Author: Alexis Long

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Helpful Articles

How Non-Working Spouses Can Contribute to an IRA

Married couples may not be able to save as much as they need for retirement when one spouse doesn’t work outside the home — perhaps so that spouse can take care of children or elderly parents.

In general, an IRA contribution is allowed only if a taxpayer earns compensation. However, there’s an exception involving a “spousal” IRA. It allows contributions to be made for nonworking spouses. For 2021, the amount that an eligible married couple can contribute to an IRA for a nonworking spouse is $6,000, which is the same limit that applies for the working spouse.

IRA advantages

As you may know, IRAs offer two types of advantages for taxpayers who make contributions to them. Contributions of up to $6,000 a year to an IRA may be tax deductible. The earnings on funds within the IRA are not taxed until withdrawn. (Alternatively, you may make contributions to a Roth IRA. There’s no deduction for Roth IRA contributions, but, if certain requirements are met, distributions are tax-free.) As long as the couple together has at least $12,000 of earned income, $6,000 can be contributed to an IRA for each, for a total of $12,000. (The contributions for both spouses can be made to either a regular IRA or a Roth IRA, or split between them, as long as the combined contributions don’t exceed the $12,000 limit.)

Boost contributions if 50 or older

In addition, individuals who are age 50 or older can make “catch-up” contributions to an IRA or Roth IRA in the amount of $1,000. Therefore, for 2021, for a taxpayer and his or her spouse, both of whom will have reached age 50 by the end of the year, the combined limit of the deductible contributions to an IRA for each spouse is $7,000, for a combined deductible limit of $14,000. There’s one catch, however. If, in 2021, the working spouse is an active participant in either of several types of retirement plans, a deductible contribution of up to $6,000 (or $7,000 for a spouse who will be 50 by the end of the year) can be made to the IRA of the nonparticipant spouse only if the couple’s AGI doesn’t exceed $125,000. This limit is phased out for AGI between $198,000 and $208,000.

Contact us if you’d like further information about IRAs or you’d like to discuss retirement planning. © 2021

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Helpful Articles Tax

Child Tax Credit Update

Recently, there were changes made to the child tax credit that will benefit many taxpayers. As part of the American Rescue Plan Act that was enacted in March 2021, the child tax credit:

  • Amount has increased for certain taxpayers
  • Is fully refundable (meaning you can receive it even if you don’t owe the IRS)
  • May be partially received in monthly payments

The new law also raised the age of qualifying children to 17 from 16, meaning some families will be able to take advantage of the credit longer.

The IRS will pay half the credit in the form of advance monthly payments beginning July 15. Taxpayers will then claim the other half when they file their 2021 income tax return.

Though these tax changes are temporary and only apply to the 2021 tax year, they may present important cashflow and financial planning opportunities today. It is also important to note that the monthly advance of the child tax credit is a significant change. The credit is normally part of your income tax return and would reduce your tax liability. The choice to have the child tax credit advanced will affect your refund or amount due when you file your return. To avoid any surprises, please contact ATA.

Qualifications and how much to expect

The child tax credit and advance payments are based on several factors, including the age of your children and your income.

  • The credit for children ages five and younger is up to $3,600 –– with up to $300 received in monthly payments.
  • The credit for children ages six to 17 is up to $3,000 –– with up to $250 received in monthly payments.

To qualify for the child tax credit monthly payments, you (and your spouse if you file a joint tax return) must have:

  • Filed a 2019 or 2020 tax return and claimed the child tax credit or given the IRS your information using the non-filer tool
  • A main home in the U.S. for more than half the year or file a joint return with a spouse who has a main home in the U.S. for more than half the year
  • A qualifying child who is under age 18 at the end of 2021 and who has a valid Social Security number
  • Income less than certain limits

You can take full advantage of the credit if your income (specifically, your modified adjusted gross income) is less than $75,000 for single filers, $150,000 for married filing jointly filers and $112,500 for head of household filers. The credit begins to phase out above those thresholds.

Higher-income families (e.g., married filing jointly couples with $400,000 or less in income or other filers with $200,000 or less in income) will generally get the same credit as prior law (generally $2,000 per qualifying child) but may also choose to receive monthly payments.

Taxpayers generally won’t need to do anything to receive any advance payments as the IRS will use the information it has on file to start issuing the payments.

IRS’s child tax credit update portal

Using the IRS’s child tax credit and update portal, taxpayers can update their information to reflect any new information that might impact their child tax credit amount, such as filing status or number of children. Parents may also use the online portal to elect out of the advance payments or check on the status of payments.

The IRS also has a non-filer portal to use for certain situations.

Let us help you.

With any tax law change, it’s important to revisit your full financial roadmap. We can help you determine how much credit you may be entitled to and whether advance payments are appropriate. How you choose to receive the credit (partially advanced via monthly payments or solely on your next year’s return) could have many impacts to your financial plans.

Please contact one of our offices today to discuss your specific situation. As always, planning ahead can help you maximize your family’s financial situation and position you for greater success.

*Article from AICPA

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Construction General Helpful Articles Jackson, TN Memphis, TN

Protect Your Construction Company from the Effects of High Supply Prices

Building supply manufacturers are doing their best to catch up with the high demand for their materials. Material prices overall are continuing to climb, making it difficult for contractors of all types and sizes to provide their services in the same manner they did before the pandemic as well as grow their businesses.

What can contractors do?

Communication is key for contractors and business owners right now. It is important for clients to know developments in supply chains and pricing. Much of the information that should be communicated can be included in contracts. Even though they cannot impact the supply chain and prices of materials, contractors can protect themselves from losing money and work through several means.

  • Expiration Dates

With prices and supply availability changing every day, contractors cannot guarantee a price for long. Since there is a chance that original quotes can change at a moment’s notice, contractors can explain that their quote is only viable until a certain date. 

  • Delay Clauses

Since there are typically damages contractors must claim when a job is not completed by the projected date, it is important for contractors to include delay clauses in their contracts. With the pandemic and the unknowns of the building materials supply chains, contractors cannot be held accountable for the delay in construction due to lack of materials.

Need more insight?

Our experts are consistently keeping tabs on industry changes. Contact one of our representatives today for consulting that will keep your business running smoothly and productively in the midst of unknowns.

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Financial Institutions and Banking

ALTA Best Practices Certification Services

Banks and mortgage lenders are under increased pressure by regulators to protect their customers’ non-public personal information (NPI)—especially within the context of their relationships with third-party vendors, including title  companies  and  attorneys.  This  pressure  has  resulted  in  lenders conducting due diligence on title companies and attorneys. The means of approaching due diligence has been inconsistent within the industry, with some  lenders  asking  vendors  to  complete  questionnaires,  others  asking vendors to submit their policies and procedures and still others conducting interviews  and  on-site  visits.  Lenders  have  struggled  to  find  the  “right” solution to conduct this due diligence.

The American  Land  Title Association  (ALTA)  responded  to  this  industry concern by developing a Best Practices Framework (ALTA Best Practices or the Best Practices). By choosing to pursue ALTA Best Practices, a title company or attorney can demonstrate to its mortgage lenders, underwriters and customers that it is following the industry’s established practices. This demonstration extends  beyond just  the protection of NPI.  As lenders have learned about the Best Practices, this guidance has quickly become their preferred method of conducting CFPB due diligence.

The Best Practices include seven areas of guidance known as pillars:

  • Licensing
  • Escrow Accounting Procedures
  • Privacy & Information Security
  • Settlement Procedures
  • Title Policy Production & Delivery
  • Professional Liability Insurance Coverage
  • Consumer Complaints

When  a  company  elects  to  pursue  Best  Practices,  it  must  first  develop policies and procedures to address each of the seven pillars. Once an organization has fully implemented its ALTA-compliant policies and procedures, it can then elect to work toward becoming certified. The certification must be performed  by  a  qualified,  independent  third  party  that  evaluates  the  title company’s compliance with its Best Practices policies and procedures.

ATA assists clients with:

  • The development of policies and procedures consistent with ALTA Best Practices.
  • Evaluation of previously prepared policies and procedures for compliance with the seven pillars of the Best Practices Framework.
  • Certification by providing an independent assessment of your organization’s operational processes, written policies, & procedures.

 

Contact partner and financial institutions expert Jack Matthis, CPA, CBA today at jmatthis@atacpa.net or by calling (731) 686-8371.

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News Tax

2021 Q3 Tax Calendar: Key Deadlines for Businesses and Other Employers

Listed below are some of the key tax-related deadlines affecting businesses and other employers during the third quarter of 2021. Keep in mind that this list isn’t all-inclusive, so there may be additional deadlines that apply to you. 

Monday, August 2

  • Employers report income tax withholding and FICA taxes for second quarter 2021 (Form 941) and pay any tax due. 
  • Employers file a 2020 calendar-year retirement plan report (Form 5500 or Form 5500-EZ) or request an extension. 

Tuesday, August 10 

  • Employers report income tax withholding and FICA taxes for second quarter 2021 (Form 941), if you deposited all associated taxes that were due in full and on time. 

Wednesday, September 15

  • Individuals pay the third installment of 2021 estimated taxes, if not paying income tax through withholding (Form 1040-ES).
  •  If a calendar-year corporation, pay the third installment of 2021 estimated income taxes.
  • If a calendar-year S corporation or partnership that filed an automatic extension: File a 2020 income tax return (Form 1120S, Form 1065 or Form 1065-B) and pay any tax, interest and penalties due. 
  • Make contributions for 2020 to certain employer-sponsored retirement plans.

Contact your ATA representative to ensure you’re meeting all applicable deadlines and to learn more about the filing requirements. © 2021

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Helpful Articles News

Early Priority for the Biden Administration: Improving Infrastructure

The Biden administration has officially been in office for 100 days.

In what is typically a period characterized by a flurry of executive orders that establish early policy priorities, President Joe Biden has understandably focused much of his energy on one of the most pressing challenges the United States has faced in generations: bringing an effective end to the COVID-19 crisis.

During the first three months in office, the Administration has been able to accelerate vaccination distribution after a record-speed vaccine development process, offering hope of a world less impacted by the spread of the pandemic.

However, with 100 days now in the rearview mirror, the Biden administration is setting its sights on the future—one in which the United States still faces both short- and long-term challenges that would be daunting for any administration. From continuing to chip away at a COVID-heightened unemployment rate to addressing domestic and social unrest to thinking through a climate change strategy, the Administration has its hands full over the next few years. With a challenging midterm election on the horizon, the motivation to advance its agenda quickly and decisively is top of mind.

For business leaders, the intersection between politics, economy, consumer behavior, public health, social issues and environmental issues has never been so large—or important. Businesses will continue to be tested in ways that they could not have imagined just a few years ago. Those that can navigate these challenges well will come out ahead.

While there are dozens of policies that will unfold over the next four years, there are several key areas for leaders to watch in the short term and consider for future opportunities and challenges that arise. One of these key areas is outlined below.

Priority: Building Back Better

On the campaign trail, then-candidate Biden outlined his vision of an infrastructure plan dubbed the “Build Back Better” plan.

The new bill, announced in full in late March as the American Jobs Plan, includes several proposed investments in both traditional and modern infrastructure systems.

  • Roads & bridges
  • Public Transport
  • Ports
  • Airports
  • Nationwide electric vehicle charging grid
  • Water Systems
  • Electric Grid Upgrades
  • Increased Broadband Access

In addition, President Biden is pushing for investment in care for elderly and disabled Americans, new affordable housing and schools, and funding for manufacturing, R&D and job training.

The Biden administration has argued that decades of a lack of investment has left the United States lagging behind others when it comes to competitiveness on the global stage. In particular, the Administration sees this as an opportunity to level the playing field, financing more projects in rural and disadvantaged communities, with a focus on sustainability and “clean infrastructure” investments.

Infrastructure is often seen as a “both-sides-of-the-aisle” issue, yet an agreement has recently been hard to come by. Whether President Biden and his team—particularly Vice President Kamala Harris and Transportation Secretary Pete Buttigieg—will be able to galvanize both sides of the aisle to come together on this shared goal of fixing the widely acknowledged problem of the United States’ aging infrastructure remains to be seen.

Interested to see what else the Biden administration is prioritizing? Read this article from BDO.

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Helpful Articles

Succession Planning Flowchart

Utilize this flowchart to discover where you are in the process of succession planning. This chart includes links to in-depth videos about succession planning. For more information about leadership succession, contact ATA Employment Solutions.

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Helpful Articles

Organizing and Utilizing Human Capital

When looking at the individuals in your company, their roles will fall into one of four categories: critical, core, supporting or misaligned. Let’s look at each of these in detail to assist you in mapping out responsibilities.

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Helpful Articles

How to Plan for Leadership Succession

Although more than 30% of family-owned businesses transition successfully to the second generation, just 12% of those businesses are viable for the third generation, and a mere 3% are operating by the fourth generation, according to Family Business Review. This video series explores practical ways to think outside the box when planning the future of your business such as outsourcing employee functions and creating a strategic succession plan.

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General

4 Reasons to Revisit Your Powers of Attorney

Although much of estate planning deals with what happens after you pass, it’s equally important to have a plan for making critical financial or medical decisions if you’re unable to make them for yourself. Carefully designed financial and health care powers of attorney allow you to designate a trusted person to make financial and medical decisions on your behalf in the event an illness or injury renders you unconscious or otherwise incapacitated. They also allow you to provide your designee with guidance on making these decisions, including your preferences regarding the use of life-sustaining medical procedures.

Review and revise as needed

Powers of attorney can provide peace of mind that your wishes will be carried out, but it’s important not to get lulled into a false sense of security. You should revisit these documents periodically in light of changing circumstances and consider executing new ones.

Possible reasons you may need new powers of attorney include:

1. Your wishes have changed.

2. The person you designated to act on your behalf has died or otherwise become unavailable.

3. You’re no longer comfortable with the person you designated. (For example, perhaps you designated your spouse, but have since divorced.)

4. If you’ve moved to another state, your powers of attorney may no longer work the way you intended. Certain terms have different meanings in different states, and states don’t all have the same procedural requirements. Some states, for example, require durable powers of attorney to be filed with the local county recorder or some other government agency.

Honoring your powers of attorney

Even if your circumstances haven’t changed, it’s a good idea to execute new powers of attorney every few years. Why? Because powers of attorney are effective only if they’re honored, and — because of liability concerns — some financial institutions and health care providers may be reluctant to honor documents that are more than a few years old.

Contact your ATA representative with any questions regarding powers of attorney. We’d be pleased to further explain how they work or, if your estate plan already includes powers of attorney, help determine if you need to revise them or execute new documents. © 2021