The next blog will focus on your business Covid-19 recovery plan. This one focuses on your personal recovery plan.  Over the past 3 months we've fallen into some habits that we might need to snap out of or we might need to keep. Take a personal assessment of these habits. Assess them and put them in the Keep or Toss Column. This could be everything from sleeping in late to more frequent family dinners, to saved money (and maybe ate healthier?) by not eating out so much. Assess your goals for the next 3 months, 6 months 1 year and 3 years. Where would you like to be as a person/family.  Strategize on how you can reach these goals.  Tactically, write down specific things you have to do to make those goals become reality.  If you don't S.O.S. (Stop, Observe and Shift), we are doomed to stay in the ditch longer than if we do a double check and take action--even micro action over time can achieve amazing progress.  Business goals fit into personal goals. But personal goals should be your guiding light and driver to lead you forward into the future with your professional goals being part of the strategy /tactics to get you there.  Beware the tail doesn't wag the dog. 

As the 3rd round of tax relief goes through the Congress and Senate kicking and screaming, here are some things us small fry should demand as well so we come out well on the back end...

1. Tax on unemployment benefits should be waived for 2020 and 2021.  As we collect unheard of amounts in unemployment, we will get hit with a huge tax bill when it comes time to file our taxes over the next two years.

2. Tax on cancelled debt should be waived for the next 5 years. As Americans to to their credit cards to survive the collapsed economy, we will need to come out of it and negotiated debt cancellation with these companies.  These cancellations are taxed--even the interest part. Wouldn't it be nice if they weren't.

3. Student tuition credits should increase and broaden.  College students are going into a very different environment than before.  Educators are doing an admirable job of pivoting their business models rapidly. Still it isn't the same. To compensate for this, the government should increase the tuition credits provided and to whom. 

Income levels allowed to take the education credits should also increase after all education is an investment and businesses get to right off all their investment expenses. Education is part of the business of our lives. Right now these income limits are ridiculously low.   

Any unused tuition credits should be allowed to carry over to future years when they can be used just like capital gain losses.

The American Opportunity Credit should apply to graduate students, not just under graduates.

4. With more Americans working at home than ever before the business use of home deduction should come back for those being paid through W2s.

​5. Union needs to become more powerful not less (said no meat packer ever). Bring back the union dues deduction.

Wearing a mask is not about whether you are sick or not. It it not even about whether you care if you get sick or not because you could get over it quickly. Wearing a mask is a sign of respect. It is acknowledging that for some people out there this is incredibly serious to their family--perhaps a matter of life and death.  Please reciprocate that respect and wear a mask when you are out. It is like a big sign that says "I get it".  Also social distancing means keep your distance. It means you have to wait until that slow poke clogging up the aisle or walking in the middle of the bike path moves.  No,  you are not social distancing if you go on a bike ride and zip by someone within 2 feet of them quickly or jog past someone, or pass someone on a narrow trail or in a congested parking lot or supermarket aisle. If we do this, we will continue to spread the virus. Be smart and patient as you enjoy summer fun. 

I work in LA County. I live in Orange County. It is really interesting to me to see the difference in the behaviors of the two counties. Around my office in Long Beach, I would say that about 90% of the people walking around the streets are wearing a mask.  In Orange County, I would say that number is more like 15%. If neighboring counties can have such different attitudes and behaviors, then it is no surprise that different states are embracing social distancing and mask wearing at different levels or urgency. 

Tax payers are just now discovering a particularly mean-spirited limit to the Economic Impact payments. We all were not surprised when this administration said any one without a social security number that qualified you to work would NOT get the stimulus check.  To the surprise and great disappointment to many citizens, the administration ALSO restricted stimulus funds to EXCLUDE citizens who were married to those without a working social. WHAT?  Why should they be punished or treated differently because of who they fell in love with? This was deliberate. How do you know?  Because there is a carve out for military/veterans married to those without working socials.  This tells you there was discussion on this topic. It wasn't accidental.  How mean spirited can you get in this scary time?

We are just one family in America. I am sure every family has its tales.  Send yours to us in an email to Trish@AmeriTaxCA.com.  Right right now this is how Covid-19 has affected us. Just sharing.  We have two college-age girls. One was called back from her study abroad program 3 months early. She is back at home and just finished her quarantine. We are haggling to get the dorm room refunded and to get her original flight booked refunded.  We were worried that course credit for certain things wouldn't count and that it might end up having to do an extra semester of school (and school tuition!). The school has just provided alternative work so that the credits can count.  She is taking classes virtually.

The other daughter is in college in WA working on her Physical Therapy degree so we have been tracking our friend Covid-19 for longer than most.  I just did an intervention upon learning that her roommates two close associates both tested positive for Covid-19. This daughter is an at-risk individual.  I had to figure out where to quarantine her since she could very possibly be a carrier. We imposed on friends with an empty cabin in Big Bear.  (Thank you!) Major worry for about a week to see if symptoms would develop.  None. Yeah! Finishing up the 14 days this Monday.  She is doing school virtually. It snowed while she was there (beautiful). She had both her birthday and Easter in quarantine.   Her college will be doing a boot camp prior to fall semester to be sure they learned the skills properly virtually as Physical Therapy is well,  physical, and requires people to practice on.

Mom and Dad are both essential workers.  Dad because he's at the port of LA/Long Beach which has been basically tracking this virus since it hit China. So again we've been more tuned into it than most. Those huge cargo ships all over the world??? Well most of them are parked in the South China Sea.  There is an app that tracks them.  Each ship is a red dot. When you look at the app, the South China Sea is smothered in red dots.  There's no blue for the sea.  You can also see way more than normal of these dots right around our very own ports. Needless to say shifts at the port have dried up and the dispatch hall has no work.  Shipping companies laid off crane operators way back when. One company laid off 100% of its crane operators.  I don't think those casuals are getting any work either. Zippo.

As a tax accountant, mom is deemed essential. She set up her office to social distance in early March and than in mid-March went 100% virtual.  Once the Mayor announced the strict stay at home orders in LA, people listened and no one came by anyway. Business stopped.  Then it picked up when the stimulus checks were announced as every "non-filer" and SSI recipient near by came in to see how they could sign-up for the stimulus check.  This didn't seem safe and we went to full mask and glove protocol in the office to answer questions and handle coffee-stained, ripped 2018 W2s with less than $1000 on them. Fortunately, on April 10th, the government put up a website link for non-filers to file a "empty" tax return so their names could be among the ones counted worthy.  Tons of people, and germs through the office, but no business.  Now Mom has to figure out how to staff an office through July 15th, when and how to lift the 100% virtual business model and go back to safe-distancing in-person service and a bunch of other stuff.

In the meantime, phones are ringing off the hook for people trying to figure out how to get their stimulus checks direct deposited, and what to do if they went through one of the 3rd party banks for their refunds...(See glitch story on front page).  It's April 16th so to heck with it. The office is closed until Monday when once more we will likely do nothing but answer phone calls about the stimulus and listen to people yell at us because theirs hasn't arrived yet and it must be all our fault. 

So to summarize, kid school/relocation worries, kid health worries, dad job worries. Mom job worries. And lastly, we have been fortunate to have some rental properties but a goodly amount of tenants have decided not to pay rent (even when their jobs weren't effected by Covid). Tenants have eviction and late fee relief. But small Landlords? Are they getting relief from their banks? Are their late fees being forgiven? Not yet. 

Biddy boom. Biddy bang. God provides. This will be over and Americans will push through. And after a period of time (years?) getting back to normal, we will have another joyful expansion and we will think the stock market won't fall and housing prices will keep going.  It's the circle of life and it moves us all to despair and hope to faith and love (Lion King). #NoTaxonUnemploymentBenefits.

Today we celebrated Easter Sunday Online--First through Zoom with our family and then through Live Stream for services.  It got me thinking as I sat safer-inside on this gorgeous day about how the new tax code impacted giving (yes, I'm a tax nerd). According to the Lilly School of Philanthropy charitable giving has fallen to 56% from 67% since 2006 and it has fallen to just 38% among those under 40.  Charitable tax deductions since the new tax code was implemented fell from 21% to 9% according to the Tax Policy Council--but this appears to be just measuring deductions, not giving.

Empirical evidence though my office in Long Beach, California suggests organizations like the  Red Cross and Salvation Army and other christian organizations like Samaritan's Purse, whose fast-acting, boots-on-the-ground response to crisis are looked to with welcome relief, will be hit hard by this over the next few years.  Clients said to me as they slipped their Tithe receipts and donations slips across the desk, "I guess these don't really matter any more."

One solution to reversing this trend is a Universal Tax deduction (much like the teachers $250 educator adjustment). Another solution is to give a tax credit for charity.  However, how much cheating these types of tax treatments will engender is probably one of the reasons they might not get traction to begin with. 

What can we do? First, we can model giving behavior to our children and friends (even though we aren't supposed to). Second, we can teach our children the three Ss--Spend, Save, Serve (aka give).  Sure we can say we give time, but really how many of us flew/drove to the closest hurricane, fire, flood, earthquake, mud slide zone nearest you?  I didn't.  When clients tell me they have no money left over after expenses to save, I ask "if you're employer reduced your pay/hours by 10% would you deal with it?" Most say, of course. So then, of course, you can always find money to save and to serve if you choose to do so.

41% of Gen Xers and 29% of Baby Boomers say they ended their marriage due to disagreements about money per a TD Ameritrade study.  (Yet the irony is that after divorce, the fighting individuals are shown to be in even worse financial circumstances than before the divorce per other studies.)  According to Cashlorette, 60% say one person spends too much or the other is too cheap. The remaining surveyed were split between someone being dishonest about money, how to divide the bills or disagreements about financial priorities, forgetting to pay the bills and such.   The Journal of Financial Therapy reports these common financial infidelities: Hiding purchases (24%), lying about how much was paid for a purchase (23%), spending money on children behind spouses back (22%), saying a purchases was on sale when it wasn't (19%), secretly withdrawing money from savings (11%), secretly getting a new credit card (11%), covering up debt (7%), hiding a raise or a bonus (4%).

As a tax accountant, I can testify that a majority of households have one person in charge of preparing taxes and attending their tax meeting.  Your financial life shows up in your tax return. Do not abdicate your responsibility for taxes. Even if only one of you can attend your tax meeting due to scheduling conflicts, at least review your tax documents and your final return together. If you do that, at least some of the above deceits won't happen to you. 

Much is written about the value of a weekly date night. Take note though, the date night is not the night you want to be talking about money issues (what a kill joy). Maybe assign the 3rd week of every month to discussing financial issues, household priorities, child rearing and to take a few moments to talk about where you see yourselves as a family 2 - 5 years down the road and what steps you can take today to get there. 

While this may seem like a self-serving post.  It isn't. Believe me, we don't make our living off of doing "EZ"s, students and seniors.  However, in the past couple of week several of those same demographic groups came to be in front of me.  In the case of the EZ, with a few short questions, I was able to determine the Tax Payer could be head of household claiming her parents who they supported and thus saved thousands of dollars this year and every year going forward. We are doing 3 years of amended returns. The "EZ" will have these savings forever, even though the tax payer will probably do their own taxes on Turbo again next year.  I mentioned, "You know I just paid for myself for about the next 5 years in just one year."

A senior came in to the office. They had been doing taxes through the free senior center tax program.  This tax payer owed money every year and couldn't understand why. We set up voluntary withholdings on social security and changed their withholdings on their pension. I'm pretty sure they won't owe next year.  We also showed how "Senior" could claim their grand daughter being that they lived in a multi-generational home. There are bunches of questions to ask in this area to determine what strategy you can/can't use.  Guess what I said, "You know I just paid for myself for about the next 5 years in just one year."

Another area where FREE does not pay may be in deciding when and when not to claim your adult college-going children who also have decent jobs. By shifting children to stand on their own tax return, they could be able to take the college credit that the parent might not be able to take and by being on their own, "Student" may also qualify for the stimulus check being issued. There are bunches of questions to ask in this area to determine what strategy you can/can't use. FREE doesn't ask you these questions.  Most tax payers think their older children are worth way more than they actually do in terms of tax advantages, but with the new tax code that might not be the case. Guess what I said, "You know I just paid for myself for about the next 5 years in just one year." Just kidding.

Whenever I give non-tax advise, I do say "You know this advise is free and free advice is worth exactly what you pay for it."  Always do your research and try to find several different sources and points of view.  Your tax adviser can be one trusted point of view on a wide range of topics. If your tax accountant isn't part of your "village", keep looking until you find one that is.