Business Update – 19 January 2022
Once again, some people are seeing bare shelves in grocery stores. Our just-in-time supply chain depends on synchrony in all links to keep shelves stocked, but a combination of factors is disrupting the timing. The fast-spreading omicron variant means grocery store workers are calling in sick, as are workers at food producers. Besides workers who are temporarily out sick, grocery stores are dealing with a labor shortage, as people quit over the stress of working in a pandemic. Trucking companies are also dealing with a shortage of drivers. Changing weather patterns and severe weather are impacting the supply of food as well as the ability to move it around.
THE AMERICAN RECOVERY PLAN ACT (ARPA)
State Small Business Credit Initiative
As part of the COVID aid package passed last March, the federal government is preparing to hand out $10 billion to help support small companies in their recovery and growth. The funds will be distributed by state, territorial and tribal governments as venture capital for startups or loans for small businesses. The funds are not intended to plug revenue holes, but to support long-term growth and recovery. For more information and application materials, please visit the Treasury’s SSBCI webpage.
Monthly Child Tax Credit Payments
If you received payments from the advance child tax credit, watch your mail for a letter that you’ll need to file your taxes and to get the remainder of the child tax credit that’s owed to you. In December, the IRS began sending out Letter 6419, which contains information on the amount of payments sent out and the number of children that the IRS based their calculations on. If you don’t receive a letter, or if you lose it, you can get the information from the IRS Child Tax Credit Update Portal. For more information on the expanded child tax credits see the IRS FAQs.
On Monday, January 24, the IRS will begin accepting and processing 2021 tax returns, according to a news release. Tax returns, whether filed electronically or by paper will be due Monday, April 18 because of the Emancipation Day holiday in the District of Columbia. While the IRS is still processing tax returns from 2020 and earlier years, taxpayers do not need to wait until those returns have been fully processed to file 2021 returns. The news release also contains links for the IRS Free File program, tips for making filing easier, and key filing season dates.
According to the Taxpayer Advocate’s 2021 Annual Report to Congress, the IRS still has backlogs of 6 million unprocessed individual returns and about 5 million pieces of correspondence. Part of the delay in processing was caused by discrepancies with stimulus payments, which required manual processing and correspondence with some taxpayers. Erin Collins, National Taxpayer Advocate, foresees continuing challenges during the upcoming filing season, as taxpayers will need to reconcile stimulus payments and possibly advance child tax credit payments they received on their returns with data from the IRS. Collins also noted in her report that phone service with the IRS was the worst it has ever been. Only 11 percent of calls were answered with hold times that averaged 23 minutes.
If you have childcare expenses, you may be glad to know that for 2021 only, the usual cap of $3,000 per child for allowable expenses for the child care tax credit has been raised to $8,000 per child for a total of $16,000 total eligible expenses for two or more children. In addition, the maximum percentage of those expenses allowed as a tax credit has increased from 35% to 50%. This means that a family who spent at least $16,000 on childcare for two or more children could receive a refundable tax credit of up to $8,000.
If you recently tried to fix an error on your credit report, but were unsuccessful, you’re not alone. According to a recent report by the Consumer Financial Protection Bureau (CFPB), only 2% of the more than 800,000 complaints received between January 2020 and September 2021 were resolved. According to the report, one cause of the small proportion of error resolution has been the rise of third-party credit monitoring and repair apps. While federal law allows consumers to use third parties to initiate disputes, the three credit monitoring agencies routinely ignore complaints submitted by third parties. A possible crackdown on credit monitoring bureaus may include fines or other enforcement actions for what may be violations of the Fair Credit Reporting Act.
While school administrators are working to keep schools open, those efforts are being hampered by a big drop in attendance as children are out sick or are being kept home by their parents. In New York City, overall attendance dropped below 70% when students returned after the winter holidays. Low attendance rates make teaching a challenge for teachers, who struggle to keep everyone caught up, and for students who fall behind when they miss school. Staffing shortages compound the problem as teachers and school staff stay home sick.
A year ago, Professor Anthony Klotz from Texas A&M University predicted the Great Resignation, a term he unwittingly coined. In an interview with Barron’s, Dr. Klotz discusses the reasons for the large wave of quits that continues to disrupt the economy. One reason is that many people who were planning to quit their jobs in 2020 postponed those plans until 2021 when vaccines became available, and the economy began to revive. Another reason is widespread burnout among frontline workers who worked long hours under difficult conditions during the first stage of the pandemic. Many others made life pivots as they confronted the death and illness brought on by the pandemic.
REMOTE AND HYBRID WORK OPTIONS
For some companies, a hybrid or flexible work schedule works better than an all-remote option, as the CEO of Nexkey found. Some issues are easier to solve in person than via lengthy Slack exchanges or email chains, and the camaraderie from working side by side can help with team building and productivity.
Before the pandemic, working remotely was the exception, not the norm, a perk often doled out in exchange for lower pay or fewer advancement opportunities. Because women have often chosen part-time or remote work as a way to balance work, childcare, and school schedules, this may have contributed to the gender pay gap. But as remote and hybrid work arrangements become the norm, the stigma associated with working from home is diminishing, and it is hoped that the penalty for remote work will diminish over time.
This may be the year that employees get raises: according to a recent survey of human resources leaders, 51% said their organizations plan to award average merit increases of more than 5%, and 68% said they had increased the number of employees eligible for cash bonuses. A New York based thinktank, The Conference Board, is predicting a 3.9% increase in wages for companies, the highest increase since 2008. People who change jobs tend to get larger salary increases than those who stay. Some people may be willing to accept salary cuts in exchange for flexibility.
As COVID-19 flares up across China, manufacturers are shutting down factories, and workers are in short supply as city lockdowns are imposed across the country. China’s zero-tolerance strategy for confining the virus is heightening fears of continuing supply chain disruptions. Companies including Samsung, Toyota, Volkswagen, Nike, and Adidas are experiencing challenges.
Despite trillions of pandemic relief, more than two-thirds of Americans say their financial situation has gotten worse over the last year. Stimulus payments allowed Americans to pay off a record $83 billion in credit card debt, but household income is not keeping up with inflation. The average U.S. household now owes $155,622 in combined credit card, mortgages, car loans, student loans and other debt.
- IRS resources for stimulus payments:
- IRS information about the Advance Child Tax Credit Payments
- The best source for up-to-date and accurate health information is the Center for Disease Control (CDC)
- Entrepreneur put together a listing of free tech resources for remote work
- The Consumer Financial Protection Bureau has warnings about COVID-related scams
- PC Magazine explains how to carry your vaccination card on your phone
- How to create a strong password
We sincerely hope that you and your family are well and remain well. If you have any questions or concerns, don’t hesitate to reach out to us. We are all in this together!