Steven L. Cox, CPA

Email: carycpa@nc.rr.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

During the month of January, we will be distributing organizer/checklists, questionnaires and also engagement letters to all clients via email. The engagement letter is simply a summary of the services I will be providing plus the proposed fee. We need all clients to include the signed letter when you submit your tax documents, regardless of how they are submitted. Thanks very much.

The IRS has indicated that they will start accepting filed 2024 tax returns on January 29, 2025. One optional but increasingly popular practice is having the IRS send you an identification PIN number each tax season that you have keyed into your tax return. This prevents anyone else from filing a return under your name. In order to take advantage of this feature, you have to set up a personal account with the IRS at irs.gov. The setup process can be a bit cumbersome to be honest, but having an account is very useful as you can also use it to check your balances, check refund statuses, order transcripts of prior year returns, track your estimated payments made, and much more.

The main options for submitting your tax documents to us are 1) uploading scanned copies via Sharefile, 2) bringing paper documents to the Cary office and either dropping off or setting up an appointment with Steve, or 3) sending by U.S. mail. While all methods are welcome, I will note that over the coming years as I move into my late 60's age wise, I will likely do a gradual reduction in my client numbers each year and some priority moving forward would be given to clients who are "paperless" and use Sharefile. Let me know if you would like more information on using Sharefile to upload documents. I repeat that this will be a gradual process.

Blue section is only for those clients who have created an LLC or other business entity with your Secretary of State's office (small number of clients):

In 2021, Congress passed the Corporate Transparency Act (CTA), whose mission is to combat money laundering activities. These are activities where illegally obtained money is transferred around among various entities in an effort to hide the origin of the funds. One part of the CTA involves Beneficial Ownership Information (BOI) reporting, which became law on January 1st, 2024. Under this law, certain entities (such as LLCs and corporations) who file or filed documents with their state's Secretary of State office as part of their registration must report ownership information to a government agency called FinCen (Financial Crimes Enforcement Network), which is part of the Treasury Department. Among my client base of almost exclusively individual (1040) tax return clients, there are several clients who have businesses that have formed LLCs (limited liability corporations) or the rare S-Corporation. These entities would be subject to BOI reporting. BOI reports include the legal filing name & information of the entity as well as all information on all owners & applicants who benefit from the entity's operations. There are stiff penalties involved for not filing this information with FinCen.

An open issue related to BOI reporting is whether CPAs assisting taxpayers with this process is considered "the practice of law", as CPAs are not allowed to do anything that might be considered the practice of law. The consensus seems to be that my assisting clients in filing this information could possibly be considered the practice of law, and therefore I will only direct affected clients to the online reporting options available where they can self-report (go to https://boiefiling.fincen.gov), but not handle the reporting myself. Those who feel they may be subject to BOI reporting or need assistance should consult their attorney. If you do not have an entity such as an LLC or S-Corp where you filed registration forms with the Secretary of State's office, this law would generally not apply to you. I am working to meet my obligation to keep clients informed regarding BOI by posting this information.

I will note that there have been efforts by many groups to stop or delay the implementation of the BOI reporting for political reasons, and a recent decision by a district court in Texas put the enforcement of the BOI reporting on hold until the legal challenges were resolved. However, the law itself remains in place. The VERY latest information (as of December 23rd) is that the deadline for having the information in place has been reinstated to January 13, 2025. This is just a short extension from the original January 1, 2025 deadline. It is therefore critical that those with LLCs or other corporate entities go to the website above and key in their beneficial ownership information. I have been told that the process is fairly straightforward. Consult your attorney if needed.

Looking ahead to the upcoming tax season, if you would like to make an appointment to meet with Steve, either in-person, by Zoom, or by phone call, feel free to click the Appointment Link below and set up a time! Please avoid calling me on the phone with no notice as I have roughly 175 clients and cannot constantly field random calls - thanks very much.

Don't forget that we always appreciate your referral of quality new clients to the practice (although the availability for new clients is limited due to capacity constraints) !!

Adding Some Context to Client Concerns About the New Administration, including Medicare & Social Security

I have personally heard and also read news stories about a high level of "angst" amongst American citizens about the new administration taking office in January and government service cutbacks in particular, with most of the questions surrounding the future of Medicare and Social Security.

While I am not an official political science expert, I do happen to be a "current events junkie" and I work hard to pass on reliable information to my clients via this newsletter. Here is some context surrounding questions that many of you have.

The new Department of Government Efficiency (or DOGE), headed by Elon Musk and Vivek Ramaswamy, is not an official government department and it has no official powers. They can make recommendations to Congress on cutting spending and they have targeted to cut $2 trillion from the federal budget and complete their work by 2026, an aggressive goal indeed.

In additional to discretionary spending programs, Musk has indicated he is open to some cuts in defense spending, which many Republicans would not support. However, even with massive cuts to discretionary programs and some defense cuts, a widely held view is that you can't get to cuts of $2 trillion without cuts to entitlement programs such as Medicare and Social Security. Generally, cuts of this nature would require 60% approval in the Senate, with the GOP projected to have 53%, thus needing 7 Democrats to join in (let's just call that "unlikely"). However, the GOP could use a process called reconciliation to get around the 60-vote threshold, but that would be messy.

Trump has proposed removing federal taxation of Social Security benefits, which would help the 56% of recipients who currently have their benefits taxed at some level due to other income. The 44% who would see zero tax benefit from the Trump proposal are the lower income recipients who rely solely or almost solely on SS benefits to live. Most people don't realize that the federal taxes collected on SS benefits go BACK into the SS coffers. As noted previously in this newsletter, the Democratic Party plan for no taxes on SS benefits (proposed starting in 2022) was paid for by raising the wage cap so that the wealthy pay SS taxes on more of their income. The Trump proposal is NOT paid for, and will cause the Trust Fund to run out in 2031 instead of the current 2034 depletion date. Therefore, if nothing is done to fix the issue, we would have projected 21% across-the-board cuts in Social Security benefits starting in 2031 to align incoming revenues with expenses.

Based on the current environment, I would say to Social Security recipients who have reached their full retirement age (FRA) but have been deferring taking benefits to age 70 because they don't need the money now and want to receive a higher benefit later, you may want to give consideration to drawing benefits now and investing the money that you don't need. See your financial advisor for guidance based on your particular situation.

In the long term, many Republicans want to "privatize" Social Security, where beneficiaries might have "Social Security Advantage" plans on the same general premise as Medicare Advantage plans. Wall Street folks would be able to earn significant commissions on a privatized program and your retirement nest egg would go up and down with the investment markets. Pay CLOSE attention if a proposal is made in the Senate shortly after Inauguration Day (reportedly to be made by GOP Senator Kennedy of Louisiana) to start the process of privatizing Social Security. The current version of the GOP plan would raise the retirement age, eliminate spousal and child benefits, and has NO option if recipients want to stay on the old system and avoid Wall Street volatility and fees.

The process of switching from one Social Security system to another, as with the Medicare system which just recently reached the point where a slight majority of beneficiaries now have private Advantage plans, would be a challenging process. Dr. Mehmet Oz, who has been tapped to oversee the Center for Medicare & Medicaid Services (CMS), has been a proponent of Medicare Advantage plans for all Americans, based on past comments. However, a recent survey showed that 61% of health systems nationwide were at least considering dropping their acceptance of some Medicare Advantage plans. Advantage plans generally restrict patients to a network of providers and are much more likely to deny a procedure than original Medicare, although there are many outstanding Advantage plans out there that are loved by their members. It seems that the greatest fear that I am hearing about Medicare and SS changes is that choices will be taken away, and these are programs where people invested significant amounts of money through payroll taxes. One expert recently gave his opinion that rather than officially discontinue original Medicare, the companies that offer Medicare Supplement insurance (that covers the 20% that original Medicare does not cover) will make their policies so expensive, only the wealthy will be able to afford them and therefore stay with original Medicare. As can be seen from recent headlines in the news, there is a growing tension between the American public and America's healthcare providers.

A great source for Medicare questions (it's free) is Chapter Medicare Advisors at (352) 841-0632. A YouTube channel related to Social Security benefits that you may want to subscribe to is run by Dr. Edward Weir and here is a link to his channel: https://www.youtube.com/@MyGovExpert. He typically does 60 minute podcasts where he discusses a current topic for 10 minutes and then takes specific questions from viewers for the remainder of the hour (also free). He spent his career working for the Social Security Administration.

Let me add one other healthcare note regarding the pricing of popular drugs for Medicare beneficiaries. Under the negotiation provisions of the Inflation Reduction Act, the negotiated price for the 10 most popular drugs will be significantly reduced beginning in 2026. For example, Xarelto would go from $517 to $197 and Jardiance would go from $573 to $197. Many Congressional Republicans have expressed opposition to the negotiated price program. Yet, it DOES save the government major dollars, which is supposed to be the goal of the new DOGE Department efforts. All of this is to be worked out in the year ahead.

I will end this article here, but obviously there is a long list of concerns out there about potential changes coming, so feel free to email me with any specific questions and I will give you one person's best answer and/or refer you to someone else that can help with your answer.

Client Travel Guide:

Share some of your favorite getaway or local places !!

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

Panama - Many Americans are newly interested in spending more time outside of the U.S. The 3 countries highlighted in this newsletter all received very high marks for livability in a recent survey of American expats living around the world.

Panama topped this list due to the friendliness of the Panamanian people to Americans, reasonable housing prices, high scores on leisure & quality of life, cost of living, and ease of the visa process although retirees rate Panama much higher than those looking to work there.



Indonesia - Many expats ranked Indonesia as one of the top countries due to the friendliness of the people and the welcoming culture, cost of living, affordable housing, availability of various visa options, and a warm climate. Indonesia has thousands of islands, so research is required to find the best location for visiting or relocation. Indonesia is very far from the US in terms of travel distance and time zones when communicating with friends and family in the US. Major places in Indonesia include Jakarta, the capital city, plus the islands of Bali, Java and Sumatra.



Colombia - This South American country has been rapidly moving up the favorability surveys of expats in recent years. The capital city of Bogata and also the Caribbean coastal city of Cartagena are very popular with expats and tourists. Colombia borders Panama and Ecuador, both countries that are very hospitable to foreigners. As with any country, it is best to research thoroughly before making the journey and talk to a travel professional who knows the area well if possible.

Submitted by Steve Cox based on research and not actual travel to these 3 countries.