January 5, 2021
January 2020 Financial Update
Many of us returned to work from the holiday break yesterday. Considering what a rocky ride 2020 was, are we collectively ready for the new year? I was interested and overwhelmed by various year-end reviews: Google’s Year in Search, Time’s Year in Review, Netflix’s Most Watched, Tumblr’s Year in Review and the NY Post’s list of 2020 events (our office dog prefers the We Rate Dogs The Dogs of 2020).
Whew, what a year.
2021 has started by continuing a few difficult trends from last year: coronavirus avoidance, work-from-home, business closures, children in virtual school, oh my! While we all hold out hope for a different future given that the vaccine has started shipping, it will take time, and these first months of 2021 are going still going to test many peoples’ patience and fortitude. Indicators are that the economy as a whole will erode further before the vaccine can be rolled out enough to make an economic impact.
On the accounting side, CPAs and tax preparers are heading into their first virtual tax busy season. While it’s not new for Happy Bookkeeping (we’ve always been virtual) it’s probably going to cause all sort of interesting problems out there for all those who’ve never tried to have a virtual tax practice before.
2021 Financial Calendar:
Since it’s January, it’s time to think about goals for the new year. What could you do with this year if you had a plan? Try to set one short-term financial goal and one long-term financial goal. Perhaps you have a retirement savings goal, or maybe you want to pay off some business debt? Give employees a raise or pay bonuses? Get organized? Whatever it is, this is a good time to think about what to do with a brand new fiscal year.
2021 Tax Updates and Dates
January is the first busy month of tax season, so some important deadlines this month. For a full list of tax deadline dates, see the IRS Tax Calendar:
- January 1: The new fiscal year begins for most U.S. businesses. If you haven’t done a year-end inventory, get to it fast!
- January 15: The final installment of 2021 estimated tax is due on Form 1040-ES. Farmers and fishermen pay their estimated tax on this date as well.
- January 31: deadline for businesses to get W-2 forms and 1099s to employees contractors.
Tax Inflation Update: The IRS has released its annual update to the standard deduction, to tax brackets and income phase-outs. Forbes wrote up a summary, or you can find the full revenue procedure here.
Forms Update: A new year also means new forms for employees and contractors. The forms to be aware of are:
- The IRS released a new W-4 form designed to help people re-estimate withholding after the Tax Cuts and Jobs Act. Fewer than a quarter of taxpayers checked it out. If you still haven’t re-calculated your withholding, here’s a resource from Gusto on how to fill out the 2021 updated version.
- The IRS also released a new 1099 form that’s of interest to contractors, the 1099-NEC, Nonemployee Compensation form. Here’s the details on the 1099-NEC. Given the gig economy and growing number of contractors, it makes sense to have a 1099 for non-employees that is more than a footnote on a general 1099 form.
Government Aid in Coronatimes
Forgiveness is the topic on everyone’s mind regarding the PPP. Well, that and evidence of PPP fraud. Maybe it was only to be expected in a quick program that suffered from quite a few changes and updates, but the rate of fraud was still disappointing to many.
One question that’s haunted small businesses who took PPP has been a subject of debate is the tax treatment of funds. An IRS ruling supported by the Treasury Department released in late 2020 says that expenses paid for with PPP funds can’t be deducted, which isn’t what the authors of the CARES Act intended. This could mean a tax hike for many. CPAs and small business owners should keep apprised of the situation as tax season begins.
More banks are now accepting forgiveness applications now, but many are still working to get the processes in place, so definitely check with your individual lender about dates and forms for your specific PPP loan. The opening date for forgiveness applications was August 10, but applications definitely started out slow. Below are those great resources I keep posting for PPP help in case you’re ready to apply for forgiveness. These resources continue to be updated and refined and more questions/answers posted.
- the FMA PPP Toolbox for Nonprofits
- the Freelancers Mutual Aid Circle,
- the SBA’s Coronavirus Small Business Guidance page
- Quickbooks has a Q&A Forum on the PPP
- Gusto Payroll has a Step-by-Step Guide to the forgiveness application
- Paychex has a PPP Practical Guide
What’s Happening, in Charts
The World Bank published a look back at the impact of COVID-19 in 12 charts, which I find really interesting. Of those, the first one struck me the most, which was “Due to the COVID-19 pandemic, extreme poverty is likely to increase sharply.”
Work and leisure has been on a lot of minds this year as habits change due to long lockdowns. Perhaps that’s why I was interested in this chart giving a global look at where peoples’ time goes during the day. In teh US, we spend a bit more than four hours a day working, toward the higher end of the pack, and almost five hours in leisure.
In honor of some good news, I present a non-financial chart showing the climbing and rapid effectiveness of Pfizer’s COVID-19 vaccine over time, even after just one dose.
Want some 2021 predictions? The folks at LinkedIn offer a variety of thoughts on employment, working from home, medical innovations, our need for more safety, and more.
Did you make a charitable deduction this year? Good news! You'll be able to deduct $300 without the hassle of itemizing, thanks to a provision in the March CARES Act.
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