CHAOS IN D.C.
George Wilson Adams CPA MBA
April 19, 2021
No Bill of Attainder or ex post facto Law shall be passed.
U.S. Constitution
The Worst Tax Season in Decades
Tax Season 2021 is the worst in decades because of the many, many retroactive tax law changes spewing from D.C. This article will summarize key changes, which may force many taxpayers who already filed their taxes in February or early March of 2021 to file amended tax returns reflecting the new rules. The situation is extremely burdensome for accountants and resembles changing the rules of baseball in the middle of a game.
In general our Constitution forbids retroactive changes to the law (the prohibition of “ex post facto” laws found in Article I, Section 9, Clause 3.) However, in various Supreme Court cases this Constitutional protection against retroactive law changes has been narrowly limited to changing criminal laws, not civil or tax laws. "No" has been turned into "Yes". Thus, legislators have a time machine that allows them to meddle with the past, undermining the firm foundation of law required by a fair and orderly society. The result of a baseball game can be changed long after the game is over, making fools out of all participants.
Ex post facto laws…are contrary to the first principles of the social compact, and to every principle of sound legislation.
James Madison
I am not the only person who is offended and threatened by ex post facto laws. See:
Constitutional Constraints On Retroactive Civil Legislation
Summary of Key Retroactive Tax Law Changes
(1) Unemployment Benefits now Tax Exempt Up To $10,200
A new, retroactive tax law change that took effect in March exempts the first $10,200 in unemployment benefits received in 2020. This exemption is phased out if your income exceeds $150,000 for a married filing joint tax return.
(2) Employee Retention Tax Credit Now Available to More Employers
Under prior law recipients of Payroll Protection Program funds were disqualified from also receiving the Employee retention tax credit, which reduces the burden of the employer social security tax. The new law allows recipients of PPP funds to qualify for this credit if they meet other conditions. For further information see the instructions to latest version of Form 941.
(3) Credits for Paid Sick and Family Leave
A refundable tax credit for sick pay and medical leave pay has been extended through March 31, 2021 and is claimed on IRS Form 941. See the instructions to Form 941 for further information.
(4) Teacher Expenses for Personal Protective Equipment Are Deductible
The cost of masks, hand sanitizer and related personal protective equipment now qualify as a component of otherwise deductible educator expenses, claimed as a deduction on Form 1040, even for those who do not file Schedule A and itemize their expenses.
(5) Distributions From Retirement Plans May Be Tax Free If Repaid In 3 Years
Distributions from retirement plans are generally taxable and early distributions taken before reaching age 59 and ½ are subject to a 10 percent penalty. New law waives the 10 percent penalty for Covid-19 related withdrawals. And if retirement funds are repaid within a 3 year period, then, ultimately, there is no tax. See new Form 8918-E and instructions.
(6) Business Meals 100% Deductible Starting in 2021
Under prior law only 50% of the cost of business meals was tax deductible. Starting in 2021 and continuing through the end of 2022 the entire cost of business meals is deductible.
(7) Possible Retroactive Tax Increases
A variety of proposals are circulating in Congress to raise taxes retroactive to January 1, 2021. Proposed tax increases are for both income tax as well as social security taxes. It is unknown at this time which proposal will prevail and what the extent of the tax hike would be. These major uncertainties make effective tax planning impossible.
(8) Like Kind Exchanges of Real Estate May Be Eliminated
Tax deferred Section 1031 like kind exchanges of real estate are on the D.C. target list, and may be eliminated. Anyone in the middle of completing a Section 1031 transaction should hurry up and get it done.
(9) Payroll Protection Program Loan Forgiveness Now Tax Free
Last minute retroactive tax law changes, including a recent change to Maine’s tax law made in early March, 2021, resulted in making Payroll Protection Program loan forgiveness tax free. See IRS Revenue Ruling 2021-02.
(10) Tax Day Extended to May 17, 2021
Both the IRS and Maine have announced that Tax Day is extended to Monday, May 17, 2021. Tax returns and payments will be legally due at that date. The due date for 1st quarter 2021 estimated tax payments remains April 15 – unless changed.
(11) Obamacare Cliff Deleted for 2020
Another huge retroactive tax law change hit in early April of 2021 and deleted the requirement to repay Obamacare health insurance subsidies if a taxpayer's income exceeded a threshold amount. Thus, the repayment amount calculated on IRS Form 8962 is disregarded and no longer effects 2020 taxes. This is great news for people who thought they would qualify for health insurance subsidies and who found out too late that their 2020 income was too high.
See:
On the flip side this is yet another retroactive change in rules that makes fools out of responsible, diligent people who choose not to use Obamacare for insurance and who, instead, paid thousands of dollars purchasing private health insurance. These individuals receive no break of any kind, and have been turned into suckers by the scum who now control our government in D.C.
Finally, I encourage everyone out there to be patient and courteous to your accountant. And I encourage all of my suffering fellow accountants to fire abusive clients who fail or refuse to understand the profoundly difficult circumstances that exist during Tax Season 2021.
DESTRUCTION MADE VISIBLE
In 2020 the author spent hundreds of dollars purchasing and many, many unpaid hours studying these tax law books - all of which were obsoleted by recent retroactive legislation. Congress made fools out of tens of thousands of accountants nationwide. (The author is holding in his left hand an authentic Franklin Mint edition of the legendary sword Excalibur.)
The only thing necessary for the triumph of evil is for good men to do nothing.
Edmund Burke
George Adams
Certified Public Accountant Master of Business Administration
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