When was the last time you reviewed beneficiary information on your life insurance policies, retirement accounts and will? It’s important to check all accounts because in many cases, beneficiary designations on policies and retirement plans supersede what is written in your will or trust documents.

DESIGNATE A PRIMARY

A primary beneficiary is the one who will inherit your asset. Keep in mind that your state may restrict who you can appoint. For example, your spouse may need to sign a waiver before you can select someone else as the primary beneficiary.

CHOOSE A BACKUP

While the primary beneficiary is first in line to receive your asset, the secondary or contingent beneficiary is next in line if that person dies before you. Most accounts don’t require one, but it’s a good idea to name a secondary to ensure your assets are distributed how you want.

COMPLETE THE PROCESS

It’s a good idea to review everything at the same time. Make sure your will or trusts include all your assets, your insurance coverage is adequate and that you are on track with retirement savings. Meet with your financial and legal professionals annually.

For more information and articles visit Whalen’s ClientLine Monthly – clientlinenewsletter

Choosing an S Corporation (S Corp) as the best legal structure for your business provides tax perks, but it also comes with limits: paying owners a reasonable salary.

SELF-EMPLOYED OR EMPLOYEE

All self-employed people are business owners. But not all business owners are self-employed. The owner of an S Corp isn’t considered self-employed in the eyes of the IRS, unlike sole proprietors or partners in a partnership. Instead, they’re considered both an employee (if they work in the business) and a company shareholder. This distinction is critical because owners of S Corps don’t pay self-employment tax on their share of the company’s profits.

GET TO WORK

To prevent owners from taking all business income as a distribution of profit and avoid paying any self-employment tax, the IRS requires that owners who provide services to the S Corp collect a reasonable salary.

SALARY OR PROFITS

Determining whether a shareholder payment is a paycheck or profit distribution, first look at how much of the company’s sales revenue was generated by the shareholder’s personal services. If the company has no other employees or subcontractors, then a reasonable amount of payments should be classified as wages since the shareholder did the work.

WHAT’S REASONABLE?

Although there’s no clear definition of what’s reasonable compensation, there are a few factors to consider, such as:

• • Training and experience

• • Duties and responsibilities

• • Time and effort devoted to the business

• • Competitive costs for similar services

• Payments to non-shareholder employees

IT’S TAXING

Payments to S Corp owners for services rendered are treated no differently than the salary you would pay an employee. Payroll taxes including FICA and federal and state income tax must be withheld from the paycheck, and the company must pay FUTA and state unemployment taxes. Form W-2 will be provided to the owner in January, as with all employees.

S Corporations are complex compared with other business structures, so if you’re considering S Corp tax status for your business, consult with your tax professional.

If the pandemic has caused a slowdown in reaching your financial goals, now is the time to review your plans and push reset for 2022. Your financial and tax professionals can guide you through this process.

REVISIT YOUR GOALS

No doubt that the last couple of years have caused many of us to shift priorities. Start with reviewing your previous goals and see if they’ve changed. Perhaps the ultra-competitive real estate market has put your home buying plans on the back burner. Identify what’s important to you this year and a few years down the road.

PUT IT IN WRITING

After a year of living one day at a time, you may now have some breathing room to look forward. Put those new short-term and long-term goals in writing. Having a written financial plan will help you focus while helping to keep you on track and moving forward.

EXPECT THE UNEXPECTED

The pandemic has taught us to expect the unexpected. Layoffs, stay-at-home orders, and remote work have taught us to be adaptable. It also raised awareness about the need to look at financial preparedness for emergencies and unknowns. For example, you may need to replenish your emergency fund to eventually cover three to six months of expenses. Also, review your insurance coverage to help avoid a financial catastrophe.

CANCEL SUBSCRIPTIONS

As you get back to socializing with friends and family, you may be spending less time at home. So, you may not need that many streaming subscriptions and memberships that you used during lockdowns. Cancel anything that you find yourself rarely using anymore and reallocate those funds to your emergency fund or savings goals.

ONLINE VIGILANCE

Keep your eyes out for cybercriminals looking for an easy payday. Be skeptical about unsolicited messages and online shopping offers that seem too good. With the numerous federal and state assistance programs created during the pandemic, scammers are looking for ways to get their hands in your pocket.

 

For more information and articles visit Whalen’s ClientLine Monthly – clientlinenewsletter

 

President Trump on Sunday night signed into law the $900 billion COVID-19 relief bill passed Dec. 21 by Congress.

 

Trump initially said he would not sign the bill because he wanted $2,000 stimulus checks for individuals instead of the $600 in the legislation. His signature Sunday came a day after unemployment benefits expired for millions of Americans and only hours before the federal government would have shut down due to a temporary funding bill expiring.

 

The legislation, the Consolidated Appropriations Act, adds $300 to extended weekly unemployment benefits, and provides more than $300 billion in aid for small businesses.

 

It also ensures tax deductibility for business expenses paid with forgiven Paycheck Protection Program (PPP) loans, provides fresh PPP funding, makes Sec. 501(c)(6) not-for-profit organizations eligible for loans for the first time, and offers businesses facing severe revenue reductions the opportunity to apply for a second loan.

 

The COVID-19 relief package is tied to a $1.4 trillion resolution to fund the government through September 2021.

 

 

Key provisions in the bill include:

 

• $325 billion in aid for small businesses struggling after nine months of pandemic-induced economic hardships. The bill provides more than $284 billion to the U.S. Small Business Association (SBA) for first and second PPP forgivable small business loans and allocates $20 billion to provide Economic Injury Disaster Loan (EIDL) Grants to businesses in low-income communities. In addition, shuttered live venues, independent movie theaters, and cultural institutions will have access to $15 billion in dedicated funding while $12 billion will be set aside to help business in low-income and minority communities.

 

• $166 billion for economic impact payments of $600 for individuals making up to $75,000 per year and $1,200 for married couples making up to $150,000 per year, as well as a $600 payment for each child dependent.

 

• $120 billion to provide workers receiving unemployment benefits a $300 per week supplement from Dec. 26 until March 14, 2021. This bill also extends the Pandemic Unemployment Assistance (PUA) program, with expanded coverage to the self-employed, gig workers, and others in nontraditional employment, and the Pandemic Emergency Unemployment Compensation (PEUC) program, which provides additional weeks of federally funded unemployment benefits to individuals who exhaust their regular state benefits.

 

• $25 billion in emergency rental aid and an extension of the national eviction moratorium through Jan. 31, 2021.

 

• $45 billion in transportation funding, including $16 billion for airlines, $14 billion for transit systems, $10 billion for state highways, $2 billion each for airports and intercity buses, and $1 billion for Amtrak.

 

• $82 billion in funding for colleges and schools, including support for HVAC repair and replacement to mitigate virus transmission, and $10 billion in child care assistance.

 

• $22 billion for health-related expenses incurred by state, local, Tribal, and territorial governments.

 

• $13 billion for emergency food assistance, including a 15% increase for six months in Supplemental Nutrition Assistance Program benefits.

 

• $7 billion for broadband expansion.

 

The bill also extends the employee retention tax credit and several expiring tax provisions and temporarily allows a 100% business expense deduction for meals (rather than the current 50%) as long as the expense is for food or beverages provided by a restaurant. This provision is effective for expenses incurred after Dec. 31, 2020, and expires at the end of 2022.

 

For further details on this bill including PPP provisions, please view this helpful information from the Journal of Accountancy.

 

 

If you have any questions or need assistance with anything in the bill, please contact your Whalen advisor.