Posted on

Raising the Debt Ceiling, Protecting Air Travel and Repealing the Iraq AUMF

3 min read

Raising the Debt Ceiling, Protecting Air Travel and Repealing the Iraq AUMFFiscal Responsibility Act of 2023 (HR 3746) – This Act represents a compromise reached by House Republicans and President Biden. Republicans negotiated concessions in exchange for voting to raise the debt ceiling to maintain the solvency of the federal government. These concessions included universal cuts to federal spending, the suspension of student loan repayments that began during the pandemic, additional work requirements for some Supplemental Nutrition Assistance Program (SNAP) and Temporary Assistance for Needy Families (TANF) recipients, and suspending the current $31.4 trillion debt ceiling until 2025. The bill was introduced by Rep. Patrick McHenry (R-NC) on May 29. The legislation was passed in the House on May 31, in the Senate on June 1, and signed into law on June 2 – just in time to avert the global financial crisis, it would have triggered by June 5.

NOTAM Improvement Act of 2023 (HR 346) – This bill was introduced in the House by Rep. Pete Stauber (R-MN) on Jan. 12. This Act instructs the Federal Aviation Administration (FAA) to establish a federal NOTAM system (notice to air missions, as required by international or domestic law) as well as an accompanying task force. The task force is directed to evaluate existing regulations, policies, systems, and international standards relating to NOTAMs; determine best practices, and make recommendations to improve the publication and delivery of NOTAM information. This bill passed in the House on Jan. 25, passed with changes in the Senate on May 9, finalized in the House on May 22, and was signed by the president on June 3.

A bill to amend the Tariff Act of 1930 to protect personally identifiable information and for other purposes (S 758) – This bill would require the Treasury Department to remove personal traveler information, such as Social Security and passport numbers, from transportation manifests before they become accessible to the public. The bipartisan bill was introduced by Sen. Steve Daines (R-MT) on March 9 and passed in the Senate on the same day. It is presently under review in the House.

A bill to repeal the authorizations for the use of military force against Iraq (S 316) – The purpose of this bipartisan bill is to repeal a decades-old AUMF (Authorization for Use of Military Force) against Iraq. This repeal restores Congress’ constitutional responsibility to undertake the traditional process for approving the use of military force. The bill was introduced on Feb. 9 by Sen. Tim Kaine (D-VA) and was co-sponsored by 31 Democrats, 12 Republicans, and three Independents. The bill passed in the Senate on March 29 and is currently under consideration in the House.

Administrative False Claims Act of 2023 (S 659) – Introduced by Sen. Chuck Grassley (R-IA) on March 6, this bill would modify the current provisions of fraud committed against the federal government. The current maximum fraud claim is $150,000; the bill would raise that limit to $1 million, as well as enable the federal government to recoup expenses related to the investigation and prosecution of each case. The Senate passed the bill on March 30 before sending it to the House, where it awaits a vote.

Posted on

New Personal Finance Provisions in the 2.0 Secure Act

4 min read

2.0 Secure ActThe Continuing Appropriations Act, enacted at the end of 2022, included several provisions that impact retirement plans going forward. Specifically, the legislation enacts SECURE 2.0, an updated version of the Setting Every Community Up for Retirement Enhancement Act of 2019. The following provisions are financial planning considerations that affect individuals.

Increases Catch-up Contributions

Beginning in 2024, catch-up contributions to employer retirement plans made by employees who earn more than $145,000 a year (regularly adjusted for inflation) must be classified as after-tax Roth contributions. This is necessary for eligible plans to retain their tax-favored status.

Starting in 2025, catch-up contributions for participants ages 60 to 63 will increase from $7,500 to $10,000 per year for contributors in most qualified retirement plans. Beginning in 2026, the new catch-up contribution will be indexed to inflation.

Allows Employer Contributions to Roth 401(k)

Employers are now able to make post-tax contributions to a Roth option in an employee’s 401(k) plan. Employers also may open a Roth account option in SIMPLE, and SEP IRA plans for employees.

Expands Emergency Distributions from Retirement Accounts

Starting in 2024, there will be a new exception to the rule for early withdrawals from qualified retirement accounts. Distributions used for unforeseeable events, such as a personal or family emergency, will not be subject to the 10 percent early withdrawal penalty. However, the rule applies to only one distribution per year and only up to $1,000. The plan member has the option to repay the distribution within three years. Absent full repayment, no further emergency withdrawals may occur during those three years.

The provision also waives the withdrawal penalty on any amount for individuals certified by a physician to have a terminal illness.

Increases Age for Required Minimum Distributions (RMD)

Starting in 2023, the age that triggers required minimum distributions (and their requisite income tax liability) from qualified retirement accounts increases from 72 to 73. Starting in 2033, the trigger age raises to 75. The RMD rule apples to 401(k), 403(b) and 457(b) plans). Also, starting in 2024, Roth 401(k) accounts will no longer require RMDs.

Reduces Excise Tax on Noncompliant RMDs

If an investor is required to start taking minimum distributions and does not take out the required amount in a single year, he is subject to a tax on the amount not distributed. The tax used to be 50 percent, but starting in 2023, it was reduced to 25 percent. Moreover, if the account owner corrects the course and takes the full distribution within a certain window of time, the tax may be further reduced to only 10 percent.

Allows Emergency Savings Accounts

Starting in 2024, the legislation permits employers to offer an emergency savings account option within its retirement plan. The following provisions apply:

  • Employee contributions are made with after-tax income
  • There is an annual cap of $2,500
  • Participants may make at least one withdrawal per month
  • Up to four withdrawals per year are not subject to fees
  • Emergency savings may be held in an interest-bearing cash-equivalent account
  • Employers may match contributions, but those must be deposited to the participant’s retirement plan investment, not the emergency savings account.
  • The emergency account is portable when the participant leaves the employer and can be rolled into a Roth-defined contribution plan or IRA

Permits Employer Match for Student Loan Payments

Presently – through 2025 – employers may contribute up to $5,250 (tax-free) a year toward worker student loan payments. Starting next year, employers have the option to classify those loan payments as contributions to the company retirement plan, such as a 401(k). This allows workers with student loans the opportunity to pay down that debt with their own income and still receive an employer match toward their retirement plan – so they don’t have to choose one or the other.

Posted on

Understanding Modified Accrual Accounting

4 min read

What is Modified Accrual AccountingAccording to the Federal Register, there were about 90,000 local and state government entities throughout the country in 2022. This number is comprised of towns, counties, cities, special districts, and independent school districts. One of the commonalities these organizations share is their use of modified accrual accounting.

Understanding the Differences Between Cash and Accrual Accounting

Cash basis accounting recognizes transactions upon the exchange of cash. Expenses are not recognized until they are paid, and revenue isn’t recognized until payment has been received. Neither future obligations nor anticipated revenues are recorded in financial statements until the cash transaction has happened.

Accrual accounting treats the recognition of expenses when they are incurred. When it comes to recognizing revenue, it occurs once a business is owed compensation for its contracted complete delivery of products or services. The act of exchanging cash or payment is less important with accrual accounting.

What is Modified Accrual Accounting

This method of accounting merges the directness of cash accounting and some attributes of the more complex but equally useful accrual accounting method to account for transaction differences. One can record modified accrual accounting as each transaction is analyzed and accounted for, hinging primarily on whether an asset is short- or long-term, be it how a business recognizes revenue or incurs a liability.

Short Term Versus Long Term

This method is highly dependent on the type of asset in question. When the cash balance has been impacted by a short-term occurrence, such as a sale to a customer or the purchase of raw materials from a vendor, it must be recorded using the cash basis. This is most often recorded on the income statement.

When it comes to events that impact more than one accounting timeframe, it is referred to as long-term. If the debt that is due beyond 12 months or fixed assets are in question, these are considered long-term and must be documented on the balance sheet.

For assets such as fixed long-term debt and fixed assets, which are considered longer-term, they are recorded on the balance sheet. Such assets are then depreciated or amortized over an asset’s lifetime.

Where Modified Accrual is Used

While public companies may use this for financial statements internally, it is not permitted for public financial reporting by generally accepted accounting principles (GAAP) or the International Financial Reporting Standards (IFRS). One important consideration for private or public companies is that when the modified cash basis method is used, there is an implicit consideration that transactions recorded on a cash basis will have to be adjusted to an accrual-based accounting to be accepted by third-party auditors.

Since the financial statements submitted to be evaluated by a third-party auditor would not have been 100 percent on an accrual basis, they would fail a third-party audit, creating a crisis of confidence among outside observers. The transition from a cash basis will require less translation to a full accrual basis accounting. However, for non-publicly traded, private businesses, for internally-only used financial statements and/or no financing required, it can be useful.

One important reason this standard is widely used throughout government agencies is because the Government Accounting Standards Board (GASB) created the standard, and it is recognized as an established metric.

The reason governmental agencies implement this standard is because local and state governments keep their attention on present year fiscal responsibilities. This works with their dual principal purposes. The first is to document in any event if present-year monetary inflows are satisfactory to fund present-year costs. It also satisfies that each government entity can substantiate if government funds are utilized in accordance with the law.

Depending on the type of entity and how they are functioning in the economy, private or public sectors can look at how modified accrual accounting impacts their operations.

Posted on

7 Tips to Save Money This Summer

4 min read

7 Tips to Save Money This SummerSummer is here, and so are all the activities. But as we know, these activities cost money. Here are a few ways you can still have fun and, while doing so, save some cash.

Look at Your Calendar

Summer months are filled with holidays, birthdays, cookouts, weddings – the list goes on. Take a look and make an estimate of how much you want to spend on each event. When you can plan ahead and figure out your budget, you won’t be faced with surprise expenditures at the last minute. Nobody likes that.

Go on a Spending Cleanse

We’re not talking for months on end – just a few weeks. During this time, make a point to spend only on necessities. It will force you to take a look at what you want versus what you need. The money that you might have otherwise spent on wants can go into a slush fund for future summer events.

Check Out Money-Saving Sites

If you want to go to an amusement park or, say, the movies, you know how quickly this can add up. Go to Groupon or LivingSocial for some serious price-slashing coupons. Other resources to check out are AAA or AARP. For instance, AAA members get up to 30 percent off tickets to Six Flags.

Take Advantage of Free Entertainment

Inquire at your public library for free events and activities. Check out your local zoo and botanical gardens for free admission days. Go online to your local parks and recreation centers – many plan free, outdoor things to do. All you have to do is dig around a little!

Freeze Your Gym Membership

Chances are you’ll be spending a lot more time outside this summer, some of which might be working out. So why pay for a gym membership if you’re not using it? Instead of paying a hefty cancellation fee or initiation fee to rejoin, ask if you can freeze your membership for the summer. You might be charged a small fee, but in comparison to your monthly or yearly dues, you could save a lot. Plus, exercising outside is good for you.

Turn Down Your Air Conditioner When Away

After you’ve been out in the heat, coming home to an icy home undoubtedly feels great. But what doesn’t feel so great is looking at your A/C bill every month. You could turn down your A/C to a tolerable temp when you leave, then, of course, turn it up when you return. Or, you can get a programmable thermostat that will automatically adjust while you’re away. According to the U.S. Department of Energy, one of these devices can save you as much as 10 percent on heating and cooling costs.

Unplug Electronics When You Leave for Vacation

Before you head out for your summer adventure, make sure to unplug everything from your entertainment system – cable box, TV and speakers – to your small kitchen appliances like your toaster and coffee maker. These devices still consume energy when they’re plugged in. If you want to expedite this, get a power strip. With just one or two flips, you can save up to 5 percent on your energy bill.

These are just a few little things you can do to shave costs, but over time, they can add up to substantial savings. They’ll also help remove the stress that lack of money can cause. You deserve to have a relaxing, worry-free summer!

Sources

https://theeverygirl.com/summer-money-tips/

https://www.gobankingrates.com/saving-money/budgeting/money-mistakes-probably-making-summer/

https://www.consumerreports.org/appliances/thermostats/best-programmable-thermostats-of-the-year-a1031454339/

Posted on

End of Covid Emergency Declarations Put Work from Home Benefits at Risk

3 min read

Work from Home Benefits at RiskThe end of the federal emergency declaration for Covid-19 came on May 11. As a result, there are various public health policy changes. For example, vaccines and treatments will remain available, but at-home tests may no longer be covered by insurance, and national CDC data reporting is subject to change.

Administratively, there are also changes to regulatory measures temporarily put in place by the emergency status that will have tax consequences. As employers struggled during the pandemic, some even had to meet payroll issues around expense reimbursements, stipends, and how these are considered fringe benefits or compensation came into light.

History of Section 139

Section 139 came into being over 20 years ago after the Sept. 11 terrorist attacks. Then President George W. Bush signed the Victims of Terrorism Tax Relief Act, which created Section 139, defining qualified disasters and providing a non-taxable status to relief payments. The emergency Covid declaration enabled Section 139 to apply under its time in existence.

Section 139

Consequently, employers were able to aid employees under the federally declared Covid-19 disaster by providing non-taxable benefits to employees while deducting 100 percent at the company level.

One of the typical principles of tax law is that in order for compensation, whether cash or in-kind, to not be taxable to the recipient, it cannot be deducted by the compensating party. This makes sense logically, as the IRS simply wants one side to pay taxes in the end. The disaster declaration allowed a sort of have your cake and eat it to the period when it came to certain employee benefits.

Impact on Benefits

So, Section 139 is the reason why some Covid-related payments never found their way onto a Form W-2. It meant that certain medical expense reimbursements such as testing and OTC treatments, dependent care expenses, and work-from-home expenses, including home office stipends, were treated as deductible for the employer providing them but still not taxable to the employee receiving them.

There was never any specific IRS guidance stipulating exactly which Covid-19 expenses qualify under Section 139. Instead, most employers looked at what benefits they would not have otherwise provided but for the COVID-19 pandemic and classified these as qualifying items.

The Big Problem

Using this logic of classifying benefits that would otherwise not exist, but for Covid-19, as the justification for their taxability under Section 139 put companies in a bind. If they want to continue these benefits, they have to be treated as taxable income to the employee, or the employer can no longer deduct them.

While some benefits, such as Covid-19 test reimbursements, are less of an issue, many employees have come to see others, such as home office stipends, as a normal benefit – especially in the context of the work-from-home (or at least partial) new normal. No longer receiving these benefits or having to pay taxes on them is going to cause a lot of consternation.

Conclusion

One thing is certain. The end of the emergency declaration is going to bring changes in the realm of employee benefits. While the easy solution could be to simply make these benefits taxable to employees, companies need to think about what and how they provide in the context of both tax compliance and employee engagement and retention.