Covid-19 Statement to Our Clients

In these unprecedented times, most, if not all, Americans are feeling the impacts of the coronavirus
(COVID-19) pandemic. Thousands are sick, a large number have died, millions of jobs are being lost amid
quarantine orders and small businesses are facing exceptional challenges to keep their doors open. The
federal government is committed to helping individuals and businesses during these uncertain times. In
addition to pushing back the April 15th tax deadline to July 15th, the government plans to issue stimulus
checks to most taxpayers, increase unemployment and authorize lenders to issue SBA loans with simpler
application processes, which in certain circumstances may not have to be repaid. Many states have also
extended filing deadlines and loosened eligibility requirements for unemployment benefits. As information
from media outlets and federal & state governments roll out in record speeds, we know you have many
questions from a business and personal standpoint, for example:

 How do I know if I’m getting a stimulus check?
 Is it possible to take distributions from my retirement account to pay my monthly expenses
without incurring penalties?
 As a self-employed individual, is it possible to apply for unemployment benefits?
 Am I required to pay my employees if they’re at home with their kids while schools are closed?
 What if I can’t afford to pay my employees sick or family leave?
 Is it better to lay off my workers or put them on temporary leave?
 Is a self-employed individual eligible for sick leave or family leave pay?
 How do the employer credits work if I pay sick or family leave to my employees?
 What are the qualifications for getting an SBA loan to keep my business afloat?
 What type of SBA loan may not require repayment?

Right now, your highest priority is your health and the health of those you love. We are diligently reading
and researching new legislation, proposed and passed, to understand its impact on you. Our main objective
is to support you and your business and to navigate this complicated and everchanging environment
together. Please contact us and let us help you walk through the details of the newly enacted federal tax
legislation and allow us to be the trusted advisors you hired us to be.

The Impact of SECURE Act

Congress recently passed sweeping legislation known as the Setting Up Every Community for Retirement

Enhancement (SECURE) Act. The Act expands opportunities for individuals to increase their savings and modifies many employer requirements as so to incentivize businesses to encourage their employees to save for retirement sooner. Many of the provisions are in effect for 2020, so now is the time to consider how these new rules affect you. Below are some of the more important elements that impact individuals and businesses.

Individuals
 Raises the required minimum distribution age from 70 ½ to 72
 Allows contributions to an IRA after age 70 ½
 Permits tax free distributions from a 529 plan to repay up to $10,000 of student loan debt
 Allows penalty free withdrawals from a 401(k) to help offset costs of having or adopting a child
 Requires distributions from an inherited IRA to most non-spouse beneficiaries be done within 10 years following the IRA owner’s death

Businesses
 Permits unrelated employers to band together to create a single retirement plan
 Increases the credit for small employer pension plan start-up costs
 Creates a new tax credit of up to $500 per year for small employers to offset costs for new 401(k) and SIMPLE IRA plans
 Requires most employers to allow long-term part-time employees to participate in 401(k) plans
 Increases penalties for failure to file retirement plan returns

The government recognizes that most Americans are not prepared for retirement. Thankfully, most of these changes will allow people more time to save for retirement, as well as provide more options for saving.

However, not every provision is favorable to all and some will impact taxpayers more than others. Let us help you identify which parts of the Act can benefit you and assist you in implementing them into your plan for the
future.

The Federal Deficit

In 2009 the federal deficit rose to 1.4 trillion.  By the end of 2014, it will drop to $642 billion and is headed to $378 billion by the end if 2015.  REASON:  $95 billion in Bailout funds will be repaid, tax hikes, a growing economy, and reining in spending due to the sequestration.

(SOURCE: KIPLINGER LETTER, WASHINGTON, DC., JUNE 28, 2013) 

Healthy Michigan Law & Affordable Health Care Act

The House has already passed legislation that sits in the laps of the Senate.  The importance of passing the Healthy Michigan Law is not only attracting businesses to the State but it also lies in the effects on the individuals and small business.

The Healthy Michigan Law will help employers avoid $50 to $80 million in penalties they will be facing come January 1st, 2014 under the Affordable Care Act if they do not provide health insurance.  Business could face fines up to $3,000 per employee otherwise.  (As we were gong to press, President Obama approved the postponement of the business mandate until 2015.)

The plan relieves the cost of uncompensated care, which falls on the small business owners.  It also expands health care coverage to workers in or near the poverty limit.

Governor Snyder has called for the Senate to set a date for a critical vote on this legislation.  He said, “This plan will save taxpayers money and reduce costs for Michigan’s job providers.  It will give consistent and cost-effective coverage to those who now rely on the emergency room as their primary source of medical care.  Passing this bill is critical to the well-being of our citizens and the vitality of our economy.”

The State is projecting a $206 million savings alone in 2014 by providing the Healthy Michigan Law.  $82 million a year in uncompensated cost is projected as being eliminated in uncompensated costs currently incurred by hospitals, being passed on to individuals and business through higher premiums.

(SOURCE:  WWW.MI.GOV)

How the Unemployment Rate is Calculated

The problem when you look at your Tax Rate Determination is that all you see are numbers, an equation and generally you have no idea if any of the numbers are correct.  The goal of this article is for you to look at your Tax Rate Determination that you have recently received in the mail (or will any day) and understand it and more so, be able to explain it to someone else.

  1. The first thing to keep in mind is that the calendar year is July 1st to June 30th.  So while you can think to yourself ‘I laid no one off this calendar year’, think first about the 12 months that the state is looking at.  For instance, the 12 months under review is July 1st, 2011 to June 30th, 2012 for the 2013 Tax Rate Determination.  Pull out your Wage Detail Reports for those 4 quarters and have handy the Form 1020, Employers Quarterly Tax Report.  (Use Form 1028 from 7-1-2012 on.)  Look at changes in personnel.  Did anyone quit and go on unemployment? Also keep in mind that the State is using 4 years of unemployment experience and that information is more than likely not available at your fingertips.
  2. The Tax Rate is determined by past unemployment benefit claims, payroll size, and years of experience.
  3. The tax rates may increase if benefits have been paid, taxes are unpaid or underpaid, and if you have increases in payroll.
  4. Tax rates are calculated by using 3 components:
    1. The Chargeable Benefits Component (CBC)
    2. The Account Building Component (ABC)
    3. The Non-Chargeable Benefit Component (NBC)
  5. CBC and ABC are known as the Experience Components and are affected by your payroll, the unemployment benefits charged to your account and the tax payments received.
    1. Chargeable benefits looks at the unemployment charged to your account.   The maximum CBC set my Michigan law is 6.3%.  CBC is Benefits Paid/Taxable Payroll.  The number of months used is based on the age of the company.
    2. Account Building is more or less as it sounds.  Based on your payroll, UIA calculates the ABC:
      1. [(Required reserve)-(Actual reserve) X.5] divided by [12 months of Total Payroll].
      2. Look on this as the “Sustainability component”.  If you lay off an employee, how much do you have in your account to sustain paying that employee? This component forces you to “save” money in your UIA account to pay all necessary unemployment.
    3. The maximum ABC rate is 3.0%.
  6. NBC is the only non-experience component.  It is a flat 1.0%, but for employers with no or little chargeable benefits, it can go as low as .5 to .06%.  In some cases it may be 0%.
  7. Additional points that can affect your rate:
    1. The Obligation Assessment Rate – a rate determined by the state to repay unemployment loans to the federal government.  This is a non-disputable rate.  Refer to the September 2012 issue for an explanation of this rate.
    2. Missing tax reports can cause the rate to be increased by as much as 3%, the Non-Reporting Penalty.  If all missing reports are mailed in within 3 years, a new UIA rate will be established but the 3% penalty will remain.
    3. In the acquisition of a business, an employer receiving the payroll andor employees, there is a mandatory transfer of the unemployment experience from the company being acquired.

Welcome to the Paranormal Economy

There have been a number of phrases that have grown out of our current economic malaise. The housing bust. Black Swans. The Mancession. Financial Contagion. The growth recession. QE2. But above all else the phrase that most people seem to agree has capture best the essence of the post financial crisis economy is “The New Normal.” Nonetheless, Bill Gross, the prominent bond fund manager who is credited with popularizing the phrase a little more than two years ago, says he may be done using the term. What phrase does Gross prefer to describe the current state of our money affairs? The Paranormal economy. –Welcome to the Paranormal Economy (Time Business)

You Can't Expect Consumers to Spend Like It's 2006

This is hardly the message families want to hear right after the holidays, when budgets were stretched to the limit to afford parties and gifts and already-forgotten stocking stuffers, and credit cards were used way more than planned. But, for the sake of economic recovery prospects in 2012, consumers are being asked to pick up the spending pace and buy more stuff. Unsurprisingly, few seem game to do so. –Don’t Expect the American Consumer to Save the Economy Anytime Soon (Moneyland)

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