tax Returns (Form 1040) to May 17, 2021 from April 15. This extension applies to both the filing of the Form 1040 or the filing of an extension form. This also extends the due date for tax payments for individuals only for payments related to 2020 to May 17. This change does not apply to states, though it is likely some/all states will extend the deadline as well.
Long Term Care through a Mandatory Payroll Tax
The Concern: As baby boomers are rapidly moving into retirement, long-term care services provided by Medicare are putting an increasing strain on budgets. 7 out of 10 people will need long-term care after turning 65, and 70% of Americans rely on public benefits such as Medicaid to cover long-term care. In fact, Washington’s spending on Medicaid-funded long-term care is projected to double to $4.01 billion per year in 2030.1
Earlier this month, the IRS issued notices to approximately 260,000 taxpayers stating they haven't filed their 2019 federal tax return. These notices, referred to as CP59 notices, are issued yearly to identified taxpayers who have failed to file tax returns due the prior calendar year (Tax Year 2019).
As post-COVID recovery efforts gain momentum, many businesses are taking a fresh look at some federal stimulus and tax relief programs they had not previously considered. One such program, the employee retention credit contained in the Coronavirus Aid, Relief, and Economic Security (CARES) Act, could be especially useful in helping companies bring back furloughed or laid-off employees.
The American Institute for Certified Public Accountants (AICPA) recently issued a Technical Question and Answer (TQ&A) that provides guidance on accounting for loans issued under the Paycheck Protection Program (PPP).