Stash Some Cash at 9.62% Before October 31?

annualized 9.62% interest rate for 6 months

I Series US savings I bonds (I bonds) purchased before 10/31/22 are paying an annualized 9.62% interest rate for 6 months. The rate decreases in November to an estimated 6.48% for the next 6 months. If you are looking for a place to park cash for more than 12 months, you may want to consider purchasing I bonds before the end of October (no later than 10/28/22).

Go to treasurydirect.gov to purchase directly from the U.S. Treasury.

Points to Ponder:

  • I Series savings I bonds include a fixed rate and an inflation-adjusted rate, adjusted every 6 months.
  • These are 30-year I bonds but can be cashed at any time after 12 months.
  • You will pay a penalty for cashing in within the first 5 years. The penalty is equal to the last 3 months of interest. So, if you hold for 15 months, you will receive interest for 12 months.
  • You can purchase up to $10k per individual social security number or entity federal identification number. For example, a family of 5 could purchase $50K plus gifted amounts.
  • You can purchase additional amounts, up to $5k per individual social security number or entity federal identification number in paper I bonds via tax refunds.
  • Paper I bonds pre-2008 can be converted to electronic I bonds in your Treasury Direct account.
  • You can gift I bonds to increase the amount that can be purchased at the current high rates. Gifted I bonds will be held in your gift box until the beneficiary “receives” them.
  • I bonds are exempt from state & local taxes.
  • For more information, see 31 Code of Federal Regulations sec 363.16.
  • Gifts are irrevocable. The holding period starts when they are purchased, not when they are received. Gifts received count towards the annual purchase limit.

Disclaimer: The information provided above is not meant to be legal or tax advise. You should consult your CPA and attorney to determine the best course of action for your situation.

~Mitzi E. Sullivan, CPA

Mitzi E. Sullivan, CPA is a cloud based professional services provider specializing in cloud accounting.

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TIME TO BRING IN THE HARVEST!

If you sold capital assets in 2022 and generated taxable capital gains, it’s a great time to consider harvesting your capital losses to reduce or eliminate the capital gains tax. Below are a few strategies to consider.

If you sold capital assets in 2022 and generated taxable capital gains, it’s a great time to consider harvesting your capital losses to reduce or eliminate the capital gains tax. Below are a few strategies to consider.

Sell and Buy Back Stocks or Crypto

  • For your long-term hold stocks or cryptos that have built-in losses, consider selling before year-end and buying back the same asset later. To avoid wash sales, wait at least 31 days to repurchase stocks. Wash sale rules do not apply to cryptos.
  • If you are expecting lower Q3 & Q4 earnings reports, you may be able to repurchase the same asset at a lower price. This allows you to offset your capital gains, while maintaining your current positions.
  • You may want to maximize tax-rate arbitrage by exchanging short-term capital gains for long-term capital gains (LTGC).

Sell and Buy Similar

  • For stocks that have built-in losses, consider selling stocks before year-end and buying back similar stocks the same day. This allows you to offset your capital gains while maintaining your current portfolio balance.
  • The stocks cannot be substantially identical, or the wash sale rules will disallow the loss. This includes puts and calls.
  • However, you can purchase stock with a performance that is highly correlated with the stock you sold.

Sell and Buy Alternatives

  • For assets that have built-in losses, consider selling before year-end and buying alternative assets. This allows you to offset your capital gains and rebalance or reposition your portfolio.
  • For example, you may want to sell growth stocks with built-in losses and purchase value stocks or real estate. Or, you may have a taxable gain on the sale of your personal residence or business that can be offset with loss harvesting.
  • This may be a great way to clean up legacy assets.

Sell and Deduct Losses

  • If you don’t have gains to offset with losses, it may still be advisable to harvest losses. You can deduct up to $3,000 per year against ordinary income and carry unused amounts forward to offset future gains.
  • This allows you to save up losses and better time future gains.

Points to Ponder

  • Remember, the long-term capital gains tax rate starts at 0%. It most likely will not be beneficial to harvest losses in a year that you have qualified for a 0% LTCG tax rate.
  • You may want to recognize built-in gains to maximize your 0% LTCG tax rate for the year.
  • Loss harvesting is for taxable accounts only. It should not be used in retirement accounts.
  • Wash sale rules apply to purchases by your spouse or the company you control.
  • Consider the timing of dividend payments before selling.
  • Always consult your financial team. Everyone’s situation is different. Benefits depend on the investor’s tax rate when they deduct the initial loss, as well as the rate at which they realize the later gain that the initial loss created. 

Disclaimer: The information provided above is not meant to be legal or tax advise. You should consult your CPA and attorney to determine the best course of action for your situation.

~Mitzi E. Sullivan, CPA

Mitzi E. Sullivan, CPA is a cloud based professional services provider specializing in cloud accounting.

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The Largest Stimulus Bill in U.S. History

Congress and the Trump Administration agreed to a deal for what will be the largest stimulus package in American history. Overnight, senators and the Trump administration officials reached a deal for approximately a $2 trillion stimulus to send direct payments and benefits to individuals and businesses devastated by the coronavirus pandemic. There will be a final vote today at noon and it is believed that the bill will unanimously pass and go into effect in the next few days.

The full details of the stimulus have not yet been released. The deal is expected to set aside $250 billion for direct payments to individuals and families, $350 billion in small business loans (https://disasterloan.sba.gov/ela/), $250 billion in unemployment insurance benefits and $500 billion in loans for distressed companies. As the plan was being negotiated, individuals who earn $75,000 in adjusted gross income or less would get direct payments of $1,200 each, with married couples earning up to $150,000 receiving $2,400 and an additional $500 per child. The payments would scale down by income and entirely phase out for individuals who earn more than $99,000 and couples who earn more than $198,000.

Although we are still waiting on the full and final details of the stimulus package, we are confident that people and businesses in need will have support from the government very soon. Members of Congress have also acknowledged that other legislative measures may be needed in the coming months if the pandemic continues to drag out.

Many of the loans and advances require current financial data and tax returns filed through 2018. Even if you still owe from previous years, make sure your tax returns have been filed through 2018. If you need any help getting caught up on your taxes and/or with loan applications, please reach out and we are happy to help. You can also follow us on social media to stay up to date on these events.

~Mitzi E. Sullivan, CPA

Mitzi E. Sullivan, CPA is a cloud based professional services provider specializing in cloud accounting.

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Hunkered Down, day 6

Financial triage.

Texas got a liquidity lifeline last night. Abbott announced that all Texas counties have been included in the Economic Injury Disaster Declaration, which grants access to the Economic Injury Disaster Loan (EIDL) program. The program provides long-term, low-interest loans to small businesses (3.75%) and nonprofits (2.75%) with repayment terms up to 30 years. That’s great news for our local mom-and-pops and employers who are sinking fast.

The turnaround time for the Express loan is reported to be 36 hours. I’m a little skeptical, but I’ll let you know. We are prioritizing these applications and working as quickly as we can to help all of our clients. Bear with us, the 4506-T is already down this morning, and I started at 4am. I’ll keep trying throughout the day and let you know if I get one to go through. Click here to complete the online application at the SBA website.

Proposed: The Main Street Emergency Grant Program would offer grants to small, and possibly mid-sized businesses, and nonprofits to cover payroll and fixed costs, such as rent. The grants would be made avialable “quickly” to provide liquidity and avoid layoffs. This proposal has not been finalized.

Recommendation: Defer the Texas Franchise Tax payment and filing deadline until August 15th, 2020. The delay would defer preparation fees and tax payments for taxpayers, while allowing more time for tax return preparers to help clients navigate the current crisis. Please contact Glenn Hegar at the Texas Comptroller of Public Accounts and encourage him to support this recommendation.

See also:

~Mitzi E. Sullivan, CPA

Mitzi E. Sullivan, CPA is a cloud based professional services provider specializing in cloud accounting.

SBA Economic Injury Disaster Loan Application Process

The U.S. Small Business Administration (SBA) has approved certain cities and states whose businesses have been negatively impacted by COVID-19 to be approved for the Economic Injury Disaster Loan.

On March 17th, Governor Greg Abbot requested emergency designation from the SBA Economic Injury Disaster Declaration to give access to the Economic Injury Disaster Loan program for the entire state of Texas. Abbot is estimating approval by next week. Small businesses can apply at: https://disasterloan.sba.gov/ela/.

The SBA has announced that the website is experiencing high volumes of traffic and slows down from 7:00 am to 7:00 pm. The best time to apply on the website is after peak hours from 7:00 pm to 7:00 am. It has been reported that some users are experiencing issues with Google Chrome. The SBA recommends using an alternate web browser like Microsoft Edge or Internet Explorer.

Hunkered Down, day 4

A new season.

Trying to stay focused. I can hear the news continually in the background and none of it’s good. Working from home is difficult when you want to sit with your family and reach out to others that you can’t be with.

Video conferencing and online services are working well. Praise God! Century Link is actually working. This may be a new normal for many of our clients who are trying these new technologies for the first time. It’s convenient and, hey, you only have to dress from the waste up.

My clients are all scrambling, adapting to the constantly changing markets and conditions. With forced closings, many are laying off, not knowing when their doors will reopen. We desperately need congress to finalize the stimulus package so we can stop trying to hit a moving target. Here’s what I know so far.

Proposed: Small Business Loans and Economic Impact Payments to Individuals

As of this morning, congress is still working out the details and has not passed the bill. The treasury department’s proposal would guarantee small business interruption loans up to 100% of 6 weeks of payroll for a wide range of eligible small businesses.

Two equal economic impact payments would be issued on April 6th and May 18th to eligible individuals. These payments are predicted to be $1,000 to $2,000 each.

In Effect: April 15th Tax Relief

Federal individual and corporate tax payments due on April 15th, 2020 are automatically deferred for up to 90 days without incurring penalty and interest. The deferral includes both 2019, and 1st quarter 2020, income and self-employment taxes. The deferral is expected to add an estimated $300 billion in liquidity to the economy in the near term. The deferral amounts are limited, so call us or check the IRS website for details: Payment Deadline Extended to July 15, 2020 and Notice 2020-17 (PDF), Relief for Taxpayers Affected by Ongoing Coronavirus Disease 2019 Pandemic.

See also: Hunkered Down, day 2

In Effect: Economic Injury Disaster Loan Program

Small business owners in the following designated states are currently eligible to apply for a low-interest loan due to Coronavirus (COVID-19): California, Connecticut, Delaware, the District of Columbia, Florida, Georgia, Indiana, Maine, Massachusetts, Montana, Nevada, New Hampshire, New Jersey, New Mexico, North Carolina, Rhode Island, Utah, and Washington. Click here to apply. Find more information on the SBA’s Economic Injury Disaster Loans at: SBA.gov/Disaster.

~Mitzi E. Sullivan, CPA

Mitzi E. Sullivan, CPA is a cloud based professional services provider specializing in cloud accounting.

Free Tax Resources Provided by the IRS

  • Free File – prepare and file your federal income tax return for free using tax preparation and filing software.
  • Where’s My Refund? – is an online tool that will track your tax refund. You will need your Social security number or ITIN, your filing status and your exact refund amount to use the tool.
  • Online Payment Agreements – you can apply for a payment plan online to pay off your balance over time.
  • IRS2Go mobile app – Check your refund status, make a payment, find free tax preparation assistance, sign up for helpful tax tips, and more!
  • Online Account – use this tool to view: Your payoff amount, updated for the current calendar day, the balance for each tax year for which you owe, up to 24 months of your payment history and key information from your current tax year return as originally filed.

Hunkered Down, day 2

Wow! What a day. Monday, March 16, 2020 was intense. Tax deadline, concerned clients, family and friends, relocating my staff and all of their equipment to work from home, setting up remote phone and conferencing systems and back up and running by noon. Thanks to my awesome staff for gitin’ er done and to my amazing clients for your support. Not gonna lie, I binged on my quarantine snacks last night and I’m a little bloated this morning.

Looks like today will be chilly and rainy. No worries. We’re all hunkered down anyway. Here’s my plan for the next two weeks:

Count my blessings! I don’t have a clue whether we are overreacting or underreacting. Time will tell. I’m so thankful to live in a community where I trust the motives of my leaders. Thank you, guys, for your honesty and dedication to our community. I am praying wisdom for you all and trusting God to work through you.

Consider my neighbor. As of last night, there were no confirmed cases in Wise County. Let’s do what we can to keep it that way. I have family and friends who are immunocompromised, or work in health care or first response. If you don’t, pretend you do.

Use my gifts. I am diligently working with clients to help them navigate this rapidly transforming economy. The potential impact on our businesses and livelihood is daunting. But necessity is the mother of invention! I see a plethora of excellent ideas and new opportunities every day. My favorite from yesterday is A Touch of Rust Online Market which will replace the market scheduled for March.

Pray. Worrying is terrible for your immune system. There is nothing more destressing than chatting it up with the Creator of the universe. This ain’t His first rodeo. Share your concerns with Him, leave them with Him, then get up and git er done!

The Rapid Response to COVID-19 in the United States

Over the weekend, President Trump and the House of Representatives passed a relief bill for the coronavirus. The new bill includes:

FREE COVID-19 TESTING

The first drive through testing center in DFW will begin today at Parkland Health & Hospital System in Dallas. More testing centers will be added in DFW in the coming days.

PROTECTION FOR FIRST RESPONDERS

The Occupational Safety and Health Administration is required to issue rules and regulations to increase protections against the coronavirus. First responders will be given priority to testing and safety protections.

PAID SICK LEAVE

The benefit must be paid by employers with less than 500 workers. Any worker who contracts the coronavirus will receive 100% of their wages during recovery and isolation period. Employers will be reimbursed by the federal government via tax credit.

FOOD AID

The bill provides $1.3 billion in food aid for low-income pregnant women, senior citizens and food banks. States will be able to provide food stamps to help families and children who would miss out on free meals from schools.

UNEMPLOYMENT BENEFITS

Legislation has provided $1 billion to help those who have been laid off due to the coronavirus outbreak.

What can employers do to help limit the number of outbreaks?

Employers should implement remote working and encourage any employers who have symptoms to stay home. For employees who cannot work remotely, employers must encourage social distancing while at the workplace and provide cleaning supplies for all workstations. Employers should encourage and educate employees on the importance of sanitation and social distancing to help keep the outbreak as minimal as possible.

COVID-19: Economic Impact and Government Relief

With COVID-19 impacting the world economy, President Trump has made plans to help strengthen businesses. Small business loans will be available to eligible organizations negatively impacted by economic slowdown. The Small Business Administration (SBA) has been instructed to provide low-interest loans to help strengthen organizations negatively impacted by COVID-19. To receive an Economic Injury Disaster Loan (EIDL) from the SBA, the organization must be in a county who has been approved for an Economic Loss Declaration. Small businesses who receive the EIDL are set to accrue interest at 3.75% and nonprofits at 2.75% with repayment terms extending up to 30 years.

In addition to the Economic Injury Disaster Loan program, “[President Trump] will be instructing the Treasury Department to defer tax payments without interest or penalties for certain individuals and businesses negatively impacted.” This tax holiday will give businesses a 90 day grace period to pay 2020 Q1 ES payments.

Avoiding and Navigating IRS Audits

Whether you are trying to avoid an IRS audit, or have received a notice from the IRS, this guide contains helpful information: irsaudits2019

See also: New Tax Law. What’s Hot. What’s Not.

~Mitzi E. Sullivan, CPA

Mitzi E. Sullivan, CPA is a cloud based professional services provider specializing in cloud accounting.

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