UPDATE 4/9/2020: Per Crain’s Chicago — More than 12,000 applied for the grants, and 700 were drawn at random from a pool of applications. The winning 450 bars and restaurants each will get an average of $14,000, which can be used for payroll and general corporate purposes. The 250 small hotels get an average of $30,000. Officials said they are looking for other sources of funds to offer more grants in the future.
To help hospitality businesses make ends meet in the midst of the COVID-19 pandemic, the State of Illinois launched the Hospitality Emergency Grant Program. Grant funds are available to support working capital like payroll and rent, as well as job training, retraining, and technology to support shifts in operations, like increased pick-up and delivery. Eligible businesses include:
Bars and restaurants with a valid license to serve food or liquor and who generated revenues of less than $1 million in 2019.
Hotels with a valid license (hotels, motels other lodging establishments) and who generated revenues of less than $8 million in 2019.
If this or any other posts on the website were useful to you, and your financial situation permits it, please consider contributing to my tip jar. This allows me to continue to provide free accounting resources to small businesses who do not have the funds available to hire a CPA.
If this or any other posts on the website were useful to you, and your financial situation permits it, please consider contributing to my tip jar. This allows me to continue to provide free accounting resources to small businesses who do not have the funds available to hire a CPA.
I’m getting a lot of client questions about unemployment these days — understandably… one person referred to it as the “IDES of March” — and thought a short Q & A + random notes and tips might be helpful. Some of these are notes from clients and friends based on their own experiences and research.
None of this should be taken as legal advice. Please see the State of Illinois’ unemployment website or give them a call (I’m hearing wait-time is about 45 minutes, so get a book or magazine out) with specific questions. For Employers: (800) 247-4984 For Employees: (800) 244-5631 I’ve also heard that some of the branch offices have shorter wait times, such as Arlington Heights (847-981-7400) and Skokie (847-745-3242).
IMPORTANT NOTE: For some reason, IDES benefits cannot be applied for with a smart phone — YOU MUST APPLY USING A COMPUTER. I know, this is ridiculous. Don’t shoot the messenger. Here’s the information you’ll need to apply.
Q: What if I’m temporarily laid off because the place where I work is temporarily closed because of the COVID-19 virus? A: An individual temporarily laid off in this situation could qualify for benefits as long as he or she is able and available for and actively seeking work. Under emergency rules IDES recently adopted, the individual would not have to register with the employment service [office of IDES]. He or she would be considered to be actively seeking work as long as the individual was prepared to return to his or her job as soon the employer reopened.
Q: What if I quit my job because I am generally concerned over the COVID-19 virus? An individual who leaves work voluntarily without a good reason attributable to the employer is generally disqualified from receiving UI. The eligibility of an individual in this situation will depend on whether the facts of his or her case demonstrate the individual had a good reason for quitting and that the reason was attributable to the employer. An individual generally has a duty to make a reasonable effort to work with his or her employer to resolve whatever issues have caused the individual to consider quitting.
Q: How are unemployment benefits calculated? A: Here’s the place where IDES shows how they calculate the amount: https://www2.illinois.gov/ides/IDES%20Forms%20and%20Publications/CLI105L.pdf — see page 16 starting with “how your benefits are determined”. Basically, they take the prior three 3-month periods (quarters) and average your wages during that time. So contrary to popular belief, it’s not based on the most recent week or pay-period. (In fact, the most recent quarter is not even included in calculations.) Then they pay 47% of that amount.
And for more information on how unemployment benefits vary so widely from state-to-state, check out this great article. The number of complicating factors involved makes apples-to-apples comparisons almost impossible.
Q: I heard that the federal government is paying an additional $600 per week as well. Do you have to apply separately to get the federal government amount? A: To the best of my knowledge at this time, there is no separate Federal application form. The state is supposed to be handling that aspect, and be reimbursed for the Federal amount, as well as their “extra” expense to process everyone. Heads-up that the one week “waiting period” will not apply for the $600 weekly amount — just for the state benefit amount. Once the Federal portion kicks in, the $600 will continue for up to four months, with the state paying for normally 29 weeks, plus another 13 weeks per Congress’ bill.
Q: I use Gusto as my payroll service. What are my options for making sure my employees are eligible for unemployment until I’m able to get everyone back to work again? A: You have two main options: 1) Dismiss all your furloughed employees in Gusto so they can apply for unemployment — Gusto will save all their data, and they will still be in the system the moment you are able to rehire. To rehire: Go to People –> Show dismissed people (right column) –> Select employee –> on the right, under actions, click “rehire employee”. – If you dismiss an employee in Gusto, then you will no longer be charged the monthly fee to keep them in the payroll system. – Keep in mind that when you dismiss an employee, you must then report to your benefits coordinator or health insurance company that the employee has been dismissed. This makes them eligible for COBRA for 18 months. COBRA allows them to remain on the group plan and reimburse the company for the cost (plus an admin fee). However, many employees cannot afford to do this, given that they’ve just lost their jobs. (Desperately trying to refrain from dwelling how immensely stupid this is, and wishing we had a single-payer tax-supported universal healthcare system.) Luckily, all the arrangements for COBRA payments happen outside both the payroll and health insurance systems. You can negotiate any arrangement you want with employees, as long as they are all treated fairly. So if the company is able to and wants to foot the bill for health insurance while the employees are furloughed, they can. If they want the employee to continue to pay only their employee percentage, and not the whole cost, they can. Or if they want to offer to fully or partially foot the bill, but defer the employee’s payment until the company reopens and they can return to work, that is also a choice you can make. Just be sure to track the liability, and document the agreement in writing. 2) The other option is to keep them on payroll at a zero or very reduced pay rate. Some employers are keeping the pay just exactly high enough for the employee to be able to have their portion of health insurance benefits withheld from their paycheck. However, it is not as easy to apply for unemployment, and they may only qualify for partial benefits. But they should be able to show the reduced or zero wages, explain that they are furloughed due to business slowdown from COVID-19 sequestering orders, and be treated accordingly as unemployed or partially-unemployed per IDES regulations. – One benefit of this approach is that they do not use up any of their 18 months of COBRA, and it allows you to easily have them pick up a shift or an odd job here or there. – This allows the employee to potentially qualify for up to 2 weeks of paid sick leave (or partially-paid leave to take care of a sick family member or a child that must be home-schooled due to school closings), and another 10 weeks of partially-paid family medical leave — to be reimbursed to the employer by the federal government in the form of refundable payroll credits. – Gusto is also providing options for deferring or waiving monthly payroll processing charges for those who need it.
If this or any other posts on the website were useful to you, and your financial situation permits it, please consider contributing to my tip jar. This allows me to continue to provide free accounting resources to small businesses who do not have the funds available to hire a CPA.
UPDATE: On April 9, the IRS issued Notice 2020-23, which expands the deadline extension to many more tax returns and payments. The most important is that second-quarter estimated tax payments are also due July 15th now, rather than the original date of June 15th. More here.
Obviously things have been changing daily in the surreal and crazy world we’re all living in right now. As of March 28, 2020, here are the new deadlines for 2019 income tax returns and 1st & 2nd-Quarter Estimated Tax Payments — for both the IRS and Illinois Department of Revenue.
Both Federal and Illinois income tax returns and payments that were due on April 15 are now due July 15. (This includes both calendar and fiscal-year filers, as well as fiscal-year extended due dates that land on April 15th.)
However, keep in mind that the new stimulus checks will be based on 2018 tax returns if the 2019 return is not filed soon — more on that in this excellent article by Tony Nitti. And of course, if you are due a refund, it is best to get that filed sooner rather than later.
An extension can be filed before July 15 to extend the filing date (but not payment date) until October 15, the usual extension date.
Federal 1Q estimated tax payments are also now due July 15 — BUT Illinois 1Q payments are still due April 15.
New automatic, systemic liens and levies are suspended for now. New delinquent accounts will not be forwarded to debt collection for now.
If this or any other posts on the website were useful to you, and your financial situation permits it, please consider contributing to my tip jar. This allows me to continue to provide free accounting resources to small businesses who do not have the funds available to hire a CPA.
Gusto is my favorite company to work with for so many reasons… but it just got better as I have been watching how much effort they’ve put into researching cash flow options for their small business clientele.
I’ll be circling back to this list soon to explore these in an order that I think makes most sense for my client base; I’ve also emailed them about some City of Chicago and Cook County resources that should be added to the list.
But in the meantime, please check out their downloadable list of Federal, State, and Private resources for relief, loans and grants available to small businesses.
As they mention in the post:
This spreadsheet will regularly be updated with financial resources for small businesses. Check back for the most up-to-date information, and share it with a business owner who may benefit from the support.
We’ll also be creating similar resources for unemployment benefits and sick leave. Visit the Talk Shop homepage for our latest publications, and see our COVID-19 employer guide for more helpful info.
If this or any other posts on the website were useful to you, and your financial situation permits it, please consider contributing to my tip jar. This allows me to continue to provide free accounting resources to small businesses who do not have the funds available to hire a CPA.
I’m getting a lot of questions on this one from clients and figured it would be good info for many out there.
If you own a small business and have had to lay off or furlough staff during this difficult time, you may wish to offer those who would like to assist an opportunity to contribute to a so-called “virtual tip jar”.
The issue is that tips are taxable income that should be run through payroll… whereas most of what we’re talking about right now are rightly termed as “gifts” — which are non-taxable to the recipient. Only if the gift exceeds $15k to any one recipient does the gifter (not recipient) have to file a gift tax return. The IRS requires that to qualify as a gift, the property (usually cash in this case) must be given without expecting to receive something of at least equal value in return.
It is reasonable to argue that these gifts are not lost wages or wage replacement — nor are they income to the company and then payroll to the staff. These are people who have simply lost their jobs through no fault of their own or the business owner’s, and we’ve become friends with these folks through the years and want to help. These are the people who’ve poured us that soothing cup of herbal tea during rough times, or a shot of tequila during rougher ones. They’ve taught us to mold clay, or taught our children music. We’ve gotten to know and love them and we want to help. That’s a gift. So here are a few “tips” for making sure your tips don’t inadvertently become taxable income to your business or your staff.
1) Make sure these are in fact gifts. No fair disguising actual sales of product or services, or trades. Don’t mess this up for everyone else.
2) Use GoFundMe, rather than an existing business method of collecting payments — not Paypal, Square, Stripe or anything else. The reason is that these businesses are required by law to send a 1099-K to you and the IRS, because the government is correct to assume that in general, those funds should be considered income. Whereas, the money in this case isn’t “income” to the business, so we need to make that clear by using GoFundMe, which is set up for arms-length gifting.
3) Secondly, use your personal name and your personal bank account for this — do not run it through the business and do not use the business EIN/ Tax ID. Again, we’re trying to make it clear that this money is just a gift to the employees out of the goodness of everyone’s heart, and not a replacement of wages that would be taxable via payroll.
4) Which brings me to another important point: do not run this through payroll. Think about it: all that is happening is that a disinterested but kind third party (a plain old nice human such as myself) decides to gift money to your staff because I feel bad that they are out of work. So I give you some money, since you’re a trustworthy person who has everyone’s contact info and can fairly distribute it. And you, personally, then take the funds and hand them out. No business account, no payroll, just an altruistic gift that you are passing along as the middle man.
There are certainly situations out there and arguments to be made that in some circumstances, these funds would qualify as income to the business, and then the payments would need to be made to employees via payroll. This is not a comprehensive post designed to address all of those alternative contexts — and should not be relied on as tax advice. Please consult with your CPA or attorney for specific questions about your own business.
If this or any other posts on the website were useful to you, and your financial situation permits it, please consider contributing to my tip jar. This allows me to continue to provide free accounting resources to small businesses who do not have the funds available to hire a CPA.
Regular readers of this blog know that I’m a huge fan of Hector Garcia and the various webinar series he’s presented through the years. He has done so much to help QuickBooks ProAdvisors and their clients, that we are all truly indebted to him.
He maintains this helpful approach by offering a free webinar about how to assist small business clients during this difficult time. Here’s the webinar — and I’ve summarized his notes and posted them below.
Summary of Hector Garcia’s COVID-19 for Small Businesses Webinar —
What small businesses need in today’s environment:
• Cash Flow
• Morale
• Purpose
• Retooling
Cash Flow
• Generate more sales – sell online, sell other things, web-based versions of your services
• New channels and forms of income – offer delivery, pre-sell future products/services, offer white-glove “touchless” alternative
• Reduction of expenses – downsize ASAP, cut unnecessary monthly services, ask vendors for “special programs” or reduce services to bare minimum, share expenses/ call friends and colleagues to share plans and services
• Delay payment of expenses – use credit card for purchases, switch to vendors that accept credit cards, ask for payment terms or extend current ones
• Cash Injection (capital or loan) – SBA loans, State-sponsored disaster/ economic relief loans
• Float Payments
Morale
• Mental health (someone to talk to – setup mastermind groups with colleagues)
• Staying in business, staying relevant, sell “something”
• Keeping talented employees (choosing which ones to let go)
• Employees not feeling like they can lose their jobs
• Ability to know that downsized employees are going to be “ok”
• Offer-up excess capacity (staff, tools, infrastructure, knowledge)
Purpose
• Businesses should have a vision/mission statement – is there a way they can still fulfill that even if the business model substantially changes?
• If they change target market, could they still fulfill their purpose?
• If they change business models and purpose, could the new purpose be as fulfilling?
• Do you have a purpose-driven brand?
• Do you have a loyal customer base that you can contact online?
Retool
• Does the business have a valuable online presence or community? If not, time to build it.
• Does the business have a contingency plan for working from home? If not, time to start preparing one.
• Is this business “social distancing” proof? If not, time to build a plan.
• Does the business have ability to sell online? If not, time to create it.
5 Key Advisory Questions
• What opportunities to fix things about your business can you take advantage of during the interruption?
• What have you learned about your business during the interruption that you didn’t know before?
• If you could have done something before the interruption what would it have been?
• As your business returns to normal what opportunities are there for you to better serve your customers?
• What is the question, that if you had the answer, would allow you to more easily recover from the interruption?
Thinking outside the box —
• Digital Tip Jars
• Gift cards, Pre-paid services, packaged discounted future services
• Reduction of services, but maintaining the customer relationship
• Delivery
• Serving the essential industries (food distribution, healthcare)
• Distilleries making sanitizer
• Restaurants (Curbside pickup, free TP/sanitizer, selling frozen food, selling “kits”)
• Farmers (drive trough fresh market)
• Babysitting for healthcare workers working overtime – https://www.mncovidsitters.org
• Drive-through confessions – https://www.deseret.com/platform/amp/faith/2020/3/23/21189502/confessions-drive-upcatholic-sacrament-faith-religion-parishioners-grace-mercy-forgiveness-covid
• Online Classes – “Zoom” version of their business – https://www.facebook.com/GuzmanDojo/?hc_location=ufi
Loans
• Check your state’s Dept of Revenue website
• County & City resources
• Check Gusto’s COVID-19 Resources spreadsheet:
https://docs.google.com/spreadsheets/d/1SRBZE2_6Nftwd02M6Oxj8MoeuZ7y93spXIgIPhkkp2w/edit#gid=0
• SBA Disaster Loan
• SBA Express Bridge Loans
Tips for Loan preparation:
• Owner’s credit will be pulled, so get a copy of the credit report (Experian, Equifax, and Transunion all offer FREE versions).
If score is under 700, have statement ready to explain areas of issues in the credit
• Use the credit report to build debt (liabilities) portion of Personal Financial statement
• Identify debt that is listed both on the individual’s (owner) personal credit and also on business balance sheet (have that narrative ready)
Beyond loan application and submitting tax returns, proactively prepare:
• Personal Financial Statements for all owners (SBA form 413)
• Business Debt Schedule SBA form 2202
• Monthly sales figures: 3 years historic, plus current year with estimate/forecast – SBA form 1368
• Have all 4506-T Forms readily signed for personal and business tax returns
• Have copies of extensions filed for 2019 returns (if extension was filed)
• Have books completed up to last month prior to loan application
• Draft a Loan narrative of what the loan proceeds will be used for, how you will be able to stay in business and keep employees on staff
• Draft Financial projections that show the post-interruption numbers supporting a profitable business that can REPAY the loan
Loan forgiveness “Paycheck protection loan” – may be passed by Congress today
Keep tight records of:
• Payroll costs (burdened)
• Rents and mortgage interest
• Utility payments
• Essential costs to maintain business operational
Comparing 8-week period from loan proceeds vs. previous year
How can accountants with multiple clients help?
• Make inventory of all your clients’ excess capacity (laid off workers, kept workers (and their skillsets), information about hours they work or are available, list of tools/infrastructure with excess capacity, unique knowledge/knowhow how team members)
• Make a database public within your client base (use Google Sheets or Airtable)
• Help them do business with each other or barter
Companies/Industries growing and hiring – if you need a job NOW…
• US Census
https://2020census.gov/en/jobs.html
• Monster.com’s top 100 Companies Hiring:
https://www.monster.com/career-advice/article/companies-hiring-now
• Amazon is hiring 100,000 new associates:
https://blog.aboutamazon.com/operations/amazon-opening-100000-new- roles
• Telecommunication software companies (Slack and Zoom)
https://jobs.lever.co/zoom
https://slack.com/careers#openings
• Grocery Stores, Pharmacies, Walmart, etc.
• Logistics and delivery companies
• Restaurants that do delivery
• 50,000+ Work from home Jobs:
https://www.indeed.com/jobs?q=work+from+home&l=Miami%2C+FL
&from=homepage_relatedQuery
• 200,000+ transportation Jobs:
https://www.indeed.com/q-Transportation-jobs.html
If this or any other posts on the website were useful to you, and your financial situation permits it, please consider contributing to my tip jar. This allows me to continue to provide free accounting resources to small businesses who do not have the funds available to hire a CPA.
Each month the City of Chicago offers twice-weekly (Wed & Fri) FREE business education workshops presented by experts in private practice as well as representatives from various city departments. There are quite a few good ones this month — see the list below — and they’re all offered at City Hall (right downtown and near public transit). To register for any of them, email BACPoutreach@cityofchicago.org or call 312.744.2086.
City Inspections – Ask Questions, Get Answers
Wed, March 4, 3:00 PM – 4:30 PM
City Hall, 121 N. LaSalle St. – 8th Floor, Room 805
Presented by the City of Chicago
To operate a successful business in Chicago you need to know what it takes to maintain compliance. Officials from several City departments will provide insight on how to operate safely, stay compliant, help prepare for inspections and highlight the do’s and don’ts of operating a business.
Empieza Un Pequeno Negocio
Fri, March 6, 9:30 AM – 11:00 AM
City Hall, 121 N. LaSalle St. – 11th Floor, Room 1103
(WorkshopPresented in Spanish) Presentado por el Northwest Side CDC(Northwest Side Community Development Corporation)
Venga aprender como abrir un negocio, los pasos quedebe de tener y no tomar. Habláramos sobre creando un plan de negocio, entiendosu mercado, y creando un plan de acción. También se hablara los pasos parasacar su licencia de negociante.
Small Business Center on the Road Expo Sat, March 7, 10:00 AM – 2:00 PM Kennedy King College – Building U, 740 W. 63rd Street The Small Business Center on the Road Expo brings business resources to the community for new and existing entrepreneurs looking to start or grow their business in the City of Chicago. This expo is free and open to the public. You can find more information or register expo at www.chismallbizexpo.com
Employee (HR) Handbooks & Workplace Policies
Wed, March 11, 3:00 PM – 4:30 PM
City Hall, 121 N. LaSalle St. – 8th Floor, Room 805
Presented by Charles Krugel, a Management-Side Labor, Employment and Human Resource Attorney Open discussion concerning whether a business needs a handbook, written policies & procedures, and how to implement them.
Buying and Selling a Business: Find, Evaluate and Negotiate
Fri, March 13, 9:30 AM – 11:00 AM
City Hall, 121 N. LaSalle St. – 11th Floor, Room 1103
Presented by LemaKhorshid, Fuksa Khorshid, LLC
Do you want to buy a business and don’t know where to start? In this step-by-step seminar learn how buying a business can be an alternative to starting up a new business. Also, learn how to effectively analyze new business opportunities and understand a business purchase contract so that you can quickly close the deal.
How to Open a Concession at O’Hare and Midway International Airports
Wed, March 18, 3:00 PM – 4:30 PM
City Hall, 121 N. LaSalle St. – 8th Floor, Room 805
Presented by City of ChicagoDepartment of Aviation – Concessions Department
Are you interested in operating a restaurant or shop at O’Hare or Midway International Airport, but don’t know where to begin? Come and learn about the Request for Proposals (RFP) process and how to operate a business at the airport. This workshop will also provide an overview of the Airport Concessions Disadvantaged Business Enterprise (ACDBE) program.
How to Obtain a Mobile Business License
Fri, March 20, 9:30 AM – 11:00 AM
City Hall, 121 N. LaSalle St. – 11th Floor, Room 1103
Presented by City of Chicago Department of BusinessAffairs & Consumer Protection (BACP)
From Food Trucks to Peddlers to Mobile Merchants, not all businesses need a store front from which to operate and Chicago is proud to support many types of mobile businesses. Attend this workshop to learn how to obtain a Mobile Food or Retail License from the BACP, including operational conditions, required inspections and application processes. Licenses covered by this workshop will include Mobile Food Dispenser and Preparer (Food Trucks), Mobile Merchant, Mobile Prepared Food Vendor, Mobile Frozen Desserts Vendor, Produce Merchant, and Peddler.
What Kind of Funding is Right For You/Your Business
Wed, March 25, 3:00 PM – 4:30 PM
City Hall, 121 N. LaSalle St. – 8th Floor, Room 805
Presented by the U.S. Small Business Administration
If you need access to capital to achieve your business goals, the SBA offers a variety of funding programs for all kinds of small business ventures. Learn what kind of funding is right for you!
What You Need to Know About Your Business & Taxes Fri, March 27, 9:30 AM – 11:00 AM City Hall, 121 N. LaSalle St. – 8th Floor, Room 805
Presented by the Internal Revenue Service (IRS) and Ladder Up
This workshop will answer important tax questions for your business including: Are you required to file a tax return? Is your worker an independent contractor or an employee? What will the IRS request during an audit? Are you required to make estimated tax payments? What resources does the IRS have for small business owners?
Also, in case you weren’t aware, BACP offers a Business Start-Up Certificate Program, designed to give business owners the essential elements in starting and growing a business. Attend nine workshops at BACP and learn the essentials of business planning, financing, marketing, legal issues, technology and more. Complete the program workshops within six months and earn your certificate, as well as get free advice on your business plan. You can register for the Business Start-Up Certificate Program at any BACP workshop. Learn about the full set of BACP offerings here.
It recently came to my attention that apparently restaurants in Chicago were not notified by the city of an important change to local taxes they are required to collect.
Therefore, the total sales tax for restaurants in the city of Chicago is now supposed to be 10.75% instead of 10.50% — this includes state and local sales taxes as well as the city’s 0.50% restaurant tax.
(For restaurants located within the MPEA Food and Beverage Tax zone, the total sales tax will be 11.75% — made up of sales taxes + 0.50% restaurant tax + the 1.00% MPEA food and beverage tax).
Unfortunately, it doesn’t appear that this change was communicated widely to restaurant owners, so many of them did not update their Point of Sale systems to increase the tax charged to customers. This means they probably underpaid their monthly restaurant tax and will owe when they file their annual restaurant tax returns.
I suggest the following steps:
Update your Point of Sale software to reflect the 10.75% tax immediately, so you can begin collecting it from customers.
Calculate the approximate underpayment for January and February (0.25% of sales) and add it to your restaurant tax payment for March.
It will all come out in the wash when you file your annual restaurant tax return in August.
Just before 2019 ended, Congress passed the SECURE Act (“Setting Every Community Up for Retirement Enhancement”). It had been languishing for months and was suddenly wrapped up in the budget legislation and passed accordingly — a surprise to most of us. It’s designed to make retirement plans more available to American workers, but there are also quite a few revenue-raisers in the bill as well that will throw a wrench into existing estate planning.
As a result: for employers, it’s a good time to revisit the retirement options you’re offering your staff; and for taxpayers, it’s a good time to revisit your retirement and estate planning.
Several rules related to tax-advantaged retirement accounts were altered. Here’s what will change:
The age at which retirement plan participants need to take required minimum distributions (RMDs) has changed to age 72 (changed from 70 ½). This only applies to those who hadn’t reached 70 ½ by the end of 2019.
Limited to $10,000 annually, the IRS has approved the use of 529 accounts for qualified student loan repayments.
For child adoption and family planning, individuals can withdraw up to $5,000 from 401(k) accounts penalty-free to assist in the cost.
Employers with an automatic enrollment into a 401(k) or SIMPLE IRA plan will receive a maximum tax credit of $500 per year.
Part-time employees who work at least 1,000 hours throughout a year or have 500 hours of service within three consecutive years can enroll in the employer-sponsored retirement plan.
An option for plan sponsors to use annuities in workplace plans to reduce liability if the insurer cannot meet its financial obligations.
If you’re an employer, definitely take a look at the credit available toward starting up a company retirement plan, and if you’re an employee, let your boss know about this credit, and that many part-time employees are now eligible to participate, but without tipping the scales away from full-time, highly-compensated employees. It’s a win-win.
As an employee, remember that there is still a credit for lower-income taxpayers for saving toward retirement, called the Retirement Savers Credit. In my work as a tax preparer I see this as an underused but very valuable perk toward getting folks started on saving for the future. Nerd Wallet wrote up a nice summary of the credit.
The SECURE Act also impacts so-called “Stretch” and Roth IRAs. It caps the distribution period for Stretch IRAs (a type of inherited Traditional IRA plan) to ten years, inflating the taxable income for recipients who otherwise would have taken smaller distributions over a longer period of time. This makes Roth IRAs more attractive — because when a Roth is inherited, it doesn’t have the same effect of bumping beneficiaries into a higher tax bracket (since with a Roth, the tax was paid before the IRA was funded).
Regardless of your tax bracket or plans for retirement, the SECURE Act will likely affect you in some way, shape, or form… so be proactive and work with your CPA or lawyer to make sure you’re making the most of it.
