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How Delays May Affect Your Tax Filing in 2021
Planning for Upcoming Tax Increases
Is Robin Hood Right for You?
Sales Incentives: Who Really Pays?
Could an IRA Trust Work for Your Plan?


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How Delays May Affect Your Tax Filing in 2021

The tax season this year – 2020 taxes filed in 2021 – will be unlike recent years for many reasons. One major change is the almost certain delays you may expect in connection with the preparation and filing of your taxes. The potential for delay is based on several factors, most of which will be out of your control but which you may want to understand and allow for this year. 
First, we have the substantial backlog at the IRS for 2019 returns that have NOT yet been processed. Between individual returns and business returns, over ten million are outstanding.

Sales Incentives: Who Really Pays?

Not every product or service sells itself and those offering most products and services devote substantial effort and funding to ensure that the desired sales happen. In the financial industry, a firm’s offering of incentives to its sales employees to push particular products has (rightly) come under fire and increasing regulation to the point that many incentive programs have been terminated or at least significantly limited.
One reason for the change is that although the firm compensates those salespeople, the funds for that compensation ultimately come from the customers.

Is the Pandemic Changing Your Plans?

As the pandemic with its related restrictions and uncertainties drags along, we are seeing more clients changing their near-term plans and goals.  Initially, many of us simply deferred activities, presumably for a few months while the pandemic (hopefully) ran its course. Now, with no clear end to the pandemic nor any return to something approaching normalcy in sight, people are making significant changes to their plans. These changes are wide ranging and appear to have affected different age groups in markedly different ways.

Don't Forget to File Your Taxes

In this rather unusual year, it is important that you do not forget to file your Federal Income Tax return this week. Many, many taxpayers took advantage of the IRS postponing the due date for the 2019 tax returns by 91 days to July 15, 2020. This step was taken in response to some of the confusion and uncertainties surrounding the pandemic and was meant to be a help to taxpayers but not an excuse from the obligation of filing and paying tax.

Of course, taxpayers may still request an extension to the filing of their returns until October 15, 2020, provided of course that the taxpayer pays the amount due by July 15, 2020.

Life Insurance Demutualization and Tax Impact

In the last twenty or so years, several major life insurance companies, owned by their policy holders as a group, determined to change the format to become a shareholder owned business. This process is called a demutualization. Members receive either a cash payment or shares in the company in exchange for their voting and liquidation rights, while retaining their life insurance policies.  

The receipt of cash or shares will be considered taxable income to the extent the value received exceeds the former member’s cost basis in the property – rights – exchanged for the cash or shares.

Taxes: Extensions, Suspensions and Deferrals

Another of the many outcomes of the pandemic has been the stream of advisories coming from the IRS regarding the relaxing of various tax requirements. The usual date of April 15 for filing and paying one’s 2019 income tax return has been extended all the way to July 15. This extension also includes the timing of IRA contributions counting towards the 2019 tax year. If you owe taxes and need time to get things in order to file and pay, this is a blessing. However, if you are expecting a refund, the extension has little, if any, value to you and you likely would not wish to delay your filing.

Helping Your Small Business with Emergency EIDL Grants

The coronavirus pandemic, with its accompanying shutdowns, has dramatically and negatively impacted small business (as well as large). Among the legislative enactments intended to help deal with the pandemic, the CARES Act includes provision for Emergency EIDL Grants which legislation allows qualifying small businesses to receive grants of up to $10,000. If you are a small business owner, affected by the pandemic, it may well be worth applying for a grant.
Covered businesses include those with fewer than 500 employees, sole proprietors, independent contractors and the like.

Why You Should Be Worried

The seemingly endless market drops that have been a feature of the so-called pandemic have many investors and some advisors in a panic. For those investors it is not a question of simply rebalancing and investing cash at the bottom of the market (since we don’t know where or when that is). Many are so fearful that they may abandon common sense and their investment plan to hope for a magic bullet that will restore their investments. This generally doesn’t work.
More importantly, though, one should be concerned about where things are going with our extremely unprepared and overleveraged governments.

The Disconnect between Cost & Service

Most types of insurance involve an annual premium and renewal to ensure continuity of the coverage. One should review the terms of the renewal offer with care and an open mind as to whether it is preferable to take the easy course and renew or to update what coverage you may require. Although many of you won’t have experienced this, years ago insurance renewals – home, auto – were not fraught with double digit increases, non-renewal or changes in terms. In fact, in cases where the insured did not experience any claims or problems, it was not uncommon to see a decrease in premium at renewal time.

Year-End Gifts and Taxes

As the end of the year approaches quickly, there is still time to make gifts to charities or family members and to not only enjoy the giving but to also reap income tax benefits from the transfers. For example, where deductible items other than charitable gifts are at all significant, then the charitable gifts will be likely to support further income tax deductions, making the gift a benefit to both donor and charity. There is no transfer tax for such gifts which makes the approach even more attractive.
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