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15
Mar

IRS Guidance on State Tax Payments

The IRS has identified 21 states that made special payments to taxpayers in 2022. After a review of those special payments, the IRS has determined that taxpayers in many states will not need to report those payments on their 2022 federal income tax returns. Special payments in four of those states should be treated as refunds of state taxes paid, and taxation is determined under the general federal income tax rules for state tax refunds. Special payments in 17 states are treated as made for the promotion of the general welfare or as a disaster relief payment and are excluded from income for federal tax purposes. Illinois and New York are listed in this category but seem to have provided a mixture of payments that fell into multiple categories (see below).

If you already filed your 2022 federal income tax return and omitted one of these special payments when it was required to be included in income, you may need to file an amended tax return and pay any additional tax due. If you included one of these special payments in income when it did not need to be included, you may need to file an amended tax return to get a federal income tax refund with respect to the special state tax payment.

Refund of state taxes paid

The IRS has concluded that the special payments from the following states in 2022 are treated as a refund of state taxes paid, and the appropriate analysis under the general state tax refund rules should be made.
Georgia

Massachusetts

South Carolina

Virginia

Under general rules, if the payment is a refund of state taxes paid, the payment is excluded from federal income tax unless the recipient received a tax benefit in the year the taxes were deducted on the federal income tax return. Thus, the recipient does not need to include the payment in income if the recipient claimed the standard deduction or the taxpayer itemized deductions but did not receive a tax benefit (for example, because the $10,000 tax deduction limit applied) in the year the state taxes were deducted.

General welfare and disaster relief payments

The IRS has determined that the special payments from the following states in 2022 were made for the promotion of the general welfare or as a disaster relief payment and are excluded from income for federal tax purposes.

State               State Payment Program

Alaska*           Energy Relief Payment (supplementing the Permanent Fund Dividend)

California        Middle Class Tax Refund

Colorado        Colorado Cash Back

Connecticut    Child Tax Rebate

Delaware        Relief Rebate Program

Florida            Pandemic Temporary Assistance to Needy Families

Hawaii             Act 115 Refund

Idaho              2022 Tax Rebate

Illinois**         Individual Income Tax Rebate/Property Tax Rebate

Indiana           Automatic Taxpayer Refund #1/Automatic Taxpayer Refund #2

Maine              Pandemic Relief Payments

New Jersey      ITIN Holders Director Assistance Program

New Mexico    Multiple rebate and relief programs

New York**     Supplemental Child Credit and Supplemental Earned Income Tax Credit

Oregon            One-Time Assistance Payments

Pennsylvania  One-Time Bonus Rebates

Rhode Island   2022 Child Tax Rebates

*Exclusion is only for the supplemental Energy Relief Payment received in addition to the annual Permanent Fund Dividend.

**The IRS stated that “Illinois and New York issued multiple payments and in each case one of the payments was a refund of taxes, which should be treated as noted above, and one of the payments is in the category of disaster relief payment.” It seems that additional guidance from the IRS is needed here to identify the tax treatment of specific payments.

Other payments

The IRS adds that other payments that may have been made by states (e.g., payments from states provided as compensation to workers) are generally includable in income for federal income tax purposes.

9
Dec

Student Loan Repayment Continue to be Challenged

Implementation for repayment of federal student loans has again been delayed by legal
challenges. If the courts have not resolved the issue by June 30, 2023, payments will start 60 days after that.1 The prior moratorium was set to expire on December 31, 2022.

Student loan payments will resume 60 days after the student loan debt relief program is implemented or the lawsuits are  resolved.

Legal challenges lead to increased uncertainty

The latest extension is in response to court rulings that have blocked implementation of the student loan forgiveness program. Under that plan, announced in August 2022, federal student loan borrowers — including graduate students and parents with PLUS Loans — with an adjusted gross income under $125,000 ($250,000 for married couples filing jointly) are eligible for $10,000 in loan forgiveness, with Pell Grant recipients eligible for up to $20,000 in debt relief.2

In November, a federal judge in Texas ruled that the student loan forgiveness program was unlawful. And in a separate lawsuit, a federal appeals court  issued an injunction against the program on behalf of six states — Arkansas, Iowa, Kansas, Missouri, Nebraska, and South Carolina — effectively stopping the Department of Education from accepting more applications and discharging any debt.3

The Biden administration asked the Supreme Court to review the lower court rulings during its current term, and the Supreme Court has agreed to hear the case, with arguments tentatively scheduled for February 2023. In the meantime, the Supreme Court left the injunction blocking the program in place.4

Pandemic-era payment pause continues

There have been nine student loan payment pauses  since the start of the coronavirus pandemic. The first pause came in March 2020 when Congress passed the Coronavirus Aid, Relief, and Economic Security Act. Subsequent payment extensions have come via Presidential executive orders. The latest extension, to most likely sometime after June 2023, will bring the total payment pause to over three years.

Over 45 million Americans owe a collective $1.6 trillion in federal student loans, the largest category of consumer debt behind mortgages. 5To date, more than 26 million people have applied for debt relief under the program; an additional 8 million people who have their income information already on file will qualify automatically for the program.6

1-2) U.S. Department of Education, 2022

3, 6) The Washington Post, November 14, 2022

4) The New York Times, December 1, 2022

5) The New York Times, November 22, 2022

23
Oct

November 1 Begins Open Enrollment for Health Insurance Marketplaces

Beginning on November 1, 2019, individuals (including families) may apply for new health insurance, switch to a different health-care plan, or re-enroll in their current plan through a Health Insurance Marketplace under the Affordable Care Act (ACA). The open enrollment period for 2020 health coverage ends on December 15, 2019.

Individuals can use Health Insurance Marketplaces to compare health plans for benefits and prices and to select a plan that fits their needs. December 15 is the deadline to enroll in or change plans for new coverage to start January 1, 2020. For those who fail to meet the December 15 deadline, the only way to enroll in a Marketplace health plan is during a special enrollment period. To qualify for special enrollment,  an individual must have a qualifying life event such as a change in  family status (for example, marriage, divorce, birth, or adoption  of a child), change in residence, or loss of other health coverage (e.g., loss of employer-based coverage, loss of eligibility for Medicare or Medicaid).   Also, only plans sold through a Health Insurance Marketplace qualify for cost assistance.

Additional information about Obamacare

While the ACA (commonly referred to as Obamacare) has not been repealed or replaced, there have been changes to the law.   The biggest change is the repeal of the tax penalty for failure to have qualifying health insurance. Though the individual mandate requiring that most people have minimum essential health insurance coverage still exists (unless an exception applies), the tax penalty for failure to have insurance has been reduced to $0, effectively repealing that penalty.

In addition, states have additional flexibility in how they select their essential health benefits. In effect, states may elect to sell short-term health insurance policies with coverage terms of up to one year. These plans may offer fewer benefits compared with the 10 Essential Health Benefits covered under the ACA. Also, California, Colorado, Massachusetts, Minnesota, New York, Rhode Island, and Washington, DC have extended open enrollment dates beyond December 15. Check with the state’s department of insurance for specific open enrollment dates.

The federal government no longer runs the marketplace for the Small Business Health Options Program (SHOP). As an alternative, small business employers may be able to contact insurance companies directly or work with a broker who is certified to sell SHOP policies.

The fate of Obamacare

Currently, the fate of the ACA is somewhat uncertain. At the end of 2018, a Texas federal judge ruled the Affordable Care Act unconstitutional. However, the judge ordered a stay pending appeals, so the ACA remains in place for the time being.

6
Jul

Qualified Charitable Distributions (QCD)

Changes in tax laws can require updating your planning.

The 2017 tax act has caused many to rethink their charitable giving. Charitable contributions for those over the age of 70.5 may benefit them by making their charitable contributions directly from their Individual Retirement Accounts (IRA).  These QCDs are treated as part of the Required Minimum Distribution (RMD) for the year they are distributed, but are not taxed.

You must be at least 70.5 when you make the contribution.

The contribution must be made from a traditional IRA. Payment from other retirement accounts do not qualify.

The payments must be to a public charity.

The maximum annual amount cannot exceed $100,000. There is no limit on the number of distributions or charities you make contributions to.

The distribution must be made directly from your IRA account to the charitable organization.

You may not receive benefits in exchange for the contribution. Examples include tickets to paid events and preferential seating.

The distribution must be part of your RMD. Amounts contributed after you have withdrawn your RMD do not qualify as QCD.  If you have already taken your annual RMD for the year, you cannot make a QCD for the year. Plan the timing of your QCD before you have taken your RMDs for the year. Distribute your QCDs early in the year before you have withdrawn all your RMDs for the year.

Include a cover letter specifying the payment is a QCD and request an acknowledgement.

The foregoing is provided for information purposes only.  It is not intended or designed to provide legal, accounting, tax, investment or other professional advice.  Such advice requires consideration of individual circumstances.  Before any action is taken based upon this information, it is essential that competent individual professional advice be obtained.  JAS Financial Services, LLC is not responsible for any modifications made to this material, or for the accuracy of information provided by other sources. 

12
Aug

Interest Rates on New Federal Student Loans Fall Slightly

The new interest rates apply to loans issued July 1, 2015 through June 30, 2016.

Interest Rates Decrease Slightly on Student Loans

23
Dec

New address effective January 1, 2015

Effective January 1, 2015 the mailing address will be:

1603 Orrington Avenue
Suite 600 Evanston, IL 60201

Meetings are available by appointment only at this new address as well as at:

9933 Lawler Avenue
Suite 440
Skokie, IL 60077

Appointments will continue to be available  at you home or business

Phone number remains: 847-328-8011
Fax number remains:      847-780-7920
Email remains:                  joe@jasfinanciallc.com
Web page remains:          www.jasfinancialllc.com

 

 

 

6
Nov

IRA and Retirement Plan Limits for 2014

 

  The release of the 2014 limits is a reminder to make sure you maximize your 2013 contributions before December 31, 2013 in addition to starting your 2014 planning.  
     
   IRA contribution limits
The maximum amount you can contribute to a traditional IRA or Roth IRA in 2014 remains unchanged at $5,500 (or 100% of your earned income, if less). The maximum catch-up contribution for those age 50 or older in 2014 is $1,000, also unchanged from 2013. (You can contribute to both a traditional and Roth IRA in 2014, but your total contributions can’t exceed this annual limit.)Traditional IRA deduction limits for 2014

The income limits for determining the deductibility of traditional IRA contributions have increased for 2014 (for those covered by employer retirement plans). For example, you can fully deduct your IRA contribution if your filing status is single/head of household, and your income (“modified adjusted gross income,” or MAGI) is $60,000 or less (up from $59,000 in 2013). If you’re married and filing a joint return, you can fully deduct your IRA contribution if your MAGI is $96,000 or less (up from $95,000 in 2013). If you’re not covered by an employer plan but your spouse is, and you file a joint return, you can fully deduct your IRA contribution if your MAGI is $181,000 or less (up from $178,000 in 2013).

If your 2014 federal income tax filing status is:

Your IRA deduction is reduced if your MAGI is between:

Your deduction is eliminated if your MAGI is:

Single or head of household

$60,000 and $70,000 $70,000 or more

Married filing jointly or qualifying widow(er)*

$96,000 and $116,000 (combined) $116,000 or more (combined)

Married filing separately

$0 and $10,000 $10,000 or more

*If you’re not covered by an employer plan but your spouse is, your deduction is limited if your MAGI is $181,000 to $191,000, and eliminated if your MAGI exceeds $191,000.

Roth IRA contribution limits for 2014

The income limits for Roth IRA contributions have also increased. If your filing status is single/head of household, you can contribute the full $5,500 to a Roth IRA in 2014 if your MAGI is $114,000 or less (up from $112,000 in 2013). And if you’re married and filing a joint return, you can make a full contribution if your MAGI is $181,000 or less (up from $178,000 in 2013). (Again, contributions can’t exceed 100% of your earned income.)

If your 2014 federal income tax filing status is:

Your Roth IRA contribution is reduced if your MAGI is between:

You cannot contribute to a Roth IRA if your MAGI is:

Single or head of household

$114,000 and $129,000 $129,000 or more

Married filing jointly or qualifying widow(er)

$181,000 and $191,000 (combined) $191,000 or more (combined)

Married filing separately

$0 and $10,000 $10,000 or more

Employer retirement plans

The maximum amount you can contribute (your “elective deferrals”) to a 401(k) plan in 2014 remains unchanged at $17,500. The limit also applies to 403(b), 457(b), and SAR-SEP plans, as well as the Federal Thrift Savings Plan. If you’re age 50 or older, you can also make catch-up contributions of up to $5,500 to these plans in 2014 (unchanged from 2013). (Special catch-up limits apply to certain participants in 403(b) and 457(b) plans.)

If you participate in more than one retirement plan, your total elective deferrals can’t exceed the annual limit ($17,500 in 2014 plus any applicable catch-up contribution). Deferrals to 401(k) plans, 403(b) plans, SIMPLE plans, and SAR-SEPs are included in this limit, but deferrals to Section 457(b) plans are not. For example, if you participate in both a 403(b) plan and a 457(b) plan, you can defer the full dollar limit to each plan–a total of $35,000 in 2014 (plus any catch-up contributions).

The amount you can contribute to a SIMPLE IRA or SIMPLE 401(k) plan in 2014 is $12,000, unchanged from 2013. The catch-up limit for those age 50 or older also remains unchanged at $2,500.

Plan type:

Annual dollar limit:

Catch-up limit:

401(k), 403(b), governmental 457(b), SAR-SEP, Federal Thrift Savings Plan

$17,500 $5,500

SIMPLE plans

$12,000 $2,500

Note: Contributions can’t exceed 100% of your income.

The maximum amount that can be allocated to your account in a defined contribution plan (for example, a 401(k) plan or profit-sharing plan) in 2014 is $52,000 (up from $51,000 in 2013), plus age-50 catch-up contributions. (This includes both your contributions and your employer’s contributions. Special rules apply if your employer sponsors more than one retirement plan.)

Finally, the maximum amount of compensation that can be taken into account in determining benefits for most plans in 2014 has increased to $260,000, up from $255,000 in 2013; and the dollar threshold for determining highly compensated employees remains unchanged at $115,000.

 

 

 

 
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22
May

What Is the Consumer Financial Protection Bureau?

The Consumer Financial Protection Bureau (CFPB) has been in the media due to the national political climate.  Many may find themselves looking for more information about this federal agency and its role in protecting consumers.

Background
The 2007 credit and loan crisis is often viewed as being the direct result of faulty consumer lending practices. Subsequently, many saw the need to have one centralized federal agency that focused on the protection of consumers regarding financial products and services, such as mortgages, credit cards, and student loans. In 2010, the CFPB was established by Congress through the Dodd-Frank Wall Street Reform and Consumer Protection Act.

The CFPB’s mission
The CFPB is charged with protecting consumers from unfavorable financial industry practices through the enforcement of federal consumer protection laws. In addition, the CFPB:

Supervises banks, credit unions, and other financial institutions
Educates consumers on how to avoid deceptive and unfair lending practices
Monitors financial industry developments
Issues regulations and guidelines for financial service providers
Collects and tracks consumer complaints in one centralized database

Recent headlines
the CFPB has taken action on a variety of consumer financial protection issues.
Some of the more high-profile headlines include:

Issuing a new mortgage rule that requires a lender to ensure a borrower’s ability to repay a mortgage loan
Releasing a report aimed at developing more affordable student loan repayment options for private student loans
Issuing a new rule that eases credit-card qualifications for stay-at-home spouses and partner

Where to get more information
For more information on how the CFPB works, visit the CFPB website at www.consumerfinance.gov.

 

 

 

 
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25
Jan

The recent tax act impacts planning

The American Taxpayer Relief Act of 2012 ads a new dimension to tax planning.  The tax rate brackets, thresholds, phase outs, etc. are different depending on the element involved.  Some vary depending on the types of income.  Types of income include: taxable income, earned income, alternative minimum taxable income, capital gains, net investment income, self employed earned income and adjusted gross income.   Incomes for the phase outs of itemized deductions, exemptions and alternative minimum tax differ.

Planning will also be impacted by the timing of income and deductions.  Defer income and accelerate income may no longer be a general approach.  Changes in income and deduction and the nature of the income and deduction anticipated in the future will must be considered. The approach for each may vary from year to year.

Key numbers are provided on the web site under “Information of Interest” and “Newsletters” under “Resources”.

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15
Oct

Welcome!

Thank you for visiting.   I will attempt to keep the posts short.  Most post will attempt to provide food for thought.   Please let me know if you have questions or comments.  

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