December 28th, 2020 New Legislation Update

Mike Sylvester • January 19, 2021

December 28th, 2020

Important email sent to all clients of SBS CPA Group, 8 th  and final email of 2020

Merry Christmas and Happy Holidays:

The newest legislation that just became law will affect at least 90% of our clients and we really suggest you at least skim this email.

Congress passed a 5,593-page bill late at night on December 21 st , 2020 and the contents of this bill were kept secret until six hours before the first vote.  This bill will have a large effect on 90% of our clients and on all public accounting firms.  Please realize we are entering our busiest time of year, and we still have to meet all of our normal deadlines.  We will need all of you to understand that it is going to take us longer to return your phone calls, return your emails, and to turn around all of the work we do for you.

The 5,593-page bill just became law on the evening of December 27 th , 2020.  There will be minor changes and interpretations to the bill over the next couple of weeks.  This email summarizes our current understanding of the Bill and all of us need to understand the Bill itself will be changed with technical corrections, and the Internal Revenue Service and the Small Business Administration will interpret parts of it differently than Congress.

If you want us to send emails like this to someone else or to another email address you have please send Shane Lengerich an email at  Shane@sbscpagroup.com  and please tell him exactly which email addresses you want him to add to our email list.   If you do not want to get these emails please use the unsubscribe feature at the bottom of this email and in this case please do not send Shane an email.

This email is split into two sections.  The first section is for everyone and is one third of the rest of this email and the second section is just for those people who own a business.  This is a very long email because there are a lot of changes in this Bill we want you to be aware of.

First section for individuals. 

Stimulus payments.

Another round of Stimulus payments are coming.  If you got a stimulus payment the first time you will get another one.  The 2 nd  stimulus payment will be $600 for each taxpayer and $600 for each spouse and an additional $600 for every dependent under the age of 17.   Remember to save the documentation the IRS sends you with the payment because we will need a copy of every Notice 1114 the IRS sends you (1 st  round and 2 nd  round).   When you drop off your taxes tell us exactly how much you received for each stimulus payment and exactly when you received it.

The Stimulus payments are not taxable income to you.  The IRS is guessing how much you should get based on previously filed tax returns.  If the IRS pays you too much money you will not have to return the extra money paid to you.  If the IRS did not pay you enough money, we will handle the additional money you are due on your 2020 income tax returns and you will get a higher refund or owe less tax depending on your personal situation.

The IRS is likely to send stimulus payments by direct deposit between now and 1/15/2021.  They will use the same method of payment as they used last time.  If you got a paper check last time you will get one this time and your check should be mailed by January 15 th , 2021.  If you do not get a stimulus payment   do not worry about it; instead, we think it will be handled when we file your income tax returns which are currently due to be filed by April 15 th , 2021.   Right now, it looks like the IRS may stop sending out stimulus payments on January 16 th , 2021 and force them to be handled on your 2020 income tax returns we are handling for you instead.  This is going to complicate things; however, it seems to be what Congress wants to happen.  This section of the Bill is not clearly written and it is the section of the Bill we are least sure about.

Unemployment payments

We do not handle unemployment claims and you should direct your questions to the Indiana Department of Workforce Development (DWD).  DWD is overwhelmed and this new law will likely cause them even more problems.  Even though we do not deal with unemployment claims we want to make sure you understand what has happened with the unemployment programs with the new law.

The Federal Government expanded all of the unemployment programs by another 11 weeks.  This includes the Pandemic Unemployment Assistance (PUA) Program and the Pandemic Emergency Unemployment Compensation Program which extended Indiana State benefits.  The PUA program will provide $300 a week.

We are not sure when these payments will start and you should watch the Indiana DWD website for updates:   https://www.in.gov/dwd/indiana-unemployment/individuals/faqs/

Rental Assistance.

The Federal eviction moratorium is extended to January 31 st , 2021.  The Federal Government is going to block grant 25 Billion dollars to the State and Local Governments based on population.  Then the States will distribute that money.  We do not know anything about this program other than what is listed in this email.  We fully expect each state will handle this program differently.  It looks like Indiana and its local Governments will get about 500 Million Dollars.  Each state and local Government is to setup a program and roughly speaking:

You qualify if your household makes less than 80% of the median income AND

At least one member of your household has qualified for unemployment benefits or has experienced a reduction in household income, incurred significant costs, or experienced other financial hardship due to or during the Covid-19 pandemic AND can demonstrate a risk of homelessness or housing instability, including having past due utility or rent payment(s), an eviction notice, has unsafe or unhealthy living conditions, or has any other evidence of such risk.

Landlords can apply for their tenants as long as their tenants cosign the application.   Payments will go directly to the landlord or to the utility provider on behalf of the tenant in most cases.

There are roughly 2,500,000 households in Indiana.  Roughly 40% of them (1,000,000) will have income below the limits Indiana will have put into place soon.   According to third party estimates as many as 250,000 households in Indiana are at risk of falling behind on rent or mortgage payments.  If we guess and say half of them are behind that is 125,000 Hoosier households behind on rent.  If half apply for rental assistance and if there is $500,000,000 dollars in Rental Assistance available then there would be $8,000 in rental, mortgage, and utility assistance available per household that might apply.

Indiana already has paid out 40 million in rental assistance and Marion County another 15 million.  It seems likely that Indiana may use their existing rental assistance portal at:  http://www.indianahousingnow.org/.

We do not know any more about these assistance programs than is in this email.  If you know someone in need of assistance paying their rent, mortgage payments, or utility bills please send them this portion of the email and we would suggest they go to the Indiana Rental Assistance Portal listed above and then immediately apply for assistance.  Indiana has a wait list and they should get on that wait list today.  Once the Federal money arrives it is likely Indiana and Marion county will change and replenish their existing programs with money and they will be first come first serve.

Last thoughts for individuals without a business

We have attached to this email our client letter and our 2020 tax planner.  Once you have everything that we need to do your 2020 income taxes please drop everything off at our office and remember we do not want you to drop anything off unless you have everything we need.  We hope you drop everything off as soon as you are sure you have everything we need.  We have a 24 hour drop box and if you wish to email items to us please email your CPA and we will send you a link so you can send us everything through a secure web portal.

Second section is for those individuals with a business

Paycheck Protection Program (PPP) Loan changes

Congress has changed the PPP loan rules for the loans authorized by the Cares Act passed on March 27 th , 2020.  This is really frustrating for all business owners, for us, for banks, and for the Small Business Administration.  It is hard to believe Congress just changed the rules for a law they passed nine months ago; however, they did.

PPP Loan forgiveness and your taxes

Congress just changed the law so that the portion of the PPP loan that is forgiven does NOT count as income and the expenses paid with the PPP loans are deductible.   This is a huge deal and means our business clients who received or receive future PPP loans will pay a lot less in taxes than they would have under the prior interpretation of the rules.   Best shown with an example.  Business 1459 got a PPP loan for $100,000.  Business 1459 got all $100,000 of the PPP loan forgiven by the SBA.  The $100,000 does NOT count as income and the expenses paid with the money are deductible.  This is a massive benefit for businesses that received or will receive PPP loans.  Please make sure the PPP loan is recorded on your books as other income in its own category.

Changes to PPP Loan forgiveness

If you have enough expenses to get your PPP loan forgiven under the old rules you need not worry about this section for the 1 st  batch of PPP loans and this is most people reading this email.

First off EIDL loan advances now do NOT lower PPP loan forgiveness.  This is a huge deal for ten of our clients.

Additional items that now qualify for loan forgiveness if paid during the covered period include:

  • Most software.
  • Property damage, vandalism, or looting damages not reimbursed by insurance.
  • Payments to suppliers for goods that are essential to the business operations and are perishable.
  • PPE and facility modification due to Covid-19.
  • Payroll costs for group life, disability, vision and dental insurance now count for forgiveness and actually count for original loan amounts and borrows can re-apply for this additional amount.

The forms for loan forgiveness have changed for loans under $150,000 and are simpler; however, everyone has to keep all of the information and do all of the calculations listed on the old forms so we are going to continue filling out the old forms and then having you turn in the one-page new form.  The new form cannot be filled out unless we verify all of the information on the old form.  We have no idea what the banks and SBA are going to do with these new rules and when they will implement them.

There is now a 2 nd  round of PPP loans available

Far fewer businesses will qualify for this second round of PPP loan funding.   In order to qualify for this second round of PPP loan funding, a business has to meet all of the following rules and #5 and #6 are going to make it so most of our clients cannot apply for a second PPP loan:

  1. Business had to be open and in operation on 2/15/2020.
  2. Must be a business concern, non-profit, housing cooperative, veterans organization, tribal business concern, eligible self-employed individual, sole proprietor, independent contractor, or small agricultural cooperative.
  3. Cannot employ more than 300 employees.
  4. Has or will use the full amount of their first PPP loan if they received one.
  5. The business had gross receipts (Income) during the 1 st , 2 nd , 3 rd , or 4 th  quarter of 2020 that demonstrates not less than a 25 percent reduction from the gross receipts of the entity during the same quarter in 2019.You only need this to be true for one quarter and if you use 4 th  quarter you have to apply after year end 2020.  You will have to prove that your quarterly gross receipts dropped by this much.  Best shown with examples:
    Gross receipts of Business 9874 were:

    1 st  quarter                   2019  $100,000                     2020  $90,000
    2 nd  quarter                 2019  $100,000                     2020  $70,000
    3 rd  quarter                  2019  $100,000                     2020  $100,000
    4 th  quarter                  2019  $100,000                     2020  $120,000
    With this example Business 9874 meets the 25% reduction in gross receipts test for Q2 of 2020 when compared to Q2 of 2019.  This company meets this test and qualifies for the 2 nd  round of PPP loan funding if they meet all of the other six tests.

  6. Last and hardest to meet is the “Necessity Requirement.”  Each business will have to certify that: “Current economic uncertainty makes this loan request necessary to support the ongoing operations of the Applicant”.  This was much easier to certify when the United States was shut down and none of us knew what was coming.  The situation is very different now.  The stock market is at a record high.  Real Estate values are at record highs.  The overall unemployment rate America is much lower than it was back during the first round of PPP funding.  There is a vaccine being distributed.  Most businesses are able to pay their bills and know what to expect moving forward.  Indiana is not expected to lock down again.  On loans under two million the banks and SBA have been accepting the certification without many questions; however, the current economic situation in the United States is very different than it was in March and April of 2020.  There is no doubt that some industries and businesses are still very affected by Covid-19 and can meet this certification especially those in the hospitality and entertainment industries.  We feel that significantly less than half of our clients who qualified nine months ago might qualify today.  If a business can easily pay all of its bills and is doing reasonably well it does not meet the new certification rules in our opinion.  This needs to be looked at on a case-by-case basis.  Covid-19 has had an uneven effect on businesses based on business type and geography.

How large are the 2 nd  round PPP loans

The new 2 nd  round of PPP loans are based on 2.5 months of average payroll costs in 2019 or on 2.5 months of average payroll costs over the 365 days prior to the date of the 2 nd  PPP loan application.  Restaurants and Hotels starting with NAICS Codes of 72 are eligible for 3.5 months of average payroll costs.

When can I apply for the 2 nd  round PPP loans

Right now, no one knows.  The 5,593-page bill just passed Congress and Banks and the SBA are currently dealing with loan forgiveness from the 1 st  round of funding and will have to digest all of the changes in the rules for both the 1 st  and 2 nd  round of funding.  The SBA will have to develop new forms for businesses to use to apply for 2 nd  round funding and complicating everything is the fact that many government employees are on vacation and New Year’s Eve and New Year’s Day are at the end of this week.  CPA firms are going to be swamped for the next four months and their time to help will be limited.

 

We might guess the SBA will have the new forms posted in early January best case and mid-January worst case.  Since Congress has given almost blanket immunity to banks, we expect many banks will want to push these loans on their clients due to the fees they can collect.  Each bank will handle this differently.  Once the SBA has forms, we expect the banks will be ready to go a week or two after that.  It is hard to say, and a new President will be coming to power at noon on January 20 th .  Covid-19 is likely to be prevalent over the next six weeks as well and this obviously complicates everything.  We are not sure when banks will be ready for applications; however, we think mid-January at the earliest and late January is more likely.     Everyone is going to have to be patient, because this process is not going to get off the ground quickly.

 

Other items

 

Covid-19 sick pay has been extended to 3/31/2021.

Interestingly in 2021 and 2022 business meals purchased from a restaurant will be 100% deductible rather than 50% deductible.  Entertainment is still not at all deductible.

The new law really protects banks who issued PPP loans.  They are off the hook for most liability regarding these loans.  This may cause the banks to push businesses to get new loans.

Last thoughts for those with a business

We need to focus on getting payroll and 1099’s out the door in January.  Please get us everything we ask for quickly.  The IRS has not extended any deadlines and we need to focus on payroll and 1099’s in January.

Business taxes will be more complicated this year.  Once you have everything, we need for your taxes please drop everything off at once.

Please be patient with us, Congress just dropped a 5,593-page Bill written in secret on us, and it changes a lot of laws and creates a lot of issues we will need to deal with.  Our turnaround times will increase and it will likely take us significantly longer to respond to emails and phone calls and you should expect this.

Mike Sylvester, CPA

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New Gambling Loss Rules

By Mike Sylvester • August 27, 2025
The gambling rules for tax year 2026 have changed due to the new tax bill. One Big Beautiful Bill Act (OBBB), was signed into law on July 4, 2025 by President Trump. These changes will affect both casual gamblers and professionals beginning in the 2026 tax year. Those who gamble should understand the new rules. The Old Rule (Through 2025) Historically, the IRS has allowed taxpayers to deduct gambling losses—but only to the extent of their gambling winnings. If you won $10,000 but lost $15,000, you could deduct $10,000 in losses, effectively zeroing out your taxable gambling income. The New Rule (Starting 2026) Beginning with the 2026 tax year, gambling losses will be deductible at only 90% of the amount of winnings. While this may sound like a minor adjustment, the impact is significant. Example: You win $100,000 and lose $100,000 during the year. Under the old rule: You would report $100,000 of income and deduct $100,000 of losses, resulting in zero taxable gambling income. Under the new rule: You can deduct only $90,000 of those losses on your federal income tax returns. That means you’ll still be taxed on $10,000 of “phantom income,” even though you truly broke even. This rule applies to all gamblers, whether you buy the occasional lottery ticket or operate as a professional gambler. How Itemized Deductions Work It’s important to understand that gambling losses are deductible only if you itemize deductions on your tax return. Here’s what that means: Standard vs. Itemized Deduction Every taxpayer can take the standard deduction—a fixed amount based on filing status. For 2025, the standard deduction is $14,600 for single filers and $29,200 for married couples filing jointly. Alternatively, you can choose to itemize deductions if the total of your eligible deductions (mortgage interest, charitable contributions, state and local taxes, medical expenses, and gambling losses, among others) is higher than the standard deduction. Where Gambling Losses Appear Gambling losses are reported on Schedule A, Itemized Deductions, not directly against gambling winnings. You must report all gambling winnings in full as income. Losses are deducted separately on Schedule A, up to the allowable limit (100% through 2025, 90% starting in 2026). Recordkeeping Requirements To claim these deductions, you must keep meticulous records—receipts, tickets, player’s club statements, and a diary of gambling activity. Without proper documentation, the IRS may disallow your deduction even if you had genuine losses. Why It Matters The IRS projects that this change will raise more than $1 billion in revenue over the next decade, but it comes at the expense of fairness. Many taxpayers will now find themselves paying tax on income they never actually earned. Professional gamblers, in particular, may feel the heaviest impact, as their livelihoods often involve large swings of wins and losses. Additionally, because gambling losses are only deductible for those who itemize, some taxpayers may find that the standard deduction provides a bigger benefit—even if it means their gambling losses go unused. This makes strategic planning even more important. Planning Ahead For 2025, the old rules remain in effect. If gambling is part of your financial life, I strongly recommend:  Evaluating whether itemizing makes sense in your situation. Keeping meticulous records of all winnings and losses. Budgeting for higher tax liability in 2026 and beyond, even if you expect to break even. Consulting with a tax professional to explore potential strategies for minimizing the impact. At SBS CPA Group, we’re here to help clients navigate these changes with confidence. If you’d like to review your individual situation and discuss strategies for 2025 and beyond, please reach out to your CPA and we’d be glad to assist. Mike Sylvester, CPA

Energy Tax Credits

By Mike Sylvester • August 27, 2025
Valuable tax credits are expiring at the end of this year. Our clients have claimed hundreds of thousands of dollars of federal energy tax credits the last few years! The One Big Beautiful Bill that passed in July changed the expiration date for the Residential Clean Energy Credit and the Energy Efficient Home Improvement Credit to December 31, 2025. Originally designed to expire in 2032, these credits can lead to substantial tax savings. To meet the Residential Clean Energy Credit requirements, you must install one of the following items in your main home or second home. The home can be new or existing. Homes you rent out do not qualify, but renters who improve the property do qualify. The credit is 30% of the expenditure, including labor. The item must be brand new; used items do not count. -Geothermal Heat Pumps -Wind Turbines -Solar Electric Panels -Solar Water Heaters -Fuel Cells (credit limited by the amount of kilowatt hours and only for main homes) -Battery Storage Systems (with equal to or greater than three kilowatt hours) You can claim all of these in the same year if you qualify for them. There are no limits on the amount of credit you can claim, except for Fuel Cells as noted above. To qualify under the Energy Efficient Home Improvement Credit rules, you would need to install one or more of the following items in a house that you live in that already exists. New homes do not qualify and neither do rental houses. The amount of the credit is 30% of the expense, with maximum limits listed below: -Exterior Doors (up to $250 per door, $500 total; must be main home; cannot include labor costs; for homeowners only-not renters) -Certified Home Energy Audit (up to $150; must be main home; for homeowners only-not renters) -Exterior Windows and Skylights (up to $600; must be main home; cannot include labor costs; for homeowners only-not renters) -Insulation and Air Sealing Materials (up to $1,200; must be main home; cannot include labor costs; for homeowners only-not renters) -Central Air Conditioners (up to $600; can be main or second home; you can include labor costs; homeowners or renters can claim) -Natural Gas, Propane, or Oil Water Heaters (up to $600; can be main or second home; you can include labor costs; homeowners or renters can claim) - Natural Gas, Propane, or Oil Furnaces and Hot Water Boilers (up to $600; can be main or second home; you can include labor costs; homeowners or renters can claim) -Electric Panel Upgrade (up to $600; can be main or second home; you can include labor costs; homeowners or renters can claim) --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- -Electric or natural gas heat pumps (up to $2,000; can be main or second home; you can include labor costs; homeowners or renters can claim) -Electric or natural gas heat pump water heaters (up to $2,000; can be main or second home; you can include labor costs; homeowners or renters can claim) -Biomass stoves and boilers (up to $2,000; can be main or second home; you can include labor costs; homeowners or renters can claim) The maximum credit per year is $3,200. You can claim up to $1,200 for anything above the line and $2,000 for anything below the line. Also, new for 2025, it must be from a qualified manufacturer with a PIN or QM Code. (Insulation and Air Sealing Materials are exempt from needing a PIN.) As you can see, the credits can provide substantial savings for you at tax time. You can claim both credits on the same tax return and they do not affect each other’s limits. All items for either credit must meet certain standards-just calling themselves energy efficient is not sufficient. Installation of the improvement needs to occur on or before December 31, 2025-simply ordering it or prepaying for it does not count. Both credits are nonrefundable, which means if the credits are bigger than your tax liability, you will not receive the excess as a refund. In the case of the Residential Clean Energy Credit, any unused credit will carry forward to use in future years. The Energy Efficient Home Improvement Credit does not carry forward. If you have already installed energy efficient improvements this year, make sure to let your tax preparer know. If you still plan to install energy efficient improvements, you may want to consult your tax advisor before making your purchase to make sure you maximize your tax savings.  Mike Sylvester, CPA

Clean Vehicle Credit

By Mike Sylvester • August 26, 2025
If you have been planning to buy a clean vehicle, you will want to act soon. Right now, there are tax credits for both individuals and businesses that can make buying an electric vehicle more enticing. However, the One Big Beautiful Bill will end these tax credits as of September 30, 2025! What is a clean vehicle? The IRS says that a clean vehicle is one that gets plugged in (aka an electric vehicle) or a fuel cell electric vehicle. Currently, if you buy a new clean vehicle for personal use, it can qualify you for the Clean Vehicle Credit. If you purchase a new car, the credit can be up to $7,500. Certain used electric vehicles can earn you a credit of up to $4,000. Tax credits are a dollar-for-dollar savings on your tax bill, so these are substantial savings! To qualify for the credit, the vehicle must meet several guidelines. To see if your vehicle qualifies, you can go to fueleconomy.gov. Also, the following income thresholds must be met: For new vehicles: -Modified AGI in the year of delivery (or the year before delivery) is no more than: -$150,000 if single, -$225,000 if head of household, -$300,000 if married filing jointly -Vehicle cost no more than -$55,000 if a sedan, -$80,000 if a SUV, pickup, or van For used vehicles: -Modified AGI is no more than: -$75,000 if single, -$112,500 if head of household, -$150,000 if married filing jointly -Vehicle cost no more than $25,000 In the case of businesses and tax-exempt organizations, the Commercial Electric Vehicle Credit allows a credit up to $7,500 for vehicles under 14,000 pounds and up to $40,000 for vehicles weighing 14,000 pounds or more. There are no income limits or price caps for businesses to qualify, but there are several eligibility requirements that must be met. You can go to fueleconomy.gov to see if your vehicle qualifies. Before taking these credits, you must make sure you did not get a point-of-sale rebate. Instead of waiting to get the tax credit when you file your taxes, you could have taken the option to take the credit at the time you purchased the vehicle which would have reduced the price you paid for the vehicle. You cannot have both a tax credit and a point-of-sale rebate for the same vehicle. Remember, these credits end September 30 th , 2025 so you must purchase and take delivery of your vehicle by then. Ensure you fill out your tax planner correctly so we can ensure you get these tax credits on your 2025 income tax returns.  Mike Sylvester, CPA

The Tax Professional Industry Is Shrinking

By Mike Sylvester • July 31, 2025
The Tax Professional Industry Is Shrinking The number of Certified Public Accountants in the United States is shrinking, and this trend is only expected to continue—and likely get worse. Three hundred fifty thousand more people have left the accounting industry than have joined it since 2020, and this has been caused by: 75% of CPAs are at or nearing retirement age Fewer people are taking and passing the CPA exam Further, many employees are leaving because they do not like the insane hours and want to focus on improving their quality of life. In our area, one or two firms close each and every year. A lot of firms are consolidating and becoming larger. The total number of firms in our area is half of what it was back in 2008. This is expected to continue. Things are very difficult in our industry, and 530 different potential new clients called our firm last year—and we spent nothing on advertising. Realize we have a total of 950 clients today. Considering we do not advertise, this honestly tells you everything you need to know about our industry. A majority of CPA firms today are not taking on any new clients because they are full—or, more likely, overfull. The three most common reasons why new clients contact us are: Prior CPA retired or died Prior firm got bought out and they dislike the new firm They cannot get questions answered We are still taking on new clients; however, we are being choosy who we onboard. Our firm is fortunate. The average age of the ten people at our firm is 41 years old. Compared to other CPA firms, that is extremely young. We already have four CPAs. We have two employees who we expect will be CPAs within the next year and another who will be an Enrolled Agent. It is a great time to be a CPA! We look forward to working with you for many years! Mike Sylvester, CPA

The Internal Revenue Service is in Trouble

By Mike Sylvester • July 30, 2025
The Internal Revenue Service will lose 25% of its total workforce in early and mid-2025. Many in Congress want to cut the IRS workforce even more next year. The IRS was already struggling to do its job before so many people were let go. For example: The Fort Wayne office was closed, along with many other offices around the country. The phone system is terrible. It is hard to get an agent on the phone, and disconnections are very common. They are issuing a record number of notices to taxpayers. Most of the notices are wrong. Worse, they have removed much of the information that used to be listed on the notices. This makes it much harder to deal with those notices and requires us to call them more and write them more letters. Their computer systems are, in some cases, 40 years old and slowly failing. The IRS has to deal with the newly passed tax laws, which are extremely complicated and will require many new forms and instructions. We have several clients who have had to wait well over a year for items to be resolved, and we expect that to get worse. The IRS has its fifth Commissioner already this year, and the current Commissioner is completely unqualified for the job. The Indiana Department of Revenue (INDOR) is also declining; however, it is more functional than the IRS. INDOR is issuing more notices and has removed a lot of information from their notices as well. INDOR’s budget has been cut by 5% this year and another 5% the following year. It looks as if they will not be allowed to hire anyone for 27 months. Further, the IRS and INDOR both have an aging workforce, and a large number of employees will retire over the next few years. The taxing agencies are getting harder to deal with, and we expect the IRS will be very difficult to deal with. All of this will be difficult for both you and our firm to deal with it. That being said, we are developing a plan to deal with it!  Mike Sylvester, CPA

One Big Beautiful Bill

By Mike Sylvester • July 29, 2025
Congress passed and President Trump signed into law major changes to the federal income tax code. These changes are very complicated and provide tax planning opportunities. Most of these changes are beneficial to taxpayers. Please ensure you read our email newsletters as we will be discussing many of the major provisions over the next few months. The changes are very complicated and: Some only affect certain years Most of them phase out at specified income levels Some require new forms Many require guidance from the IRS to be issued We will attend a large amount of training on these new provisions and do not expect much of the IRS guidance to be available until October 2025. Karena, Brent, and I can be hired to provide tax planning and help you minimize your income taxes. Please reach out to us in October of 2025.  Mike Sylvester, CPA

Why You’re Getting More Tax Notices

By Mike Sylvester • June 25, 2025
Summer has arrived in Fort Wayne, Indiana. Both the Internal Revenue Service and The Indiana Department of Revenue are sending more incorrect tax notices. Worse both have changed their notices to provide little, or any information, forcing us to reach out to them and talk to them to find out what their notice means. Both agencies are struggling due to budget cuts. We expect this to get worse over the next couple of years. We are happy to help you with tax notices; however, they currently take a long time to resolve, and we charge separately for resolving tax notices. The Internal Revenue Service is in complete disarray due to DOGE cuts and some reports show that the IRS may only answer 16% of phone calls they receive next tax season. Further, we are seeing it take the IRS years in some cases to respond to notices, and it now often takes them 6 to 12 months to process amended returns, old year returns, and returns for those who are deceased.  The tax agencies are much harder to deal with than they were five years ago; and we expect this to get worse due to budget cuts.

TaxDome Implementation

By Mike Sylvester • June 25, 2025
SBS CPA Group implemented TaxDome this year. Our clients really like the easy-to-use portal, and more than half of our clients are using this platform. We expect that number to grow significantly. We like TaxDome and have received great feedback from our clients. A copy of your tax returns is in TaxDome. You can retrieve them yourself any time. If you need help please reach out to Nikkie Reyes at Admin@sbscpagroup.com or call her at 260-407-5000 and she can help you retrieve a copy of your tax returns from TaxDome or, if needed, she can get them to you in another way. If you have not opted into TaxDome, please opt in. Just email Nikkie or call her and she will help you opt in. If you are married and file a joint return both of you need to opt into TaxDome. Opting into TaxDome is not required for current clients next year. We really like TaxDome, and you will too. Please give it a chance. Mike Sylvester, CPA

Social Security And Retirement: What You Should Know In 2025

By Mike Sylvester • June 17, 2025
The Original Purpose of Social Security: A Three-Legged Stool Social Security is a cornerstone of the United States' social safety net. Many Americans depend on this program to fund their retirement. The most recent data available from the Social Security Administration highlights the program's critical role in retirement planning. Social Security benefits account for approximately 30% of the income for individuals ages 65 and older. Retirement income was envisioned as a three-legged stool consisting of pensions, personal savings, and Social Security, each contributing one-third. The program was never intended to serve as the primary source of retirement income. Many Lower-Income Retirees Rely Heavily On Social Security 51.8% of individuals ages 65 and older depend on Social Security for half or more of their income. 24.7% of people in this age group rely on it for 90% or more of their income. Statistics Regarding Which Retirees Depend On Social Security The extent of reliance varies significantly by income quintile ; note the first quintile is the lowest 20% of taxable income and the fifth is the highest 20%: In the 1st quintile, 64.1% rely on Social Security for 90% or more of their income in retirement. In the 2nd quintile, 47.8% rely on Social Security for 90% or more of their income in retirement. All the way up to the 5th quintile, none of whom rely on Social Security for 90% or more of their income in retirement. Can Social Security Survive Beyond 2033? The program faces significant challenges. Without reform, Social Security will not be able to pay full benefits by 2033 . This presents a critical issue for Congress, as reductions in benefits are politically and socially untenable. Many changes are being made to the program via the Department of Government Efficiency. Further The Social Security Fairness Act was passed into law on January 5 and this brought more changes to the program. How Social Security Benefits Are Calculated Despite its importance, many people are unaware of how their Social Security benefits are calculated. Since the Social Security Administration ceased mailing statements in 2011, individuals must proactively set up an online account to access this information. The benefit formula is intentionally progressive, favoring lower-income earners by replacing a higher percentage of their income. For higher-income earners, Social Security becomes less significant as a percentage of their total retirement income. Terminology For Calculating Your Social Security Benefit 1. Credits: To qualify, individuals must earn 40 credits. In 2025, one credit is earned for every $1,810 in covered earnings (most often wages), with up to four credits given annually. 2. Average Indexed Monthly Earnings: The AIME figure is based on a worker's 35 highest-earning years, adjusted for inflation. If fewer than 35 years of earnings exist, zeros are averaged in. 3. Primary Insurance Amount: This is the monthly benefit a person receives at full retirement age. PIA is calculated using a formula adjusted annually for inflation. 2025 Social Security Payout Example: How The Formula Works Bend points are critical to the calculation and can be used to ensure you draw as much as possible in retirement. For a retiree with an AIME of $7,391 (This is annual wages of $88,692 in 2025 dollars): • 90% of the first $1,226 = $1,103.40 • 32% of the amount between $1,226 and $7,391 = $1,972.80. • Total PIA = $3,076.20 (before Medicare premiums). Strategies To Maximize Your Social Security Benefits To optimize benefits: • Aim for an AIME of at least $1,226, as the first tier yields a 90% replacement rate. • Understand that amounts above $7,391 are replaced at only 15%. Reviewing your lifetime earnings is crucial to ensure accuracy. Errors are far easier to correct early on than later on, when reconstructing decades-old income records may be challenging. Will Your Social Security Be Taxed? What Retirees Should Know Since 1983, up to 85% of Social Security income has been subject to federal taxes, depending on other income sources. This makes the program more progressive but also adds complexity to retirement planning. Consider discussing this with your tax professional and financial planner. When Should You Start Collecting Social Security? When to begin drawing Social Security benefits is a critical decision, particularly for married couples. Meeting with a qualified financial planner may be appropriate. Starting benefits early results in reduced monthly payments, while delaying up to age 70 increases them. Careful analysis and planning are essential to maximize lifelong benefits. Final Thoughts: Why Understanding Social Security Matters More Than Ever Social Security is a vital program for most Americans. Understanding its mechanics and planning effectively can significantly impact your retirement security and should be carefully considered before retirement. I do some consulting on this topic and if you want to hire me to do some Social Security planning please send me an email at Mike@sbscpagroup.com . Mike Sylvester, CPA

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