The tax season ended this year on Monday, May 17th, making it the second year in a row that the deadline has been extended. Our office and our CPA subsidiaries worked until the last possible moment. An unwritten rule is that the longer you take yourself to complete a project, the longer it will take to complete the task.
This year and last year proved that this observation is correct.
The IRS and Congress have been preoccupied with bees for the past few years. The reaction to excessive corporate taxation led to the Tax Reduction and Employment Act from 2018. The SECURE law became law in January 2020. The CARES act was in response to COVID in March 2020. Our leaders seem to believe that it takes a village full of regulations to guard our economy and our citizens.
The Tax Cut and Employment Act (TCJA) of 2017 was the most significant change to our tax law since the Tax Reform Act of 1986. The act is responsible for increasing the standard deduction, capping the state and local income tax deduction (SALT) at $ 10,000, Lower marginal tax brackets, increase inheritance tax exemption to $ 11.2 million for individuals and $ 22.4 million for married couples, and remove personal and dependent tax exemptions.
The Act to Establish Every Municipality for the Improvement of Retirement (SECURE) came into effect in January 2020. The law removes the IRA “stretch” for non-spouse beneficiaries and increases the minimum age for distribution (RMD) to 72 years. The changes are not limited to these problems. The SECURE Act was extensive and confusing.
The COVID-19 pandemic required some sort of response, and Congress and the IRS complied by passing the Coronavirus Aid, Aid and Economic Security Act (CARES). This bill contained various temporary measures to ease the burden of the economic downturn that resulted from the closure of virtually all areas of our economy. The focus has been on protecting individuals and businesses from the shutdown of our national and global economies. The answer was quick. The implications have yet to be fully understood.
New to the “village” of pastoral trials is the American rescue plan of 2021. That bill included another round of incentives for skilled individuals, an increase in child tax credits, an increase in childcare tax credits, an extension of federal unemployment benefits, and many other temporary ones financial bonuses to help people who are still dealing with the effects of COVID-19.
Each of the laws deserves individual discussion and conversation. Overall, the “village” of regulations will have unknown consequences for the American economy. We will never know what would have happened if our guides hadn’t responded. “Quarterbacks on Monday morning” discusses what should have happened regardless of the result.
Our job is to manage what is and not what we believe. A friendly suggestion would be to base your financial decisions on the most likely direction of our economy, regardless of your opinion. We do that as professional asset managers.
Joseph “Big Joe” Clark, whose column is published on Saturdays, is a certified financial planner. He can be reached at [email protected] or 765-640-1524.