Business Update – October 27 2021
On November 8, the U.S. will open borders to foreign travelers, marking a new stage in the pandemic. The Delta variant surge is easing, vaccinations and boosters are available to more people, and mask mandates are being dropped. Case counts appear to be decreasing, and hospitalizations are declining in most parts of the country. However, worker shortages – particularly in restaurants – persist as a reminder that the pandemic is still not behind us.
THE AMERICAN RECOVERY PLAN ACT (ARPA)
Monthly Child Tax Credit Payments
The advance Child Tax Credit payments are supposed to be based on a clear formula, but for the last two months, some families have seen drastic cuts in the payments they receive. One couple received $500 in July and August, then $313 in September, and hope to receive $229 for October. In some cases, the IRS seems to be adjusting payments based on recently filed 2020 tax returns, but so far, the IRS has provided only a few details.
As a reminder, if you want to opt out of future payments, you must opt out by the deadline for the next month’s payment. Check out the IRS FAQs where you’ll find everything you need to know about opting out in Section J.
Many federal tax provisions are indexed for inflation, but some are not, with the result that periods of high inflation – as we have now – some taxpayers will be winners, and some will be losers. Middle-income households tend to benefit from provisions such as the standard deduction, which increase every year with inflation, while higher-income households tend to be impacted by provisions that have not changed in years. The standard deduction for a couple filing jointly will likely increase from $25,100 to $25,900, but the $500,00 exemption from capital gains for selling a home hasn’t changed since the law was passed in 1997, even though home prices have doubled since then. Many workers will see small increases to their paychecks in January as less income tax is withheld to compensate for the increased standard deduction.
THE GREAT REASSESSMENT
In an effort to stem the tide of employees leaving, some companies are offering paid sabbaticals to help combat burnout. For example, Synchrony Financial offers employees the option to apply for a sabbatical of up to one year at reduced pay, and consulting firm PwC is offering a one- to six-week leave of absence at 20% of pay. However, because many people can’t afford a pay reduction, this benefit may be of more interest to higher earners.
Job openings are near record highs, enhanced unemployment benefits have ended, kids have returned to school, and hourly pay has increased, but Americans are still not returning to work for at least six reasons. First, the ongoing pandemic is still keeping many front-line workers away for health reasons. Early retirements have reduced the pool of available workers. While most schools have reopened, outbreaks at schools result in quarantines, which make it difficult for parents to commit to steady work. Reduced spending and pandemic stimulus payments have allowed many people to amass sufficient savings to stay out of the workforce. While wages have increased, that increase may not be sufficient to attract people back to work. Other factors, such as a mismatch between worker and company expectations and the desire of many to switch careers, will take time to resolve.
REOPENING THE OFFICE AND REMOTE WORK OPTIONS
Going back to the office after an extended period of remote work can be a rocky return. Advice from five Harvard Business School professors can make that transition a bit easier. For example, Tsedal Neeley suggests using “the office as a tool rather than a destination” to encourage workers to return when there’s a need for collaboration, connection, or creativity. Joe Fuller reminds managers that because the pandemic is still ongoing, a flexible approach can help businesses adapt to the “next normal” and to the “next normal” after that.
In response to the ongoing supply chain problems, P&G joins many of the nation’s largest companies in raising prices on a broad array of consumer goods. P&G, like many other big companies, has the resources to charter its own ships or move production to other locations. P&G has also benefited from consumers with more disposable income to purchase its offerings, which tend to be more expensive than the competition. However, as consumers face price increases across the board, companies that have benefited from higher prices may be at risk.
A high school teacher had to rent a party bus – complete with neon lights and stripper poles – to take a group of students on a field trip because of a nationwide shortage of school bus drivers. Like many other low-wage workers who were sidelined during the pandemic, many are not returning quickly to their jobs. Bus drivers tend to be older than most workers and are also at a greater risk of COVID infection because they spend time in an enclosed area with many unvaccinated students. Their split schedule also makes it challenging to take on another job. Companies like Amazon have been luring drivers with the promise of better pay, more hours, and freedom from the need to keep rowdy kids under control.
- 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
- Fast Company has a listing of the best productivity apps for 2020
- 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!