Unemployment Tax Savings from the 2021 Stimulus Bill

If you or your spouse collected unemployment in 2020, you need to watch this video!

Photo by Nataliya Vaitkevich from Pexels

President Biden recently signed the American Rescue Plan into law, and it has some very exciting provisions for people who collected unemployment during 2020. Hannah Cole of Sunlight Tax created the following short video to give you the latest information about how the new law will apply to unemployment income.

Hannah goes through specific information about the unemployment taxes affected by this retroactive legislation. Hannah covers what you need to know about filing, whether you have already filed your 2020 taxes or whether you have not filed yet. She goes through a few scenarios to show how much you can save depending on your current tax rate and whether more than one person in your household was collecting unemployment last year.

Here’s what Hannah has to say:

What the tax savings is on $10,200 of unemployment income (thanks Democrats!), and a shoutout to those of you who called, texted & knocked to get out the vote--you had a hand in this tax bill that will lift 50% of American children out of poverty and take a meaningful step towards guaranteed income for families with children. You made a difference. Americans (of all parties) will benefit from your work! Thank you!!!❤️🇺🇸

Watch the blog for a longer post about the entire stimulus bill coming soon!

How Can Freelancers Benefit from New Tax Laws?

Hannah’s short interview on BPR Radio

Image via StartupStockPhotos on Pixabay

Hannah Cole had an interview with Matt Peiken of Blue Ridge Public Radio in North Carolina last week. She discussed the new tax laws and some of the areas where artists and other freelancers can benefit from them, like sick and family leave credits.

Although she talked to Matt for about an hour, the broadcast only contained a short clip. You can listen to Hannah and read about the tax law changes in her discussion with Matt in the article on the BPR website.

If you missed the live Shuttered Venue Operators Grants webinar mentioned in the article, click here to sign up to get the replay video.

What Do Arts Organizations Need to Know About the Federal Shuttered Venue Operators Grant?

Congress earmarked $15 billion in grants for performing arts venue operators impacted by the pandemic and here’s what you need to know.

On December 27, 2020, a congressional stimulus bill that was passed and signed into law by then President Trump had several provisions to help US residents through the COVID-19 crisis. Among these are additional stimulus payments, enhanced and extended Federal unemployment benefits, additional Paycheck Protection Program (PPP) money, simplified PPP forgiveness rules, an extension of the temporary charitable contribution deduction for taxpayers who take the standard deduction, and a doubling of the business meals deduction from 50% deductible to 100% deductible for the years 2021 and 2022 so long as the meal is purchased from a restaurant. (Takeout meals are okay.) These provisions should provide some help to all of us as we continue to weather the economic crisis.

But one item in the bill will specifically help people in the arts. Congress earmarked $15 billion in grants for arts venue operators whose income decreased due to the pandemic crisis. The money is meant to help these organizations weather the rest of the crisis, with priority given to the hardest-hit venues, and $2 Billion set aside for smaller, so called, “main street” venues. The funding is targeted primarily towards live venue operators, movie theaters, talent representatives, and live performing arts organizations. Museums (including zoos and aquariums) are eligible with some additional restrictions.

So, what do these grants look like? The Shuttered Venue Operators (SVO) Grant money, which will be administered by the Small Business Administration (SBA), provides grants of up to 45% of the organizations’ gross earned revenue (or $10 million, whichever is less). …read more…

This article first appeared on Hyperallergic on February 23, 2021.

Translating the New Tax Bill for Small Businesses

“Am I going to benefit from the new business deduction?”

“Do I need to incorporate to take advantage of it?”

These are questions I’m hearing a lot since the passage of the massive new tax bill. Much of the worry centers around some misconceptions. So, I’d like to outline what’s in the new provision, who it affects, and why you likely don’t need to change a thing to benefit.

The most important outcome of the new tax law (officially the Tax Cuts and Jobs Act, or TCJA) was to give a large, permanent tax cut to corporations. The corporate tax rate went from 35% to 21%. Those numbers are a little deceptive, because most US corporations don’t pay nearly that rate once you factor in tax credits and loopholes. A 2016 U.S. Government Accountability Office study found that between 67% and 72% of all active US Corporations between 2006 and 2012 had no tax liability after credits. In fact, the effective corporate tax rate (a much more meaningful number) is closer to 15%. But despite the fact that most corporations don’t pay anything close to the corporate tax rate, the point of the TCJA was largely to cut that rate.

But most businesses in the US are small businesses, not large corporations. In fact, 30.2 million businesses (or 99.9% of US businesses) are small businesses, according to a government-sponsored  2018 US Small Business Administration report. About half the private workforce in the US is employed by small businesses, and more than a quarter of the small businesses are minority-owned. However, the big corporate tax cut rate did not help these businesses at all. So rightfully, Congress introduced a provision into the TCJA to create a little more parity, called the deduction for Qualified Business Income (QBI) (also known as Section 199A). This provision, unlike the corporate tax cuts, is strictly for businesses known as “pass-through entities.” (More on that in a moment.)

But first, here’s what it does: …read more…

Money and Happiness: Artists' Superpower

Chicory, acrylic on canvas, 2016 by Hannah Cole. Courtesy of Slag Gallery, New York.

Artists Have a Superpower

I see all kinds of incomes in my tax practice, and the one thing it confirms for me is that, once past the basic human needs, money and happiness aren't related. I've been doing a lot of reading on the science of happiness lately, and also on the financial independence movement, (favorites: Mr. Money Moustache, Frugalwoods, and the Mad Fientist) and I've suddenly been noticing the strong thread of happiness science within the extreme-frugality movement. 

And I had a thunderstrike: artists have a superpower. We already know this. No one goes into art because their top priority is getting rich. And most artists do go into it because they feel a need, and they get things out of art that are more important than money. Things like connections, community, curiosity, continuous learning, challenges and projects, and engagement with the unknown. 

So this post is just a word of appreciation. 

But here are a few things you can DO with your money to help it grow and give you lifelong security. Because that is my particular passion project:

• Open a SEP IRA.

• A super basic (and funny) intro to low-cost investing, from Mr. Money Moustache