Gross Income – Resource KT Fri, 11 Jun 2021 22:25:33 +0000 en-US hourly 1 Gross Income – Resource KT 32 32 New Mexico families get $ 94 million in tax relief Fri, 11 Jun 2021 19:07:09 +0000

NEW MEXICO (KRQE) – Almost $ 100 million in tax breaks have been paid to families in New Mexico in a one-time special rebate. According to Taxation & Revenue New Mexico, approximately 157,000 taxpayers who claimed the Working Family Tax Credit received a one-time tax refund of $ 600 that was authorized in Senate Bill 1 during the legislative session of 2021.

The ministry says in a press release that the refund will be given to taxpayers who claim the credit on their 2020 personal income tax return and have adjusted gross income of $ 31,000 or less for single tax filers or $ 39,000 for single tax filers. married people declaring jointly or heads of family.

Qualifications for the Working Families Tax Credit this year are the same as for the Federal Working Income Tax Credit. Discount information is available in Tax bulletin 100.39 at

More families will now be able to qualify next year under the terms of this rebate. The ministry reports that under the provisions of House Bill 291, the Working Families Tax Credit will be available to taxpayers without a social security number and to taxpayers under the age of 18.

In 2019, nearly 200,000 families applied for the credit under the old eligibility rules. In addition, the law will increase the income tax level for LICTR eligibility from $ 22,000 to $ 36,000, increase the maximum refund from $ 450 to $ 730, and index the refund to inflation so that over time its value does not erode.

July Child Tax Credit Update: Here’s How to Prepare for the IRS Portal Opening Thu, 10 Jun 2021 20:34:22 +0000

With 39 million U.S. families slated to benefit from the expanded child tax credit, millions of parents are waiting for information on how they can ensure they receive the credits once the IRS starts sending checks on July 15th. In addition to sending the checks, the IRS says it unveil a pair of portals for taxpayers before July 1 to be used for credit.

The IRS is developing a portal that will allow parents to choose whether they want the monthly cash payments they’re entitled to, or if they just want to receive the full tax credit in 2021. You can also update your information personal information for qualifying life events, such as the birth of a child or marriage, that could change your income levels or other qualifying markers.

While details on how the portals work have not been released – especially for those that don’t file annual fees – parents can always prepare in advance for how they want to approach credits. There are a handful of things to consider before the portals go live and a decision on how to receive the money is made.

Who qualifies?

The credit was extended when the American Rescue Plan was enacted in March and went from $ 2,000 per child to $ 3,000 for each child aged 6 to 17, and to $ 3,600 for children under 6 years.

Income thresholds based on your tax returns determine whether you qualify for the extended credit and how much you can receive, but there is no limit to the number of children you can receive as long as you are eligible for the credit.

The IRS uses your 2019 or 2020 tax returns to determine your qualifying status. If you’ve already submitted your 2020 tax return, you don’t need to do anything else as the IRS will review it and determine your eligibility. If you haven’t filed for 2020, your 2019 returns will be used, but you can request an adjustment (more details below).

For a single person, their adjusted gross income cannot exceed $ 75,000 per year in order to receive full credit. Heads of household can earn up to $ 112,500 while receiving full credit. Anyone earning more than this will not be eligible for the larger credit.

Married couples, those filing jointly, or eligible widows or widowers will receive the full benefit if the combined adjusted gross income is less than $ 150,000. The adjusted gross earnings above will have their credit reduced by $ 50 for every $ 1,000 above the threshold.

For single filers with income of $ 200,000 or less and joint filers with income of $ 400,000 or less, you can still claim the previous child tax credit of $ 2,000 per child.

Changes in your qualification status

Again, the final details were not disclosed, but the IRS has confirmed that parents will be able to submit qualifying income changes to the department in order to receive more benefits. These can include changes in income status, the birth of a new child, reporting status (such as getting married) and more.

These changes could dramatically change the amount of money you receive for credit or whether you are now eligible for credit. Especially if you haven’t yet declared your 2020 taxes and your income has changed from 2019 to 2020.

The IRS should publish more information on how to submit these changes once the portals are open.

How do you want to receive the credit?

Once your eligibility is known, you’ll want to think about how you want to receive the credit. Before the credit expansion, parents would receive the money in the form of a credit on their taxes. With the new rules in place, you can choose to receive half of the credit in the form of six monthly installments that will be sent directly to you from July 15 until the end of the year.

For example, an eligible family of five with three children aged 6 to 17 would receive $ 750 per month for a total of $ 4,500 in payments. The remaining $ 4,500 would then be applied as a credit on the family’s 2021 income tax return.

However, if this family prefers to receive the full extended credit in their 2021 tax return, they will be able to make this choice through the portal. The IRS would then credit the family with $ 9,000 on next year’s returns and they would not receive a monthly payment.

The IRS has not said whether parents will be able to make a monthly choice about how they wish to receive the money, so you may want to consider the impact of both options on your finances for the rest of the year. the year before you make your choice.

Checks should be sent on the 15th of each month, unless the 15th falls on a statutory holiday.

Could the expansion extend beyond this year?

While the credit extension is currently only scheduled for this year, President Joe Biden has offered to extend the extension until 2025 as part of his draft U.S. plan for families. Many elected officials have shown their support for the plan, but some say it is not enough and have introduced legislation that would make the expansion permanent, according to CNBC.

Ohioans who paid taxes on unemployment benefits last year can get refunds Wed, 09 Jun 2021 11:02:19 +0000

COLUMBUS, Ohio — Did you pay federal and / or state income tax on your unemployment benefits last year? You are now probably entitled to get this money back.

But at the same time the IRS worked alone To identify who should get a federal income tax refund and send the money to them, it is not as easy to get a state-level tax refund: it is up to the taxpayers of the Ohio to file an amended tax return and other documents to get the money they are owed, according to the Ohio Tax Department.

The latest federal coronavirus stimulus package, passed on March 11, waives federal income tax up to $ 10,200 in unemployment benefits for any taxpayer (or up to $ 20,400 for joint filers ) who earned less than $ 150,000 in adjusted gross income in 2020.

Theirs said it has already reimbursed varying amounts to about 2.8 million Americans who filed their taxes before the stimulus package passed. In total, about 13 million taxpayers could be eligible for a federal tax deduction on unemployment benefits last year, according to the IRS.

In Ohio, Governor Mike DeWine signed state law on March 31, declaring that anyone eligible for a federal tax deduction on their 2020 unemployment benefits is also entitled to a state-level income tax deduction.

Not everyone who overpays their taxes this way will get a refund – the money can be used to offset back taxes or other debts.

To get a state-level tax refund, eligible Ohioans must do three things, according to the Ohio Department of Taxation:

First, they have to file an amended tax return via one of the sellers approved by the state tax service. (Taxpayers can submit an amended return themselves via a printed paper form, but Tax Department spokesman Gary Gudmundson said it takes much longer – weeks, if not months – to process paper returns).

Specifically, applicants must submit an amended Ohio Tax Form IT 1040 (be sure to click on the “amended return” box at the top of the form), as well as an amended SD Form 100 for those residing in a school district to traditional tax base. . Residents of Ohio have until May 17, 2025 – four years after this year’s tax deadline – to submit an amended return.

Second, the amended return must be accompanied by a transcript of the IRS tax account showing the taxpayer’s new adjusted federal gross income. These transcriptions can be obtained via the IRS website or by calling (800) 908-9946.

The third and final requirement is to complete an Ohio Reasons and Explanation of Corrections form (also called an IT RE form) as well as a similar but separate form for school district income tax (an SD RE form) if applicable.

When asked why the state is forcing Ohioans to do all of this to get a refund, rather than managing it on their own like the IRS does, Gudmundson said in a statement that his department “Doesn’t have all the information the IRS needs easily and independently.” adjust an individual’s Federal Adjusted Gross Income with respect to unemployment benefits received in the 2020 tax year. ”

Additionally, there is no process in place for the IRS to share Ohio taxpayer information with state tax authorities, Gudmundson said. “It’s not to blame the IRS,” he said. “They find themselves in an extraordinary and unique situation that has been imposed on them in the middle of the tax season.”

Ohio, like other states, saw an unprecedented rise in jobless claims when the coronavirus crisis began in mid-March 2020, leading to ‘stay at home’ and business closure orders .

Between mid-March and the end of December, the Ohio unemployment system said it paid about $ 7.7 billion in traditional benefits, as well as $ 7.6 billion in federal special unemployment benefits in the event of a claim. pandemic, to more than 800,000 Ohioans.

Read more stories about Ohio politics and government:

New book by Dennis Kucinich chronicles his tumultuous tenure as mayor as he reflects again on job search

Justice Jennifer Brunner announces her candidacy for Chief Justice of the Ohio Supreme Court

Ohio Statehouse observers monitor Senate income tax cut and education plans

Senate report on Jan.6 U.S. Capitol riot co-authored by Senator Rob Portman recommends security changes

Ohio must use 200,000 injections of the Johnson & Johnson coronavirus by June 23 or they will expire, DeWine says

You might pay a higher tax rate than a billionaire – ProPublica Tue, 08 Jun 2021 08:59:00 +0000

ProPublica is a non-profit newsroom that investigates abuse of power. The IRS Secret Files is an ongoing draft report. Subscribe to be notified of the publication of the next opus.

The richest Americans win the tax game, no matter which metric you use. ProPublica published an article, based on a vast mine of unpublished information from the IRS, which reveals the paltry amount of taxes paid by the ultra-rich compared to their massive accumulation of wealth.

But this wealth of IRS data also reveals new information about how little tax the richest 25 Americans pay on the most conventional measure: income. Not all are able to minimize their income and avoid taxes; some bring in very large sums. But even then, the data – and new analysis from ProPublica – shows they are still paying surprisingly low rates.

On average, they paid 15.8% federal personal income tax between 2014 and 2018. They had adjusted gross income of $ 86 billion and paid $ 13.6 billion in income tax. during this period.

That’s lower than the rate a single worker earning $ 45,000 a year could pay if you include Medicare and Social Security taxes.

Even by the most conventional test, the ultra-rich pay low income tax rates

The top tax bracket is 37%, but the 25 richest Americans paid an average of 15.8% of their reported income from 2014 to 2018.

Source: ProPublica analysis of IRS data

The federal tax system is designed to be progressive: the more money people make, the higher the tax rate they are supposed to pay. Today, a married couple pays a 10% tax rate on their first $ 19,900 of taxable income (after deductions), increasing to 37% for anything they earn above $ 628,300.

But these are just the rates on paper. To get a more accurate picture, IRS analysts look at the taxes people actually pay. This is called the “effective tax rate”. If you had earned $ 10 million and paid $ 2.5 million in taxes, you would have had an effective rate of 25%.

Looking strictly at income taxes, IRS statistics show that effective tax rates actually increase with income. In 2018, the latest year for which data is available, taxpayers earning between $ 500,000 and $ 1 million paid on average twice the tax rate as taxpayers earning between $ 100,000 and $ 200,000. Taxpayers earning between $ 2 million and $ 5 million paid 27.5%, the highest of all taxpayers. But, at this point, the climb stops.

From there, rates go down as income goes up. By the time you reach the most rarefied income group whose data is released by the IRS – the richest 0.001% of taxpayers, a collection of 1,400 people who each disclosed incomes in excess of $ 69 million – the rate fell to 23%.

But as ProPublica’s new analysis shows, the top 25 pay even less than that.

How is it possible?

Typically, the wealthy of all stripes keep their tax rates low in several ways. Some are simple: they avoid forms of income, like wages, which are taxed at a high rate, 37%, and derive most of their money from capital gains and investment dividends, most of which are taxed. at 20%. (Among those with the highest annual incomes and highest capital gains are elite hedge fund managers.) Large charitable donations reduce taxable income. Other tax-saving approaches are more obscure: everything from the deduction for things like interest payments to various credits for business owners.

The top 25 are taking these strategies and applying them on an epic scale, ProPublica found. The wealthiest can also choose when to collect income, matching their deductions to lower their bills. By using their large stocks of stocks, they can make large charitable grants. This achieves the double feat of avoiding any taxes on the growth of the stock while obtaining tax deductions for full value.

To understand how low the personal tax burden of the nation’s wealthiest Americans is compared to typical wage earners, you need to count other forms of federal taxes as well. Social security and health insurance obligations, which are automatically withheld from employee paychecks, hardly hit the ultra-rich, as they tend to avoid the forms of income, like wages, to which taxes apply. ProPublica found that these taxes had a negligible effect on the total burden of the 25 richest. If we include them in our calculation above, it would increase the average tax rate of the richest from 15.8% to 16%.

Most workers, however, pay more in Social Security and Medicare levies than in income taxes – although they probably don’t know it. The taxes for these retirement and health programs are administered in a way that makes them almost invisible: not only are they subtracted automatically with each pay period, but the burden is shared. Half is taken directly from employees’ salaries and the other half is paid by employers.

Take the typical worker we quoted above, who had a salary of $ 45,000 in 2018. With the standard deduction, that worker’s income tax bill would be $ 3,800, or a rate of 8. %. But now add payroll taxes. The worker paid just over $ 3,400 directly during the year; in addition, the worker’s employer paid an amount equivalent to his share of the worker’s social security and health insurance taxes. Government agencies and most economists typically count both contributions – a total of nearly $ 6,900 in this case – as a tax that is effectively borne by workers since it is part of the cost of paying their wages. The logic is that employers take these costs into account when hiring and would hire fewer people or pay them less because of the tax burden.

In total, our worker paid $ 10,700 in taxes. Taken as a percentage of the worker’s total compensation (including a typical health plan), this gives a rate of 19%.

Yes, that’s higher than the average rate of the 25 richest Americans.

Here’s what you need to know Mon, 07 Jun 2021 21:09:29 +0000

Select’s editorial team works independently to review financial products and write articles that our readers will find useful. We may receive a commission when you click on product links from our affiliate partners.

The easiest way to start saving for retirement is to use an IRA, but the type of account you choose can make a big difference in how much you get when you’re off work.

Traditional IRAs and Roth IRAs are the two most popular types of retirement accounts, but they have some significant differences that any investor should consider before deciding which one to open.

With traditional IRAs, you delay paying taxes until you withdraw funds from your account later in retirement. With Roth IRA, however, you pay taxes up front by contributing after-tax dollars, and later in retirement, your withdrawals are tax-free (as long as your account has been open for at least five years).

Generally, traditional IRAs work best if you expect to be in a lower tax bracket when you retire, while Roth IRAs are best for those in a lower tax bracket today. . The latter is probably best for young investors who are early in their careers and therefore plan to have more income (and a higher tax rate) when they retire.

Beyond the tax implications alone, however, there is more to consider when choosing between a traditional IRA and a Roth IRA.

From their early withdrawal rules to their contribution limits and eligibility conditions, Select details what the two types of retirement accounts have in common and where they differentiate. Plus, we recommend our top picks from each.

The benefits of contributing to an IRA

IRAs stand out as an effective way to save for retirement because of the tax breaks mentioned above, but that’s not their only benefit. The biggest benefit of an IRA is that you won’t pay tax on any investment gains you’ve made over the years, which could save you hundreds of thousands (or even millions) of dollars when you start to make withdrawals.

IRAs are easy to set up and accessible, offered at most banks and credit unions, as well as through online brokers and investment firms. You can set up automatic contributions into your IRA from your checking or savings account, making investing for your future one less thing to think about.

And unlike being limited to your employer’s 401 (k) plan, you can choose your investments with an IRA, and there are plenty of brokerage firms or banks that will help guide you based on your retirement schedule.

If you already have a 401 (k) plan through your employer, an IRA is an effective way to supplement your retirement savings. And since a 401 (k) has the same tax benefits as a traditional IRA, the choice is easy: branding on a Roth IRA with your 401 (k) will ensure you get tax relief now. and in the future.

Early withdrawal rules

Overall, the rules for early withdrawal from an IRA are more lenient with Roth IRAs than with traditional IRAs.

Traditional ARIs: If you withdraw funds from your Traditional IRA before age 59 and a half, you are taxed at your current income tax rate and you are charged a 10% early withdrawal penalty.

Roth IRA: Withdrawals from your Roth IRA before age 59 and a half depend on your contributions or income. Withdrawal contributions of your Roth IRA at any age is tax and penalty free. Withdrawal earnings before age 59 and a half, however, incurs a 10% early withdrawal penalty and may be subject to income taxes as with a traditional IRA.

Roth IRAs also offer a unique benefit that traditional IRAs do not: first-time home purchases, education costs, and birth or adoption costs (within certain limits) count as exceptions to the early withdrawal penalty.

Contribution limits

Traditional IRAs and Roth IRAs have the same contribution limits, which is set annually.

Traditional and Roth IRAs: For 2021, your total contribution limit to Traditional and Roth IRAs is $ 6,000 if you are under 50 and $ 7,000 if you are 50 or older.

Traditional IRAs also offer a useful benefit that Roth IRAs don’t: your contributions to a traditional IRA can be deducted from your taxes each year, up to certain limits. This essentially means that you are rewarded for putting money into your retirement account, as the contributions help reduce the amount you owe in taxes. But be careful: instead of spending those savings every year when you do your taxes, consider reinvesting them in your retirement account to maximize the amount of money you have available when you retire. The deduction limits for traditional IRAs in 2021 are as follows:

You cannot make a deduction if …

  • You have a workplace pension plan and your income is $ 76,000 or more as a single filer / head of household
  • You (or your spouse, if married) have a working pension plan and your income is $ 125,000 or more as a married filing jointly
  • You (or your spouse, if married) have a working pension plan and your income is $ 10,000 or more as a separately filed marriage

If you (and your spouse, if married) do not have a workplace pension plan, you can make a full deduction up to the amount of your contribution limit.

Eligibility criteria

The Best Traditional and Roth IRAs for Your Retirement Savings

After reviewing the commonalities and differences between Traditional and Roth IRAs above, it’s time to research the best provider for the account you choose.

We’ve reviewed and compared over 20 different accounts offered by national banks, investment firms, online brokers, and robo-advisers so you don’t have to. While many providers offer both traditional IRAs and Roth IRAs, some stand out better for those looking to open a Roth IRA because they are attractive to young investors.

Here are our top-rated picks that offer both Traditional and Roth IRAs – and offer benefits that beginners can greatly benefit from, such as no minimum deposit requirements and educational tools to help you on your investment journey.

Charles Schwab IRA

Information about Charles Schwab IRA was independently collected by Select and was not reviewed or provided by Charles Schwab prior to posting.

  • Minimum deposit

  • Fresh

    No account fees; $ 0 commission fee for stock and ETF transactions; $ 0 transaction fees for over 4,000 mutual funds; $ 0.65 per options contract

  • Premium

  • Investment options

    Stocks, bonds, mutual funds, CDs and ETFs

  • Educational resources

    Comprehensive retirement planning tools

Editorial note: Any opinions, analysis, criticism or recommendations expressed in this article are the sole responsibility of Select’s editorial staff and have not been reviewed, endorsed or otherwise approved by any third party.

Shepherds help protect the grasslands Mon, 07 Jun 2021 02:26:20 +0000 By YANG ZEKUN in Tongliao, Inner Mongolia | China Daily | Updated: 2021-06-07 09:38

The photo taken on June 5, 2020 shows a view of the grasslands of the Jarud Banner in the city of Tongliao, in the north China’s Inner Mongolia Autonomous Region. [Photo/Xinhua]

As spring rolled into the grasslands last month, the Khongorbaatar shepherd’s first task after waking up around 6 a.m. was to check on his 160 newborn calves and family grasslands.

Khongorbaatar, from Jaruug Banner, Tongliao, Inner Mongolia Autonomous Region, said that thanks to new centralized breeding methods designed to restore grasslands, the number of calves born each year continues to increase, earning him around 2 million. yuan ($ 312,000).

The same pasture raised about 1,000 sheep and 300 cattle, with a gross income of about 1.4 million yuan per year. But there was not enough grass to eat, and the 45-year-old said that purchasing fodder cost him nearly a million yuan a year.

In 2014, Khongorbaatar and his brother and sister created a modern ranch, merging their families’ 667 hectares of pasture land, which allowed them to increase mechanization and reduce costs.

In response to a government call to reduce the number of sheep and increase the number of cattle to make cattle ranching more sustainable, Khongorbaatar sold all of his sheep in 2017 and started raising cattle.

Sheep often eat grass up to the roots, causing desertification, while cattle only eat the top part of the grass, he said, adding that cattle dung is good for growth. grass and ecological restoration.

Khongorbaatar witnessed a marked improvement in the environment, recalling that every spring, for as long as he can remember, strong winds blew the sand and yellowed the sky.

The situation began to improve about ten years ago due to measures taken by the government and herders to combat overgrazing and destruction of grasslands, and restore the damaged environment.

“We have lived in the prairie for generations, and the prairie is where our roots are, so we also want to keep it green,” Khongorbaatar said.

“In recent years, due to the passage of free grazing, the grassland vegetation has been restored and the time required to herd livestock has also been shortened. “

Unen, deputy head of the banner, said that for a long time the management was backward, the price of livestock was low, feeding them was expensive and the number of cattle and sheep was quite high, putting great pressure on the grasslands. .

The government has decided to change the banner’s development model and seek a way to balance environmental protection and animal husbandry, he said.

The banner now has 1.1 million hectares of meadows, 45% of which are prohibited from grazing. The government encourages herders to improve the quality of their livestock and develop various businesses based on grassland cultivation, Unen said.

Drawing on the beautiful grassland landscapes and distinctive ethnic cultural activities, Khongorbaatar developed an ecotourism business on his ranch in 2017 that attracts around 10,000 visitors per year. Although the COVID-19 outbreak affected tourism last year, the ranch’s tourism income reached around 200,000 yuan.

China has prioritized environmental protection and sustainable development with the National Human Rights Action Plan (2016-20), released by the Information Office of the Business Council State, emphasizing an environmental right as an important fundamental right.

The plan called for efforts to tackle pressing environmental problems such as air, water and soil pollution, with the aim of improving the environment overall.

Tuquan, a county of the Hinggan League of Inner Mongolia, uses a circular economy model to protect the environment and promote sustainable development.

In Tuquan Shuguang Modern Agricultural Circular Economic Park, a company raises livestock intensively, plants fodder crops and also purchases the stems of harvested food crops from local farmers to feed the livestock, said Zhu Dejun, director of the park.

Cattle manure is collected and used as raw material for an organic fertilizer business in the park or put into farmland as manure to encourage the growth of fodder and food crops, Zhu said.

“We put waste into recycling, reduce environmental pollution and bring income to agricultural businesses and local farmers,” he said. “Organic fertilizer can improve the quality of the soil.”

Environmental law is a basic and important human right, and everyone needs a high-quality environment, said Li Yunlong, a teacher at the Party School of the Communist Party of China Central Committee.

Protecting the environment is the premise and prerequisite for sustainable development, he said.

Yuan Hui contributed to this story.

What is a Roth IRA? How to choose the best retirement account Sun, 06 Jun 2021 13:00:51 +0000

Dear Liz: Can you explain the difference between a Roth IRA and a Roth 401 (k)? What are the advantages of a Roth 401 (k)? My company offers it and I am considering starting to make deferred contributions to it while continuing my 401 (k) contributions.

Reply: Contributions to Roth IRAs and Roth 401 (k) are after-tax, which means you don’t get an initial tax deduction like you do with traditional IRA and 401 (k) accounts. But the money grows tax-deferred and may be tax exempt in retirement.

You typically open and contribute to a Roth IRA at a brokerage firm, which gives you access to a wide range of investment options. Much like traditional 401 (k) accounts, Roth 401 (k) are offered by an employer, usually with a limited number of investment choices.

Roth 401 (k) allow people to contribute much more than they could to Roth or traditional IRAs. The Roth 401 (k) also allow contributions from high earners, who might be excluded from contributing to a Roth IRA.

Roth IRA contributions are limited to $ 6,000 with a catch-up contribution of $ 1,000 for those 50 and over. Your ability to contribute begins to decline after certain income limits. This year the phase-outs start at $ 125,000 of adjusted adjusted gross income for single filers and $ 198,000 for married couples filing jointly.

Roth 401 (k) have no income limit and allow you to contribute up to $ 19,500 ($ 26,000 for those 50 and over). This is the combined limit for elective deferrals from your paycheck. If you are under 50 and contribute $ 10,000 to the pre-tax portion of 401 (k), for example, you could contribute up to $ 9,500 to the Roth option.

The Roth IRAs and Roth 401 (k) also have different rules for withdrawals. You can withdraw your contributions from a Roth IRA at any time without paying taxes or penalties. Withdrawals from a Roth 401 (k) before the age of 59 and a half can also result in taxes and penalties, although you usually have the option of taking out loans.

Plus, you don’t have to start making withdrawals at age 72 on a Roth IRA, as you typically do with other retirement accounts, including Roth 401 (k) s. You will have the option of converting a Roth 401 (k) into a Roth IRA, usually after you quit your job, in order to avoid the minimum distributions required this way.

Sudden death brings a dilemma

Dear Liz: My son passed away suddenly and his million dollar life insurance policy was assigned to me, his mother. I want the money to be divided equally between her two children for future use. They are now 18 and 15 years old. Which financial vehicle should I use? The funds are in my money market account just waiting to be placed in something.

Reply: Please use some of the money to pay for personalized advice from advisors who are trustees. Trustee means that the advisor is required to put your interests first. Most advisors are not trustees, but you can find financial planners who Assn. personal financial advisers, the XY planning network, the Garrett Planning Network and the Alliance of Global Planners.

Which vehicle (s) you use for cash will depend on your goals and how you want to distribute the funds over time. You will need good advice on how to invest, minimize taxes, and incorporate the money into your own estate plan. Distributing money to your grandchildren may trigger the need to file donation tax returns, although you don’t actually owe donation tax until you donate millions of dollars. .

Your son may have chosen you as a beneficiary because he trusted you to do good to his children. Or it may not have updated its beneficiaries since the policy request. (Several ex-spouses ended up with life insurance proceeds because the policy owner failed to update beneficiaries after the divorce.) It is a good idea to check the beneficiaries of any life insurance once a year or after any significant life. change to make sure the money always goes where you want it.

Liz Weston, Certified Financial Planner, is a personal finance columnist for NerdWallet. Questions can be sent to him at 3940 Laurel Canyon, No. 238, Studio City, CA 91604, or by using the “Contact” form at

IRS Guidelines on the COBRA Grant, Part III: Claiming the Premium Assistance Credit | Dickinson wright Thu, 03 Jun 2021 23:41:38 +0000

Under the American Rescue Plan Act of 2021 (“ARPA”), a 100% COBRA grant is available to qualified beneficiaries who lose coverage due to involuntary termination or reduced hours. . The grant is available for the period April 1, 2021 through September 30, 2021, if the person is not eligible for other group health plan coverage or Medicare. For more information, please refer to our previous Customer Alerts on the New COBRA Grant which can be viewed here and here.

On May 18, 2021, the IRS issued Notice 2021-31, which provides helpful advice on a number of questions in the form of 86 FAQs. The first part of our series of customer alerts on the new COBRA subsidy (which can be viewed here) addressed the following issues:

  1. When Did an “Involuntary” Termination Occur?
  2. What events may constitute a “reduction in hours” for grant eligibility purposes?
  3. What group health plans must be offered to people eligible for assistance?

Our customer alert part II (which can be consulted here) addresses:

  • When is an Eligible Recipient an Eligible Person for Assistance?
  • What rights are available if a person eligible for potential assistance is entitled to an extended election period?

This final part III deals with matters relating to the premium assistance credit available to the person to whom premiums are payable for COBRA Continuing Coverage.

The ARPA amended the Internal Revenue Code (the “Code”) to provide that the person to whom premiums are payable for continued coverage is entitled to a “premium assistance credit” for each calendar quarter against. tax imposed by Section 3111 (b) of the Code 1.45% of the Medicare share of the FICA tax) in an amount equal to the premiums not paid by those eligible for assistance for COBRA coverage due to the grant. If the amount of the credit in a calendar quarter is more than the tax due (after reduction for other credits), the excess is treated as a refundable tax overpayment. The credit claimed in the tax year is included in the gross income of the premium recipient for that year.

Who can apply for the premium assistance credit?

The person authorized to apply for the premium assistance credit is:

  1. the multi-employer plan, in the case of a group health insurance plan that is a multi-employer plan;
  2. the common law employer who maintains the plan, in the case of a group health plan (other than a multi-employer plan) which is (a) subject to the federal COBRA, or (b) which is self-funded; and
  3. the insurer providing the coverage, in the case of any other group health plan not described in subsection (1) or (2) (generally fully insured coverage subject to state continuance coverage requirements).

Notice 2021-31 designates this person as the “premium beneficiary”. In most cases, the sponsor of the employer’s group health insurance plan will be the person entitled to claim the credit. This Customer Alert discusses the employer’s right to claim the Premium Assistance Credit, but keep in mind that the premium beneficiary could be a multi-employer plan or an insurer as described above.

How much is the premium assistance credit?

The credit for a quarter is generally equal to the COBRA premium for eligible beneficiaries in the same situation who are not eligible persons for assistance if the employer does not subsidize the COBRA premium for other eligible beneficiaries, including 2% administrative fee (c. COBRA premium.)

Is the credit reduced if the employer subsidizes the COBRA premium?

Yes. The credit is reduced if the employer pays part of the COBRA premium for other eligible beneficiaries who are not eligible persons. For example, if an employee who is involuntarily terminated on March 31, 2021, chooses COBRA and pays the active employee rate of $ 200 per month for three months, then is charged the full COBRA premium of $ 1,000 per month , the credit is $ 200 for three months (April, May and June) and $ 1,000 for the next three months (July, August and September) if the former employee continues to be a person eligible for assistance.

If the COBRA premium is currently less than the maximum allowable amount, can a plan increase the amount billed for COBRA coverage?

Yes. COBRA regulations allow a plan to increase the COBRA premium if the plan currently charges less than the maximum allowable amount (102% of premium.)

What is the amount of the credit if the group of eligible recipients includes both persons eligible for assistance and persons not eligible for assistance?

The credit can only be claimed in respect of those eligible for assistance. If the family members who are eligible beneficiaries include one or more persons who are not persons eligible for assistance, the premium is allocated first to persons eligible for assistance and then to persons not eligible for assistance. help. For example, if an employee is a person eligible for assistance and the covered spouse is not an eligible person, the credit would be limited to the COBRA premium for the coverage reserved for employees.

How is the premium assistance credit for an individual health reimbursement scheme (HRA) calculated?

The credit of an individual HRA cover is limited to 102% of the amount actually reimbursed in the month for each Person Eligible for Assistance. Thus, the credit may not be the same every month, as the actual repayment of each eligible beneficiary must be tracked for the month to calculate the credit.

When is the employer entitled to the credit?

When a person eligible for assistance makes the COBRA election, the employer is entitled to the credit for the periods of coverage that began before that date. For each subsequent coverage period, the credit can be claimed from the first day of that coverage period.

Example: The period of coverage is the calendar month. An individual eligible for assistance makes a COBRA election on June 17, 2021, as of April 1, 2021. As of June 17, 2021, the employer is entitled to a credit equal to the COBRA premium not paid by the individual eligible for help for April, May and June. The credit can then be claimed from July 1 and August 1 and September 1 for the months of July, August and September.

If the employer is the beneficiary of the bonus and uses a third party as a COBRA administrator, he will have to keep in close contact with the COBRA administrator to know when a COBRA choice is made by a person eligible for assistance and therefore when the credit associate can be claimed.

How does the employer claim the premium assistance credit?

The employer claims the credit by reporting the credit (the amount of unpaid COBRA premiums for those eligible for assistance) and the number of people receiving a COBRA grant on the appropriate lines of their federal employment tax return. Usually, this is Form 941, Employer’s Quarterly Federal Tax Return.

The employer can:

  1. reduce its federal employment tax deposits, including withheld taxes, that it would otherwise be required to deposit, up to the amount of the anticipated credit; and
  2. Apply for an advance credit advance that exceeds federal employment tax deposits available for reduction by completing Form 7200, Employer Advance Payment of Credit Due to COVID-19.

As of the date of this customer alert, Form 7200 has been updated to add appropriate lines to use for requesting a premium assistance credit advance, but Form 941 has not yet been updated.

Should an employer repay the credit if a person eligible for assistance does not inform them that the person eligible for assistance is no longer eligible for the grant because they have become eligible for another plan coverage group health or Medicare?

No, as long as the employer does not know the person’s eligibility for the other coverage.

Can an employer claim the premium assistance credit for amounts that count under other COVID relief provisions?

No. An employer cannot apply for a premium assistance credit for amounts that are taken into account such as:

  • Eligible salaries or eligible health care expenses under the CARES Act;
  • Sick leave salary eligible under the Emergency Paid Sick Leave Act (Article 3131 of the Code);
  • Qualified family leave salary under the Law on the Extension of Family and Emergency Medical Leave (Article 3132 of the Code); or
  • Employee retention credit claimed by an employer who is the subject of a closure by government order due to COVID-19 (Code article 3134).
New York Tax Appeals Tribunal rules mandatory S corporation election triggered based on IRC definition of income Thu, 03 Jun 2021 07:03:46 +0000

On May 17, 2021, the New York Tax Appeals Tribunal (“Tribunal”) tenuous that in order to determine whether a New York C corporation is required to elect to be treated as an S corporation following the investment ratio test under New York Tax Law § 660 (i), this test requires that the “Federal gross income” adopts the same definition as that provided by the Internal Revenue Code (“IRC”) and as indicated in the federal returns of the corporation.

In 2012, a third party purchaser purchased all of the outstanding shares of Lepage, Inc. and Bakeast, Inc. from taxpayers. Both Lepage and Bakeast had elected to be treated for federal income tax purposes as corporations in the subchapter S. However, neither of the two entities filed for elections for the company New York S. In connection with the sales, valid choices under IRC § 338 (h) (10) were made and the sales were therefore treated as deemed asset sales by Lepage and Bakeast, followed by a liquidation distribution of the consideration to taxpayers.

After verification, the Division of Taxation (“Division”) concluded that under Section 660 (i) of the New York Tax Act, Lepage and Bakeast should be treated as New York S corporations for the purposes of tax year 2012. The NY Tax Law § 660 (i) includes an investment ratio test that a New York S corporation election is mandatory if the investment income of a federal S corporation during d ‘A tax year exceeds 50% of its “federal gross income” for that year. Since the sales of Lepage and Bakeast were treated as sales of assets under IRC § 338 (h) (10), the division concluded that the parts of the gain from those sales which met the definition of investment income were included in the determination of federal gross income. de Lepage and Bakeast. Due to the inclusion of these amounts in federal gross income, Lepage and Bakeast exceeded the investment ratio for 2012 and the Division therefore asserted that they should be treated as New York S corporations.

The taxpayers argued that Lepage and Bakeast did not exceed the investment ratio and, therefore, the criteria for the mandatory election of the New York S corporation had not been met. As part of their argument, the taxpayers asserted that the term “gross federal income” should not include income that would not have been included in gross federal income if the corporations were treated as C corporations for the purposes of federal income tax. Although Lepage and Bakeast reported gains from the sale of assets when they reported federal gross income at the federal level for the purpose of reporting income attributed to New York, Lepage and Bakeast both reported amounts for the federal level. Federal taxable income that had been reduced from the company’s deemed asset sales gain. The taxpayers justified the reduction, arguing that, because Lepage and Bakeast were C corporations in New York, for the purposes of the calculation under New York Tax Law § 660 (i), their “federal gross income” should be limited to those items that would be counted as “federal gross income” as if corporations were also treated for federal income tax purposes as corporations C. Taxpayers further argued that Section 660 (i) of New York tax law should follow a similar standard and that the meaning of federal gross income should be limited to only those amounts that would be treated as federal gross income if the corporation were treated as a C corporation for federal income. for tax purposes.

The court rejected the taxpayers’ arguments, stating that nothing in New York Tax Law § 660 (i) stated that “federal gross income” should be so limited. The Court upheld the ruling that the New York S corporation status was mandatorily chosen for Lepage and Bakeast and that taxpayers were therefore subject to liability as S corporation shareholders for gains from sales.

What a new income-based repayment plan could mean for student loan borrowers Wed, 02 Jun 2021 13:42:31 +0000

Last week, the Biden administration announced it would begin a full review of several popular federal student loan programs, including income-based repayment plans. And that could mean big changes down the road for student loan borrowers.

Income-Based Repayment Plans – known more widely as Income-Based Repayment (IDR) – are federal student loan repayment plans that allow borrowers to have affordable monthly payments, even for large loan balances. The plans use a formula applied to a borrower’s income (usually their adjusted gross income as shown on their federal income tax return), adjusted for family size. Payments are recalculated every 12 months. If there is a balance left after 20 or 25 years, depending on the specific plan, that balance is canceled. This type of student loan forgiveness could be treated as taxable income for the borrower under current law, although Congress has temporarily exempted the student loan forgiveness from federal tax until 2025.

The Biden administration’s review of income-driven reimbursement programs will be conducted through a process called negotiated rule making, which involves a review and possible rewrite of federal regulations. The process begins with a series of public hearings, followed by rule-writing cycles and public comment periods.

Unlike bills, which must be approved by Congress to enact new statutory programs, federal regulations are rules issued by federal agencies under existing law. Federal agencies can use negotiated rule making to modify or even substantially modify or add to existing federal programs without having to involve Congress at all. The negotiated rule-making process was used by the Obama administration to create two brand new income-driven reimbursement plans without any involvement from Congress: Pay As You Earn (PAYE), which was created in 2012, and Revised Pay As You Earn (REPAYE) in 2015. These programs have resulted in a substantial reduction in monthly payments for millions of student loan borrowers. The PAYE and REPAYE regulations were drafted under the umbrella of an old income-based repayment plan called Income-Contingent Repayment (ICR).

It’s entirely possible that the upcoming negotiated rule-making sessions announced by the Biden administration could similarly be used to improve existing income-based repayment plans, or perhaps even replace those plans with a higher plane. While it’s far too early to know what a new income-based repayment plan might look like, Biden proposed a new income-based repayment plan during his presidential campaign last year. The main feature of his proposal was a dramatic reduction in monthly payments. Currently, all existing income-oriented schemes use a formula applied to a borrower’s “discretionary income” – the amount of their gross income adjusted above a poverty-exempt limit. The formulas range from 10 to 20% of the borrower’s discretionary income, depending on the plan. Biden had proposed a new plan that would require borrowers to pay only 5% of their discretionary income. If passed, that would equate to a 50% reduction in payments compared to the PAYE and REPAYE plans, currently the most affordable income-based repayment plans.

Other possible reforms to income-based reimbursement programs are sure to emerge during the development of negotiated rules, such as the following:

  • Shorter repayment period – Most student loan borrowers have to pay off their loans for 25 years before they can get their balances forgiven. But some borrowers, such as those eligible for the PAYE plan, and borrowers who are paying their REPAYMENT loans who do not have graduate loans, may get loan forgiveness in 20 years.
  • Consideration of expenses – Biden’s plan in his 2020 campaign would have allowed student loan borrowers to factor in household expenses. Currently, income-oriented plans do not take into account the borrower’s expenses.
  • Taxation on loan forgiveness – Currently, canceling a student loan under income-based repayment plans can be a taxable event for borrowers, resulting in a “tax bomb” at the end of the term. repayment of the borrower. Congress recently exempted the cancellation of federal student loans from tax by inserting a provision in Biden’s recent stimulus bill, but that exemption is temporary and expires at the end of 2025.
  • Accrued interest – One of the problems with current income-driven repayment plans is that monthly payments may not be high enough to cover ongoing accrued interest. This can lead to dramatic increases in the balance over time, even if the borrower makes their payments on time and progresses toward a possible loan forgiveness. This can make repayment of the loan much more expensive, if not inaccessible, and could also lead to an even bigger “tax bomb” at the end of the repayment term. PAYE and REPAYE, the two new income-focused plans, included interest benefits designed to mitigate the accumulation or capitalization of interest, but those benefits ultimately failed to stop the runaway growth of the balance. A new income-focused plan could potentially include more aggressive protections, such as strict caps on accrued interest.
  • Parent PLUS Loans – Federal Parent PLUS Loans, which are loans to parents for their child’s undergraduate education, are largely excluded from income-based repayment plans. Parent PLUS loans that are consolidated through the Federal Direct Consolidation Program can be repaid under the Income-Based Repayment Plan (ICR), but this plan is much more expensive than other income-based options. Since the inception of PAYE and REPAYE, the struggles of Parent PLUS borrowers have gained attention, which may increase the chances that Parent PLUS borrowers will benefit from reforms to these repayment programs.

The first public hearings examining these and other federal loan programs are expected to begin later this month. But developing negotiated rules is a long process. It will be months before student loan borrowers have a clear idea of ​​what reforms to income-based repayment programs might look like, and possibly one to two years before the new regulations are finalized.

Further reading

Biden administration to review income-based repayment and student loan forgiveness programs

Will Biden cancel student loan debt? We may know soon

Biden Student Loan Forgiveness Review: Should You Take Action Now To Write Off Student Debt Later?

If you’ve paid off your student loans, you may be eligible for a refund