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What You Need to Know About the SECURE Act

Inherited IRAs and the SECURE Act of 2019

At the end of 2019, the SECURE Act (Setting Every Community Up for Retirement Enhancement Act) was signed into law, modifying RMD (required minimum distribution) rules for inherited IRAs and retirement accounts. 

Under the SECURE Act, inherited IRAs and retirement accounts must be distributed and taxed within 10 years of the original owner’s death.  Prior to the SECURE Act, inherited IRAs were frequently referred to as “stretch” IRAs, as they allowed non-spouse beneficiaries to take relatively small distributions over the course of the beneficiary’s life.  The benefit to this was the ability to keep the bulk of the investment in a tax deferred or tax free (Roth IRA) environment. 

By capping the lifespan of the inherited IRA at 10 years, the IRA beneficiary’s ability to grow the account over decades in either a tax-free or tax-deferred environment has been significantly impacted.  Additionally, the new rules put a burden on beneficiaries in the form of tax acceleration by greatly increasing a beneficiary’s taxable income–especially in situations where the beneficiary has income of their own—resulting in a higher tax rate. 

Exceptions to the SECURE Act

  • The 10-year period does not apply to surviving spouses—they can treat the inherited IRA as if it were their own
  • Disabled beneficiaries are exempt from the 10-year period
  • Non-spouse heirs (example:  unmarried partner, sibling) who are less than 10 years younger than the original IRA owner can treat the inherited IRA as if it were their own
  • Minor children, while still a minor, are exempt from the 10-year timespan.  However, as soon as they become adults (age of adulthood is determined by the state in which they live) the 10-year period begins and they must fully distribute the IRA within that timeframe

Positive Changes

  • The SECURE Act increases the age at which a taxpayer must begin taking required minimum distributions from age 70 ½ to 72.  This allows taxpayers to continue their retirement savings for a longer period of time

Under old tax law, a taxpayer could make IRA contributions until they reached age 70 ½.  This has been modified by SECURE Act; now, workers of any age can contribute to a retirement account.  This change will make it easier for seniors to make contributions and back-door Roth IRA contributions.

If you need help minimizing your taxes on your retirement income, it’s best to make a plan and create projections based on your desired distributions. Contact P.T. Anderson Accounting to set up your tax planning session.

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Special Edition: Preparations We’ve Made for You to Keep You Safe During the Coronavirus COVID-19 Spread

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We sincerely hope that you and your family are healthy and happy and will not be directly impacted by the highly contagious coronavirus during this flu season. In our tax and accounting office, we have taken serious precautions to fight the spread of this disease, and we wanted to let you know your health and safety is of paramount importance to us. 

Virtual Services

For people who prefer to restrict their social activity, we understand and are ready to serve you virtually through our cloud tools. Our team is fully equipped to handle your entire tax and accounting services, from start to finish, through a series of online virtual tools. 

We can handle your initial inquiries via phone and email. We have easy-to-use video-conferencing software for those of you that want to see us face-to-face via our webcams. You can upload your documents securely and safely to our client portal and secure email tools. We can deliver your tax return in the same way, where you download it from the client portal or access it via secure, encrypted email.

All of these software applications are easy to use, and we can help you learn them. 

Please note that if a quarantine goes into effect in our area, this virtual service option will definitely come in handy for all of us. 

 Our Staff Safety

This busy season, more of our staff will be working remotely in their own homes. This will be done to protect our staff, their families, and our business. 

Deadlines and Extensions

So far, the IRS has not extended any tax-related deadlines. Until they do, it will be business as usual.

We are working as hard as we can to get your return processed and filed for you. Please understand that if our office or community experiences significant disruptions due to this virus, we may be extending more returns than normal this year.

Healthy and Safe

We wish you and your family a healthy and safe spring, and we’re grateful for your continued business.  Please reach out to P.T. Anderson Accounting at.any time if you have questions or need help. 

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Staying Productive While Working From Home

How to Work from Home More Often

If you agree that “there’s no place like home,” then you may also have a wish to work from home more often. In many cases, you can, and here are some tools you need to get started. 

If the products and services your business sells can be sold or delivered digitally, then you’re a candidate for working from home most of the time. If you have a storefront where customers visit to purchase your products and services, you can still perform some of your business duties remotely or rely on staff to greet and serve the customers. 

You may also be able to be proactive about moving more and more of your business online. Some examples include:

  1. Hold more business meetings online instead of face to face.
  2. Encourage employees to work from home if their presence does not require face-to-face customer meetings.
  3. Provide online training for clients who cannot travel to an onsite course.
  4. Move your scheduling online by providing an app for clients to book their own appointments.
  5. Move your products online by using a shopping cart.
  6. Provide a delivery option in your business. (This may have you or your staff traveling more and not less unless your items can be delivered via a shipping service.)

Meeting with Customers

The next best thing to greeting customers in person is using video-conferencing.  You can easily start with FaceTime (for iPhone users). Android users have it a little tougher, but many use Facebook’s Messenger, Google’s Duo (both parties need to download the app), or imo (ditto on both parties). 

If you have more complex meeting needs, software like Zoom is perfect to get you started. Hardware-wise, you’ll need a webcam, and a microphone is preferred. If you have a cell phone, you can use the mic and speakers in the headset provided. 

Simply create your account at Zoom, and set up a meeting.  Invite people by emailing them a link to join you. Join the meeting at the set time, and conduct your business with your customer. You can hide your webcam if you’re shy, and you can share your screen in case you want to go over a report or something else with your client. Zoom has a free account option and can be found at https://zoom.us. 

And remember, if you’re a little too shy for videoconferencing, you can always conduct business with clients using the good old-fashioned telephone or email. 

Sharing Documents with Customers

If you have documents to share with all of your customers, you can post them online on your website. If you have private documents, you can use portal software to securely create a private section of the portal exclusively for that client. Apps that can do this and that are not accounting-specific include Citrix ShareFile and Box.com.

You can also share documents that don’t have sensitive financial or company information with clients using Google Drive. Simply create them, then share them using the email addresses of the appropriate clients. 

Receiving Client Communications

Already customers are reaching out to businesses via all of the social media platforms as well as the messaging platforms, such as Messenger and WhatsApp. Your virtual team can easily track all of these incoming messages by watching for notifications from anywhere in the world. 

You might also be using an industry-specific app for customer interactions. For example, if you’re in the wellness space, MindBody apps are ubiquitous. If you’re an attorney, you’re likely using Clio.

Keeping in Touch with Your Team

You can use the same tools mentioned above to connect with your team members, but you will probably want one or two more apps – a private messaging app for when urgent things come up that need an immediate answer, and in some cases, a task management system. 

Software like Slack is perfect for you to stay in touch with your team and keep communications private. It provides messaging functionality and more. 

For task management, there are literally hundreds of apps to choose from. The simplest is something like Todoist, and typical small business options include software such as Asana and Monday.com.

If you want a Swiss-army-knife suite of tools that perform many of the above functions and are deeply integrated, Microsoft Teams fits the bill by providing a full collaborative platform for businesses of all sizes. 

There’s No Place Like Home

We hope these apps provide you with the ability to stay in touch with your customers and your business while working from home, sweet home. Contact P.T. Anderson Accounting to find out more.

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Special Edition: Families First Law

Changes Affecting Small Business Employers

Disclaimer: This article will provide a broad overview of this act.  Be sure to consult with legal experts to fully understand how this legislation affects your business. 

The Families First Coronavirus Response Act was passed on March 18, 2020 and contains several provisions that affect private businesses with fewer than 500 employees and all public employers. It goes into effect April 2, 2020.

The major sections affecting employers include:

  1. Emergency paid sick time leave
  2. Tax credits
  3. Expansion of the FMLA

Other important topics for employers right now includes the OSHA requirement to maintain a safe workplace and information regarding layoffs and furloughed employees.

Emergency paid sick time leave

If an employee cannot work or telework because of the following reasons, they are eligible for emergency paid sick leave in the amount of their regular pay, up to $511 per day and $5,110 for the benefit period.

  • the employee is subject to quarantine or isolation
  • the employee has been advised by a health care provider to self-quarantine
  • the employee is experiencing symptoms of coronavirus and seeking a medical diagnosis

If an employee is unable to work or telework due to a need for leave because the employee is doing the following, they are eligible for two-thirds of their regular pay, up to $200 per day and $2,000 during the benefit period.

  • Caring for an individual who is quarantined or isolated or has been advised by a health care provider
  • Caring for their child if school or child care is unavailable
  • Is experiencing “any other substantially similar condition specified by” the Secretary of Health and Human Services in consultation with the Secretaries of the Treasury and Labor.

The amount of sick time granted is the number of hours the employee normally works in a 2-week period, up to 80 hours.

Exemptions: The Secretary of Labor can exempt small businesses with fewer than 50 employees if compliance jeopardizes going concern. They can also exclude certain health care providers or emergency responders.

This section is effective No later than April 2, 2020 and expires December 31, 2020.

Employers will need to track emergency paid sick leave separately in their time tracking or payroll system as a special payroll item so that it can be calculated and reported for tax purposes. 

Payroll Tax Credits

Employers will receive payroll tax credits for qualified emergency paid sick leave that they pay to employees. They will effectively be 100% reimbursed for what they pay out.

The tax credits include health insurance payments.

Expansion of the FMLA

The Family Medical Leave Act has been expanded to include another condition for employees who have worked for the employer for at least 30 days and who are unable to work because they need to care for their child during a public health emergency because their school or day care is closed.

The benefit includes two-thirds of the employee’s regular pay, up to $200 per day and $10,000 over the benefit period.

The duration of leave is 12 weeks, and the first 10 days taken may be unpaid, but the employee can use other paid leave for those days. Health care providers and emergency responders may be excluded.   

After the leave, there are protections for job restoration with some exceptions.

Safe Workplace

OSHA requires employers to maintain a safe workplace for all employees.  That means keeping the workplace clean and free of employees who might be contagious.  Here is a list of approved cleaners that kill COVID-19: https://www.epa.gov/pesticide-registration/list-n-disinfectants-use-against-sars-cov-2

Employers have the right to send employees home that have a temperature, display symptoms, or otherwise endanger other employees. If sent home in the middle of the workday, they must be paid for their normal day. 

The CDC guidelines have been updated for additional requirements such as social distancing and other strategies.  You can find them here: https://www.cdc.gov/coronavirus/2019-ncov/community/guidance-business-response.html

Layoffs and Furloughs

An employer can lay off or furlough workers. There are three kinds: 

  1. Permanent layoff is one where there is no rehire date. The employer must pay accrued vacation and sick leave, if any.
  2. Temporary layoff is one where there is an intention of re-hiring within six months. The employer may be required to pay accrued vacation and sick leave.
  3. Furlough is where hours are reduced or workers are asked to stop working for a few weeks.

In all three situations, employees should be directed to apply for state unemployment insurance.

If a small business finds that it can’t make payroll, the best thing to do is to contact your accountant and/or attorney to understand your options.

Guidance for Employers

If you need help understanding what you need to do in your small business to meet these new legal requirements, please contact your HR consultant, attorney, or accountant. Feel free to contact P.T. Anderson Accounting for guidance.

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The Augusta Rule: How to Receive Tax-Free Income

What is the Augusta Rule?

The Augusta Rule, known to the IRS as Section 280A, allows homeowners to rent out their home for up to 14 days per year without needing to report the rental income on their individual tax return. 

Originally created to protect residents of Augusta, Georgia who would rent out their homes to attendees of the annual Masters golf tournament, the Augusta Rule applies to any taxpayer who owns a home in the United States, provided that your home is not your primary place of business. 

How Does it Work for the Homeowner?

So long as the home you own is not your primary place of business, you can rent it out for up to 14 days and not report that income on your individual tax return.  The rent you charge must be reasonable and in-line with what the rental market supports; charging $1000 per night when comparable houses rent for $200 per night is not considered reasonable! 

Homeowners can rent their house to individuals looking for vacation opportunities or they can rent their house to a business owner who intends to use it for business purposes. 

Shifting Income from Your Business

If you are a business owner and do not use your home as your primary place of business, employing the Augusta Rule can be an effective strategy for moving income away from your business and shifting it to personal income, where there would be no tax consequence. 

For example, as a business owner, you host a monthly meeting with your Board of Directors.  Under the Augusta Rule, your business can pay you a reasonable amount to rent your house to conduct the once-per-month meetings.  Provided that the total rental period doesn’t exceed 14 days and the rent charged is reasonable, your business is able to deduct the rent payment on the business tax return and you won’t have to report this as income on your personal taxes! 

Having documentation to support your claiming this as a business deduction is critical—to prove the rent was reasonable, you could print rental quotes for similar meeting locations.  To document that a meeting occurred, you could keep minutes or other records of business discussions.

Contact P.T. Anderson Accounting to find out more.