As we head into Q2 of 2021, we can all likely agree that our financial mindset at this point in 2021 is different than it was in the second quarter of 2020. Within the last year, a lot has changed around us. We have experienced many challenges, and our priorities have likely shifted. Due to this and some recent changes regarding government deadlines that may impact your finances, we feel it is a good time to share some financial planning updates and tips to keep in mind so you can stay ahead of the game.
2020 Tax Returns
The Internal Revenue Service (IRS) announced a May 17 deadline extension for individuals filing federal taxes. For those filing personal tax returns in Pennsylvania, the deadline has also been extended to May 17. Please note that different states may vary on their deadlines for state taxes, so if you do not reside in Pennsylvania, we recommend verifying your state’s specific deadline.
There is no extension for those making estimated tax payments – both federal and for Pennsylvania. Estimated taxpayers should continue to follow the same filing schedule they would normally follow for their estimated payments. This includes taxpayers with estimated taxes due on April 15, 2021. Again, please refer to the www.IRS.gov and www.PA.gov for more specific information.
Estimated Tax Tip: When filing your tax return, keep in mind that if your taxes are not paid through withholding, or your withheld taxes are not enough, and you expect to owe at least $1,000 in tax for 2020, you may have to pay estimated taxes and may incur a fee if your payments are late. According to the IRS, “If the amount of income tax withheld from your salary or pension is not enough, or if you receive income such as interest, dividends, alimony, self-employment income, capital gains, prizes and awards, you may have to make estimated tax payments. If you are in business for yourself, you generally need to make estimated tax payments.” Learn more in our article about estimated tax payments.
Reviewing Your Financial Status
Tax time is also a good time to review your retirement and investment management status. If the last year taught us anything, it is to be extra vigilant about being financially prepared for unexpected and uncontrollable events. If you feel your emergency funds may be less than they should be right now, consider whether it makes sense to adjust your 401K retirement contributions to help bolster your emergency funds. While it is prudent to make the maximum contributions and receive the benefit of employer-matched funding, there may be times when it makes sense to reduce your contributions for a period of time, and then resume making the maximum allowable contributions when your emergency fund saving goals have been accomplished. Before making any changes, we recommend seeking the guidance of an experienced financial advisor to help prepare a personalized, long-term financial and investment plan that will guide you through 2021, ensure you have enough of a financial buffer for unexpected events, and allow you to coast into your retirement years. If you do not have an advisor, perhaps now is a good time to find the right one for you.
RELATED: Learn more about how to choose the right financial advisor.
Federal Payment Protection Plan (PPP) Loan Program
For certain eligible business owners who participated in the Federal Paycheck Protection Program (PPP) First Draw, a Second Draw of the PPP loan is available for applicants through May 31, 2021. According to sba.gov, “Second Draw PPP loans can be used to help fund payroll costs, including benefits. Funds can also be used to pay for mortgage interest, rent, utilities, worker protection costs related to COVID-19, uninsured property damage costs caused by looting or vandalism during 2020, and certain supplier costs and expenses for operations.”
Also, included in the Second Draw is increased assistance for accommodation and food services businesses. Sba.gov states, “For most borrowers, the maximum loan amount of a Second Draw PPP loan is 2.5x the average monthly 2019 or 2020 payroll costs up to $2 million. For borrowers in the Accommodation and Food Services sector (use NAICS 72 to confirm), the maximum loan amount for a Second Draw PPP loan is 3.5x the average monthly 2019 or 2020 payroll costs up to $2 million.”
For more information, please refer to:
https://www.sba.gov/funding-programs/loans/covid-19-relief-options/paycheck-protection-program/second-draw-ppp-loan#section-header-0
This time of the year is a great fit to review your financial outlook and adjust your financial plan so you can make sure you are on track to achieve your goals. We hope these updates, reminders, and tips help you kickstart your financial planning for 2021 and beyond.
If you have questions about this information or your financial plan, call us today at 412-630-6000. Our experienced financial advisors are here to help.
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