Volume 2022 Number 2 - Spring Edition for All Clients

Steven L. Cox, CPA

Telephone: (919) 469-1773

Online at: carycpa.com or stevenlcoxcpa.com

Cary Office: 1135 Kildaire Farm Road

Suite 200

Cary, NC 27511 (year round office)

Pictured Staff Left to Right:

Mrs. Robbie Cox, Communications Assistant

Steve Cox, CPA

Mrs. Sharon Gentry, Admin Assistant

Thanks for a Successful Tax Season / Looking Forward to Even Better Tax Seasons Ahead

This past tax season was quite a challenge with several experienced tax preparers in the Cary-Raleigh area having recently retired (or passed away unfortunately). My practice added quite a few new clients, but now I am taking steps to maintain a stable & manageable client base and focus on continuing to improve the quality of our service.

New items added this past tax season included popular new payment options such as Venmo and Paypal. We put more focus on using Sharefile, where clients upload their scanned tax documents and receive downloaded important documents such as tax return drafts in a more secure manner. We also made sure we had password protection on any key document sent as an email attachment. We continue to improve our newsletter offerings, including special one-topic newsletters sent to inform a specific subset of clients about a new tax development, such as one that impacts clients with children under age 18 or clients who are at or near retirement. Our easy-to-use appointment software allows clients to make any type of appointment online (in person, Zoom or phone conference).

As we move forward, we will be encouraging more clients to go "paperless" and use our Sharefile option. We will continue to run the operation from our convenient Kildaire Farm Road location in Cary (with great receptionists Angie and Lynn). There will be a small 2% surcharge for payments made by Venmo, Paypal and credit cards next year, with no extra charge for direct draft of bank account or check payments.

Don't forget that we always appreciate your referral of quality new clients to the practice !!

Appointment Link

2022 Legislative Update

Some Tax Credits Expired or Reduced for 2022

IRS Focal Areas

SECURE Act 2.0 in the Senate

Mount Vernon, VA

Home of George Washington

In 2021, the Child Tax Credit (CTC) was expanded, including monthly advance payments on the CTC between July and December. With the failure to this point of the Build Back Better bill to pass in the Senate, the CTC is scheduled to go back to the previous $2,000 per child amount with no advance payments for 2022.

Without Congressional action, tax credits for installing solar panels and solar water heaters will be reduced from 26% to 23%.

Current IRS focal areas include tax returns that claim large real estate losses, especially by taxpayers claiming to be real estate professionals. Another focal area is cryptocurrency transactions going unreported. Other areas of interest to the IRS include schemes such as syndicated conservation easement donations, taxpayers who fail to report holdings in foreign bank accounts and more recently, compliance on pass-through entity returns such as partnerships and S-Corps.

A bill called the SECURE Act 2.0 recently passed the House and is currently under consideration in the Senate. This bill would gradually raise the age for taking Required Minimum Distributions (RMD's) from the current age 72 to age 75 over the next decade. It would also allow larger catchup contributions for people close to retirement age. Some version of the law is expected to pass this year.

You May Have Seen the News Story of the IRS Throwing Away over 30 Million "Information Returns" Filed by Paper

A news item that generated a certain amount of water cooler chatter was a recently released story that the IRS had destroyed 30 million returns filed by paper as they did not have the resources to process them.

The IRS noted that the returns reflect less than 1% of the 3.2 billion informational returns filed and that the returns were from 2018 and 2019. A typical filed return in this group would be government copies of 1099 forms issued where the government matches them to individual tax returns. Due to the lack of resources caused by the pandemic, it was decided that the benefit to be gained by processing the forms was much less than the cost of processing. The IRS also noted that 100% of the information forms for 2020 and 2021 would be processed. None of the destroyed returns were individual returns filed by taxpayers.

By The Numbers

1. FINALLY IN THE BLACK - The US government ran a $119 billion surplus in January 2022, breaking a streak of 27 consecutive months of deficits, and its first surplus month during the pandemic (source: BTN Research).

2. SMALLER HOMES - The average size of a single-family home built in the US in 2020 was 2,480 square feet, the 5th consecutive year that the national average size has declined (source: Census Bureau).

3. COULD THE INVASION IMPACT THESE EXPORTS? - 12% of the world’s wheat exports and 16% of the world’s corn exports come from Ukraine (source: Department of Agriculture).

4. WATER NEEDED - 74% of the land in the western United States (covering 9 US states) is in a “severe drought” as of 3/17/2022 (source: US Drought Monitor).

5. WORKING FULL-TIME - The number of Americans with full-time jobs peaked at 152.5 million as of 2/29/2020 (pre-pandemic), fell to 130.5 million as of 4/30/2020, and has since rebounded to 150.4 million as of 2/28/2022 (source: Bureau of Labor Statistics).

6. BOOMERS RETIRING - Per President Biden’s 3/28/2022 budget projection, Social Security outlays will increase by +79% over the next 10 years, Medicare outlays will rise +118% and interest costs will rise +213% (source: White House).

7. TWO-YEAR (PLUS) GRACE PERIOD - The 37 million Americans with “direct federal student loans” have not been required to make a student loan payment since March 2020, i.e., since the start of the pandemic. $1.3 trillion of the $1.6 trillion in total student loans are “direct federal student loans,” i.e., a loan made directly by the Department of Education (source: Federal Reserve Bank of New York).

8. IT’S BAD EVERYWHERE - Global inflation is projected to rise by +7.4% during calendar year 2022 (source: International Monetary Fund).

9. SIDE HUSTLE - 27% of American adults earn money from “gig activities,” e.g., childcare, house cleaning, ride sharing, selling goods online or renting property (source: Report on the Economic Well-Being of US Households).

10. NO PLACE LIKE HOME - In the first 54 Super Bowls (1967-2020), no NFL team played and won the game on their home field. But in the last 2 Super Bowls (# 55 and # 56), the winning team (Tampa Bay in 2021 and the Los Angeles Rams in 2022) played and won the game on their home field (source: NFL).

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News

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Winter Wolf Howl

NEWS YOU CAN USE:

As many of you know, taxpayers who have lived in their homes as their primary residence for at least two of the five years prior to the sale of the residence can take a capital gain exclusion - $250K for single taxpayers and $500K for married couples. It has been a long time since gains above these levels were common, but they are now becoming much more common in many of the hot housing markets across the country (including the Triangle area of NC). Don't forget that the long term capital gain is computed by taking your NET selling price (gross price less selling expenses such as real estate commissions and other expenses) and subtracting your COST BASIS in the house. The cost basis includes the original purchase price plus capital improvements that you have made while living there. Therefore, it is becoming more important to keep records of capital improvements made. Just a few examples of capital improvements would be replacing a roof, adding storm windows, putting an addition or new deck on the house, adding built-in appliances or adding new carpet or flooring.

If you take one message from this newsletter, know that it is critical THAT YOU VOTE IN ALL UPCOMING ELECTIONS - primary, general, local, state, national, they all matter. There are decisions being made that will affect generations to come. For my NC clients - the statewide primary is TUESDAY, MAY 17TH (tomorrow or today depending on when you may be reading this). Be involved and have your voice heard!! In NC, polls open at 6:30 AM and close at 7:30 PM.

Are you paying $139/year or up to $14.99/month for Amazon Prime? This popular subscription can be a win for some, but recent articles have some subscribers asking if it is worth it. For example, other vendors such as Walmart and Target now offer free-shipping plans as well as same day, in-store pickup. Some features such as free Kindle downloads of certain items as well as cloud photo storage are often rarely used by existing subscribers. Some say Amazon's Prime Day is becoming a huge garage sale for items that are not selling well. On the other hand, there can be valuable benefits if those benefits fit your needs. Everyone's situation is different.

Getting out and exploring the world this summer? Here are the top trending travel destinations: 1. Scandinavia, 2. Australia & New Zealand, 3. Costa Rica, 4. Greece & Italy, 5. Georgia & Armenia, 6. Canada, 7. Kenya & Tanzania, 8. Singapore and 9. Great Britain & Ireland.

Alert for those with student loan balances. The pause on student loan payments during the pandemic WAS set to expire on May 1st, but President Biden recently announced that the pause is being extended to August 31st due to the pandemic. One related item regarding the repayment process - with many loans, there are income driven repayment options (IDR's) which allow you to structure your repayment based on your current income level which may soften the blow. The Biden Administration is considering some partial forgiveness of student loan balances although potential details are still being worked out.

Tired of annoying ads playing while you pump gas? There are four unmarked vertical buttons to the right of most video screens on gas pumps. The second button from the top is typically the MUTE button which will allow you to pump your gas in peace. You're welcome !!

A reminder that the deadline for all Americans to have a REAL ID is May 3, 2023, which is now less than a year away. Your local DMV has more information about the process of acquiring a REAL ID.

Client Travel Guide:

Share some of your favorite getaway places !!

Send photos & descriptions to carycpa@nc.rr.com

Beaufort, NC - a fisherman always hates to give away his favorite spot, but now that our local news station in Raleigh has a "Beaufort cam" during the nightly weather forecast, I guess the secret is out. Beaufort is a great low-stress getaway.

Submitted by Steve Cox

Montpelier - home of James Madison in Orange, VA - Thomas Jefferson's nearby home at Monticello attracts a lot more visitors, but Montpelier is a great window into America's great history and the story of James & Dolly Madison. Nearby Orange, VA is a great small town to visit.

Submitted by Steve Cox

Wyoming - when we took our pre-pandemic Discover America trip a few years ago, we developed a new list of favorite places with Wyoming at or near the top of the list.

Submitted by Steve Cox