Category: Blog

How to Manage Your Aging Parents’ Finances

How to Manage Parents FinancesTaking over your aging parents’ finances is not easy. But it’s something that can be handled in an organized, compassionate way. Here’s a roadmap that shows how to embrace it and do the right things for everyone involved.

Start the conversation early. Right now, your parents might not need any help. They might be handling everything just fine. But there will come a day when they can’t – and they’ll need your help. The National Institute on Aging recommends that parents give advance written consent to designated family members so they can discuss personal matters with doctors, financial representatives and Medicare officials. If you don’t have this, you’ll be faced with some road blocks. If you open the dialogue now, you’ll circumvent obstacles, as well as get a better feel for what their future needs might be.

Watch for the signs. If you don’t see your parents often, and even if you do, the signs of when you need to step in might be a bit hard to detect. That said, there are some things to look for that will indicate that their needs are changing.

  • Unusual purchases. If you find out that your folks are buying things that don’t match their lifestyle, or entering lots of contests and sweepstakes, then it’s time to speak up. Behavior like this might get out of hand – or worse, they might be getting scammed. Older people are most vulnerable to the vultures out there. 
  • Stacks of unopened mail. Watch for this, as the letters might be unpaid bills and/or solicitations for sweepstakes. Both are problematic.
  • Complaining about money. If your folks seem to be always low on cash, or say “no” to activities that they usually enjoy, talk to them. They might need your help for a number of reasons, whether it’s reconciling accounts or remembering how to pay bills, or if they even paid them.
  • Physical setbacks. Fading vision can impede driving to the bank and arthritis can be painful while writing checks or typing on the keyboard. Whatever ailment your parents might suffer from, this could be a cue that they need your assistance.
  • Memory problems. This is somewhat self-explanatory, but specific things to look for are not knowing what day or year it is, or just forgetting things that your parents once always remembered.

Start slowly. Instead of charging in and announcing that you’re taking control, take baby steps. Maybe offer to write checks for them. Or offer to pay a bill or two. Gradual, gentle steps make them feel more at ease and comfortable with the new way of doing things.

Gather important documents. Things to collect are account numbers, credit card info, birth certificates, insurance policies, deeds and wills. Make sure they’re all current and up-to-date. Put them in a secure location so you’ll have easy access when you need them.

Consider power of attorney. This is key. Even if your parents don’t need your help at the moment, there will come a time when they will. There are several types of POA to consider: financial, medical or general decisions. Unlike written consent, this gives you legal authority to act on their behalf when they’re unable to.

Communicate what’s going on. Once you’ve started to manage your parents’ finances, keep your siblings, as well as theirs, in the loop. This way, if you’re unable to handle something, you can ask for backup support.

Keep your finances separate. It might be the easiest thing to do – mix your parents’ finances with yours – but in the long run, it’s not such a good idea. It can become a slippery slope. Granted, there may be times when your parents need a loan, but for the sake of clarity and personal record-keeping, it’s best not to jeopardize your own retirement and savings goals.

If you need more help, reach out to the National Alliance for Caregiving. As we all know, the circle of life is inevitable. But caring for your parents might be one of the most important things you’ll ever do – and chances are, you’ll want to get it right.

 

Sources

https://bettermoneyhabits.bankofamerica.com/en/saving-budgeting/aging-parents-finances

Taxation of Legal Settlements and Fees

Taxation of Legal Settlements and FeesThe taxation of legal settlements and fees is a complex topic. While the mechanics to make a proper claim are now easier, the rules are still complex. Below we look at six rules to consider when it comes to the taxation of legal settlements and the deduction of legal fees on your taxes.

  1. Taxes depend on the origin of the claim; or in plain English, according to why you are seeking recovery. For example, in a case where the plaintiff is suing another business for losing profits, the settlement would be considered lost profits, and therefore would be ordinary business income. If a worker sues for unlawful termination, then the settlement would be considered wages and taxed accordingly. Another example is where a plaintiff sues a negligent builder; here the damages won’t be classified as income, but instead will reduce the purchase price of the real estate.

    The big difference in the above examples is that in the first two cases the settlements are taxable; in the third, they are not. As with many things in tax law, be aware that the rules are full of nuance and exceptions.

  2. Some recoveries are tax free, even if they wouldn’t appear to be on the surface. One example here is cases of personal physical injuries, like a car accident. While you may be suing for lost wages due to the inability to work, the damages should be tax free due to section 104 of the tax code that shields damages for personal physical injuries and physical sickness.

    The important distinction here is the physical requirement. The IRS is unclear exactly what constitutes physical harm, but generally requires that you can physically see the injury.

  3. Medical expenses are tax free. Regardless of the type of harm (physical or emotional), payments for medical expenses are tax free. Moreover, the definition of medical expenses is rather broad.
  4. Allocating damages can save on taxes. Most legal disputes involve multiple issues, and as a result the total settlement amount will involve several types of considerations. The parties in suit can agree to the allocation of the settlement according to the issues – and therefore its tax treatment. While these agreements aren’t binding to the IRS, they’re rarely ignored and can provide a good defense for your tax position.
  5. Attorney fees can be a trap. However you pay your attorney – whether hourly or on a contingent fee basis – legal fees will affect your net recovery and your taxes. Plaintiffs who use contingency fee arrangements are typically treated (for tax purposes) as receiving 100 percent of the money recovered. In other words, you’re taxed on the part of the money your attorney takes out of the settlement.

    To understand this a little better, take an example suit for emotional distress where you recover $200,000 in damages, with a 40 percent contingency fee arrangement with your attorney. Here, the plaintiff is going to have $200,000 in taxable income even though they only received $120,000 (with $80,000 going to the attorney). Not all lawyers’ fees face this draconian tax treatment, but this is the general rule in contingency fee cases.

  6. Punitive damages and interest are always taxable. This is true even if the injuries are 100 percent physical. Take a case of a car crash where you get $30,000 in compensatory damages (for the car damage) and $2 million in punitive damages. The $30,000 is tax free, but the $2 million is fully taxable.

Conclusion

These are some of the basic rules surrounding the taxation of legal fees and settlements. There are many nuances and subtleties, but what you should take away from this article is that, in many cases, there are ways to structure both any settlement received and how you pay your attorney to minimize your tax burden.

How Businesses Can Stay Current with the Digital Economy

Digital EconomyAccording to the U.S. Chamber of Commerce, the level of usage and data swirling around the internet is expanding at an accelerating pace. The amount of data on the internet globally during 2020 amounted to 3 trillion gigabytes; and 2022’s traffic is expected to increase to 4.5 trillion gigabytes. As a result, the U.S. Chamber of Commerce is concerned about the challenges American companies will have when it comes to business competitiveness.

According to a survey from Statista titled “Challenges encountered as a result of digital transformations in global organizations as of 2020,” there are common challenges that businesses are facing, such as:

  • 51 percent of respondents said that “skill gaps have opened up on traditional teams as top talent moves to digital teams or products”
  • 48 percent said that “cultural differences or conflicts have arisen between traditional and digital teams”
  • 41 percent also mentioned that “traditional teams have struggled to keep up with the pace of how digital teams work”

With so many issues businesses face as technology races ahead, it’s important for organizations to recognize and adapt to the dynamics of digital commerce. According to Harvard Business Review (HBR), it’s important to align the business and its goals correctly, especially when it comes to getting the most out of software development. For example, when companies buy software, they generally use third-party software for all their needs. While accounting and human resources functions may be fine for standardized uses, there are often situations when a personalized approach is needed to provide customers with a memorable experience.

HBR suggests businesses take certain steps that can make the journey easier and more effective in the long run. The first thing to do is identify current information technology-focused employees, because they’re the most closely aligned and ready for the transition. Along with looking for outside talent, it’s important to let internal software developers have an active role in the process.

It’s also important to let developers be stakeholders (along with accountability for failure) for solving organizational challenges versus giving them rigid assignments. Don’t focus exclusively on punishing failure; instead, encourage developers to analyze, pick apart reasons why failure happened and how future experiments can incorporate learning from past failures. Include developers in discussions with the people who will be using the software (other employees and customers who will be using it in the future).

Let’s look at Domino’s mobile application development as a case study. They were able stand out by improving their app with a feature that gave customers the ability to track their order from when it was being prepared to delivery. This process included increasing the efficiency of its systems, practices and techniques, along with having employees who performed advertising related functions work closely with software developers. It helped their stock price increase dramatically, performing better than many publicly traded technology companies.  

One challenge for businesses going forward is since there are still tens of millions expected to come online with broadband, the amount of data and traffic will only increase. When it comes to broadband service requirements set by the Federal Communications Commission (FCC), they are at least 25 Mbps to download and 3 Mbps to upload. According to the FCC, approximately 14 million Americans lack broadband, with as many as 42 million reporting lack of access, according to Broadband Now Research. New York City’s Mayor’s Office of Technology reports that 18 percent of NYC residents lack broadband, making it problematic to work from home, access government services online, make doctor appointments, etc.

According to a December 2021 Digital Trade and U.S. Trade Policy report from the Congressional Research Service, there’s no stopping the expansion of trade in the digital world. It found statistics from the Department of Commerce for the “digital economy,” where 9.6 percent of GDP was generated from this sector. It also found that 7.7 million workers were employed because of this approach to commerce. However, unless businesses take care to ensure the same level of communication is accessible, formally and informally, there may not be the same level of efficiency for remote workers.

According to MIT Sloan Management Review, remote workers are at a disadvantage when it comes to indirect types of learning employees have compared with in-person settings. Whether it’s before work starts, during break or lunch time, or interacting with or observing a customer or client, employees working virtually have little to zero of these types of passive opportunities to learn on the job. Be it an additional comment after signing off an email, having a few opportunities to chat or talk online during breaks or similar, this type of passive informal communication needs to be addressed to make up for the in-person experiences other employees have.

While the way work will be conducted in the future can’t be predicted, it will certainly include using the internet – and for many employees, it will involve some time away from the office.

Sources

https://www.uschamber.com/international/ten-trends-in-2022-global-perspectives-for-business

https://www.statista.com/statistics/1133436/challenges-digital-transformation/

https://hbr.org/2021/01/in-the-digital-economy-your-software-is-your-competitive-advantage

https://docs.fcc.gov/public/attachments/FCC-21-18A1.pdf

Mind the Map: The Hidden Impact of Inaccurate Broadband Availability Claims

https://sgp.fas.org/crs/misc/R44565.pdf

https://sloanreview.mit.edu/article/overcoming-remote-work-challenges/

What Does the Metaverse Mean for Businesses

Metaverse for BusinessesMetaverse has become a buzzword with much debate on its potential implications once it is fully realized. As far as businesses are concerned, the metaverse presents new opportunities and challenges, especially for marketing, branding and communication professionals.

Understanding Metaverse

Metaverse became a hot topic thanks to Facebook announcing its rebrand to Meta in October 2021. However, the metaverse is not new and can be traced back to 1992 in the fiction novel “Snow Crash” by Neal Stephenson. Stephenson used the term to refer to a virtual world where people can do different activities.

As the internet moves to a new iteration as Web 3.0, different players are working toward creating their metaverse – or rather, a unified virtual space. This virtual environment is intended to be used to carry out activities such as playing games, attending meetings, buying digital goods and services, tourism, education and even for work.

Although metaverse might seem like a futuristic notion that will require massively advanced technologies, its foundational elements are already in place. This is because it’s enabled by virtual reality (VR) and augmented reality (AR). Some users, especially gamers, have had experiences with virtual reality and augmented technologies. Some online retailers already use augmented reality on their e-commerce platforms to help shoppers experience a product before ordering it.

However, metaverse technology seeks to connect all of these separate apps and platforms to create a continuous experience that will integrate audiences and elements from different platforms into one. The metaverse will be characterized by a boundless and decentralized virtual economy and immersive social experiences.

It is not possible yet to gauge how disruptive the metaverse will be, but one sure thing is that it will introduce new ways of doing things. As has already been witnessed, to keep up with trends, businesses had to adapt to technologies such as social media platforms even when they were initially created for social interaction. Hence, businesses need to be prepared.

Metaverse in Business

As any new technology helps early adopters gain a significant advantage over competitors, metaverse will be no different. However, it may initially favor large businesses that can afford to take risks and have budgets to invest in enabling requirements. Despite this, different-sized businesses should get ready to adjust their marketing strategies to the virtual economy.

There are predictions that the metaverse could generate vast revenue to the tune of $1 trillion. Hence, the metaverse has a massive business opportunity, including advertising, demand for new hardware, virtual events, e-commerce, etc.

As an example of the readiness for companies to adopt metaverse, consider Nike. The brand has already taken steps into the metaverse by filing for trademark applications, indicating its intention to make and sell virtual branded sneakers and apparel.

Businesses will benefit differently from the metaverse. For instance, companies manufacturing computer chips and servers stand a good chance for a significant gain to their businesses. So will cloud service providers that will be vital for the metaverse virtual worlds.

Manufacturers also will use the metaverse to create digital models of their products using digital twins technology (a virtual representation of a physical object or process). This will help adjust manufacturing processes, carry out quality control, product demos, and simulate the supply chain.

Remote work that was highly adopted due to the recent pandemic will be enhanced by the metaverse. It will be possible to have co-working spaces and carry out virtual trainings and simulations.

It also will help promote physical businesses. By interacting with objects in 3D form, shoppers can try on clothes online, check out houses, cars, etc. The ability to shop virtually means that businesses can design brands to suit different customer needs and increase retail sales.

Such possibilities mean that marketers will need to research customer behavior and preferences in the virtual space. This will require businesses to set up metaverse teams if they want to remain competitive. This is especially necessary to reach customers where they spend their time.

On the downside, there are concerns about privacy issues and data harvesting – like any other technology. The decentralized characteristic of a true metaverse also means it will be challenging to regulate. Such cases introduce risks to businesses. Nevertheless, such risks have never stopped businesses from adopting new technologies.

Conclusion

Customer experience is vital in any business. For businesses to continue maintaining long-term relationships with customers, they may have to adapt and use virtual avatars to serve as customer service agents. Thus, businesses need to be more innovative to tie existing communication channels to the metaverse channel. They can do this by formulating an entry plan to the metaverse while ensuring a balance between opportunities and risks.

Relief for USPS Financial Requirements, Plus Support for Victims of Sexual Harassment and Online Child Exploitation

HR 2497,HR 4445,HR 3076,HR 2074,S 2551,S 2538Amache National Historic Site Act (HR 2497) – This Act was introduced by Rep. Joe Negusa (D-CO) on April 24, 2021. The bill authorizes the Department of the Interior to acquire land in Colorado in order to establish a park called the Amache National Historic Site. It is to be included as part of the National Park System for the purpose of preserving, protecting and interpreting resources associated with the incarceration of civilians of Japanese ancestry during World War II at the Granada Relocation Center, as well as the military service of incarcerees at the Granada Relocation Center. The bill was passed by Congress on Feb. 18 and is now with the president.

Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act of 2021(HR 4445) – The bill was introduced by Rep. Cheri Bustos (D-IL) on July 16, 2021. It invalidates arbitration agreements that prohibit a party from filing a lawsuit in court involving sexual assault or sexual harassment. The bill passed in both the House and the Senate on Feb. 10 and is awaiting signature by the president.

Postal Service Reform Act of 2022 (HR 3076) – This Act is designed to provide stability and enhance the services of the United States Postal Service. Among its many provisions, the bill proposes to: Repeal the annual prepayment requirement for future retirement health benefits;  establish a Postal Service Health Benefits Program to offer health benefit plans for USPS employees and retirees; coordinate enrollment for retirees under this program and Medicare; develop a publicly available dashboard that tracks service performance and reports on USPS operations and financial conditions. The legislation was introduced by Rep. Carloyn Maloney (D-NY) on May 11, 2021. It passed in the House on Feb. 8 and goes to the Senate next for consideration.

Indian Buffalo Management Act (HR 2074) – This Act was introduced by Rep. Don Young (R-AK) on March 18, 2021. The bill establishes a permanent program within the Department of the Interior to develop and promote tribal ownership and management of buffalo and buffalo habitat on Indian lands. Furthermore, the department may enter into agreements with tribal organizations to transport surplus buffalo from federal land onto Indian land. The bill passed in the House on Dec. 8, 2021, and is presently with the Senate.

AI Training Act (S 2551) – The purpose of this legislation is to establish a training program in artificial intelligence (AI). It would be managed by the Office of Management and Budget for an acquisition workforce of executive agencies by ensuring that those workforces have knowledge of the capabilities and risks associated with AI. The Act would require the program to be updated at least every two years, measure workforce participation and solicit and analyze feedback from program participants. The bill was introduced by Sen. Gary Peters (D-MI) on July 29, 2021. It passed in the Senate on Dec. 18, 2021, is currently under consideration in the House.

EARN IT Act of 2022 (S 2538) – EARN IT is an acronym for Eliminating Abusive and Rampant Neglect of Interactive Technologies. The purpose of this bipartisan legislation is to revise the current federal framework for governing the prevention of online sexual exploitation of children by establishing a National Commission for Online Child Sexual Exploitation Prevention. The commission would develop best practices for interactive computer services providers such as Facebook and Twitter to prevent, reduce and respond to the online sexual exploitation of children. In addition to requiring service providers to report facts and circumstances to identify and locate minors involved, the Act would also limit provider liability protections for alleged violations of child sexual exploitation laws. It was introduced by Sen. Lindsey Graham (R-SC) on Jan. 31 and is presently under consideration at the committee level.

How To Maximize the Potential of Your 401(k) Plan

Maximize 401(k), Maximize 401kOne of the easiest ways to save for retirement is to participate in an employer-sponsored retirement plan. You simply select a percentage of your paycheck that you would like transferred to your 401(k) (or similar) account. Not only does your employer make the transfer for you, but it comes out of your paycheck before income taxes are taken out. This way, you avoid paying taxes on that income from each paycheck, and those taxes are not due until you withdraw the money from your retirement plan. This usually happens once people retire and enter a lower tax bracket.

That’s the simple beauty of investing in a 401(k) plan. However, with a little more effort, you can do a better job of maximizing its potential. The following are strategies to consider.

Take Advantage of an Employer Match

Most employers offer to match your 401(k) contribution up to a certain percentage. For example, an employer might contribute an additional dollar for every dollar you contribute, up to 3 percent of your pay. Although the plan may allow you to defer more than 3 percent, it’s always a good idea to contribute at least the same percentage as your employer agrees to match. After all, the employer contribution is basically free money. Be aware, however, that your contributions, employer matches and all interest, dividends and capital gains earnings in the account will eventually be taxed as income when distributed. If your employer offers a matching contribution to your 401(k) plan, try to defer at least the percentage of your income required to take full advantage of that match.

Contribute More Each Paycheck

The best way to maximize your 401(k) is to deter the maximum amount of income you can from each paycheck. Remember, it comes out of your income before it ever hits your bank account, so you can learn to live on less while building up your retirement savings. In 2022, employees may contribute up to $20,500 for the year; those age 50 and older can save up to $27,000 (an increase for each group of $1,000 versus 2021). Another benefit is that employer matches do not count toward that contribution limit.

If you are not currently maxing out your 401(k) plan contribution, consider these tactics to help you get there.

  • Increase your deferral rate gradually, such as once a year or each time you receive a raise, promotion or bonus. This will enable you save more without changing your take-home pay. Just be sure that increasing your deferral rate does not cause you to exceed the annual contribution limit.
  • Some companies implement an automatic escalation feature, such as increasing your deferral rate by one percentage point each year – unless you opt out. If this is the case, don’t opt out of the automatic increase.
  • A good time to increase your deferral rate is during the annual enrollment period when you are thinking about the cost of other benefits and how they will impact your household budget.

Consider an Annuity Option

The SECURE Act of 2019 included a provision that limits employers’ liability when they offer an insurer-issued retirement annuity option. A 401(k) annuity option typically offers the ability to convert that portion of your retirement account into a stream of income guaranteed (by the issuing company) for a certain period, or even for as long as you live. It’s usually recommended to put only a portion of your 401(k) savings into an annuity, as it has higher expenses and might have growth potential limitations. However, the annuity option is appealing because it can continue paying out income after your other investment options have dwindled, which ironically works much the same as a traditional pension (which the 401(k) was designed to replace). Not every employer offers an annuity option in their 401(k) plan, but thanks to the new legislation it could become more prevalent.

Invest More Aggressively

Americans are currently seeing the dramatic impact that a rise in inflation can have on their household budget. Now imagine that impact when you’re in retirement and living on a fixed income. One way to increase your potential earnings for a larger retirement nest egg is to invest in more growth-oriented assets now, while you’re still working. That generally means a higher allocation to stocks to help your 401(k) investment surpass the growth of inflation. In fact, many stocks are issued by companies that tend to increase revenues as inflation rises.

With additional effort and strategic planning, it’s not that difficult to get your 401(k) to work harder to help you save more for a long, fulfilling retirement.

8 Ways to Negotiate Medical Bills

Negotiate Medical BillsAccording to statistics from the Society for Human Resource Management (SHRM), employer-budgeted healthcare costs increased to an average of $12,792 per employee in 2021. Employees can help keep employer healthcare costs – and their premiums – down by planning ahead and negotiating fees for service.

Call Before Your Treatment

When you’re busy, sending an email might expedite your request. However, it’s best to stop, take a little time to pick up the phone and talk to a real person. Ask for the hospital’s billing department and get an estimate of how much your procedure might cost. (Write down the name of the person you speak with, plus the day and time.) Send this to your insurance provider to find out what your plan will cover. Then contact the hospital and let them know how much you can afford. When you’re recovering, you’ll have less worry about how to pay.

Offer to Pay in Full Up-Front

If you have the resources to do this, go for it. Consumer Reports estimate that you could save 20 percent off your bill. Ask to speak to someone who has the authority to grant you this deal and again, jot down the details of your call. However, if the treatment is more than you can afford, you might consider medical debt consolidation.

Shop Around for Less Expensive Providers

Insurance companies usually offer cost estimates for treatments. Some companies like UnitedHealthcare and Blue Cross Blue Shield even have cost comparison tools. If your insurance provider doesn’t offer this, try third-party sites like Healthcare Bluebook and GoodRx to shop and compare. Remember that though important, cost should never be the top consideration when deciding on a facility for your healthcare.

Understand What Your Insurance Covers

And what it doesn’t. Ask for a Summary of Benefits and Coverage from your provider to find out exactly what’s what when it comes to coinsurance, deductibles and more. Being prepared is always a good idea.

Ask for an Itemized Bill

After your treatment, you’ll receive an Explanation of Benefits (EOB) from your insurance company. This isn’t a bill and might be updated while your claim is being processed. But the first thing to do when you receive these are to check them for errors – humans make them!

Make Sure Services are In-Network

Before your procedure, check to see that all your labs, anesthesiologists and other services are in-network. Some states prohibit out-of-network providers from charging out-of-network prices when performing care at an in-network setting. Learn about your state’s level of protection at The Commonwealth Fund.

Seek Assistance Programs

Ask your healthcare provider – the hospital or lab’s billing department – about financial assistance and/or charity programs. Thankfully, hospitals have a standard procedure for helping those who are unable to pay their bills. Some hospitals even have discounts for people who don’t have access to medical insurance. You might also ask your provider about medical debt forgiveness. If this is an option, you’ll be asked to share tax returns and other relevant documents. Other resources to help you navigate your healthcare expenses are the Patient Advocate Foundation or the PAN Foundation.

Get on a Payment Plan

Generally, healthcare providers offer no-interest payments and are available to anyone who needs it. Better still, you won’t have to meet eligibility requirements like you would with payment assistance programs. But when setting something like this up, make sure you agree to a plan that you can stick with. Otherwise, your bill might be turned over to a collection agency.

As you know, your health is your most precious asset. Make sure you’re fiscally prepared to care for it.

Sources

https://www.lendingtree.com/personal/how-to-negotiate-medical-bills/

https://www.shrm.org/resourcesandtools/hr-topics/benefits/pages/health-plan-cost-increases-return-to-pre-pandemic-levels.aspx#:~:text=Budgeted%20health%20care%20costs%20increased,of%205.2%20percent%20from%202020.

Medical Debt Consolidation: Using a Loan to Pay Medical Bills (lendingtree.com)

State Balance-Billing Protections | Commonwealth Fund

2022 U.S. Tax Legislation Forecast

2022 U.S. Tax Legislation ForecastNo one knows for sure what 2022 will bring in the form of tax legislation, but there is certain to be some action. Top tax analysts think there are several topics that are likely to come up in 2022. Most predict that a lot of potential changes that were discussed but never made much traction in 2021 will be revisited.

Rolling Back Corporate Tax Rates

Back in 2017, then-President Trump’s Tax Cuts and Jobs Acts (TCJA) reduced corporate tax rates. While a bid raise them again failed in 2021, many believe there is a good chance that Democrats will try again in 2022. Most believe a 2022 proposal would try to raise the current 21 percent corporate tax bracket up to between 25 percent and 28 percent, but opinions vary. While most analysts see a push to raise rates, no one predicts a push to go back to pre-2017 rates, which were as high as 35 percent. Republican opposition to any such measure is expected to be strong.

The Billionaire Tax

New spending proposals in 2021 saw the backing of a billionaire tax as a method to help finance them. While no such tax made its way into law during 2021, many analysts believe that a billionaire tax is likely to resurface once again in 2022.

The name is a bit of a misnomer, as the most recent proposals applied to more than just billionaires; they were set to impact taxpayers with more than $1 billion in assets as well as those with over $100 million of income for three years in a row. Under these thresholds, the tax would only impact approximately 700 to 800 people in the United States.

Proposals from 2021 included a controversial provision that is a major deviation from current tax law: taxing unrealized gains. Currently, with few exceptions for professional traders who can elect to mark-to-market for example, tradable assets such as stocks are taxed only on realized gains once the asset is sold. Iterations of the billionaire tax proposed to change this and require such assets to be valued annually and taxed according to the unrealized portion as well. The rationale is that the ultra-wealthy can take loans against their assets and avoid ever selling or realizing the gains – and therefore avoid taxes as well.

Finally, it’s important to note that this particular form of billionaire tax is not the same as a wealth tax. This tax focuses on unrealized gains only and not the taxpayer’s total wealth.

A True Wealth Tax

Another tax law that made its way into the national spotlight during 2021 and is likely to get another try in 2022 is some form of a wealth tax.

Typically, a wealth tax is a flat tax percentage placed on a taxpayer’s total net worth annually; say one percent, for example. Unlike essentially all forms of taxation in the United States, a wealth tax would see someone owing money year-after-year even if they never made any more money.

One of the biggest non-political problems with a wealth tax is logistics. Taxing net worth means that every asset a taxpayer owns needs to be valued annually, including real estate, cash, investments, business ownership and other assets. This creates a huge administrative burden and leaves a lot of room for interpretation between valuation professionals as well.

No analyst foresees any wealth tax proposals applying broadly. Instead, most see it being targeted at the ultra-wealthy – those with a net worth over $50 million. This makes it politically palatable as the vast majority of taxpayers are exempt; however, there are many who oppose any such tax either due to ideological reasons or because they feel it represents a slippery slope to eventually capture more and more taxpayers with lower net worth thresholds.

Tougher Regulations on Cryptocurrency

One of the most unclear areas for potential 2022 tax law proposals involve cryptocurrencies. The reality is that most of Congress simply doesn’t understand the market and the IRS itself is mired in technical rules on how to treat various sectors of the emerging financial arena.

While some analysts predict there will be proposals to differentiate the tax treatment from more traditional assets, others believe the moves will be largely regulatory and focus on compliance and minimizing tax avoidance within the asset class.

Conclusion

Many of the above tax provisions are highly partisan in nature. As a result, it is likely that congressional gridlock will ensue and little if anything will get passed through legislative channels. This leaves many analysts predicting that tax changes, to the extent possible under our system, may see more executive actions than usual. Regardless, with the current economic uncertainty, high inflation and geopolitical instability, the topics above may or may not come up this year. One thing is certain however, taxes won’t be going away or getting any simpler.

What’s the Future for Measuring Employee Performance?

Measuring Employee PerformanceYearly performance evaluations just might be heading out the door, according to a recent WorkHuman Analytics & Research Institute Survey. Findings reveal that these appraisals are less than effective and used less often. Based on select findings, 55 percent of employees responded that yearly evaluations don’t help them become better in their role. Almost as many, 53 percent, indicated that annual reviews recognize an employee’s complete workload. The survey also found that only 54 percent of businesses used annual reviews in 2019, compared to 82 percent of workers saying their employer used annual reviews in 2016.

According to Gallup, only 14 percent of workers responded positively that performance reviews motivated them to get better at their skill set. It also found that among businesses with 10,000 workers, time taken for performance evaluations reduced employee productivity by at least $2.4 million and up to $35 million. It also found that one-third of workers’ output and quality declined.

When it comes to traditional performance reviews, many employees believe they are run by managers with little regard to any employee input whatsoever. However, there are other ways to evaluate an employee: the worker can evaluate themselves; their co-workers can appraise them; or a combination of a self-, peer- and manager-focused assessment.

As Harvard Business Review explains, since traditional performance reviews are mutually stressful for managers and their subordinates, there are a few recommendations to attempt to make it a more productive experience.

The first recommendation is to set initial, mutual expectations for manager and employee. When the year begins, the business’ performance requirements should be detailed for the employee so that expectations are clear. By setting performance objectives with the employee, the manager and business will ensure that employees are answerable for their performance.

The second step is to prepare for the in-person evaluation as it gets closer to the meeting. Two weeks before the in-person evaluation, HBR recommends that workers and managers review their past accomplishments – good, bad, etc. Managers could also ask for objective co-workers’ assessments of the employee’s work to garner different perspectives on their performance.

Before a face-to-face meeting, give the employee the assessment to let them internalize it and let their emotions settle before the discussion. From there, the atmosphere should be established by the manager. When it comes to competent, high performers, managers should keep the reviews on the workers’ accomplishments and progression at the company, along with concerns they might have in their role. For poor performers, putting the focus on accountability and improved results is the recommended route.

Asking employees what’s working and what’s not working can be helpful for both manager and employee. It’s also recommended to point out what specific actions, not generalities, employees should take to keep improving.

Based on the evolution of how and where work is being conducted, it seems that the annual performance review needs to be re-evaluated and updated. Only time will tell how it will change, but based on what’s not working, it will evolve as the workplace moves deeper into the 21st century.

Sources

https://www.workhuman.com/press-releases/White_Paper_The_Future_of_Work_is_Human.pdf

https://hbr.org/2011/11/delivering-an-effective-perfor

Importance of Cloud Accounting Certification

Cloud Accounting CertificationCertifications are not a new thing in the accounting industry. However, with new technology trends, accounting departments are faced with the challenge of taking courses in technology in order to carry out their tasks. Many businesses are ditching desktop-based accounting software and turning to cloud-based software. This requires that the users be well-versed with necessary skills to use the cloud accounting solution.

What is Cloud Accounting?

Among the cloud-based solutions that businesses have adapted is cloud accounting. Cloud accounting has all the functionalities of desktop accounting. However, in cloud accounting all processes are carried out online where the data is stored on cloud servers.

Cloud accounting offers businesses various benefits, such as the ability to access the system anytime and from anywhere as long as there is internet access. It also offers access to real-time information, online payments, latest software versions, easier compliance and scalability, among others. At the same time, cloud accounting solutions also allow remote working.

As businesses strive to gain from the benefits offered by cloud accounting solutions, a new challenge arises: lack of skilled employees. Hence the need to upskill.

Why it is Important to Have Cloud Accounting Certification

As cloud accounting becomes highly adopted, there is no doubt that there will be an increase in demand for certification for individuals as well as for organizations.

For individuals, this is important as it will indicate they have the competence to use the cloud accounting software. This is an added advantage to retaining a job or for individuals looking to take up jobs in the accounting field. Employers also could look for certification as proof that an employee already has skills on the type of cloud systems the business uses.

A certified employee will be able to set up the initial business data on a cloud accounting system. They also will know how to handle daily transactions online such as payments, receipts, and invoices, among other tasks. Other important transactions handled by cloud accounting solutions include bank reconciliations, reporting, payroll administration, and budgeting.

Since cloud accounting uses advanced technology like artificial intelligence, the employees will acquire more advanced skills, including financial analysis and cash flow forecasting.

Certified employees will have a better understanding of security levels in the cloud, considering that security is one of the most important issues to businesses.

Apart from learning new skills, certification will enhance workplace performance, as users will be required to complete courses and exams before getting certified.

Again, employees who upskill are less likely to worry about being replaced and, in any case, new knowledge gives employees a chance to negotiate higher pay.

When it comes to businesses, having certified employees means that they can handle projects or tasks successfully as they have a common understanding of cloud accounting systems. This ensures a business of efficiency and reduced operational costs as it can implement a standardized system. Furthermore, customers prefer working with qualified professionals – and this can be demonstrated through certification.

Since cloud computing is a core competency for businesses today, a certification is not only suitable for bookkeepers and accountants, but also for business owners, managers, CFOs and anyone who will be using cloud accounting solutions.

And with trends such as remote accounting and cloud-based accounting services, the certification helps to become future-ready.

Conclusion

The benefits offered by cloud accounting promise to transform the accounting industry through bookkeeping efficiency and streamlined financial administration, as well as provide real-time information. However, the success of these cloud-based systems depends on the users having the appropriate skills. As new technologies emerge, there is a fear of been replaced. But by upskilling, businesses can attend to clients while employees not only get to retain their jobs, but also offer more value.