The federal government’s response to the COVID-19 pandemic continues to impact individual income tax returns, from the suspension of federal student loan interest to expanded child tax credits. For many taxpayers, this may mean your 2021 return may look a bit different from last year’s tax return. For some, this may mean a smaller refund or a higher tax rate. Here is some information about how certain factors may result in a lower federal income tax refund or affect your taxes due.

No Tax Waiver on 2021 Unemployment Benefits

In March 2021, Congress passed the American Rescue Plan Act, which waived federal income tax on up to $10,200 of unemployment benefits paid per individual in 2020.1. However, no unemployment tax breaks have passed since then. This lack of a tax waiver means that the approximately 25 million Americans who received unemployment benefits in 2021 and did not have federal income tax withheld (or pay estimated taxes) may receive a smaller refund than before.

Advanced Child Tax Credits May Lower Refunds

If you have a child under the age of 17 and did not opt-out of the $250 or $300 per month per child advance payments beginning in June 2021, there is a lower income tax refund possible to compensate for these advanced child tax credits payments.2 The overall child tax credit was higher than in prior years (at $3,600 per child age five and under and $3,000 per child age six and over). However, advancing half the overall credit over the last half of 2021 means that taxpayers may now get proportionally less when they file their tax returns.

No Federal Student Loan Interest In 2021

For more than a decade, taxpayers who pay interest in federal student loans have been able to deduct up to $2,500 in interest paid. But with the suspension of interest on federal student loans from March 2020 through May 2022, many taxpayers will not have any student loan interest to deduct for 2021.

Those With Defaulted Student Loans Could Have Refunds Seized

Along with the moratorium on student loan payments and interest charges, the federal government stayed tax refund offsets—and all collection activity—for defaulted federal student loans. This moratorium meant that those whose loans were in default could not have their tax refunds garnished by the IRS during the stay period.

The moratorium expires on January 31, 2022. This expiration means those who file a tax return early—and receive a refund on or after Feb. 1—could see this refund garnished and put toward their overall loan balance and penalties. For taxpayers in this situation, it might be worth investigating your options to get your loans out of defaulted status before filing your 2021 tax return.
Suppose any of these situations apply to you. In that case, a financial professional may be able to help you investigate other available federal and state tax benefits that may help manage your tax bill or boost your refund.

1. https://www.cnbc.com/2022/01/03/no-a-tax-break-on-2021-unemployment-benefits-isnt-available.html
2. https://www.forbes.com/sites/robertfarrington/2021/11/22/americans-should-be-prepared-for-a-smaller-tax-refund-next-year/?sh=4fd19fd1c718

This information is not intended as authoritative guidance or tax advice.  You should consult with tax advisor for guidance on your specific situation.

Important Disclosures:

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.

This information is not intended to be a substitute for specific individualized tax advice. We suggest that you discuss your specific tax issues with a qualified tax advisor.
All information is believed to be from reliable sources; however LPL Financial makes no representation as to its completeness or accuracy.

This article was prepared by WriterAccess | LPL Tracking #1-05239398


For business owners, estate planning may seem like another task to do on a long to-do list. Having a solid estate and succession plan in place may be crucial to your business’s long-term success. If you are incapable of making business decisions, or if you unexpectedly pass away without an estate plan, your heirs may scramble to keep your business afloat.

Here are three tips that may make the estate planning process less stressful.

Begin With the Basics

When making an estate or business succession plan, start with a workable outline. Do not be afraid to set out a plan that still needs some fine-tuning. Put your ideas in writing. Even simple notes are better than leaving your loved ones without guidance and scrambling while dealing with emotional turmoil.

Some factors to consider when drafting a will and basic estate plan include:

• Who would you like to run your business in your absence? Should this person be a full owner, part owner or simply a manager?
• What framework would you like your heirs or loved ones to use to resolve business-related disputes in your absence?
• Do you want to restrict business ownership to family members or allow others to invest?
Imagining the future of your business helps to make big-picture estate planning decisions.

Make Your Plans Tax-Efficient

An attorney may help you write a will and a business contingency plan but may not be the best professional to work on tax issues. A financial professional may work with you on the process of succession. The goal is to transfer your business with a strategy that manages the impact of state, federal, and local income taxes on the transaction.

Discuss Your Intentions with Those Affected

One of the biggest sources of friction in the business transition process may come from the hurt feelings of those involved. Interfamily disputes may come up from miscommunication or unmet expectations. If your child has counted on being tapped to run the business in your absence, only to see that you named someone else to this role, it can be tougher for your loved ones to rally together.

Even if you suspect that this discussion may lead to some conflict, it is important to communicate your intentions and plans with those affected by them. The time to work on these issues is before they are needed, not after it is already too late.
Important Disclosures:

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.

This information is not intended to be a substitute for specific individualized tax or legal advice. We suggest that you discuss your specific situation with a qualified tax or legal advisor.
This article was prepared by WriterAccess | LPL Tracking # 1-05233601


A pre-retirement checklist to make early (or earlier) retirement a reality

As we make our way through 2022, maybe the dream of early retirement has begun to take shape in your mind. Maybe you’re researching when you might first qualify for Social Security retirement benefits (hint: for Social Security income, the youngest age when you can apply is 61 years and nine months old – you would then receive your first Social Security check four months later – one month after your 62nd birthday).

But as attractive as monthly checks may be, seriously consider your financial position to be sure you can afford to walk away from the nine-to-five routine.

When reviewing your retirement income, incorporate accurate Social Security figures into your financial equation. Keep in mind that Social Security benefits paid at an early retirement age will be less than the benefits paid at full retirement age (65–67, depending on your date of birth). To estimate your Social Security benefit amount, you can go to the Social Security Administration’s website at www.ssa.gov to use the agency’s online calculator.

Think Beyond Social Security

Beyond your Social Security benefits, however, are other major factors, such as your overall financial situation, prospects for future income, and satisfaction with your job. If early retirement seems a reasonable goal, determine how much income you can count on from savings to supplement your Social Security benefits. Remember to include income from employer-sponsored retirement plans, such as 401(k)s, Individual Retirement Accounts (IRAs), or annuities.

Once you have determined your retirement resources, add up your current living expenses and calculate a rough estimate of how much income you may need during retirement. It is possible to live on less than your pre-retirement income, depending on your lifestyle. If you find that your retirement funds will be insufficient, explore the possibilities of selling your home, and moving to an area with a lower cost of living, or finding part-time employment where compensation is within allowable Social Security limits to avoid benefit reduction.

Other Considerations

Another critical point to consider is whether retiring from your job would leave you without life and health insurance or other necessary benefits. You may want to investigate the cost of private health coverage until you reach the age that you will be eligible for Medicare. It is also important to prepare for medical costs in retirement, including potential long-term care needs.

Typically, many people underestimate the cost of long-term care and overestimate the funding that will be available through public programs and private health insurance. In reality, Medicare only covers short-term care. It may also cover some nursing home or assisted living costs, but only for skilled care that is deemed medically necessary for the duration of an illness, usually limited to 100 days following a three-day hospital stay.

Consequently, Medicaid has become the primary source of public funding for long-term care.But, because it is a government program designed to help those in financial need, individuals must “spend down” their personal assets and meet the Federal poverty guidelines before qualifying for assistance.

However, long-term care insurance is an alternative that can help cover extended care expenses before you or a loved one become eligible for Medicaid. Policies vary, but in general, they provide a daily, set amount of coverage that can be used in a number of ways. This type of insurance may help cover the expenses of nursing homes, assisted living facilities, adult day health programs, and/or at-home care. The cost of coverage is typically based on your age, current health status, and specific policy features, such as scope of coverage, levels of care, and duration of benefits.

Your Pre-Retirement Checklist

To begin preparation for an early retirement, read the following statements. If you have given careful consideration to the task, check it off.

• I have completed an assessment of my current financial situation, including income, expenses, assets, and liabilities.
• I have determined which of my expenses may be lower after I retire and which may be higher.
• I have determined how much I can expect from Social Security, veterans benefits, and pension plans.
• I have estimated how much I expect to receive from interest on my savings, real estate rentals, etc.
• I have reviewed my insurance policies to ensure that they meet my present and future needs.
• I have organized a strategy to pay off my large bills and debt before retirement.

Final Assessment

If you have any doubts about being able to make ends meet, working for a while longer may help improve your financial situation. If, however, income from savings, rents, royalties, or other non-employment sources, combined with Social Security benefits, is enough to meet your projected retirement expenses, you may want to focus on making your dream of an early retirement a reality.  

Important Disclosures:

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any Long Term Care (LTC) product. To determine which LTC product may be appropriate for you, consult your financial professional.

This article was prepared by FMeX. | LPL Tracking #1-05228085