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Just Married? Financial Chores to Complete when You Tie the Knot

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Wedding season typically peaks in late summer and early fall, according to wedding website TheKnot.com. This year, that peak may be even more noticeable due to pent-up demand for wedding festivities caused by the COVID-19 pandemic.

HERE”S SOME USEFUL FINANCIAL ADVICE FOR COUPLES WHO TIE THE KNOT IN 2021

How Much Does It Cost to Tie the Knot?

The average cost of a wedding —excluding the engagement ring and honeymoon — was about $19,000 in 2020, down significantly from the average of $28,000 in 2019, according to The Real Weddings Study 2020 [COVID-19 Edition]. The pandemic has temporarily reduced the average cost, largely because the average number of guests fell dramatically last year.

The drop in average wedding cost seems to be only temporary, according to the survey. The average cost for a wedding reception in 2021 is expected to be roughly $22,500.

Costs vary significantly by geographic location, however. The most expensive state to get married is New Jersey, where couples spend an average of $53,400 for a wedding and reception. The least expensive state is Utah, where the average cost is only $19,700.

Housekeeping Chores

Whether you’re planning a wedding celebration now or later, it’s important to remember the administrative tasks to address when you say, “I do.” Many of these tasks relate to name changes. Some people choose to take on their spouse’s last name or use a hyphenated (or blended) version of both last names.

The tradition of changing names is becoming less common. Many newlyweds, including some same-sex married couples and people over 35 with established careers, are sticking with their original surnames.

If you do decide to change your name, here’s the protocol after you’re legally wed:

Visit Your Local SSA Office. Notify the Social Security Administration (SSA) after you’re married to protect Social Security benefits and credit ratings. To get a new Social Security card, you need to complete an application (available online) and provide proof of identification with your old and new names, such as a driver’s license and a marriage certificate. If you were born outside the United States, you’ll also need proof that you’re a citizen or legally in the country.

Update IRS Records. The SSA informs the IRS about name changes, and the tax agency’s records are generally updated 10 days later. If you don’t notify the SSA and file a tax return with your new married name, IRS computers won’t be able to match the new name with the Social Security number.

Spread the Word. Once your name is officially changed with the SSA, newlyweds need to share the good news with everyone else. In addition to filling out the proper forms with your employer’s human resource department, here are some other records to update to avoid confusion:

  • Driver’s license,
  • Passport,
  • State and local tax records,
  • Voter registration,
  • Vehicle registration,
  • Property titles,
  • Utility records, such as phone, cell phone, electric, gas, water and trash removal,
  • Bank, credit card and brokerage accounts,
  • Pension and retirement plans,
  • Insurance policies and beneficiaries,
  • Medical, dental and pharmacy records, and
  • Email addresses and social media accounts.

When you return to work after the honeymoon, consult your company’s human resource department to evaluate how your change in marital status affects your benefits options. You might save money by eliminating duplicate health care or life insurance coverage, for example. And don’t forget to change beneficiary designations on retirement plans and insurance policies.

Combining Your Finances

Financial matters are a leading cause of conflict for married couples, especially when you’re trying to blend two established households into one. So, it’s important to consult a R+R tax advisors to get a handle on your financial, tax and estate planning strategies as a joint household.

Newlyweds need to candidly discuss such issues as how much savings and debt each partner brings to the table. Each partner’s credit rating should be disclosed to identify potential problems early in the relationship.

You’ll also need to decide whether to combine your savings, checking and credit card accounts. Even if you decide to maintain separate accounts, it’s often helpful to have at least one joint account to pay for shared expenses, such as the costs of a mortgage or car, rent, household expenses and childcare.

A joint account can also help avoid trouble in case one spouse dies. When a spouse or common law partner dies and there are separate accounts, the survivor will be excluded from the other separate account if the estate goes into probate.

In addition, R+R often help newlyweds establish joint financial goals, including annual budgets and contingency plans in case a spouse gets laid off or becomes disabled. Once your short-term goals are set, look to the future: What age do you expect to retire? Where would you like to live when you retire? What activities — such as hobbies, travel, part-time work and volunteerism — do you envision participating in during your golden years? Are your current retirement account savings and contributions sufficient to achieve those goals?

Don’t let administrative chores prevent you from living happily ever after. R+R tax advisors are here to help address critical housekeeping chores head-on – Contact us today.

About Reynolds + Rowella

Reynolds + Rowella is a regional accounting and consulting firm known for a team approach to financial problem solving. As Certified Public Accountants, our partners foster a personal touch with our clients. As members of DFK International/USA, an association of accountants and advisors, our professional network is international, yet many of our clients have known us for years through the local communities we serve.

Our mission is to operate as a financial services firm of outstanding quality. Our efforts are directed at serving our clients in the most efficient and responsive manner possible, delivering services that exceed the expectations of those we serve. The firm has offices at 90 Grove St., Ridgefield, Conn., and 51 Locust Ave., New Canaan, Conn. For more information, please contact Elizabeth Bresnan at 203.438.0161 or email.

Child Tax Credit: what you need to know

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Families may be able to cash in on various tax credits to offset their tax liability on a dollar-for-dollar basis – Plus, recent legislation has enhanced some of the credits for 2021.
FOUR KEY TAX CREDITS FOR FAMILIES THAT ARE CURRENTLY ON THE BOOKS:

1. Child Credit

For 2021 only, the American Rescue Plan Act (ARPA) expands the child credit. The changes include the following for eligible parents:

  • The maximum credit increases to $3,000 for a qualifying child. Plus, you can claim another $600 for each qualifying child under age six.
  • The credit is 100% refundable.
  • The age threshold for a qualifying child increases from 17 to 18.

What’s more, you don’t have to wait until you file your 2021 return to benefit from the enhanced child credit. The IRS will begin distributing advance payments to eligible parents on July 15 and continue them through December of this year.

There’s one major downside to these changes: The phase-out ranges for the child credit in 2021 are lower than they were before the new law.

 Filing Status 2020 phase-out range 2021 phase-out range
 Single $200,000 – $240,000 $75,000
 Married, filing jointly $400,000 – $440,000 $150,000

However, some parents with incomes above the phase-out range for 2021 can elect to claim the child credit of up to $2,000 under the prior rules.

2. Child and Dependent Care Credit

The ARPA also includes significant changes in the child and dependent care credit for 2021.

For starters, the dependent care credit may be claimed by parents who incur costs of caring for children under age 13 (and other eligible dependents) that allow them to be gainfully employed. This covers expenses for daycare centers, babysitters and even summer day camp.

Under the ARPA, the dependent care credit is fully refundable for 2021. In addition, the maximum credit rate increases to 50% for qualified expenses of up to $8,000 for one child ($16,000 for two or more children). So, the credit ultimately is worth up to $4,000 for one child ($8,000 for two or more children).

However, the credit percentage is gradually reduced if your adjusted gross income (AGI) exceeds $125,000. It bottoms out at 20% for an AGI above $183,000. Furthermore, if your AGI exceeds $400,000, the credit is gradually reduced until it zeroes out for an AGI above $438,000.

3. Higher Education Credits

Parents with children in college may be entitled to receive one of the following higher education credits:

American Opportunity Tax Credit (AOTC). This credit is available for qualified expenses for each student in the family for up to four years. Qualified expenses include tuition, room and board, books, computer equipment and supplies. The AOTC is phased out between $80,000 and $90,000 of modified adjusted gross income (MAGI) for single people ($160,000 and $180,000 for married people who file joint tax returns).

Lifetime Learning Credit (LLC). The maximum LLC is $2,000 per taxpayer, but it is available for all years of study. Previously, the phase-out ranges were between $59,000 and $69,000 of MAGI for single people ($118,000 and $138,000 for married people who file joint tax returns). Under the Consolidated Appropriations Act, the lower phase-out ranges for the LLC have been increased to match those for the AOTC.

You can claim either the AOTC or the LLC, but not both. For most parents, the AOTC remains the optimal choice for a child completing school in four years.

4. Adoption Credit

If you’ve adopted a child in 2021, or plan to adopt one, you may qualify for a tax credit. For 2021, the maximum credit is $14,440 of the qualified expenses incurred to adopt an eligible child who is under age 18 or one who needs special care. Qualified expenses include adoption agency fees, court costs, attorneys’ fees, travel costs (including meals and lodging) and re-adoption expenses for a foreign child.

The credit begins to phase out for taxpayers with a MAGI above $216,660. Once your MAGI is $256,600, you no longer qualify.

The credit is generally claimed in the year that qualified expenses are paid or incurred. However, if the adoption isn’t finalized by the end of the tax year, you may claim the credit in the following year or the year in which the adoption is finalized.

These four credits are just the tip of the iceberg for families! Under current federal income tax law, some families may qualify for other tax credits, such as the earned income tax credit or the health care premium assistance credit. Contact a R+R tax advisor to start planning for the 2021 tax year.


About Reynolds + Rowella

Reynolds + Rowella is a regional accounting and consulting firm known for a team approach to financial problem solving. As Certified Public Accountants, our partners foster a personal touch with our clients. As members of DFK International/USA, an association of accountants and advisors, our professional network is international, yet many of our clients have known us for years through the local communities we serve.

Our mission is to operate as a financial services firm of outstanding quality. Our efforts are directed at serving our clients in the most efficient and responsive manner possible, delivering services that exceed the expectations of those we serve. The firm has offices at 90 Grove St., Ridgefield, Conn., and 51 Locust Ave., New Canaan, Conn. For more information, please contact Elizabeth Bresnan at 203.438.0161 or email.

7 Valuable Deductions for Self-Employed Individuals

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Being your own boss gives you access to tax incentives not available to other workers. These include self-employment tax deductions for a home office, vehicle expenses and health insurance.

To help stretch your resources, we’ve rounded up seven tax deductions that may provide sizable benefits for people who are self employed.

Uncle Sam encourages entrepreneurship by offering various federal income tax breaks for self-employed individuals.

1. Health Insurance

Years ago, self-employed individuals could not deduct the full amount of their health insurance premiums, like corporate entities could. But the playing field has been leveled.

For 2021, you might be able to write off all your health insurance premiums if the business generates ample profit. This deduction is claimed “above the line” on your personal tax return. So, it reduces your adjusted gross income for other tax purposes. It applies to premiums for health, dental and long-term care insurance incurred for yourself, your spouse and dependents under age 27.

2. Retirement Plan Contributions

Not only can self-employed individuals accumulate retirement assets on a tax-deferred basis, they can also write off current contributions within generous limits. As with health insurance premiums, retirement plan contributions made by self-employed individuals are deductible “above the line.”

Your retirement plan options range from easy-to-administer plans — such as Simplified Employee Pension (SEPs) or Savings Incentive Match Plans for Employees (SIMPLEs) — to more-complicated solo 401(k) plans and Keogh plans specifically designed for self-employed individuals. Generally, the limits are the same as they are for comparable employer-sponsored plans.

3. Home Office Deductions

Currently, you can’t deduct home office expenses if you’re a corporate employee, but self-employed individuals may be eligible for a significant deduction. This represents a clear advantage for self-employed people.

To qualify, you must use the home regularly and exclusively as your principal place of a business or a place to meet or deal with clients, customers or patients in the normal course of business. If you have no fixed place of business, you may qualify if you do administrative work at home.

The deduction is based on the business-use percentage. For example, if you use 10% of your home’s square footage for business, you can deduct 10% of your indirect expenses — such as utilities, repairs and insurance — plus 100% of your direct expenses, such as painting the office or installing window coverings. In addition, you can claim a generous depreciation allowance under IRS tables.

There’s also a simplified method that’s allowed under the tax law: You can deduct $5 for each square foot of home office space, up to a maximum total of $1,500. Be aware that you may switch between the traditional and simplified methods from year to year. Once you pick, you aren’t locked into either method for future tax years.

Do you drive your personal vehicle for business purposes? Even though you may also use the same vehicle for personal driving, you can deduct vehicle costs attributable to business travel, based on the percentage of business use.

4. Business Vehicles

For example, suppose you use your car 80% for business driving in 2021. That means you can deduct 80% of your vehicle costs — such as gas, repairs and insurance — plus a generous depreciation allowance, subject to certain limits for “luxury cars.” And, if you buy the car in 2021, you may also qualify for a Section 179 deduction and 100% bonus depreciation.

Be aware that the IRS is a stickler for documentation. Briefly stated, you must keep a contemporaneous log listing every business trip and proof of your expenses. Alternatively, you can cut down the expense recordkeeping by using the standard mileage rate of 56 cents per business mile (plus business-related tolls and parking fees) in 2021.

As pandemic-related restrictions loosen, you may start taking long-distance trips for business reasons. Self-employed people can deduct travel expenses, including round-trip airfare, hotel costs, meals and other incidentals (such as tips and cab fares).

5. Business Travel

The primary purpose of your trip must be business-related. So, you can spend a little time on personal pursuits while you’re away, but this can’t be a disguised vacation. As with business vehicle expenses, the IRS imposes strict recordkeeping rules.

6. Business Meals

You can generally deduct the cost of your meals while you’re traveling away from home on business. But recent legislative changes have affected deductions for meals.

Normally, deductions for business meals were limited to 50% of the cost. However, under the Tax Cuts and Jobs Act, the deduction for business entertainment expenses, including certain meals, was repealed, beginning in 2018. The IRS subsequently established that 50% the cost of qualified business meals incurred in connection with entertainment — such as food and beverages bought for a client at a sporting event — remains deductible if charged separately from the entertainment.

For 2021 and 2022 only, the Consolidated Appropriations Act increases the deduction for qualified business meals to 100%. This temporary change applies only to food and beverages provided by a restaurant.

7. Self-Employment Tax

A self-employed individual is responsible for paying self-employment tax, the equivalent of the federal payroll taxes for employees. As with employees, the Social Security portion of self-employment tax is imposed on amounts up to an annual threshold ($142,800 for 2021).

But self-employed people must pay both the employer’s and employee’s share of federal payroll taxes. That means the 15.3% tax rate for self-employment tax is double the 7.65% rate for employees. But you can deduct half of the self-employment tax on your personal return. This deduction is claimed “above the line.”

These are just a handful of valuable tax breaks that are available to self-employed individuals. As tax rules are complex and changing, consider engaging an R+R tax advisor to help ensure you are taking advantage of all the tax breaks for self-employed individuals and plan for the 2021 tax year.

About Reynolds + Rowella

Reynolds + Rowella is a regional accounting and consulting firm known for a team approach to financial problem solving. As Certified Public Accountants, our partners foster a personal touch with our clients. As members of DFK International/USA, an association of accountants and advisors, our professional network is international, yet many of our clients have known us for years through the local communities we serve.

Our mission is to operate as a financial services firm of outstanding quality. Our efforts are directed at serving our clients in the most efficient and responsive manner possible, delivering services that exceed the expectations of those we serve. The firm has offices at 90 Grove St., Ridgefield, Conn., and 51 Locust Ave., New Canaan, Conn. For more information, please contact Elizabeth Bresnan at 203.438.0161 or email.

Is Your Staff Firing on All Cylinders? 6 Key HR Issues for 2021

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Enduring a global pandemic may not be as traumatizing as military combat, but in both cases, the aftereffects can linger. When the smoke clears, there’s a lot of rebuilding that needs to happen to return to a state of normalcy. And as the COVID-19 pandemic finally begins to recede into the rearview mirror, another potentially disruptive force may come into play: a new direction in federal labor policy.

Here are some key HR issues and questions to ask yourself and prepare to grapple with as the year unfolds.
1.  What’s the best return-to-work scenario?

If many members of your team have been able to work from home over the past year, you’ll probably find that some want to make that arrangement permanent. But is that a good idea? Finding the best answer will depend, first, on your ability to decide which employees can work as well remote as they do at your workplace.

Then you’ll need to figure out how to handle employees who want to work remote but haven’t demonstrated their ability to do so productively—while considering the morale impact of your decisions (both positive and negative). And you’ll need to check to be sure no demographic patterns emerge in your decisions that could open you up to a discrimination charge. For example, suppose all those you allow to work from home happen to be women with young families and those you require to return to the workplace fall outside of that category. That decision may make perfect sense to you, but you may get some serious complaints of discrimination.

2.  How can you keep employees safe from COVID-19?

Few employers outside certain industry sectors (for example, food production) are planning to make vaccination a condition of returning to work. Legal risks could loom large with requiring vaccinations, except under conditions where the risk of spreading infection is high. So, you’ll need to consider a spectrum of responses from doing nothing at all, to gentle nudging, to cash or paid-time-off incentives.

3.  Are your employees experiencing any lingering emotional wounds?

Chances are you have employees who have lost loved ones to the virus. Or if they had to endure lengthy periods of unemployment, their personal finances may be in tatters. Or those who spent months working from home may have developed a sense of alienation from you and their coworkers. Whatever the case, it’s important to assess the non-medical well-being of employees and what resources you might need to make available to them to help them get back on track.

4.  Is your staff the right size?

During the pandemic many employers were able to get by with fewer employees. While some of that was due to a pandemic-induced slowdown in business, lessons in maximizing productivity have emerged. Some employers will conclude that, even with an eventual return to pre-pandemic business volume, their staff needs to be downsized. Knowing how to do so ethically and in a legally defensible way is key.

5.  Is your team diverse and inclusive enough?

Diversity and inclusion have become a topic of importance as businesses look to recruit and retain talent. Employers should look at their current workforce and identify areas of opportunity to increase and encourage diversity among their staff. Research has shown that a diverse and inclusive workplace leads to greater readiness to innovate, helps with employee retention, and positively impacts a businesses revenue growth.

6.  Does your compensation pattern meet a gender equity test?

As with diversity, pay equity from a gender perspective is in the spotlight. While few employers would consider that their pay practices are unfair to women, it might be fruitful for employers to look at the issue in a new way. For example, some states are discouraging employers from basing compensation offers to new hires on their salary history alone. That approach can lock many women into lower salary ranges. Employers are encouraged (or possibly required) to base pay offers purely on what is paid to male employees performing the same work with the same level of responsibility.

Running a successful business is never simple. But it’s made easier by having a loyal, productive, and contented workforce. That requires regularly asking yourself important HR management questions and, when needed, making changes to turn unsatisfactory answers into good ones.

R+R’s HR consulting team is here to help— we provide solutions to workplace issues that support and optimize you operating principles. Contact Katie Hall to help navigate your compliance requirements and relieve the overwhelming daily tasks surround recruitment, talent management, benefits, or payroll.

About Reynolds + Rowella

Reynolds + Rowella is a regional accounting and consulting firm known for a team approach to financial problem solving. As Certified Public Accountants, our partners foster a personal touch with our clients. As members of DFK International/USA, an association of accountants and advisors, our professional network is international, yet many of our clients have known us for years through the local communities we serve.

Our mission is to operate as a financial services firm of outstanding quality. Our efforts are directed at serving our clients in the most efficient and responsive manner possible, delivering services that exceed the expectations of those we serve. The firm has offices at 90 Grove St., Ridgefield, Conn., and 51 Locust Ave., New Canaan, Conn. For more information, please contact Elizabeth Bresnan at 203.438.0161 or email.

Choosing The Right CPA Firm To Audit Your Employee Benefit Plan

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Employee benefit plan audit services are designed to protect the financial integrity and assets contained in your plan and provide valuable information to plan administrators—not to mention legal and financial advantages from an EBP audit.

If your organization needs an EBP audit, one of the most important decisions of your plan administrator is selecting a qualified, independent auditor to perform the audit.

Three Factors to Consider When Choosing a Benefit Plan Auditor
1. Plan auditor qualifications

Federal law requires an employee benefit plan auditor responsible for signing the audit report to be licensed or certified as a public accountant by a State regulatory authority.  In addition, the auditor must be independent and not have any financial interests in the plan or the plan sponsor.

2. Auditor experience and firm peer review results

One of the most common reasons for deficient audit reports is the failure of the auditor to perform tests in areas unique to benefit plans. The more training and experience an auditor has with employee benefit plan audits, the more familiar the auditor will be with specialized benefit plan auditing standards.  In addition, firms performing benefit plan audits should have the audits subjected to their triannual peer review and annual internal inspection process.  Peer review is an external inspection process performed by an external independent auditor.  Peer review examines the audit firm’s adherence to their quality controls standards including “tone at the top”, hiring process and compliance with regulations to include; continuing professional education, compliance with auditing standards and the application of generally accepted accounting principles.

3. Association memberships

The Employee Benefit Plan Audit Quality Center (EBPAQC) is a voluntary membership center of the American Institute of Certified Public Accountants (AICPA) to help audit firms meet the challenges of performing audits of employee benefit plans.  Being a member firm requires the audit firm to comply with a higher set of standards and practices specific to plan audits than non-member firms. In addition, the AICPA and EBPAQC requires its members to have their audit practice reviewed by internal and external qualified auditors.

Employee benefit plan audits have increasingly become the subject of examination by the DOL and IRS, so it is imperative to select a qualified employee benefit plan auditor.  For a full list of EBPAQC member firms, click here.

To ensure you have an experienced auditor, you may want to discuss their work with other employee benefit plan clients to ensure they are well versed in your plan type. Some key questions to ask when considering a benefit plan auditor are: 

  • Are you a CPA? 
  • How many employee benefit plan audits do you perform each year?
  • Are the auditors in your firm performing benefit plan audits required to have specialized employee benefit plan audit training? 
  • Are your benefit plan audits subjected to peer review?
  • What were the results of your most recent peer review? 
  • Are you a member firm of the AICPA’s Employee Benefit Plan Audit Quality Center?

Choosing a benefit plan auditor can be overwhelming and the selection of an experienced and reliable auditor is very important. R+R can help you and your plan administrators comply with key ERISA, DOL and IRS requirements. Our audit experience includes single and multi-employer defined benefit, profit sharing, 401(k) and ESOP benefit plans. Contact Dan Harris for more information.

About Reynolds + Rowella

Reynolds + Rowella is a regional accounting and consulting firm known for a team approach to financial problem solving. As Certified Public Accountants, our partners foster a personal touch with our clients. As members of DFK International/USA, an association of accountants and advisors, our professional network is international, yet many of our clients have known us for years through the local communities we serve.

Our mission is to operate as a financial services firm of outstanding quality. Our efforts are directed at serving our clients in the most efficient and responsive manner possible, delivering services that exceed the expectations of those we serve. The firm has offices at 90 Grove St., Ridgefield, Conn., and 51 Locust Ave., New Canaan, Conn. For more information, please contact Elizabeth Bresnan at 203.438.0161 or email.

FFCRA Paid Leave Extension Until September 30, 2021 with Tax Credits

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BY KATIE HALL, REYNOLDS + ROWELLA

President Biden has signed the American Rescue Plan Act (ARPA) into law on March 11, 2021, which includes an extension of tax credits for employer-provided paid sick leave originally provided under the Families First Coronavirus Response Act (FFCRA).

Previously, the FFCRA provided Emergency Paid Sick Leave (EPSL) to employers with fewer than 500 employees. Employers had to pay sick leave of up to 80 hours to an employee who was:

  1. subject to a federal, state, or local quarantine or isolation order related to COVID-19;
  2. advised by a health care provider to self-quarantine due to concerns related to COVID-19;
  3. experiencing symptoms of COVID-19 and seeking a medical diagnosis;
  4. caring for an individual who is subject to a federal, state, or local quarantine or isolation order related to COVID-19, or has been advised by a health care provider to self-quarantine due to concerns related to COVID-19;
  5. caring for a child of such employee if the school or place of care of the child has been closed (including the closure of a summer camp, summer enrichment program, or other summer program), or the childcare provider of such child is unavailable due to COVID-19 precautions.

For reasons 1, 2, & 3 the employer pays qualified sick leave wages for up to two weeks (up to 80 hours) at 100% of the employee’s regular rate of pay to a max of $511 per day and $5,110 in the aggregate.

For reasons 4 & 5, the employer pays qualified sick leave wages for up to two weeks (up to 80 hours) at a rate of 2/3 of the employee’s regular rate of pay. The maximum amount of qualified sick leave wages paid due to these reasons $200 per day and $2,000 in the aggregate.

For all reasons listed above, employers could receive a dollar-for-dollar tax credit up to the maximums listed.

Beginning April 1, 2021, the ARPA extends employer’s ability to receive tax credits for voluntarily providing EPSL through September 30th and expands the reasons for eligible leave. Now, in addition to the reasons listed above, employees are eligible to take leave for the following reasons at 100% of the employee’s regular rate of pay to a max of $511 per day and $5,110 in the aggregate:

  • The worker is getting a COVID-19 vaccine;
  • The employee is recovering from complications due to receiving the vaccine;
  • The worker is awaiting the results of a COVID-19 test or diagnosis for coronavirus.

The ARPA also resets the 10-day limit for the tax credit for paid sick leave under FFCRA as of April 1st. Accordingly, if employees had previously exhausted their entitlement to paid sick leave under the FFCRA, they now have another 10-day/80-hours for use.

Since it is optional for employers to provide this leave, employers have a few decisions to make:

  • Option 1: Continue offering FFCRA paid sick leave for the reasons above and reset balances with a new bank of time. This will allow employers to claim the tax credit for eligible leave taken.
  • Option 2: Continue offering FFCRA paid sick leave but retain your employees’ current balances and not reset leave balances on April 1. Employers will NOT be eligible for the tax credit with this option.
  • Option 3: Discontinue offering FFCRA paid sick leave beginning April 1 and reset balances to zero.

While providing employees with a reset leave balance as of April 1st is at no cost to the employer, employers still need to weigh the benefits of doing so. Employers should consider the severity of the outbreak in their area, what their demand for labor will be like through September 30th, and how increased vaccination rates will affect their workforce.

Katie Hall, PHR, Director, HR

katieh@reynoldsrowella.com With over a decade of diversified knowledge in HR, Katie has extensive hands-on experience leading HR initiatives including policy design, compensation, performance management, recruiting, compliance reporting, HR workflow development, training and development, and benefits administration. She assists R+R clients with recruiting and retaining quality staff and working closely with businesses in regards to their benefits, training and compensation programs

About Reynolds + Rowella

Reynolds + Rowella is a regional accounting and consulting firm known for a team approach to financial problem solving. As Certified Public Accountants, our partners foster a personal touch with our clients. As members of DFK International/USA, an association of accountants and advisors, our professional network is international, yet many of our clients have known us for years through the local communities we serve.

Our mission is to operate as a financial services firm of outstanding quality. Our efforts are directed at serving our clients in the most efficient and responsive manner possible, delivering services that exceed the expectations of those we serve. The firm has offices at 90 Grove St., Ridgefield, Conn., and 51 Locust Ave., New Canaan, Conn. For more information, please contact Elizabeth Bresnan at 203.438.0161 or email.

COBRA Subsidy Under the American Rescue Plan Act of 2021

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BY KATIE HALL, REYNOLDS + ROWELLA

The American Rescue Plan Act (ARPA), signed into law by President Biden on March 11, 2021, includes several provisions requiring immediate action by employers. Among the provisions includes a 100% federal subsidy of COBRA premiums during the period of April 1, 2021, through September 30, 2021.

COBRA Subsidy Overview:

For a limited period, the ARPA requires employers to cover 100% of the cost of continuing group health coverage under COBRA for up to six months for “assistance eligible individuals” or “AEIs”. An AEI is a current or former employee who has lost coverage under their employer’s health care plan due to a reduction in hours or involuntary termination (for reasons other than gross misconduct). This will effectively allow AEIs (and their spouses and dependent children) to continue employer-sponsored health insurance coverage without having to contribute towards the premium costs through September 2021. Individuals who voluntarily terminated their employment are not eligible, and all other COBRA Qualifying Events do not quality for ARPA’s COBRA subsidy.

What Employers Need to Know:
  • Employers will need to identify their AEIs. AEIs are employees or former employees who lost health plan coverage within the past 18 months (on or after November 1, 2019), because of an involuntary termination of employment or reduction in hours.
  • AEIs and family members who currently have COBRA coverage will be eligible for a 100 percent subsidy of their premiums for up to six months (through September 30, 2021). The employer, insurer or multiemployer plan sponsor will offset the cost by claiming a credit against Social Security and Medicare payroll taxes.
  • AEIs and family members who lost coverage because of an involuntary termination or reduction in hours after November 1, 2019, but who either did not elect COBRA or let their COBRA lapse, will have until 60 days after receipt of the notice to elect COBRA beginning April 1st. Any election for these participants would be prospective only, and not retroactive to the date coverage was lost. It is unclear whether these election deadlines will supersede the previous Department of Labor extension for COBRA elections.
  • Employers will need to send the below notices to each of these AEIs (and their covered family members) within 60 days after April 1, 2021. The Department of Labor is supposed to issue model notices within 30 days of enactment.
    • General Election Notice- Employers must provide a General Election Notice to AEIs who first become eligible for subsidized coverage between April 1st and September 30th, 2021. This notice must provide AEIs with information regarding premium assistance.
    • Special Election Notice- Employer must provide a Special Election Notice to AEIs who previously elected and discontinued COBRA coverage or declined COBRA coverage between November 2019 to March 31, 2021.
    • Expiration of Subsidy Notice- Employers must provide this notice to AEIs to alert them that the subsidized aspect of their COBRA coverage will expire on a certain date. This notice must be provided between 15 to 45 days before the subsidy ends.
  • The ARPA subsidy does not extend COBRA coverage—coverage will still expire 18 months after coverage was lost, even if that is in the middle of the subsidy period. Apart from ARPA, coverage can be extended for a second qualifying event (up to a total of 36 months). ARPA does not address whether the subsidy will apply during that period.
  • Any AEI or family member who is or becomes eligible for other group health coverage or Medicare is not eligible for the subsidy. The individual has the obligation to notify the employer if he or she is not eligible or loses eligibility.
  • Employers can allow AEIs to enroll in other health plan options offered by the employer (rather than the option the AEI was enrolled in prior to the loss of coverage) if that other option is less expensive.
  • The subsidy is not taxable to the COBRA beneficiary.
  • There is no income cap for the subsidy.

While this subsidy goes into effect in a matter of days, there are still many questions yet to be answered. As the DOL releases model notices, regulations, and other guidance, R+R will continue to update clients on the COBRA subsidy.

If you have questions about new COBRA subsidy requirements or how it will impact your business, contact R+R’s Director of HR Services, Katie Hall.

Katie Hall, PHR, Director, HR

katieh@reynoldsrowella.com With over a decade of diversified knowledge in HR, Katie has extensive hands-on experience leading HR initiatives including policy design, compensation, performance management, recruiting, compliance reporting, HR workflow development, training and development, and benefits administration. She assists R+R clients with recruiting and retaining quality staff and working closely with businesses in regards to their benefits, training and compensation programs

About Reynolds + Rowella

Reynolds + Rowella is a regional accounting and consulting firm known for a team approach to financial problem solving. As Certified Public Accountants, our partners foster a personal touch with our clients. As members of DFK International/USA, an association of accountants and advisors, our professional network is international, yet many of our clients have known us for years through the local communities we serve.

Our mission is to operate as a financial services firm of outstanding quality. Our efforts are directed at serving our clients in the most efficient and responsive manner possible, delivering services that exceed the expectations of those we serve. The firm has offices at 90 Grove St., Ridgefield, Conn., and 51 Locust Ave., New Canaan, Conn. For more information, please contact Elizabeth Bresnan at 203.438.0161 or email.

The American Rescue Plan Act (ARPA)

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Here are some of the key ARPA provisions that will affect federal income taxes for some people in 2020 and 2021.

Key Changes for Individuals

The new law includes the following tax and financial provisions for individuals and families:

  • Additional EIPs. A third round of economic impact payments (EIPs) will provide $1,400 for eligible individuals ($2,800 for married couples) and $1,400 for each qualifying dependent. The income caps for receiving these payments has been significantly reduced from the caps that applied to prior EIP payments.
  • Expanded and partially exempt unemployment benefits. Federal unemployment benefits of $300 per week have been extended through September 6, 2021. In addition, taxpayers who report less than $150,000 of adjusted gross income (AGI) may exclude up to $10,200 of unemployment benefits from gross income for tax years beginning in 2020. Married couples with AGI of less than $150,000 may exclude up to $20,400 of unemployment benefits if both spouses received these benefits in 2020.
  • Expanded and increased Child Tax Credit (CTC). This credit has been expanded for 2021 to include qualifying children under age 18, and for eligible taxpayers, the amount has been increased from $2,000 to $3,000 per qualifying child ($3,600 for children under age 6 at year end).
  • Enhanced child and dependent care credit. For 2021, this credit will be refundable, and the amount will increase for eligible taxpayers. For taxpayers with AGI of $125,000 or less, the maximum amount of the credit for 2021 is $4,000 for one qualifying child or dependent ($8,000 for two or more qualifying children and dependents). The credit is phased out at higher income levels.
  • Exclusion for student loan forgiveness. Partial and full discharges of certain student loans given after December 31, 2020, but before January 1, 2026, may be exempt from federal income tax.
Key Changes for Businesses

The new law includes the following tax-related provisions for businesses and self-employed individuals:

  • Expanded Employee Retention Tax Credit. This credit has been extended through the end of 2021 (before the law, it had been scheduled to end on June 30). It’s also been expanded to apply to recovery startup businesses that launched after February 15, 2020, and have average annual gross receipts under $1 million.
  • Increased exclusion for employer-provided dependent care assistance. The exclusion for assistance provided under a qualified dependent care assistance program has been increased to $10,500 ($5,250 for married people who filed separate returns) for 2021.
  • Exclusion for EIDL advances. Eligible small businesses that receive targeted Economic Injury Disaster Loan (EIDL) advances may exclude the amounts received from gross income for federal tax purposes.
  • Exclusion for restaurant revitalization grants. Businesses that provide food or drinks, i.e. restaurants, food trucks and bars, may receive restaurant revitalization grants from the U.S. Small Business Administration. These grants are excluded from gross income for federal tax purposes.
  • Extension of limitation on excess business losses. Noncorporate taxpayers are currently subject to a limit on excess business losses of $250,000 ($500,000 for a married joint-filing couple). These limits are adjusted annually for inflation. Losses that are disallowed under this rule are carried forward to later tax years, then they can be deducted under the rules that apply to net operating losses. Previously, the CARES Act temporarily suspended the excess business loss rule for losses arising in tax years beginning in 2018 through 2020. This limitation comes back into play for 2021 and was scheduled to expire at the end of 2025. The ARPA pushes back the expiration date by one year to the end of 2026.

The COVID-19 pandemic has affected every household and business in some way—this article only covers some of the provisions in the 628-page new law. If you or your business have suffered financial losses, contact a R+R tax advisor to discuss resources under the ARPA that may be available to help you with recovery.

About Reynolds + Rowella

Reynolds + Rowella is a regional accounting and consulting firm known for a team approach to financial problem solving. As Certified Public Accountants, our partners foster a personal touch with our clients. As members of DFK International/USA, an association of accountants and advisors, our professional network is international, yet many of our clients have known us for years through the local communities we serve.

Our mission is to operate as a financial services firm of outstanding quality. Our efforts are directed at serving our clients in the most efficient and responsive manner possible, delivering services that exceed the expectations of those we serve. The firm has offices at 90 Grove St., Ridgefield, Conn., and 51 Locust Ave., New Canaan, Conn. For more information, please contact Elizabeth Bresnan at 203.438.0161 or email.

U.S. GAAP Accounting for PPP Loans

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By:  Daniel Harris

As of and for the year ended December 31, 2020 there will be diversity in practice as it relates to the accounting treatment a for profit business elects to apply to forgivable loans received during 2020 under the Small Business Administration Paycheck Protection Program (PPP).  Although legally a PPP loan is considered debt, many business owners believe the PPP loan, in substance, is a government grant.

Accounting Principles Generally Accepted in the United States of America (U.S. GAAP) does not have specific authoritative guidance as it relates to a for profit business and accounting for government grants.  As a result, the following two accounting models are acceptable under U.S. GAAP before forgiveness of the PPP loan is received:

1.         Treat the PPP loan as debt in accordance with Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) 470, Debt.  If treated as debt, a liability would be recognized on the balance sheet and classified according to the nature of the current and long-term portions.  The PPP loan would remain on the balance sheet until formal forgiveness is received and the debt is legally released, or, until the PPP loan is repaid.  Interest should be accrued in accordance with the interest method under FASB ASC 835, Interest.

2.         To the extent management believes the PPP loan is in substance a government grant and they have met the conditions for forgiveness, they may be able to analogize to non-authoritative guidance included in FASB ASC 958, Not-for-Profit Entities (FASB ASC 958)and recognize income to the extent they have met the conditions for forgiveness (i.e. prior to receipt of legal release or formal forgiveness) during the year ended December 31, 2020.  To the extent the conditions for forgiveness for the full amount has not been met, the remainder would be recorded as a liability as of December 31, 2020. 

Note – For a Not for Profit – Model 1 above can be used or Refer to ASC 958, Not for Profit Entities (ASC 958) which can result in a similar answer to Model 2.

Whichever model is selected, appropriate financial statement disclosures are required.

Reynolds + Rowella is following COVID-19 tax and accounting guidance closely and will continue to keep you informed as a trusted advisor during this time. For more information on borrower accounting for PPP loans as well as the overall impact of COVID-19 on estimates of credit losses please contact Dan Harris.

About Reynolds + Rowella

Reynolds + Rowella is a regional accounting and consulting firm known for a team approach to financial problem solving. As Certified Public Accountants, our partners foster a personal touch with our clients. As members of DFK International/USA, an association of accountants and advisors, our professional network is international, yet many of our clients have known us for years through the local communities we serve.

Our mission is to operate as a financial services firm of outstanding quality. Our efforts are directed at serving our clients in the most efficient and responsive manner possible, delivering services that exceed the expectations of those we serve. The firm has offices at 90 Grove St., Ridgefield, Conn., and 51 Locust Ave., New Canaan, Conn. For more information, please contact Elizabeth Bresnan at 203.438.0161 or email.

What Employers Should Know About the COVID Vaccine

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BY KATIE HALL, REYNOLDS + ROWELLA

The COVID-19 vaccine is providing many employers with the hope that things may soon return to normal—or as normal as can be considering a year-plus long pandemic. The vaccine certainly provides a glimmer of light at the end of the tunnel, but there are few things employers should consider while planning how to best protect their employees.

Let’s start with the most common questions:

Can we require all employees to get vaccinated?

The simple answer: Yes, but with exemptions. On December 16th, 2020, The Equal Employment Opportunity Commission (EEOC) released guidance specific to COVID-19 vaccination programs. While they have not expressly stated that employers can require vaccinations, it can be inferred that it may be permissible with certain exemptions. Specifically, employers must be prepared to exempt those with disabilities, pregnancy-related medical conditions, and/or religious objections.

The EEOC’s guidance states that the Americans with Disabilities Act (ADA) allows employers to require that individuals “shall not pose a direct threat to the health or safety of individuals in the workplace. However[…] if a vaccination requirement screens out or tends to screen out an individual with a disability, the employer must show that an unvaccinated employee would pose a direct threat due to a ‘significant risk of substantial harm to the health or safety of the individual or others that cannot be eliminated or reduced by reasonable accommodation.’” If an employee refuses to obtain the vaccine due to disability, the employer should evaluate whether they pose a direct threat by evaluating

  • the duration of the risk;
  • the nature and severity of the potential harm;
  • the likelihood that the potential harm will occur;
  • and the imminence of the potential harm.

If it is concluded that an unvaccinated employee would pose a direct threat to the worksite, the employer must then consider whether a reasonable accommodation can be made, such as allowing the employee to work from home or providing another mutually agreed-upon work arrangement.

Title VII of the Civil Rights Act of 1964 (Title VII) also provides certain exemptions. Once an employer is made aware of an employee’s sincerely held religious beliefs, practice, or observance that prevents them from getting the vaccine, the employer must provide a reasonable accommodation unless it results in undue hardship (as determined under Title VII) to the employer.

Can we fire an employee that refuses to get vaccinated?

If an employee cannot get vaccinated due to a disability or sincerely held religious beliefs and no reasonable accommodation is possible, then an employer can “exclude” the employee from the workplace. This does not mean that the employee can be terminated, but that the employer will need to determine if any other rights apply under federal, state, or local authority before making that decision.

Employers may be faced with a difficult situation if employees refuse the vaccine outside of protected reasons, especially if a large number of employees refuse. Employers may have to choose between firing a potentially large number of employees or taking these refusals on a case by case basis, which may leave the employer open to discrimination claims.

So we can require the vaccine- but should we?

It depends. In certain environments, such as in healthcare, a vaccination requirement may make sense so long as employers comply with ADA and Title VII. But what about for those who are not considered frontline workers? For these employers, the answer becomes a bit grey. Employers should consider the climate surrounding the vaccine, as well as the fact that many Americans are hesitant to get it. A mandatory vaccination program may take a hit on employee morale in certain instances. Additionally, employers should also be aware of potential worker’s comp claims should the requirement result in an employee developing complications from the vaccine.  

What about providing incentives to employees to get the vaccine?

Currently, there is a lack of legal guidance from the EEOC surrounding incentives to get the vaccine. However, many large corporations are forging ahead with incentives despite this. Some of these incentives include one-time cash payments and paid time off to receive the vaccine. If an employer chooses to provide incentives, they should also consider how that may impact those that cannot get the vaccine due to disability or religious reasons. In order to avoid claims of discrimination, employers may want to provide other avenues to receive the incentive, such as taking a training on COVID safety precautions or periodic COVID testing.

As we await further guidance on this topic, providing education surrounding the vaccine in conjunction with a voluntary vaccine program may be employer’s safest bet.

As a Connecticut employer, what can I do now?

CT employers play a large part in getting CT residents vaccinated. The CT.gov website provides employers with information they need to help their workers gain access to the vaccine. According to the website, “Employers who have Phase 1b-eligible workforce should complete [the online VAMS enrollment form] in order to enroll in VAMS and enable their employees to schedule a vaccine appointment. Employers who do not have employees eligible in Phase 1b do not need to take any action at this time.”

Once an eligible employer has registered with VAMS, the employer can upload a roster of employees. Employees listed on the roster will receive an email from VAMS inviting them to schedule an appointment to receive the vaccine.

As with all things COVID-related, the rules are regularly in flux. Employers should check EEOC’s latest guidance prior to finalizing any vaccination programs or incentive plans for their workforce.

We would be happy to discuss with you the complex and evolving issues employers are navigating with the COVID-19 vaccinations. Contact the R+R HR consulting team for development of your company’s vaccine.

Katie Hall, PHR, Director, HR

katieh@reynoldsrowella.com With over a decade of diversified knowledge in HR, Katie has extensive hands-on experience leading HR initiatives including policy design, compensation, performance management, recruiting, compliance reporting, HR workflow development, training and development, and benefits administration. She assists R+R clients with recruiting and retaining quality staff and working closely with businesses in regards to their benefits, training and compensation programs

About Reynolds + Rowella

Reynolds + Rowella is a regional accounting and consulting firm known for a team approach to financial problem solving. As Certified Public Accountants, our partners foster a personal touch with our clients. As members of DFK International/USA, an association of accountants and advisors, our professional network is international, yet many of our clients have known us for years through the local communities we serve.

Our mission is to operate as a financial services firm of outstanding quality. Our efforts are directed at serving our clients in the most efficient and responsive manner possible, delivering services that exceed the expectations of those we serve. The firm has offices at 90 Grove St., Ridgefield, Conn., and 51 Locust Ave., New Canaan, Conn. For more information, please contact Elizabeth Bresnan at 203.438.0161 or email.

where to find us and how to call us

90 Grove Street / Ridgefield, CT 06877 / Office: 203.438.0161 / Fax: 203.431.3570
51 Locust Avenue / New Canaan, CT 06840 / Office: 203.972.5191