Changes Are Coming to Your 401(k) Statements

Changes Are Coming to Your 401(k) Statements

A new information policy will soon impact your 401(k) statements, thanks to the Secure Act, which was passed in 2019. The legislation requires special disclosures be added to your quarterly statements issued after June 30.

In addition to the basic information about your investments and the size of your savings, you’ll now also see “lifetime income illustrations.” This information is meant to help you gain a “big picture” view of how long your nest egg may last when you retire. This will be illustrated by showing approximately how much income you would receive each month for the rest of your life if you were to buy an annuity with your current 401(k) savings at age 67.

There will be two examples shown on your statement:

  • A “single life” annuity, which pays income to an individual buyer for life.
  • A “qualified joint and survivor” annuity, which pays income for an individual and a surviving spouse for life.

Keep in mind that the estimates:

  • Are based on your current 401(k) balance.
  • Don’t include projections on how your savings may grow and affect your future nest egg.
  • Don’t account for Social Security or other retirement savings.
  • Assume your full balance will be fully “vested.”

Start Saving More Now

If you’re getting close to retirement age, the new disclosures will give you a clearer picture of your current financial situation. If retirement is still a ways off, however, the estimates will give you a better idea of how much more you should start saving now — while you still have time.

For example, you can better formulate a retirement plan now if you know how much you will have to spend when the time comes. Seeing it on your statement might inspire you to increase your 401(k) contribution — especially if your employer offers a 401(k) match that you haven’t maxed out yet.

Be sure to check with your plan administrator to see if they offer online resources that can help you determine your future income needs. Organizations like AARP and the American Institute of Certified Public Accountants also offer free online retirement calculators.

Did You Know?

Google offers digital training courses and tools to help your small business adapt, grow and better serve your community. Visit Grow With Google for information on improving your online presence, including:

  • Setting up an online business
  • Getting listed on search & maps
  • Using YouTube to grow your business
  • Learning about Google tools
  • And more

Mid-Year Mileage Rate Increase

Due to rising fuel costs, the IRS is increasing the standard mileage rates for the rest of the year. Beginning July 1, the new business mileage rate will be 62.5 cents per mile, up 4 cents from the current rate. The new rate for deductible medical or moving expenses (available for active-duty members of the military) will be 22 cents, up 4 cents. The 14 cents per mile rate for charitable organizations remains unchanged.

Enhanced Business Meal Deduction Still Available

Don’t forget that, through the end of the year, you can continue to take advantage of the enhanced business meal deduction. For 2021 and 2022 only, businesses can generally deduct the full cost of business-related food and beverages purchased from a restaurant. Otherwise, the limit is usually 50% of the cost of the meal.

To qualify:

  • A business owner or employee must be present when food or beverages are provided.
  • Meals must be from restaurants (i.e., businesses that prepare and sell food or beverages to retail customers for immediate on-premises or off-premises consumption).
  • Payment or billing for the food and beverages (including taxes & tips) must occur before January 1, 2023.
  • The cost of food and beverages must be billed separately from any entertainment
  • The expense cannot be lavish or extravagant.
Tax Tips for Gig Workers

Tax Tips for Gig Workers

Are you a “gig” worker?

The gig economy, or sharing or access economy, is any activity where you earn income providing on-demand work, services or goods. Often, it’s through a digital platform like an app or website. Two of the most popular types are ride-sharing (i.e., Uber and Lyft) and home rentals (i.e., VRBO and AirBnB), but there are others.

If you earn income through any type of gig work, be sure to keep these tips in mind:

  • Income from gig work is taxable. This is true whether the work is full-time, part-time or if you are paid in cash.
  • While providing gig services, you must be classified correctly. You or the business for which you are working must determine whether you are an employee or independent contractor.
  • If you are considered an employee, your employer typically withholds income taxes from your pay.
  • If you are an independent contractor, you may be required to make quarterly estimated income tax payments, plus pay your own Social Security, Medicare or Medicaid taxes.

If you have questions about paying taxes related to gig employment, please contact us. Or check out the Gig Economy Tax Center on the IRS website.

Retirement Plan Changes Due to COVID-19

If you have encountered financial hardship because of COVID-19, you may be able to withdraw up to $100,000 from your retirement plan or IRA before December 30, 2020. If you do so and are not yet age 59½, you will NOT have to pay the 10% penalty that generally applies to early distributions.

Do You Qualify?

To qualify, you must:

  • Have tested positive and been diagnosed with COVID-19, or
  • Have a dependent or spouse who has tested positive and been diagnosed with COVID-19.

You must also experience financial hardship due to you, your spouse or a member of your household:

  • Being quarantined, furloughed or laid off, or having reduced work hours.
  • Being unable to work due to lack of childcare.
  • Closing or reducing hours of a business that you own or operate.
  • Having your pay or self-employment income reduced.
  • Having a job offer rescinded or start date for a job delayed.

Consider All Your Options

While you may not pay a penalty, keep in mind that any distribution you take is still subject to regular income tax — but you can stretch the reporting on your tax returns over a three-year period. Note, however, that you must also repay the distribution to your retirement plan or IRA within three years. So it’s important to consider all your options before choosing to withdraw your retirement funds early.

Give us a call if you’d like some guidance on the best way to proceed for your situation.

MONEY BRIEF #1

Beginning this tax year, there is a new Form 1099-NEC: Nonemployee Compensation for business taxpayers who pay or receive nonemployee compensation. Payers must complete this form to report any payment of $600 or more in 2020 to one payee. The due date for filing the form is February 1, 2021. Note that nonemployee compensation may be subject to backup withholding if a payee has not provided a taxpayer identification number to the payer or the TIN provided was incorrect. Backup withholding can apply to most kinds of payments reported on Forms 1099 and W-2G, even though the payer doesn’t generally withhold taxes.

MONEY BRIEF #2

The SBA’s Economic Injury Disaster Loan (EIDL) Advance program, which provided grants to small businesses, closed after exhausting the $20 billion in emergency funding provided by Congress. The EIDL Advance program provided businesses with $1,000 per employee, up to a maximum of $10,000. Recipients did not have to be approved for a loan to receive Advance program funds. The funds went to nearly 6 million small businesses, including nonprofits, sole proprietors and independent contractors.

The SBA will continue to accept applications for EIDL program loans, which offer a 3.75% interest rate for small businesses and 2.75% rate for nonprofits. Businesses can apply for EIDL loans on the SBA disaster assistance page.

Note that if you receive a Paycheck Protection Program loan AND an EIDL loan, you must deduct the EIDL funding from the amount eligible for PPP loan forgiveness.

Georgia Ranks as the #9 Lowest-Cost State to Retire

Georgia Ranks as the #9 Lowest-Cost State to Retire

According to a recent study by GOBankingRates, Georgia ranks as one of the best states to retire if you’re trying to stretch your nest egg.

If you have $100,000 saved, for example, you can expect to live off that for 877 days in Georgia (roughly 2-1/2 years). The study considered the average total expenditures for people aged 65 and over, as well as the cost of living index in each state.

The cheapest state to retire is Mississippi (946 days), while the most expensive is Hawaii (428 days). The national average is 780 days, which equates to nearly $48,000 in annual expenditures.

Are You Ready to Retire?

Retiring in Georgia can be a good choice if your retirement savings are less than you’d like. More than half of American workers (52%) say they’re behind where they should be in saving for retirement, according to a study by Bankrate.com. Just 16% say they are right on track, and 11% feel they are ahead of where they should be in terms of saving. Another 20% of respondents say they don’t know if they’re on track or not. And a full 38% say they have never had a retirement account at all!

“Getting your retirement savings on track begins by fully utilizing your tax-advantaged retirement savings options, such as a workplace 401(k) and supplementing that with an IRA,” said Bankrate’s chief financial analyst, Greg McBride, CFA. “Aim to save at least 10% — and ideally 15% — of your income specifically for retirement. The best time to start is ‘today,’ and the worst time to start is ‘someday.’”

The tendency to be behind on retirement savings is highest among households with an annual income between $30,000-$49,999, with 62% responding that they are behind where they should be. That figure falls to 52% for households earning an income under $30,000 per year, and 48% for households with incomes of $80,000 or more.

We Can Help

No matter where you are in your retirement savings timeline, we can help you get started — or keep going — so you can retire wherever you want to and not worry about your savings running out. Call us today!

Sources: Yahoo! Money, GO BankingRates, BankRate

The information provided here by Premier CPA Services PC is for general information only. It does not constitute legal, accounting, tax or other professional advice or services, and is presented without any representation or warranty as to the accuracy or completeness of the information. Please contact us for information as it relates to your circumstances.

New Tax Changes May Affect Your Retirement Savings

New Tax Changes May Affect Your Retirement Savings

President Trump signed into law in December a bill to keep the federal government funded. As part of that bill, several new tax changes were enacted, include some major changes to retirement plan rules.

The new “SECURE” Act is designed to encourage retirement savings and to simplify administrative requirements for small businesses. For the most part, these are positive changes and good news if you’re saving for retirement. Some of the key changes include:

  • Increasing the age after which required minimum distributions from certain retirement accounts must begin from age 70½ to age 72.
  • Repealing the maximum age for IRA contributions, which was formerly 70½.
  • Allowing penalty-free distributions from qualified retirement plans and IRAs to help pay for births and adoptions.
  • Allowing qualified home healthcare workers to contribute to a defined contribution plan or IRA.
  • Making it easier for long-term, part-time employees to participate in elective deferrals.
  • Making it easier for small businesses to offer multi-employer plans by allowing otherwise completely unrelated employers to join in the same plan.

One change that could create some substantial tax consequence is the requirement that non-spouse beneficiaries of IRAs and qualified retirement plans withdraw all money from inherited accounts within 10 years. This rule takes effect for accounts inherited after January 1, 2020.

Other Tax Changes Made

In addition to the retirement plan adjustments noted above, the new law also:

  • Allows certain expenses associated with registered apprenticeship programs to count as qualified higher education expenses for 529 accounts.
  • Repeals the excise tax on certain high-cost employer health plans (the Cadillac tax), the medical device excise tax and the annual fee on health insurance providers — all of which were part of the Patient Protection and Affordable Care Act, but had been postponed or suspended.
  • Extends several expired tax provisions, including those relating to the discharge of qualified principal residence indebtedness income; the treatment of mortgage insurance premiums as qualified residence interest; the continuance of the 7.5% (instead of 10%) adjusted-gross-income floor for medical expense deductions; and an above-the-line deduction for qualified tuition and related expenses.
  • Extends through 2020 several tax credits that were scheduled to expire, including a new markets tax credit, an employer credit for paid family and medical leave, the work opportunity credit, and the credit for health insurance costs of eligible individuals.
  • Provides tax relief for victims of various disasters occurring in 2018, 2019, and through January 19, 2020.

Give Us a Call: 706-632-7850

To take full advantage of the changes under this recent legislation, schedule an appointment to come in and talk with Jackie or Donna. We can review your personal situation and provide guidance for some smart financial moves.

We’re also booking appointments for tax filing beginning in January, so call us if you’re ready to get started!

(Source: Journal of Accountancy)

Important & Interesting Dates to Note for 2020

JAN 15: 4th Quarter Estimated Tax Payments due for 2019

JAN 31: Final date for employers to send W-2 and 1099 forms

FEB 2: Super Bowl LIV (Miami)

FEB 29: Leap Day

MAR 8: Daylight Savings Time begins

MAR 24: Georgia Presidential Primary

APR 1: Census Day (By this date, every home will receive an invitation to participate in the 2020 Census)

APR 15: Tax Day

APR 22: Earth Day 50th Anniversary

JUL 24-AUG 9: Summer Olympics (Tokyo)

OCT 15: Tax Filing Extension Deadline

NOV 1: Daylight Savings Time ends

NOV 3: Election Day

The information provided here by Premier CPA Services PC is for general information only. It does not constitute legal, accounting, tax or other professional advice or services, and is presented without any representation or warranty as to the accuracy or completeness of the information. Please contact us for information as it relates to your circumstances.

Georgia Loves Its Retirees!

Georgia Loves Its Retirees!

The Peach State is among the top 10 tax-friendly states for retirees, as ranked by Kiplinger in 2017. Social Security income is exempt from Georgia state taxes, as is up to $35,000 of most types of retirement income for anyone age 62 to 64. When you hit 65, the exemption rises to $65,000 per taxpayer.

Eligible retirement income includes pensions and annuities, interest, dividends, net income from rental property, capital gains, royalties, pensions, annuities and the first $4,000 of wages and other earned income. Many Georgia seniors can also claim property tax exemptions above and beyond normal homestead exemptions.

Social Security Tax-Smarts

Just because Social Security benefits aren’t taxed at the state level in Georgia doesn’t mean you’re off the hook. Uncle Sam is probably going to want a bite, and the amount subject to taxes will be calculated on a sliding scale based on your income.

Coordination Is Everything

Because the tax rules focus so much on income, it’s important to coordinate when you start taking Social Security benefits. You’ll want to weigh when to take benefits with when you expect to receive income from other sources.

For example, you might be tempted to start taking benefits as early as possible — even if you’re still working. The gotcha here is that the wage income you’re earning in that paycheck can easily bump you over the income thresholds at which your benefits will become taxable. Even worse, you’re likely to be in a higher tax bracket because you’re still working, so the tax hit will be a double whammy. Waiting to claim benefits until after you’ve quit working may be smarter, but it really all depends on your financial situation.

One Size Does Not Fit All

The best retirement income strategy varies based on your individual circumstances, so it’s impossible to give one-size-fits-all advice. But we can help you think through your situation — including how to navigate the Social Security taxation rules and how to reduce the amount you have to pay to Uncle Sam. Just call the office to make an appointment today.

(Source: smartasset.com/retirement/georgia-retirement-taxes)

Visit SSA.Gov
You can get a good estimate of your future Social Security benefits by looking at your most recent Social Security statement. To check it online, you’ll just need to create an account at www.ssa.gov. There’s a ton of valuable information here in addition to benefit estimates.

Social Security Fast Facts

Did you know …

  • President Franklin D. Roosevelt signed the Social Security Act into law on August 14, 1935.
  • Ida M. Fuller, a retired legal secretary in Vermont, was the first person to collect Social Security; her check, paid on January 1, 1940, was for $22.54.
  • As of December 31, 2018, about 176 million people were paying Social Security taxes, and about 63 million were receiving monthly Social Security benefits.
  • To qualify for Social Security retirement benefits, you must be at least 62 and have paid into the system for 10+ years.
  • The longer you wait to collect Social Security (up to age 70), the higher the monthly benefit you’ll receive.
  • Your spouse and/or ex-spouse may be eligible for benefits based on your earnings record.
  • Social Security may provide benefits to your spouse and younger children in the event of your death.
  • If you can’t work due to a long-term disability, you may be eligible for Social Security disability benefits.
The Million Dollar Question: Are You (Really) Ready for Retirement?

The Million Dollar Question: Are You (Really) Ready for Retirement?

People tend to underestimate how much they are going to need for retirement. Americans aged 65-74, for example, currently spend an average of $55,000 a year. But 60% of Baby Boomers who haven’t yet retired believe they will need less than that to live on during retirement — in fact, 44% believe they will need less than $35,000.

Unfortunately, those statistics are just two of the many disconnects we have over the need for retirement savings. Several recent studies find that many Americans, especially younger ones, might not be financially ready to retire when the time comes. Consider:

  • 66% of working Millennials (those aged 22-37) have no retirement savings whatsoever, and only 5% are saving adequately for retirement.
  • Thanks to the “Great Recession,” Millennials today generally earn about 20% less in wages, are less likely to own a home and have accumulated about half of the wealth of their parents at the same stage of their lives.
  • 47% of Gen Xers (those aged 38-53) have no retirement account, and about 48% of those who do have less than $50,000 saved.
  • Some reports say up to 45% of Baby Boomers (those aged 54-72) have zero retirement savings!
  • For retiring Boomers, the average Social Security check is $14,000 a year. And only 23%-38% of Boomers expect any income from a private company pension plan.

The news doesn’t have to be all bad, though. Individual Retirement Accounts (both Roth and Traditional) remain a proven way to put away money on a tax-advantaged basis. And special “catch up provisions” allow taxpayers age 50 and older to sock away a little more each year. For 2019, your total contributions to all of your traditional and Roth IRAs is limited to $6,000 ($7,000 if you’re age 50 or older), or the total amount of your taxable compensation for the year (if it’s less than the limit). And you have until April 15, 2020, to make this year’s contribution.

Just call us at 706-632-7850 or email us to schedule an appointment — we’ll be happy to walk you through your retirement saving options!

Sources: National Institute on Retirement SecurityCNBCBusiness Insider ForbesMarketWatch, IRS

Term of the Week:
Tax-deferred

Tax-deferred refers to investment earnings, such as interest, dividends or capital gains, that accumulate tax-free until the investor takes the profits — at which time income taxes and capital gains taxes come due. The most common types of tax-deferred investments are individual retirement accounts (IRAs) and deferred annuities. Because no taxes are paid until you take a withdrawal, your money can grow at a faster rate than it would in a taxable product.

So You Want to Be an Astronaut

Adventurous (and rich!) folks can soon take a ride to the International Space Station (ISS). NASA has opened up the ISS to companies that fly “private astronauts” into space for a visit of up to 30 days. It will only cost you about $52 million to buy a seat on SpaceX, Elon Musk’s famous spaceship! (Source: CNBC)

The information provided here by Premier CPA Services PC is for general information only. It does not constitute legal, accounting, tax or other professional advice or services, and is presented without any representation or warranty as to the accuracy or completeness of the information. Please contact us for information as it relates to your circumstances.