According to HRSA at: Provider Relief Fund Reporting Requirements and Auditing | Official web site of the U.S. Health Resources & Services Administration (hrsa.gov):
The September 30, 2021 Reporting Period 1 deadline has not changed; however, in response to challenges providers are facing given the COVID-19 surges and natural disasters around the country, a 60-day Grace Period is in place. This period allows providers to come into compliance with their Provider Relief Fund (PRF) reporting requirements should they have failed to meet the Sept 30, 2021, deadline.
- While you will be out of compliance if you do not submit your report by September 30, 2021, repayment or other enforcement actions will not be initiated during the 60-day grace period (October 1 – November 30, 2021).
- The grace period began on October 1, 2021, and will end on November 30, 2021 at 11:59 p.m. ET.
- Providers should return unused funds as soon as possible after submitting their report. All unused funds must be returned no later than 30 days after the end of the grace period (December 30, 2021).
This grace period only pertains to the Reporting Period 1 report submission deadline. There is no change to the Period of Availability for use of PRF payments.
All recipients of PRF payments must comply with the reporting requirements described in the Terms and Conditions and specified in directions issued by the U.S. Department of Health and Human Services (HHS) Secretary. Submit your report via the PRF Reporting Portal.
Most years, the government bumps up the maximum Social Security taxes that you can pay. For 2022, the maximum wage base jumps to $147,000, an increase of $4,200, or 2.9%, over the max of $142,800 that was in place for 2021.
At a rate of 6.2%, the maximum Social Security taxes that your employer will withhold from your salary is $9,114. This is $260 higher than the 2021 max of $8,854. Employers then match any Social Security taxes withheld from their staff’s salaries.
Higher Medicare Taxes Due To The Affordable Care Act Passed In 2012:
Starting back in 2013, the employee portion of the Medicare tax jumps from the current rate of 1.45% to 2.35% on earned income in excess of $200k for single individuals and $250k for married couples filing a joint tax return. As of now, the employer will continue to match their employees’ Medicare taxes at a rate of 1.45%, which means the total marginal Medicare tax will be 3.8% for high-income taxpayers. This tax is reported on the Form 8959.
For example, if you’re single, and earn wages of $500k from your job, expect to pay $2,700 in additional Medicare taxes (($500k – $200k) * .9%) for 2013 and beyond.
To increase taxes for high-income individuals even more, the Medicare tax continues to apply to unearned income. Anyone with income over the $200k or $250k threshold should expect to pay Medicare taxes at a rate of 3.8% on interest, dividends, capital gains, and net rental income (except for when you rent office space you own to your practice) in addition to any federal and state income taxes due on this income. This tax is reported on the Form 8960.
Calculating the Self-employment Tax:
If you’re self-employed and earn more than $400 in net profit from your business, you’re subject to Social Security and Medicare taxes as well. Known as the “self-employment tax”, you’ll need to complete a Schedule SE to calculate this tax, and then report the amount due on your Form 1040.
The self-employment tax is based on a Social Security tax rate of 12.4% and a Medicare tax rate of 2.9%. These rates are double those paid by employees, since a self-employed person must pay both the employee’s portion and the employer’s portion of both taxes. Remember, when you work as an employee, your employer matches the Social Security and Medicare taxes withheld from your pay.
Unlike most other taxes, when dealing with self-employment taxes, the more you earn, the less you pay in taxes. If you earn income as an employee and as an independent contractor, and your combined “earned” income exceeds $142,800 in 2021, make sure to complete all the lines of the Schedule SE. Otherwise, your tax calculation will not be correct and you’ll end up overpaying your self-employment taxes.
Seems that the upcoming multi-trillion dollar spending package could include a provision eliminating the Backdoor Roth Conversion. Essentially, those post-tax contributions many individuals routinely deposit into their IRAs each year might no longer be eligible to be converted tax-free into a Roth IRA starting in 2022 – depending on how the new rules play out of course.
Known as a Backdoor Roth, this popular strategy allows high income taxpayers to fund a Roth IRA even in years that their income far exceeds the allowable threshold. For 2021, single individuals earning more than $140k and married couples earning more than $208k aren’t eligible to contribute money directly into a Roth IRA.
If you’re sitting on an IRA that includes post-tax contributions or plan to contribute for 2021, you might only have until 12/31/21 to convert your IRAs to a Roth IRA. Please note, the larger the value of all of your IRAs as compared to the total post-tax contributions sitting in those IRAs, the higher the percentage of the Roth conversion that will be taxed.
- Start by figuring out how much post-tax dollars you have in your IRAs as of 12/31/20. If you’ve been tracking these IRA contributions correctly, you can find the total on the Form 8606attached to your personal tax returns. If your Form 8606 is incorrect, try to recreate the post-tax contributions within your IRAs as best you can.
- Next, tally up the value of all of your IRAs. Include your traditional IRAs, rollover IRAs, SEP IRAs and SIMPLE IRAs while omitting money already held in your Roth IRAs. Also exclude the value of all your non-IRA retirement accounts such as your work 401Ks, 403Bs, 457s, Keogh Plans, Profit Sharing Plans, and Solo 401ks since those accounts are employer sponsored retirement plans instead of IndividualRetirement Accounts (IRAs).
- Lastly, divide the total post-tax contributions sitting in your IRAs by the total value of all of your IRAs to figure the percentage of the IRAs converted that will NOT be taxed.
Let’s say you have $100k in your IRAs of which $25k represents post-tax contributions. In this scenario, 75% of each dollar converted will be taxed. Convert all $100k and you would pick up $75k of additional income. Convert just $20k and expect to pick up $15k ($20k * 75%) of additional income even through the amount converted is less than the total post-tax contributions in your IRA.
How to Minimize Taxes on a Roth Conversion
Have you made non-deductible contributions into an IRA over the years but are still reluctant to convert the IRA to a Roth due to the total value of your IRAs? One way around this pitfall is to first roll a chunk of your IRAs into your employer sponsored retirement accounts or your Solo 401k, and then convert the remaining balance to your Roth. Doing so reduces the denominator, and therefore, makes the Roth conversion much more tax efficient.
First check that your employer’s retirement plan accepts IRA rollovers., If so, set up for a direct rollover from your IRAs into that 401k or 403b account, making it easier for the IRS to track that the money taken from your IRA was in fact deposited into your work retirement plan.
To figure out the amount to roll into your employer’s plan, look at the total post-tax contributions as reflected on your 2020 Form 8606. Make sure to also factor in 2021 non-deductible IRA contributions made. You then figure the maximum amount to roll out of your IRA by subtracting the total post-tax contributions available from the total of all your IRAs.
Let’s say you have $100k in your IRAs of which $25k represents post-tax contributions. If you don’t want to pay any taxes on the Roth Conversion, first roll $75k out of your IRAs into your 401k or 403b plan at work or Solo 401k if you are self-employed. That will leave only $25k of post-tax dollars in your IRA that you can now convert tax-free into your Roth. (Please note that a Solo 401k is different from a SEP IRA.)
Maybe take this opportunity to convert a few extra dollars to your Roth. Yes, you will owe some taxes for 2021, but that will provide you with more money growing tax-free within your Roth until withdrawn.
One more warning – please be careful to review the investment options available within your work retirement plan as well as the underlying fees associated with those funds. Rolling money from an IRA held in a high quality, low-cost environment into a platform with a poor selections of mutual funds or with funds that come with high fees could easily cause this strategy to backfire the longer the money sits in those poor performing funds.
With December 31st less than two months away, now is the time for you to act if you already have post-tax dollars sitting in an IRA and/or plan to add up to $6k ($7k if 50 or older) into an IRA for 2021, and you would like to convert those funds to a Roth IRA before this popular tax planning opportunity might disappear.
Are you worried that the stock market is extremely high right now making your portfolio of stocks and equity mutual funds a little riskier than you like? Or does it concern you that higher inflation will lead to higher interest rates which will cause your bond funds to decline in value?
According to the website: https://www.treasurydirect.gov/indiv/research/indepth/ibonds/res_ibonds.htm : A Series I savings bond is a security that earns interest based on both a fixed rate and a rate that is set twice a year based on inflation. The bond earns interest until it reaches 30 years or you cash it, whichever comes first. NEWS: The initial interest rate on new Series I savings bonds is 7.12 percent through April 2022.
I-Bonds offer a few advantages. First, while the value of most bonds moves inversely to changes in interest rates (as interest rates increase bond values fall), the value of the I-Bond remains constant and can be redeemed at any time for the face amount of the bond plus all of the interest earned over the years. Plus, the interest rate is reset every 6 months based on the inflation rate at that time. And the value of an I-Bond is backed fully by the full faith and credit of the US government.
One big downfall of I-Bonds is that an individual can only invest up to $15k per year into I-Bonds. To hit that max, you would purchase $10k through an account you set up at www.TreasuryDirect.gov, and would purchase the remaining $5k through your federal tax refund when you file your tax returns each year.
Why not purchase $10k of I-Bonds prior to 12/31/21 and then purchase another $10k in January of 2022 to bring your holdings to $20k? Married couples can double up to invest a combined total of $40k in I-Bonds within the next few months.
If you’re looking to invest more than $10k into this type of treasury bond at this time, you might consider purchasing Treasury Inflation-Protected Securities (TIPS) instead. Check out: https://treasurydirect.gov/indiv/products/prod_tips_glance.htm to learn more about this more sophisticated option. You can also purchase mutual funds that invest in Inflation Protected Treasury Bonds through Vanguard, Fidelity, and other financial institutions.
A chart comparing TIPS to I-BONDs is available at: https://treasurydirect.gov/indiv/products/prod_tipsvsibonds.htm.
Please visit www.TreasuryDirect.gpv for more information about I-Bonds and other government backed fixed income opportunities.