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May 01
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What Is Web 3.0? Understanding The Next Generation of the Internet

By Blog, What's New in Technology

What Is Web 3.0? The internet keeps evolving. It started with static web pages in Web 1.0 before evolving to interactive and dynamic content in Web 2.0. A new phase of technology is now introducing Web 3.0, or the third generation of The World Wide Web. Although it is a work in progress, it is necessary to understand the new concept and how it will impact the future of online interactions.

What is Web 3.0?

Web 3.0 is a term used to describe the next generation of the internet. Industry experts consider it the next big thing in the evolution of the The Web after Web 2.0. Web 2.0 refers to the Internet era characterized by user-generated content, social networking, and interactive web applications; it is known mainly as the Internet of Information.

Web 3.0, on the other hand, is built on top of the existing infrastructure; however, it introduces new technologies that enable computers to interpret data in a more human-centered manner. It combines disruptive technologies such as blockchain, augmented reality, virtual reality, edge computing, IoT, etc. As a result, the internet will become a more intelligent and efficient tool for finding and processing information.

Web 3.0 is also referred to as the semantic web or decentralized web and aims to create a more meaningful online experience by integrating artificial intelligence (AI), decentralized networks, and semantic understanding.

Key Features of Web 3.0

Decentralization

Web 3.0 makes good the move toward decentralization. Decentralization implies that instead of relying on central authorities, data is simultaneously stored in multiple locations. Since Web 3.0 is built on decentralized networks, such as blockchain technology, it creates a more transparent, secure, and trusted web and gives users more control over their data.

Artificial Intelligence and Machine Learning

Web 3.0 will enable computers to comprehend information similar to the way humans do, using semantic web concepts and natural language processing. It also will utilize machine learning – technology that employs data and algorithms to imitate human learning and enhance accuracy. Web 3.0 is designed to leverage the power of artificial intelligence (AI), making web applications more intelligent and enhancing their capacity to make informed decisions. It also helps automate tasks, improve efficiency, and provide more personalized experiences for users.

Ubiquity and Connectivity

The rise of the Internet of Things (IoT) is another contributing factor, enabling information and content to be more connected and ubiquitous. It also means data is accessible via multiple applications and devices.

3D Visualization

Using augmented reality, virtual reality, and mixed reality combined with technologies such as IoT makes it possible to create a spatial web. This helps maintain real-life scale and experience on the web. A good example is the application of VR technology in e-commerce.

Openness and Accessibility

Web 3.0 is built on open standards and protocols, which make it more accessible to both developers and users. This promotes innovation and collaboration across different sectors and communities.

The Impact of Web 3.0 and Challenges

Web 3.0 will significantly change how users interact with information online and transform different aspects of life, including commerce, health, and education, among others. For instance, decentralization gives users greater control over their personal data. This might help limit the collection of data without user consent or compensation.

With blockchain technology as a foundation of Web 3.0, the data becomes immutable, transparent, and hard to hack. This is because all transactions will use self-executing smart contracts.

Web 3.0 will usher in a new era of automation as intelligent systems and algorithms become increasingly integrated into online experiences. This will include more intelligent chatbots, personalized recommendations, sophisticated predictive analytics, and autonomous systems.

As a result, there will be an improved user experience. Users will have a more personalized and interactive experience online, with applications that can better understand their needs and preferences.

Despite the impressive positive impact, Web 3.0 is still in its early emerging stage and is not without challenges. As more significant work and effort are being put toward its actualization, several issues must be addressed. First, to facilitate specific user functions, additional layers must be built on top of the blockchain to ease its complex operations.

Secondly, decentralization introduces data governance and regulation concerns. With no central control of data, bad actors can take advantage to promote hate speech, misinformation and cybercrime.

Thirdly, this new iteration of the internet also requires implementing new technologies and using advanced devices.

Conclusion

The evolution of the internet is inevitable. Although more effort is still required to realize the full potential of Web 3.0, business leaders should be aware of new developments to ensure they can take advantage of opportunities presented by the spatial web and venture into new avenues to remain competitive.

May 01
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Shoring Up Services for Veterans, Energy Production and Cybersecurity Risks

By Blog, Congress at Work

Shoring Up Services for Veterans, Energy Production and Cybersecurity RisksRelating to a national emergency declared by the President on March 13, 2020 (HJ Res 7) – On March 13, 2020, then-President Trump declared a national emergency relating to the COVID-19 pandemic. Since then, emergency status has continued until the passage of this resolution. The national emergency status relaxed many healthcare rules, such as training mandates for nursing home aides, easier access to certain prescribed medications (e.g., Adderall, Ritalin, oxycodone, buprenorphine), and utilization of uncredentialed nurse practitioners and physician assistants for hospitalized Medicare patients. The resolution to end emergency status passed in the House on Feb. 1 and Senate on March 29. The resolution was introduced by Rep. Paul Gosar (R-AZ) on Jan. 9 and enacted by President Biden on April 10.

Wounded Warrior Access Act (HR 1226) – This bill requires the Department of Veterans Affairs (VA) to respond to online requests by claimants for records related to VA claims and benefits. The VA must notify a requester within 10 days that their request has been received and fulfill the request within 120 days. The bill was introduced by Rep. Pete Aguilar (D-CA) on Feb. 28 and passed in the House on March 7. It currently resides in the Senate.

Veterans’ COLA Act of 2023 (S 777) – Effective Dec. 1, 2023, this bipartisan bill would increase the rates of compensation for veterans with service-connected disabilities as well as dependency and indemnity compensation for the survivors of certain disabled veterans. The bill was introduced on March 14 by Sen. Jon Tester (D-MT). It passed in the Senate on March 30 and is currently under consideration in the House.

Understanding Cybersecurity of Mobile Networks Act (HR 1123) – Introduced by Rep. Anna Ashoo (D-CA) on Feb. 21, this bill would require the National Telecommunications and Information Administration to report on the cybersecurity vulnerability of mobile service networks and mobile devices to cyberattacks and surveillance by adversaries. The bill was passed unanimously in the House on March 7; its fate currently resides in the Senate.

Lower Energy Costs Act (HR 1) – This bill is designed to reduce energy costs by increasing American energy production, exports, infrastructure, and critical minerals processing by implementing transparency, accountability, and permitting rules as well as improving water quality certification and expediting energy projects. The bill was introduced by Rep. Steve Scalise (R-LA) on Jan. 26 and passed in the House on March 30. It is currently awaiting review in the Senate.

SECURE Notarization Act of 2023 (HR 1059) – This bipartisan legislation was introduced in the House by Rep. Kelly Armstrong (R-ND) on Feb. 17. It would permit notaries public to notarize electronic records and perform notarizations for remotely located individuals. The bill provides technical requirements, including creating and retaining video and audio recordings to conduct the transaction. Additionally, the bill would require all U.S. courts and states to recognize in-person and remoted notarizations affecting interstate commerce. The bill also allows a notary public to remotely notarize electronic records involving an individual located outside of the United States, subject to certain requirements. The bill passed in the House on Feb. 27 and is currently under consideration in the Senate.

Apr 01
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How Volunteering Can Earn You a Big Tax Deduction

By Blog, Tax and Financial News

Most people volunteer out of a sense of altruism, duty or purpose – not to get a tax deduction from Uncle Sam. At the same time, if your good deeds could also result in lower taxes, why not? Theoretically, this would free up more time to volunteer or let you make a charitable donation, a win-win for you and the cause you care about.

What Volunteering Expenses Can You Deduct?

As with all tax rules and regulations, the devil is in the details. If you itemize your tax deductions, you might be eligible for some valuable deductions. Any expenses deducted must directly relate to the charity where you volunteer, and you can’t have been reimbursed for them. Lastly, you will need to be taking the itemized deductions and not the standard deduction.

Below, we will look at the specifics of what you can and cannot deduct.

Time Spent Volunteering

Unfortunately, not. Regardless of how much time you spend volunteering, those hours have no economic value in terms of a tax deduction. Now, you may be saying: My time when I serve a client is billed out at $250 per hour. No matter, in this case the IRS simply does not care. When it comes to donating your time as a volunteer, the only thing you get in return is a warm fuzzy feeling for doing a good thing.

Volunteering Expenses

Often, organizations ask volunteers to provide their own supplies and materials to carry out the work. Think things like office supplies, for example. In other cases, volunteers will need to provide their own safety gear or a special uniform. All these types of expenses are deductible if you are paying for them out of your pocket and not getting reimbursed.

Cost of Commuting

Driving your own car as part of your volunteer work also can yield a charitable deduction. Under section 170, the IRS provides a standard rate of $0.14 per mile driven in 2022 and 2023. Alternatively, you can deduct the actual costs of fuel (i.e., gas or diesel) and tolls. Once again, it is deductible only if you are not reimbursed for the expenses.

Travel Expenses

Travel expenses related to volunteering also can be deductible. To qualify, the expenses must be directly related to the volunteer work; not have been reimbursed; and reasonable. The definition of reasonable is of course open to interpretation and relative depending on the circumstances; however, taking a private plane or flying first class is unreasonable in the eyes of the IRS.

You also can deduct the cost of meals needed while volunteering at the full cost (100 percent). The 50 percent business limitations do not apply.

Fundraising Costs

Hosting a fundraising event can cost big bucks. For individuals generous enough to host such an event, it is completely legitimate to deduct your unreimbursed expenses for putting on the event.

Recordkeeping

Like any tax deduction for personal or business reasons, keeping good records is key. Keep track of mileage with a daily logbook, keep receipts and note what, where, when, who and why for each volunteer-related expense. This applies to any of the items above, from simple mileage to hosting an entire fundraising event.

Conclusion

Volunteering is a great way to give back to your community or a cause you care about. It also can be a source of additional tax deductions, which will put more money in your pocket to spend or use for charitable purposes as you see fit. If volunteering is part of you and your family’s life, consider the guidelines outlined above and talk to your tax professional about your individual situation.

Apr 01
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Different Ways to Value a Business

By Blog, General Business News

When it comes to valuing a business, there are many ways to examine a company’s profitability. Looking at a business’ liquidation value and its breakup value are two of many approaches to see how a company is functioning and how it might run under different management and economic environments.

Liquidation Value

This type of valuation can be defined as the difference between what tangible assets would sell for at auction minus outstanding liabilities. Typically, intangible assets are not considered in this type of valuation. However, if the intangibles along with the physical assets are considered for sale and not sold at auction, it would be considered a business’ “going-concern value.” Examples of intangibles include goodwill, brand recognition, patents, etc.

There are many considerations when exploring liquidation value. Generally speaking, the liquidation value is more than salvage value but less than book value. When a company is going out of business and assets are auctioned off, proceeds will normally be valued below the asset’s historical cost. Historical cost refers to how assets are reported on the balance sheet. However, if the market assesses assets lower in value compared to business use, it could be lower than book value.

Here is an example of how liquidation value can be calculated. Say a business has liabilities of $1.1 million. Based on the balance sheet, the book (or historical) value of assets is $2 million; and assets have a salvage value of $100,000. If the value of selling the business’ assets via auction is projected to be $0.80 per dollar, it could be expressed as follows:

$1.6 million (assets sold at auction at $0.80 per dollar) – $1.1 million (liabilities) = $500,000 (Liquidation Value)

Breakup Value

Also known as “the sum-of-parts value,” the breakup value determines the worth of a corporation’s individual segments if they were operating independently. Investors might pressure the company to spin off one or more segments into a separate publicly traded company to maximize its value.  

For each operating unit, the first step involves determining the segment’s cash flow, revenue and earnings. Such valuations can be benchmarked to publicly traded industry peers to determine comparative value of the business segment in question.

Financial ratios, including price-to-earnings (P/E) or price to free cash flow, are examples of starting points that analysts use to compare segmented business lines to industry peers to determine if it’s trading at below fair value, fair value or above fair value.

For example, if the P/E ratio of the company being analyzed is lower than its peers, it could mean the company is cheaper, or trading below fair value on an earnings basis. Though a more thorough financial analysis and assessment of macroeconomics is recommended, such as interest rates, inflation, etc., analysts could make an educated projection on how future earnings may or may not hold up in the future, compared to the business segment’s snapshot valuation.

Another way to evaluate is via discounted cash flows (DCF). This shows the segment’s future free cash flow projections through a discount rate, generally the weighted average cost of capital (WACC). The formula arrives at the present value of the business segment’s future cash flows. The following DCF example can tell the expected profitability and how to treat it going forward as part of the business:

Assume the company’s WACC is 10 percent; the amount invested is $5 million; it will last three years; and the annual estimated cash flows are as follows:

Cash Flow                Discounted Cash Flow

Year 1: $2 million       $1,818,181.82

Year 2: $4 million       $3,305,785.12

Year 3: $6 million       $4,507,888.81

Compared to the amount invested of $5 million for the business’ selected business segment, the discounted cash flows for the project are $9,631.855.75. This could give an indication of how the business line might do if it’s spun off or how its performance will impact other lines of the business financially.

While valuation is subjective, especially in periods of volatile inflation and interest rate conditions, the more points of valuation analysis that occur, the better the chances that valuations will turn out to be correct.

Apr 01
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Mega Backdoor Roth IRA

By Blog, Financial Planning

The Roth IRA is a retirement savings account in which you invest only after-tax dollars. Subsequently, all earnings grow tax-free and may be withdrawn tax-free. However, there are limits to who can contribute and how much they can contribute to a Roth IRA.

Federal rules restrict direct contributions to a Roth IRA for high-income earners. In 2023, a single, head of household, or married, filing separately tax filer may contribute up to $6,500 if under age 50; $7,500 if 50 or older. However, if the investor has a modified adjusted gross income (MAGI) above $138,000, he is permitted only limited and phased out contributions up to a total annual income of $153,000, above which he cannot contribute to a Roth. Limited contributions for an investor who is married filing jointly begins at $218,000 in annual income and phases out at $228,000.

However, there is a way to work around these contribution rules using a Roth IRA conversion. To optimize this strategy, investors may be able to conduct a Mega Backdoor conversion from their employer-sponsored retirement plan to a Roth.

The Mega Backdoor Roth strategy is suitable in a handful of circumstances:

  • When you’ll be able to max out your employer plan contribution
  • When your earned income is too high to contribute to a separate Roth IRA
  • If you can save more than the 401(k) and IRA combined limits in one year

Employer Rules

To deploy this strategy, the investor must check with his retirement plan administrator to ensure that the plan allows for post-tax contributions and in-service distributions. If so, the investor should first max out his income-deferred contributions to the 401(k). In 2023, the maximum 401(k) contribution limit is $22,500; $30,000 if age 50 and older.

However, he may invest a maximum of $66,000 or $73,500 (age 50 and up) in his 401(k) for the year, which is the combined total for employer and employee contributions. For example, let’s say a 52-year-old employee earns $200,000 and defers 15 percent ($30,000) of his pre-tax income. His employer kicks in another dollar-for-dollar match up to 4 percent of his salary ($8,000). With the deferred total at $38,000, the employee could pitch in another $28,000 in post-tax contributions to his after-tax 401(k) account – to reach the maximum total of $66,000.

The next step is for the employee to take advantage of in-service distributions by immediately rolling over his contributions from the 401(k) to an in-plan Roth option or a separate Roth IRA – before any earnings accrue (to avoid taxes on earnings).

Tax Notes

Once the after-tax funds are converted to the Roth IRA, the money grows tax-free, and the investor can withdraw it as tax-free income in retirement. There also is no RMD requirement for Roth IRA funds at any age. However, note that if the funds are converted to an in-plan Roth option, earnings are subject to a penalty if withdrawn before age 59½. If the funds are converted to a separate Roth IRA, tax-free withdrawals are only available penalty-free five years after each corresponding rollover is conducted.

The Mega Backdoor Roth strategy is appropriate for high earners looking to minimize taxes on both their current income and their long-term retirement investments.

Apr 01
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6 Tax Tips for 2023

By Blog, Tip of the Month

It’s that time of year again: tax time. And while many of your money-saving options might be limited after Dec. 31, there’s still a lot you can do to help lower your taxes, save money and avoid penalties. Here’s a quick snapshot.

Contribute to Your Retirement Accounts

Yes, doing this will help lower your tax bill. So, if you haven’t already maxed out your contribution for 2022, you can still do so up until April 18 for a traditional IRA (deductible or not), and a Roth IRA. If you have a Keogh or Simplified Employment Pension Plan (SEP), you can apply for a tax filing extension until Oct. 16; however, it’s best not to wait that long to contribute to those plans so you begin tax-free compounding. Plus, when you make a deductible contribution, your money will compound tax deferred. For instance, if you put away $5,000 a year for 20 years with an annual return of 8 percent, your $100,000 in contributions will grow to more than $250,000. Do you see these numbers? Gotta love this.

File a Form 2210

So last year, if you had an income windfall that arrived after Aug. 31, 2022, and you think you might owe taxes on it, you can file what is called an Underpayment of Estimated Tax. It will help annualize your estimated tax liability and possibly reduce any extra charges. That said, don’t try to pay too much. It’s better to owe the government than to expect a refund. As we all know, the IRS doesn’t give you any interest when they borrow money from you.

Itemize Your Deductions

While it’s so much easier to take the standard deduction, you could save a boatload when you do this, especially if you’re self-employed, own a home or live in a high-tax area. Here are couple ways to figure out if this option is right for you.

  • When your qualified expenses add up to more than the 2022 standard deduction of $12,950 if you’re single and $25,900 if you’re married.
  • If the portion of your medical expenses exceeds 7.5 percent of your 2022 adjusted gross income.

Take that Home Office Deduction

Good news: eligibility rules for claiming your home office deduction have been loosened, so for small business owners this is huge. And the rules apply even when you don’t have clients visit you in your office space. Here’s what you can write off:

  • Rent or mortgage interest
  • Utilities
  • Insurance
  • Repairs or maintenance
  • Depreciation
  • Housekeeping

Note: The percentage of these costs that are deductible are based on the square footage of your office within the context of the total area in your home.

Provide Dependent Taxpayer IDs

Don’t forget to enter Taxpayer Identification Numbers (usually Social Security numbers) for your children or other dependents. If you fail to do this, the IRS will deny you these important credits that might rightfully be yours, such as the Child Tax Credit. However, you’ll want to be careful if you’re divorced. Only oneof you can claim your kids as dependents. If you and your ex both claim your child, your return process will be detoured and they’ll be contacting you for more information. If you’re a new parent, be sure to get your child’s Social Security card as soon as you can so you’ll have it ready at tax time.

Consult a Professional

If you feel you need help or if your numbers aren’t where you’d like them to be, get in touch with your trusted tax specialist. You might be missing some critical info in your return that could help lower your tax obligation.

Taxes are a necessary part of life in the United States, so make sure you have all the right tools when diving in. When you’re well-equipped, chances are this process won’t be as much of a chore.

Sources

https://www.irs.gov/newsroom/how-small-business-owners-can-deduct-their-home-office-from-their-taxes

https://turbotax.intuit.com/tax-tips/tax-planning-and-checklists/tax-tips-after-january-1st/L8fY6OyFl

Apr 01
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The Importance of Global Collaboration in Regulating Emerging Technologies

By Blog, What's New in Technology

Emerging technologies, such as artificial intelligence, machine learning, data analytics and biotechnology, greatly transform society and reshape the global economy. However, these technologies also come with a significant challenge regarding ethical and social implications. Global collaboration by governments, regulators and industry leaders can help ensure that emerging technologies are developed and deployed responsibly.

Challenges of Regulating Emerging Technologies

Emerging technologies have led to complex situations that traditional governments might find difficult to manage. For instance, today’s advanced technologies also come with new forms of crime. This requires law enforcement and public safety organizations to keep up with new and innovative crimes. Today’s governments face challenges that affect the development of effective digital laws.

One of these challenges is the independence of technology from physical state territories. The interconnection of technology devices over the internet has no boundaries. This makes it impossible for any country to regulate all aspects of the technologies. Secondly, all states are not the same, and each enhances its technology-related laws according to its capabilities. While strong economies can afford robust IT infrastructure, other countries do not have the technical capacity.

Other factors that complicate technology regulation include the ability of major technology companies to bypass established regulations. Additionally, states are consumers of technology products and services developed by private corporations. Since they are not the innovators, policymakers and regulators do not understand the intricate technology systems that affect the regulatory decisions that must be made.

The above mentioned are only a few of the challenges that make technology regulation complicated. Still, there is a growing need for digital governance and a digital constitution.

Why Global Collaboration is Crucial in Regulating Emerging Technologies

  1. Address ethical and social issues – significant ethical and societal issues, like data privacy and security, are brought up by emerging technology. However, international cooperation can help ensure coordinated and efficient responses to these issues.
  2. Growing competition for technological dominance – political, societal and economic rivalries are driving technological dominance. Increased competition for elements of technology supremacy can only result in conflict, obstructing technology’s ethical use.
  3. Technology diffusing globally – in most cases, new technologies are available for adoption anywhere in the world. Thus, international regulatory frameworks must be coordinated to prevent competing or incompatible laws.
  4. Harmonizing standards – global cooperation can assist in harmonizing standards and laws for new technology, making it simpler for businesses to comply and lowering entry barriers for new players.
  5. Promote inclusivity – emerging technologies have the potential to make existing social and economic inequalities even worse. Collaboration on a global scale can ensure that these technologies are usable by everyone and do not reinforce or introduce new forms of exclusion.
  6. Enhance innovation – collaboration across borders can facilitate the exchange of knowledge, ideas and best practices, leading to more innovation and faster technological advancement.
  7. Avoid existential risks – technology can potentially introduce threats that endanger life globally. Such risks might include nanotechnology weapons and engineered pandemics. However, developing strategic global legal frameworks that identify potential risks can help avoid the proliferation of dangerous and harmful technologies.

Existing Efforts for Global Collaboration in Regulating Emerging Technologies

There are numerous initiatives for international cooperation in regulating emerging technologies. For example, the Global Partnership on Artificial Intelligence (GPAI) brings together governments and business executives from across the world. Its goal is to ensure artificial intelligence (AI) is developed and deployed responsibly in a human-centric manner. GPAI’s main focus is on responsible AI, data governance, the future of work, and innovation and commercialization.  

The Organization for Economic Cooperation and Development (OECD) is another international organization where governments work together to solve common challenges and develop global standards. A good example is their recommendation on responsible innovation in neurotechnology, adopted by the OECD Council in December 2019. Other organizations working toward promoting global collaboration and coordination on emerging technology issues include the World Economic Forum (WEF) and the United Nations.

Unfortunately, there is still a lot of work to be done. Continued global cooperation is crucial to ensure that emerging technologies are created and used to benefit society. Currently, there is no global agreement on technology regulation; instead, regulators take different and sometimes conflicting standpoints.

Conclusion

The pace and impact of emerging technologies are likely to keep increasing. Although these developments improve human experiences, the potential for these technologies to disrupt social, economic and political systems worldwide means that it is essential for governments, private companies and civil organizations to work together to ensure that they are developed responsibly.

Apr 01
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Transparency for the Coronavirus, Federal Settlements, Smart Appliances and Public Education

By Blog, Congress at Work

COVID-19 Origin Act of 2023 (S 619) – This bill would authorize the Office of the Director of National Intelligence (ODNI) to declassify all information relating to the origin of COVID-19 and any correlation with the Wuhan Institute of Virology. The ODNI would be required to redact the report as necessary to protect sources and methods, and then submit it to Congress. The bill was introduced on March 1 by Sen. Josh Hawley (R-MO). It passed the Senate on the same day and the House on March 10. It is currently awaiting signature by the president.

Disapproving the action of the District of Columbia Council in approving the Revised Criminal Code Act of 2022 (HJ Res 26) – This resolution nullifies the Revised Criminal Code Act of 2022, which had previously been enacted by the council of the District of Columbia (DC). The bill modified DC criminal laws by altering sentencing guidelines, reducing maximum penalties and expanding the right to a jury trial for certain misdemeanor crimes. The resolution was introduced by Rep. Andrew Clyde (R-GA) on Feb. 2. It passed in the House and Senate on March 8 and was enacted by the president on March 20.

Providing for congressional disapproval under chapter 8 of title 5, United States Code, of the rule submitted by the Department of Labor relating to “Prudence and Loyalty in Selecting Plan Investments and Exercising Shareholder Rights” (HJ Res 30) – This resolution was introduced by Rep. Andy Barr (R-KY) on Feb. 7. In December 2022, the Department of Labor established a rule that the fiduciaries of employer-sponsored retirement and other investment benefit plans may take into account environmental, social and governance (ESG) factors of companies where they choose to invest shareholder funds, as well as voting on shareholder resolutions and board nominations. This joint resolution, which was passed in both the House and the Senate on March 1, would nullify that rule. The bill was vetoed by President Biden on March 20.

Settlement Agreement Information Database Act (HR 300) – Introduced by Rep. Judy Chu (D-CA) on Jan. 20, this bipartisan bill would require agencies to submit information related to any settlement or consent decree associated with a violation of civil or criminal law. This includes settlements with individual employees who appeal adverse personnel actions such as firings and suspensions; or federal settlement agreementsnegotiated behind closed doorsas a result of enforcement actions. The Office of Management and Budget would be responsible for reviewing and archiving all agreements, as well as determining when confidentiality is necessary to protect the public interest of the United States. The bill was passed unanimously in the House on Jan. 25. Its fate currently resides in the Senate.

Fighting Post-Traumatic Stress Disorder Act of 2023 (S 645) – This bill would require the Attorney General to devise a program for making treatment for post-traumatic stress disorder and acute stress disorder available to public safety officers.The bill was introduced on March 2 by Sen. Chuck Grassley (R-IO). It passed in the Senate on March 2 and is currently under consideration in the House.

Informing Consumers about Smart Devices Act (HR 538) – Passage of this bill would require manufacturers of internet-connected devices such as smart appliances, which include a camera or microphone, to disclose this fact to consumers. The bill does not apply to devices that a consumer would reasonably expect to include these features (e.g., mobile phones, laptops). The bill was introduced by Rep. John Curtis (R-UT) on Jan. 26 and passed in the House on Feb. 27. It is currently awaiting review in the Senate.

Sunshine Protection Act of 2023 (S 582) – This bipartisan bill would make daylight savings time permanent. It was introduced on March 1 by Sen. Marco Rubio (R-FL), but has yet to be assigned to a committee for review.

Parents Bill of Rights Act (HR 5) – This legislation was introduced in the House by Rep. Julie Letlow (R-LA) on March 1 with 122 Republican co-sponsors. It would require public schools to allow parents to review certain materials and resources (e.g., the curriculum, library books, teachers’ materials used in the classroom) and be informed/grant consent for certain school activities (e.g., school budgets, use of technology in the classroom, attendance for guest speakers in the classroom, mental health treatment, gifted and talented programs). The House Committee on Education and the Workforce has issued a report on the bill, but it has yet to be presented for a vote by House members.

Mar 01
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Sold Your Home Last Year or Plan to in 2023? If So, Here’s What You Need to Know

By Blog, Tax and Financial News

tax breaks home sale, 2022 2023 home sale taxesThe U.S. housing market has been extremely volatile over the past year. Year-over-year growth rates were at highs of 20.1 percent in April 2022, then declined to only 8.6 percent in November – the biggest drop in over 20 years. As a result, many homeowners who sold their homes in 2022 or plan to in 2023 may have either gains or losses depending on their location and timing. Below, we tackle the issues you need to know to properly account for the taxation of your home sale.

Only Some Gains Are Taxable

Not all gains on home sales are taxable, with the initial $250,000 or $500,000 exempt in certain circumstances. All you need to do is have lived in the home as a main residence for at least two out of the past five years before the sale.

A key factor is that the above exclusion applies only to the sale of your main home. If you own multiple houses, the one you spend the most time in typically counts as your main home.

Reporting

Just because the gain on a home sale qualifies for exclusion from taxation, it does not mean that you do not need to report the transaction and income. Often, you will receive a Form 1099-S; and in all cases, you need to report the sale on Schedule D and Form 8949 with your Form 1040.

Also, remember that part of your gains could be taxable. Even if a married couple qualifies for a $500,000 exclusion, if they have a $600,000 gain, then the $100,000 over the exclusion is taxable.

Figuring Your Gain

To understand if you have a gain or loss on the sale of a home, you will need to make a calculation. First, start with calculating your basis. This is the price you paid for the house plus any significant improvements. When you sell your home, your gain is the sales price (less taxes, realtor commissions, etc.) and this basis. It pays to keep good records of remodeling and additions.

Capital Gains Tax

Like any capital asset (a stock, for example), if you owned your home for one year or less before you sold it, then you have short-term capital gains, which are treated as ordinary income for tax purposes. If you owned it longer than one year, then your capital gain above the exclusion is long-term.

Losses

In the case where you have losses on the sale of your home and not a gain, then you are in a bit of a bad spot. There is no tax impact since you cannot claim a loss on the sale of a personal residence. This is the other side of the exclusion of gains.

Exceptions to the Rules

As always, with the tax law, there are exceptions. One example is when a home is transferred as part of a divorce settlement. Here there is no reportable gain or loss unless your ex-spouse is a nonresident alien.

Other exceptions that might affect the taxability of your gain include those involving taxpayers who died, empty land, or a home that was destroyed. If you believe you have unusual circumstances related to a 2022 or pending 2023 home sale, then it’s best to consult with your tax professional.

2023 Home Sales

Looking at the remainder of 2023, there are mixed opinions on the single-family housing market. The consensus is that there will be fewer homes on the market for sale; however, how far prices may decline is up for debate.

Some analysts believe home prices will not drop much in 2023, despite increased mortgage rates due to demand being supported by low inventory. Meanwhile, others think prices could decline quite a bit, especially in certain markets such as Florida, Texas, and the Southeast, where they’ve run up the most in recent years.

National home price averages, while statistically cited, are meaningless, with residential real estate being, so location dependent. Many homeowners who sell in 2023 may still have a profit on the sale of their home. Assuming no tax law changes, the same capital gains rules will apply in 2023 as they did in 2022.

The takeaway here is that if you are thinking about selling this year, start planning now. Gains realized in 2023 are not reportable or taxable until 2024. Figuring out your basis and adjustments now will save a lot of headaches next tax season.

Mar 01
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How Secure 2.0 Will Impact Employers’ Tax Situations

By Blog, General Business News

Secure 2.0 EmployersThe Setting Every Community Up for Retirement Enhancement 2.0 Act of 2022, otherwise known as SECURE 2.0, is a piece of legislation that focuses on how employers and their employees are able to save for retirement and how it impacts their bottom lines.

Businesses with as many as 50 employees can receive a tax credit when they offer a defined contribution plan to employees. The start-up tax credit permits up to 100 percent of start-up costs ($5,000 annually) to offset administrative expenses to implement a start-up plan. However, for businesses with 51 to 100 employees, the first SECURE Act’s tax credit equal to 50 percent of administrative costs, capped at $5,000, remains in effect.

SECURE 2.0 also allows for an employer tax credit of up to $1,000 per employee, effective Jan. 1, 2023, when the business contributes to defined contribution plans as long as the employee makes no more than $100,000 annually. It’s phased down over a five-year period. For employers with 51 to 100 employees, the credit phases down based on the number of active employees.

Another tax credit is for eligible employers that employ military spouses. Beginning in 2023, employers with up to 100 employees making at least $5,000 annually are able to obtain a general tax credit, up to $500 for three years as long as they meet the following conditions in conjunction with the company’s defined contribution plan:

  • Qualified employees enroll within two months of onboarding.
  • Once qualified, an employee is entitled to plan benefits he wouldn’t otherwise be eligible for until after 24 months of employment, such as the employer deposit of an amount equal to what the employee contributes to his plan.
  • Contributions from the business are assigned in full to the employee.       

The $500 tax credit is comprised of $300 contributed by the employer to the employee and $200 based upon eligible military spouse participation.

Employers may utilize the tax credit during the year the military spouse is onboarded and the following two tax years. Employees also need to attest to their status to qualify.

If an employee is married to someone who is actively serving in the armed services, that person is considered a military spouse. However, if such an individual is considered a Highly Compensate Employee (HCE), he or she must be excluded from this definition based on compensation level.

Based on IRS regulations, there are two different tests that determine if an employee is an HCE and determines eligibility for contribution plan participation by employees and potential tax implications for employers. The first test is an ownership test; the other is a compensation test to determine if an employee is an HCE.

Looking at the compensation test, the IRS’ HCE Threshold for 2022 and 2023 is $135,000 and $150,000 in compensation, respectively. The ownership test looks at whether an employee owns 5 percent of the business during the determination year or within the present plan year. If the same employee has the same 5 percent ownership stake within the lookback year, which is the past 12 months immediately preceding the determination year, they are deemed to meet the ownership test.

While each company has different attributes and must navigate the tax code based on their own circumstances, understanding how the SECURE 2.0 law works is one way to make the most of tax obligations.

Sources

https://www.finance.senate.gov/imo/media/doc/Secure%202.0_Section%20by%20Section%20Summary%2012-19-22%20FINAL.pdf

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