Slowly, our world is changing. A percentage of the population has been vaccinated and many employees are headed back to the office. However, this may cause a bit of anxiety – and understandably so. Here are few ways to help take the edge off of returning to the workplace.
Wake up Earlier
For some of you, working from home might have caused you to shift your office hours. Maybe you’re starting later and staying up later. Whatever your routine, it’s safe to say that generally, office hours are 9 a.m. to 5 p.m. A few days, perhaps a week, before you expect to go back, set your alarm earlier. Each day, baby step it back a few minutes to the time you roused yourself before the shutdown began. Though things might never be the same, at least your re-entry into the work world might feel somewhat familiar.
Prepare the Night Before Your First Day
Along with starting your day earlier, think through everything you need to take with you. Do you drink coffee? Make sure you have a thermos with a hot cup of joe ready to go. Do you eat lunch at work? Make your lunch the night before; or if you prefer microwavable meals, be sure you’ve got all your favs ready to pop into your work bag. Ensuring that you will have sustenance at whatever time you lunch will save you a lot of worry.
Review Your Workplace Protocols
Here we’re talking about rules to keep you safe. Do you need a mask if you’ve been vaccinated? What if you haven’t been vaccinated? Do you need to always wear a mask? Will there be hand sanitizer onsite or do you need to bring your own? Email HR or leadership to be fully aware of the policy so you can keep up-to-date with any changes. Staying informed will help calm your nerves.
Manage Your Stress
Make sure you’re being mindful of how you’re feeling emotionally before, during, and after you return to work. If you’re dealing with anxiety when you’re back at work, practice self-care. Take a walk outside during lunch to get some fresh air. If you like to exercise and your gym is open, plan a quick workout. If for some reason you can’t leave the office, try meditation apps like Calm, Headspace or Simple Habit. (These are also great when you get home and before you go to bed – anytime, actually.) You might also call a friend or family member and share how you’re feeling. Letting off some steam and expressing yourself helps alleviate some of the pressure that might be building up.
Communicate with Your Team
Making the transition back to the office can be challenging, if not downright tough. To diffuse any misunderstandings, practice transparency with everyone, no matter what their position. If you’re a manager, lay out your expectations so that everyone is on the same page. If you’re an individual contributor, make sure your manager and peers know what you’re working on, your hours, and any out-of-the-office days you have coming up. Many companies are asking employees, initially, to split their time between the office and home, which means that for some a full transition back to the office is yet to come. Regardless, overcommunicating will ensure you don’t miss out on anything important.
We may never return to the days before the pandemic. However, we’re making strides to get back to a place of normalcy and are here to guide you every step of the way.
Slowly, our world is changing. A percentage of the population has been vaccinated and many employees are headed back to the office. However, this may cause a bit of anxiety – and understandably so. Here are few ways to help take the edge off of returning to the workplace.
Wake up Earlier
For some of you, working from home might have caused you to shift your office hours. Maybe you’re starting later and staying up later. Whatever your routine, it’s safe to say that generally, office hours are 9 a.m. to 5 p.m. A few days, perhaps a week, before you expect to go back, set your alarm earlier. Each day, baby step it back a few minutes to the time you roused yourself before the shutdown began. Though things might never be the same, at least your re-entry into the work world might feel somewhat familiar.
Prepare the Night Before Your First Day
Along with starting your day earlier, think through everything you need to take with you. Do you drink coffee? Make sure you have a thermos with a hot cup of joe ready to go. Do you eat lunch at work? Make your lunch the night before; or if you prefer microwavable meals, be sure you’ve got all your favs ready to pop into your work bag. Ensuring that you will have sustenance at whatever time you lunch will save you a lot of worry.
Review Your Workplace Protocols
Here we’re talking about rules to keep you safe. Do you need a mask if you’ve been vaccinated? What if you haven’t been vaccinated? Do you need to always wear a mask? Will there be hand sanitizer onsite or do you need to bring your own? Email HR or leadership to be fully aware of the policy so you can keep up-to-date with any changes. Staying informed will help calm your nerves.
Manage Your Stress
Make sure you’re being mindful of how you’re feeling emotionally before, during, and after you return to work. If you’re dealing with anxiety when you’re back at work, practice self-care. Take a walk outside during lunch to get some fresh air. If you like to exercise and your gym is open, plan a quick workout. If for some reason you can’t leave the office, try meditation apps like Calm, Headspace or Simple Habit. (These are also great when you get home and before you go to bed – anytime, actually.) You might also call a friend or family member and share how you’re feeling. Letting off some steam and expressing yourself helps alleviate some of the pressure that might be building up.
Communicate with Your Team
Making the transition back to the office can be challenging, if not downright tough. To diffuse any misunderstandings, practice transparency with everyone, no matter what their position. If you’re a manager, lay out your expectations so that everyone is on the same page. If you’re an individual contributor, make sure your manager and peers know what you’re working on, your hours, and any out-of-the-office days you have coming up. Many companies are asking employees, initially, to split their time between the office and home, which means that for some a full transition back to the office is yet to come. Regardless, overcommunicating will ensure you don’t miss out on anything important.
We may never return to the days before the pandemic. However, we’re making strides to get back to a place of normalcy and are here to guide you every step of the way.
These articles are intended to provide general resources for the tax and accounting needs of small businesses and individuals. Service2Client LLC is the author, but is not engaged in rendering specific legal, accounting, financial or professional advice. Service2Client LLC makes no representation that the recommendations of Service2Client LLC will achieve any result. The NSAD has not reviewed any of the Service2Client LLC content. Readers are encouraged to contact a professional regarding the topics in these articles. The images linked to these articles are protected by copyright and should not be copied for any reason.
Auditing is crucial to ensure the accuracy and fairness of financial information. However, one of the biggest threats to audit reputation today is data quality. This is because of the large volumes of data that businesses produce today. To deal with so much data, auditors are now turning to data analytics.
Data Analytics and Audits
Technology has played a major role in business growth as it aids in reducing operational costs and improving customer service. As such, many businesses have adopted enterprise resource planning (ERP) systems. These systems result in huge volumes of data, making it nearly impossible to analyze using the traditional audit process.
Auditors are left with no choice but to also use IT-based solutions; and this led to the development of audit software to support the auditors in data extraction and analysis.
To further enhance the workings of audit software, it’s now being integrated with data analytics. Given that data analytics works with structured data, the systems incorporate machine learning (deep learning) to extract useful data from a host of unstructured data.
Although these developments in the audit profession have not changed the primary role of auditors, they have changed how an audit is done by helping produce high quality audit evidence.
How Data Analytics Improves Audit Quality
Traditional audits involve combing through piles of data, which is time consuming. As a result, auditors prefer workarounds like data sampling, which does not give a true outcome.
With data analytics, an auditor does not have to restrict data to financial reporting systems only. Instead, they can use data from multiple complete data sets, such as sales statistical data and employee and customer master data. This enables an auditor to go beyond traditional audits that target limited data and include different audit relevant data.
Using data analytics tools, auditors look for predefined patterns that help reveal ambiguous relationships between variables that a manual system might not identify. This helps facilitate a more comprehensive decision that includes all data sets.
By integrating data analytics, auditors have access to a powerful tool that helps them better understand a business. As a result, they can easily identify key audit risks, provide deeper insights into a business’ systems and controls, detect fraud, and provide value in a less costly manner.
Apart from simplifying and speeding up the audit process, data analytics also enables auditors to focus on key risks.
The capabilities of data analytics continue to evolve to the point of automating the auditing process through advanced data analytics (ADA). This enables the automation of routine audit processes, allowing the auditors more time for matters that require professional judgment.
Challenges of Audit Data Analytics
Audit data analytics isn’t without a few challenges, one of which is data exchange between a business and an auditor, whether internal or external. This is in relation to different systems used in data collection. To handle this challenge, the AICPA introduced data standards to be used for data requests and to ensure production of standard reports from the ERP systems.
Another challenge is the integrity of data fed into the analytics systems, as this determines the quality of the end results. Systems used should be designed around collecting meaningful data. Auditors must also ensure that the conclusions fed into the systems are accurate and correct.
Although data analytics reduces the sampling risk, it introduces the challenge of getting numerous exceptions, mostly referred to as outliers, that produce results outside audit expectations. This calls for auditors to investigate the exceptions/outliers to determine if they are errors or misstatements.
Conclusion
Integrating data analytics into the audit process greatly improves audit quality and credibility. With rapid advancements in technology, the capabilities of data analytics will continue to evolve, making auditing work even more efficient while maintaining high quality.
Although the adoption of data analytics is dependent on the size of a business, availability of skilled staff is also crucial. To remain relevant in a fast-changing environment, auditors need to advance their skills to effectively use the data analytics tools.
Audits in Accounting: Improving Audit Quality with Data Analytics
July 1, 2021 · Blog, What’s New in Technology
⏱ 4 min read
Auditing is crucial to ensure the accuracy and fairness of financial information. However, one of the biggest threats to audit reputation today is data quality. This is because of the large volumes of data that businesses produce today. To deal with so much data, auditors are now turning to data analytics.
Data Analytics and Audits
Technology has played a major role in business growth as it aids in reducing operational costs and improving customer service. As such, many businesses have adopted enterprise resource planning (ERP) systems. These systems result in huge volumes of data, making it nearly impossible to analyze using the traditional audit process.
Auditors are left with no choice but to also use IT-based solutions; and this led to the development of audit software to support the auditors in data extraction and analysis.
To further enhance the workings of audit software, it’s now being integrated with data analytics. Given that data analytics works with structured data, the systems incorporate machine learning (deep learning) to extract useful data from a host of unstructured data.
Although these developments in the audit profession have not changed the primary role of auditors, they have changed how an audit is done by helping produce high quality audit evidence.
How Data Analytics Improves Audit Quality
Traditional audits involve combing through piles of data, which is time consuming. As a result, auditors prefer workarounds like data sampling, which does not give a true outcome.
With data analytics, an auditor does not have to restrict data to financial reporting systems only. Instead, they can use data from multiple complete data sets, such as sales statistical data and employee and customer master data. This enables an auditor to go beyond traditional audits that target limited data and include different audit relevant data.
Using data analytics tools, auditors look for predefined patterns that help reveal ambiguous relationships between variables that a manual system might not identify. This helps facilitate a more comprehensive decision that includes all data sets.
By integrating data analytics, auditors have access to a powerful tool that helps them better understand a business. As a result, they can easily identify key audit risks, provide deeper insights into a business’ systems and controls, detect fraud, and provide value in a less costly manner.
Apart from simplifying and speeding up the audit process, data analytics also enables auditors to focus on key risks.
The capabilities of data analytics continue to evolve to the point of automating the auditing process through advanced data analytics (ADA). This enables the automation of routine audit processes, allowing the auditors more time for matters that require professional judgment.
Challenges of Audit Data Analytics
Audit data analytics isn’t without a few challenges, one of which is data exchange between a business and an auditor, whether internal or external. This is in relation to different systems used in data collection. To handle this challenge, the AICPA introduced data standards to be used for data requests and to ensure production of standard reports from the ERP systems.
Another challenge is the integrity of data fed into the analytics systems, as this determines the quality of the end results. Systems used should be designed around collecting meaningful data. Auditors must also ensure that the conclusions fed into the systems are accurate and correct.
Although data analytics reduces the sampling risk, it introduces the challenge of getting numerous exceptions, mostly referred to as outliers, that produce results outside audit expectations. This calls for auditors to investigate the exceptions/outliers to determine if they are errors or misstatements.
Conclusion
Integrating data analytics into the audit process greatly improves audit quality and credibility. With rapid advancements in technology, the capabilities of data analytics will continue to evolve, making auditing work even more efficient while maintaining high quality.
Although the adoption of data analytics is dependent on the size of a business, availability of skilled staff is also crucial. To remain relevant in a fast-changing environment, auditors need to advance their skills to effectively use the data analytics tools.
Disclaimer
These articles are intended to provide general resources for the tax and accounting needs of small businesses and individuals. Service2Client LLC is the author, but is not engaged in rendering specific legal, accounting, financial or professional advice. Service2Client LLC makes no representation that the recommendations of Service2Client LLC will achieve any result. The NSAD has not reviewed any of the Service2Client LLC content. Readers are encouraged to contact a professional regarding the topics in these articles. The images linked to these articles are protected by copyright and should not be copied for any reason.
Juneteenth National Independence Day Act (S 475) – This bill authorizes Juneteenth National Independence Day on June 19 as a legal public holiday. The bill was introduced by Sen. Ed Markey (D-MA) on Feb. 25. It was passed by both the House and the Senate on June 16 and signed into law by the president on June 17.
Protecting America’s First Responders Act (S 937) – This bill was introduced by Sen. Chuck Grassley (R-IA) on April 29. The legislation ensures that certain law enforcement and first responders who have become permanently and totally disabled as a result of personal injuries sustained in the line of duty have prompt access to specific payments and benefits. The bill passed in the Senate on June 10 and is currently under consideration in the House.
HAVANA Act of 2021 (S 1828) – This bill provides financial support and resources for American officials suffering from the so-called Havana Syndrome – a mysterious set of symptoms that first affected federal employees stationed in Cuba in 2016. The bill authorizes disability benefits to American personnel who have experienced qualifying anomalous health incidents while serving in other countries throughout the world. The legislation was introduced by Sen. Susan Collins (R-ME) on May 25 and passed in the Senate on June 8. It is currently under consideration in the House.
Preventing Disaster Revictimization Act (HR 539) – Introduced by Rep. Sam Graves (R-MO) on Jan. 28, this bill would prevent the Federal Emergency Management Agency (FEMA) from taking back disaster assistance funds that it mistakenly awarded to victims who applied for assistance in good faith. Under current law, FEMA can go back weeks, months or even years to seek repayment of funds in cases where the agency subsequently determined it mistakenly granted assistance, but no fraud was committed. This bill would require FEMA to waive that disaster relief debt. The legislation passed in the House on June 15 and is in the Senate for consideration.
United States Innovation and Competition Act of 2021 (S 1260) – This bill establishes a Directorate for Technology and Innovation in the National Science Foundation (NSF) for the purpose of strengthening U.S. leadership in critical technologies. The legislation authorizes investments in research, development and manufacturing in key technology focus areas, such as artificial intelligence, high performance computing and innovation to support national security strategy. The Office of Science and Technology Policy is to develop an annual strategy for the federal government to improve national competitiveness in science and research, and help grow critical industries to generate jobs for the future. The bill was introduced by Sen. Chuck Schumer (D-NY) on April 20 and passed in the Senate on June 8. It is currently under consideration in the House.
Recognizing the Abolishment of Slavery and Compensating Law Enforcement, Overseas Federal Employees and Disaster Relief Victims
July 1, 2021 · Blog, Congress at Work
⏱ 3 min read
Juneteenth National Independence Day Act (S 475) – This bill authorizes Juneteenth National Independence Day on June 19 as a legal public holiday. The bill was introduced by Sen. Ed Markey (D-MA) on Feb. 25. It was passed by both the House and the Senate on June 16 and signed into law by the president on June 17.
Protecting America’s First Responders Act (S 937) – This bill was introduced by Sen. Chuck Grassley (R-IA) on April 29. The legislation ensures that certain law enforcement and first responders who have become permanently and totally disabled as a result of personal injuries sustained in the line of duty have prompt access to specific payments and benefits. The bill passed in the Senate on June 10 and is currently under consideration in the House.
HAVANA Act of 2021 (S 1828) – This bill provides financial support and resources for American officials suffering from the so-called Havana Syndrome – a mysterious set of symptoms that first affected federal employees stationed in Cuba in 2016. The bill authorizes disability benefits to American personnel who have experienced qualifying anomalous health incidents while serving in other countries throughout the world. The legislation was introduced by Sen. Susan Collins (R-ME) on May 25 and passed in the Senate on June 8. It is currently under consideration in the House.
Preventing Disaster Revictimization Act (HR 539) – Introduced by Rep. Sam Graves (R-MO) on Jan. 28, this bill would prevent the Federal Emergency Management Agency (FEMA) from taking back disaster assistance funds that it mistakenly awarded to victims who applied for assistance in good faith. Under current law, FEMA can go back weeks, months or even years to seek repayment of funds in cases where the agency subsequently determined it mistakenly granted assistance, but no fraud was committed. This bill would require FEMA to waive that disaster relief debt. The legislation passed in the House on June 15 and is in the Senate for consideration.
United States Innovation and Competition Act of 2021 (S 1260) – This bill establishes a Directorate for Technology and Innovation in the National Science Foundation (NSF) for the purpose of strengthening U.S. leadership in critical technologies. The legislation authorizes investments in research, development and manufacturing in key technology focus areas, such as artificial intelligence, high performance computing and innovation to support national security strategy. The Office of Science and Technology Policy is to develop an annual strategy for the federal government to improve national competitiveness in science and research, and help grow critical industries to generate jobs for the future. The bill was introduced by Sen. Chuck Schumer (D-NY) on April 20 and passed in the Senate on June 8. It is currently under consideration in the House.
Disclaimer
These articles are intended to provide general resources for the tax and accounting needs of small businesses and individuals. Service2Client LLC is the author, but is not engaged in rendering specific legal, accounting, financial or professional advice. Service2Client LLC makes no representation that the recommendations of Service2Client LLC will achieve any result. The NSAD has not reviewed any of the Service2Client LLC content. Readers are encouraged to contact a professional regarding the topics in these articles. The images linked to these articles are protected by copyright and should not be copied for any reason.
Equity compensation is becoming more mainstream and is not just for executives anymore. Grants of restricted stock or restricted stock units (RSUs) are getting to be more common than stock options – and the rules are different, as is the tax planning. Below we will look at some of the particulars of how restricted stock and RSUs operate, how to understand a grant, planning for the tax consequences, and what to do after the shares vest.
How Restricted Stock and RSUs Work
At their core, restricted stock and RSU company shares that vest according to a schedule can be awarded as compensation. The vesting schedule can be tied to length of employment, meeting certain performance criteria, or a combination of both. Upon vesting, the employee owns the shares themselves and can do what they wish with them – from holding, selling, gifting, etc. While this might sound simple, the devil is in the details.
Understanding Your Grant
First, it is important to understand that restricted stock or RSUs are similar to stock options but have important tax and financial planning differences.
There are important facts you need to determine. First, how does the vesting schedule work; what amount of shares vest and when? Is the vesting simply tied to length of service or are there performance or even liquidity event triggers? Second, what are your tax-withholding choices?
From there, you can determine or at least estimate key factors such as how much the award will be worth both pre-tax and post-tax.
Tax Planning – Section 83(b) Election
Taxation can be tricky with restricted stock and RSUs. One strategy is to use a Section 83(b) election for restricted stock.
Typically, a person is taxed when the restricted stock vests regardless of whether the shares are sold. The Section 83(b) election allows the taxpayer to be taxed on the share value at the grant date instead. This election can be made within 30 days from the grant date of the restricted stock and is not an option for RSUs.
Why would you want to consider a Section 83(b) election? Remember that regardless of the election or not, you are taxed as ordinary income for the share value regardless of whether you hold or sell the shares. The advantages are that if you think the stock price will rise between the grant and vesting, then you will pay less ordinary income tax and have lower cash outflows. Second, after the initial taxation of the grant, the change in value after this point is capital gains.
Tax Planning – Withholding
The other issue to consider is not withholding enough taxes. The IRS rules say that your company is required to withhold 22 percent for restricted stock and RSUs (37 percent for income over $1 million during the same year).
The problem is that there is a good chance your margin tax bracket is higher than 22 percent if you are receiving these kinds of equity compensation awards. As a result, you will need to make some estimated payments to cover the difference. Unless you have enough cash from other sources, you may need to consider liquidating some of your shares to cover the tax bill.
The conundrum here is that if you do not see the shares immediately and the price falls, then you will be selling shares at a lower value than what you are being taxed on. It is best to consider your holistic tax scenario and work with your tax advisor to come up with a plan.
Game Plan for After Vesting
Aside from the tax consequences, you need to consider the impact on your overall financial planning. One of the biggest risks taxpayers can face is that they become heavily concentrated in the company stock. You will need to look at your overall portfolio and consider if you need to diversify depending on how much of your net worth is tied up in a single stock now.
Some financial planners recommend looking at the situation this way in an example with your shares worth $150,000 at vesting. If you had $150,000 in cash to invest, pay down debt, etc., would you use all of that to buy the company stock? If the answer is no, then why would you hold it? In other words, do not let tax implications lead your financial planning decisions.
Conclusion
More and more companies are issuing compensation in equity forms such as restricted stock grants or RSUs. Make sure you understand your vesting schedule and conditions so you can plan for the tax implications as well as your overall financial picture.
Restricted Stock & RSUs: 3 Planning Tips
July 1, 2021 · Blog, Tax and Financial News
⏱ 4 min read
Equity compensation is becoming more mainstream and is not just for executives anymore. Grants of restricted stock or restricted stock units (RSUs) are getting to be more common than stock options – and the rules are different, as is the tax planning. Below we will look at some of the particulars of how restricted stock and RSUs operate, how to understand a grant, planning for the tax consequences, and what to do after the shares vest.
How Restricted Stock and RSUs Work
At their core, restricted stock and RSU company shares that vest according to a schedule can be awarded as compensation. The vesting schedule can be tied to length of employment, meeting certain performance criteria, or a combination of both. Upon vesting, the employee owns the shares themselves and can do what they wish with them – from holding, selling, gifting, etc. While this might sound simple, the devil is in the details.
Understanding Your Grant
First, it is important to understand that restricted stock or RSUs are similar to stock options but have important tax and financial planning differences.
There are important facts you need to determine. First, how does the vesting schedule work; what amount of shares vest and when? Is the vesting simply tied to length of service or are there performance or even liquidity event triggers? Second, what are your tax-withholding choices?
From there, you can determine or at least estimate key factors such as how much the award will be worth both pre-tax and post-tax.
Tax Planning – Section 83(b) Election
Taxation can be tricky with restricted stock and RSUs. One strategy is to use a Section 83(b) election for restricted stock.
Typically, a person is taxed when the restricted stock vests regardless of whether the shares are sold. The Section 83(b) election allows the taxpayer to be taxed on the share value at the grant date instead. This election can be made within 30 days from the grant date of the restricted stock and is not an option for RSUs.
Why would you want to consider a Section 83(b) election? Remember that regardless of the election or not, you are taxed as ordinary income for the share value regardless of whether you hold or sell the shares. The advantages are that if you think the stock price will rise between the grant and vesting, then you will pay less ordinary income tax and have lower cash outflows. Second, after the initial taxation of the grant, the change in value after this point is capital gains.
Tax Planning – Withholding
The other issue to consider is not withholding enough taxes. The IRS rules say that your company is required to withhold 22 percent for restricted stock and RSUs (37 percent for income over $1 million during the same year).
The problem is that there is a good chance your margin tax bracket is higher than 22 percent if you are receiving these kinds of equity compensation awards. As a result, you will need to make some estimated payments to cover the difference. Unless you have enough cash from other sources, you may need to consider liquidating some of your shares to cover the tax bill.
The conundrum here is that if you do not see the shares immediately and the price falls, then you will be selling shares at a lower value than what you are being taxed on. It is best to consider your holistic tax scenario and work with your tax advisor to come up with a plan.
Game Plan for After Vesting
Aside from the tax consequences, you need to consider the impact on your overall financial planning. One of the biggest risks taxpayers can face is that they become heavily concentrated in the company stock. You will need to look at your overall portfolio and consider if you need to diversify depending on how much of your net worth is tied up in a single stock now.
Some financial planners recommend looking at the situation this way in an example with your shares worth $150,000 at vesting. If you had $150,000 in cash to invest, pay down debt, etc., would you use all of that to buy the company stock? If the answer is no, then why would you hold it? In other words, do not let tax implications lead your financial planning decisions.
Conclusion
More and more companies are issuing compensation in equity forms such as restricted stock grants or RSUs. Make sure you understand your vesting schedule and conditions so you can plan for the tax implications as well as your overall financial picture.
Disclaimer
These articles are intended to provide general resources for the tax and accounting needs of small businesses and individuals. Service2Client LLC is the author, but is not engaged in rendering specific legal, accounting, financial or professional advice. Service2Client LLC makes no representation that the recommendations of Service2Client LLC will achieve any result. The NSAD has not reviewed any of the Service2Client LLC content. Readers are encouraged to contact a professional regarding the topics in these articles. The images linked to these articles are protected by copyright and should not be copied for any reason.
According to a Prudential survey, 87 percent of respondents said they would prefer to work remotely at least one day per week. This is compared to 13 percent of respondents preferring to work at the office all the time. The same survey found that one-third of respondents wouldn’t want to work for a business that had a 100 percent on-site work policy.
According to a report from Microsoft titled, “The Next Great Disruption is Hybrid Work – Are We Ready?” 54 percent of employees report “feeling overworked” while 39 percent say they “feel exhausted.” The study attributes these employee feelings to an overload of “digital collaboration” through “remote meetings, emails, chats, and groups working on documents together.” With workers reporting a desire for change in the workplace, how can companies develop their own hybrid work policy?
Crafting an Effective Hybrid Work Policy
By developing the right mix of remote work and office work, employees and employers can find a balance that works well for everyone. Looking to Fujitsu, as Harvard Business Review (HBR) explains, we can study a model of how the pandemic changed everyone’s view – including owners, managers and workers – of working in the office all the time.
Hiroki Hiramatsu, head of the human resources unit at Fujitsu, realized that the 120 minutes people spent traveling to work could be put to better use. There was a better mousetrap to be devised to make both the business and its workers more efficient with a hybrid workplace plan. For businesses that want to create more flexible working arrangements, HBR believes there are four areas of focus:
1. Employee’s Position and Responsibilities
The first task is to examine the employee’s position and list of responsibilities. HBR looks at the job of a strategic planner and hones in on the attribute of focus. They are responsible for creating business plans and obtaining details on their industry. Requiring intense focus, they need time that is not interrupted; hence, this can be performed virtually anywhere.
Looking at the team manager, being able to coordinate things is imperative. Team managers are more efficient and effective in person to provide guidance and job-improving feedback while in the office working on projects.
While there’s no cut-and-dry call on where both of the scenarios could be done, with a hybrid work policy, certain tasks can be done anywhere, while other tasks are more effectively completed at home or at the office. A hybrid work policy merges the benefits for businesses and their employees.
2. Worker Inclinations
HBR explains that it’s imperative to understand individual worker preferences and aid teams to work within such preferences. Using the example of two strategic planners, there are different employees with different work and family lives. One lives far away from the office, has a busy family life with kids in school and prefers a hybrid work approach. The other employee is at an earlier stage in their career, doesn’t have a dedicated home workspace and lives near the office.
This stage is where companies can speak with employees and have them take surveys to see how a hybrid workplace policy can be constructed for optimal employee engagement.
3. Reworking How Work is Done
When it comes to working outside the office, HBR explains that in a hybrid work environment, businesses have to get creative, especially with technology. HBR uses the example of the Norwegian Equinor corporation that is involved in handling gas from North Sea fields. In place of normal operations for plant inspections, robotic devices were supplied to provide real-time visual data for inspection engineers to complete their jobs remotely with the same level of accuracy.
4. Equal Policy Application
Regardless of the hybrid policy that’s developed, it’s important to maintain inclusion and fairness. HBR points out that without applying the policy evenly, it can lead to less productive workers, higher rates of burnout, fewer instances of teamwork, and more turnover. Additionally, with select employees having time- and place-dependent jobs unsuited or not optimized for a hybrid workplace, many felt they were treated unfairly when this approach is taken.
HBR gives the example of how Brit Insurance changed the traditional approach to the uneven application of a hybrid work policy. One out of 10 of its employees were chosen randomly, from all departments and job roles. Over the next six months, these employees were put in six-person groups to work together virtually. After reflecting on their working styles and capabilities, and their coworkers’ and company’s needs, they concluded that by developing ideas based on their experience and sharing them with the CEO, change would occur. The project resulted in the Brit Playbook, documenting novel ideas for employees to work together.
While each business is unique and will have its own tailored hybrid plan, taking the time to learn how to develop it effectively it will help reduce problems in implementing it.
According to a Prudential survey, 87 percent of respondents said they would prefer to work remotely at least one day per week. This is compared to 13 percent of respondents preferring to work at the office all the time. The same survey found that one-third of respondents wouldn’t want to work for a business that had a 100 percent on-site work policy.
According to a report from Microsoft titled, “The Next Great Disruption is Hybrid Work – Are We Ready?” 54 percent of employees report “feeling overworked” while 39 percent say they “feel exhausted.” The study attributes these employee feelings to an overload of “digital collaboration” through “remote meetings, emails, chats, and groups working on documents together.” With workers reporting a desire for change in the workplace, how can companies develop their own hybrid work policy?
Crafting an Effective Hybrid Work Policy
By developing the right mix of remote work and office work, employees and employers can find a balance that works well for everyone. Looking to Fujitsu, as Harvard Business Review (HBR) explains, we can study a model of how the pandemic changed everyone’s view – including owners, managers and workers – of working in the office all the time.
Hiroki Hiramatsu, head of the human resources unit at Fujitsu, realized that the 120 minutes people spent traveling to work could be put to better use. There was a better mousetrap to be devised to make both the business and its workers more efficient with a hybrid workplace plan. For businesses that want to create more flexible working arrangements, HBR believes there are four areas of focus:
1. Employee’s Position and Responsibilities
The first task is to examine the employee’s position and list of responsibilities. HBR looks at the job of a strategic planner and hones in on the attribute of focus. They are responsible for creating business plans and obtaining details on their industry. Requiring intense focus, they need time that is not interrupted; hence, this can be performed virtually anywhere.
Looking at the team manager, being able to coordinate things is imperative. Team managers are more efficient and effective in person to provide guidance and job-improving feedback while in the office working on projects.
While there’s no cut-and-dry call on where both of the scenarios could be done, with a hybrid work policy, certain tasks can be done anywhere, while other tasks are more effectively completed at home or at the office. A hybrid work policy merges the benefits for businesses and their employees.
2. Worker Inclinations
HBR explains that it’s imperative to understand individual worker preferences and aid teams to work within such preferences. Using the example of two strategic planners, there are different employees with different work and family lives. One lives far away from the office, has a busy family life with kids in school and prefers a hybrid work approach. The other employee is at an earlier stage in their career, doesn’t have a dedicated home workspace and lives near the office.
This stage is where companies can speak with employees and have them take surveys to see how a hybrid workplace policy can be constructed for optimal employee engagement.
3. Reworking How Work is Done
When it comes to working outside the office, HBR explains that in a hybrid work environment, businesses have to get creative, especially with technology. HBR uses the example of the Norwegian Equinor corporation that is involved in handling gas from North Sea fields. In place of normal operations for plant inspections, robotic devices were supplied to provide real-time visual data for inspection engineers to complete their jobs remotely with the same level of accuracy.
4. Equal Policy Application
Regardless of the hybrid policy that’s developed, it’s important to maintain inclusion and fairness. HBR points out that without applying the policy evenly, it can lead to less productive workers, higher rates of burnout, fewer instances of teamwork, and more turnover. Additionally, with select employees having time- and place-dependent jobs unsuited or not optimized for a hybrid workplace, many felt they were treated unfairly when this approach is taken.
HBR gives the example of how Brit Insurance changed the traditional approach to the uneven application of a hybrid work policy. One out of 10 of its employees were chosen randomly, from all departments and job roles. Over the next six months, these employees were put in six-person groups to work together virtually. After reflecting on their working styles and capabilities, and their coworkers’ and company’s needs, they concluded that by developing ideas based on their experience and sharing them with the CEO, change would occur. The project resulted in the Brit Playbook, documenting novel ideas for employees to work together.
While each business is unique and will have its own tailored hybrid plan, taking the time to learn how to develop it effectively it will help reduce problems in implementing it.
These articles are intended to provide general resources for the tax and accounting needs of small businesses and individuals. Service2Client LLC is the author, but is not engaged in rendering specific legal, accounting, financial or professional advice. Service2Client LLC makes no representation that the recommendations of Service2Client LLC will achieve any result. The NSAD has not reviewed any of the Service2Client LLC content. Readers are encouraged to contact a professional regarding the topics in these articles. The images linked to these articles are protected by copyright and should not be copied for any reason.
President Biden presented his $1.8 trillion American Families Plan, which focuses on expanding benefits for education, children and childcare. The Biden administration intends to pay for the plan with a series of tax hikes on certain individual taxpayers. Depending on your income and source of wealth, there are some clear winners and losers of this proposal, so let’s look at each and start with those who lose.
Losers Under the Plan
High Earners: The proposed plan would increase the highest individual tax rate from 37 percent up to 39.6 percent. Currently, this tax bracket starts with those earning more than $523,000 for singles and $628,000 for taxpayers who are married filing jointly. While the percentage increase may appear small, this change is projected to raise more than $111 billion over the next 10 years.
Heirs of Large Estates: The plan proposes eliminating the “step-up” in basis on assets received when an estate is passed on. The step-up in basis means that the heir now has a basis in the inherited asset equal to the fair market value at the date of death. This essentially eliminates the payment of capital gains taxes.
The plan allows for the initial $1 million in transferred gains to remain tax-protected, so this would only impact larger estates.
Wealthy Investors: A change to the long-term capital gains and qualified dividends taxation is proposed for taxpayers earning more than $1 million per year.
Currently, long-term capital gains (on assets held for more than one year) and qualified dividends are taxed at a flat 20 percent. The plan taxes long-term capital gains and qualified dividends as ordinary income, raising the rate to 39.6 percent for the taxpayer affected.
Hedge Funds and Private Equity: The Biden plan looks to eliminate the carried interest tax break, which allows partners in the funds to treat a large portion of their compensation as long-term capital gains instead of ordinary income.
Real estate investors: Currently, the tax law allows for what are called section 1031 like-kind exchanges. A 1031 exchange allows the proceeds from the sale of real estate to be reinvested in another similar or “like-kind” asset, and defer the capital gains taxes as a result.
The proposed plan would eliminate section 1031 like-kind exchanges for all sales where there are gains of $500,000 or more.
Winners
Low and Middle-Income Families with Children: The Biden tax plan calls for a five-year extension of the expanded Child Tax Credit (CTC) created in the American Rescue Plan. The CTC gives a credit of $3,000 for every child age 6 to 17 and $3,600 for children 5 and younger for single taxpayers earning $75,000 or less and married filers earning $150,000 or less. The plan would also make the existing $2,000 CTC permanently refundable.
Low-Income Individuals Without Children: The plan proposes a permanent enlargement of the Earned Income Tax Credit. The American Rescue Plan increased the maximum benefit for filers without children from $534 to $1,502 and broadened the eligibility criteria to include those under and over 65.
Working Parents: The American Rescue Plan also included a temporary enhancement of the Child and Dependent Care Tax Credit. This credit would give qualifying families a tax credit of up to $4,000 for one child or $8,000 for more than one child to compensate for childcare costs while they work, including after-school programs. The new tax plan would make this credit permanent for those making $125,000 per year or less.
Conclusion
The benefits of the Biden tax plan for its winners are nothing new or novel. Essentially, it calls for making permanent several the provisions originally passed in the American Rescue Plan and increases taxes on wealthier taxpayers to pay for it.
The Biggest Winners and Losers in President Biden’s Proposed Individual Tax Plan
June 1, 2021 · Blog, Tax and Financial News
⏱ 3 min read
President Biden presented his $1.8 trillion American Families Plan, which focuses on expanding benefits for education, children and childcare. The Biden administration intends to pay for the plan with a series of tax hikes on certain individual taxpayers. Depending on your income and source of wealth, there are some clear winners and losers of this proposal, so let’s look at each and start with those who lose.
Losers Under the Plan
High Earners: The proposed plan would increase the highest individual tax rate from 37 percent up to 39.6 percent. Currently, this tax bracket starts with those earning more than $523,000 for singles and $628,000 for taxpayers who are married filing jointly. While the percentage increase may appear small, this change is projected to raise more than $111 billion over the next 10 years.
Heirs of Large Estates: The plan proposes eliminating the “step-up” in basis on assets received when an estate is passed on. The step-up in basis means that the heir now has a basis in the inherited asset equal to the fair market value at the date of death. This essentially eliminates the payment of capital gains taxes.
The plan allows for the initial $1 million in transferred gains to remain tax-protected, so this would only impact larger estates.
Wealthy Investors: A change to the long-term capital gains and qualified dividends taxation is proposed for taxpayers earning more than $1 million per year.
Currently, long-term capital gains (on assets held for more than one year) and qualified dividends are taxed at a flat 20 percent. The plan taxes long-term capital gains and qualified dividends as ordinary income, raising the rate to 39.6 percent for the taxpayer affected.
Hedge Funds and Private Equity: The Biden plan looks to eliminate the carried interest tax break, which allows partners in the funds to treat a large portion of their compensation as long-term capital gains instead of ordinary income.
Real estate investors: Currently, the tax law allows for what are called section 1031 like-kind exchanges. A 1031 exchange allows the proceeds from the sale of real estate to be reinvested in another similar or “like-kind” asset, and defer the capital gains taxes as a result.
The proposed plan would eliminate section 1031 like-kind exchanges for all sales where there are gains of $500,000 or more.
Winners
Low and Middle-Income Families with Children: The Biden tax plan calls for a five-year extension of the expanded Child Tax Credit (CTC) created in the American Rescue Plan. The CTC gives a credit of $3,000 for every child age 6 to 17 and $3,600 for children 5 and younger for single taxpayers earning $75,000 or less and married filers earning $150,000 or less. The plan would also make the existing $2,000 CTC permanently refundable.
Low-Income Individuals Without Children: The plan proposes a permanent enlargement of the Earned Income Tax Credit. The American Rescue Plan increased the maximum benefit for filers without children from $534 to $1,502 and broadened the eligibility criteria to include those under and over 65.
Working Parents: The American Rescue Plan also included a temporary enhancement of the Child and Dependent Care Tax Credit. This credit would give qualifying families a tax credit of up to $4,000 for one child or $8,000 for more than one child to compensate for childcare costs while they work, including after-school programs. The new tax plan would make this credit permanent for those making $125,000 per year or less.
Conclusion
The benefits of the Biden tax plan for its winners are nothing new or novel. Essentially, it calls for making permanent several the provisions originally passed in the American Rescue Plan and increases taxes on wealthier taxpayers to pay for it.
Disclaimer
These articles are intended to provide general resources for the tax and accounting needs of small businesses and individuals. Service2Client LLC is the author, but is not engaged in rendering specific legal, accounting, financial or professional advice. Service2Client LLC makes no representation that the recommendations of Service2Client LLC will achieve any result. The NSAD has not reviewed any of the Service2Client LLC content. Readers are encouraged to contact a professional regarding the topics in these articles. The images linked to these articles are protected by copyright and should not be copied for any reason.
According to a Tufts University survey, six in ten of those surveyed are now vaccinated against COVID-19. However, almost 40 percent of the unvaccinated respondents said they won’t get the vaccine. Only 28.5 percent of the remaining unvaccinated respondents said they will get vaccinated against COVID-19 in the future, with the remaining unvaccinated respondents unable to decide whether they will take the vaccination. With vaccine hesitancy a concern, how can employers encourage more people to get the vaccine?
It is important to understand why some view vaccines skeptically in order to overcome vaccine hesitancy among employees.
The Johns Hopkins University Coronavirus Resource Center attributes vaccine hesitancy to these factors:
The first factor is safety. Since the vaccine was developed faster than most vaccines have been traditionally, many individuals are concerned about reactions, side effects and quality assurance. More can be read from the CDC VAERS Report.
The second reason has to do with the vaccine’s effectiveness, and how well it works against the coronavirus.
The other reasons for hesitancy are due to things like religious beliefs, vaccine phobias and current health issues of the unvaccinated.
This phenomenon is not isolated to the United States. Based on a global survey of 32 nations that Johns Hopkins cites, 98 percent of Vietnamese would get the vaccine, while only 38 percent of those in Serbia would get the vaccine once it’s available.
Navigating Vaccinations in the Workplace
Requesting a Vaccine Exemption Due to Religious Beliefs
Businesses that fall within the purview of Title VII (Civil Rights Act of 1964), must accommodate an employee’s sincerely held religious belief, practice or observance unless it causes an undue hardship on the business.
The CDC says that once a company is aware of a worker’s “sincerely held religious belief, practice or observance [that stops him from accepting the flu shot], the employer has to provide a reasonable accommodation [except if it causes] an undue hardship.” While this refers to influenza, the reasoning behind it applies equally to an employee expressing their religious objection to a COVID-19 vaccination.
Accommodations for Disabled Employees
According to the Equal Employment Opportunity Commission (EEOC), the Americans with Disabilities Act (ADA) covers employers in the private sector and state and local governments that employ 15 or more workers. The ADA offers guidance for employers when an employee requests to be exempt from a COVID-19 vaccination due to a disability. This Act says that employers are able to implement a workplace standard specifying that a person cannot “pose a direct threat to the health or safety of individuals in the workplace.”
If, however, this workplace standard either sorts out or will likely sort out a disabled person from meeting the workplace safety standard by being unvaccinated, the employer must demonstrate that such person without a vaccine would pose a direct threat of risk to another person in the workplace that cannot be reduced by a reasonable accommodation.
The Equal Employment Opportunity Commission (EEOC) believes a direct or proximate threat exists from the unvaccinated person through four tests: length of the danger, how severe and the type of harm that could occur, the chances of the potential harm that will happen, and proximity of the realistic harm.
When it comes to determining if a reasonable accommodation exists, the EEOC lists three criteria: the worker’s professional responsibilities, if there is a different job the worker could transition to in order to make the vaccination less necessary, and how serious it is to the company’s function that the worker be vaccinated.
How to Encourage More Vaccinations
The U.S. Chamber of Commerce cautions that employers who are contemplating mandating their workers take the COVID-19 vaccination, state law varies on how far they can go. However, a good way to get employees vaccinated is by encouraging and not requiring vaccination. Forcing employees to get the COVID-19 vaccination might make workers look for new employment or face a lack of motivation. Depending on the state laws, a vaccine mandate from an employer might lead to a legal battle if employees refuse to get vaccinated or in rare cases an employee dies from the vaccine.
One way to incentivize employees to get the COVID-19 vaccine is by offering them a cash payment to do so. Average incentives range from $50 to $500 with most being $100.
Based on recommendations from the Centers for Disease Control and Prevention (CDC), there are many things employers can do to help get their employees vaccinated against COVID-19.
One recommendation is to have management explain to employees why it’s important to get the vaccination by creating flyers, posters and other forms of communication when staff are entering and leaving the building.
Offering workers, the ability to get vaccinated onsite could encourage people who are on the fence, especially after they see their co-workers get vaccinated.
One part of the American Rescue Plan, which passed in 2021, as the Internal Revenue Service (IRS) outlines, permits businesses to claim tax credits if they give their workers paid time off to get vaccinated. This tax credit is eligible for employer reimbursement through paid sick and family leave. It also provides an employer tax credit if employees need time off to recover from any post-COVID-19 vaccine side effects.
Businesses with fewer than 500 employees are eligible for this tax credit for paid sick and family leave that occurs between April 1, 2021, and Sept. 30, 2021. This includes for-profit, tax-exempt organizations and some government employers. Self-employed taxpayers also are eligible for an equivalent tax credit.
Taking the time to encourage workers to get vaccinated, learning how to navigate certain aspects of employment laws and state laws, and making sure to maximize one’s business balance sheet are all essential tools to make the most of 2021 and set up an even better 2022 fiscal year.
Vaccine Hesitancy: Why We Have It and How It Affects Employers and Employees
June 1, 2021 · Blog, General Business News
⏱ 6 min read
According to a Tufts University survey, six in ten of those surveyed are now vaccinated against COVID-19. However, almost 40 percent of the unvaccinated respondents said they won’t get the vaccine. Only 28.5 percent of the remaining unvaccinated respondents said they will get vaccinated against COVID-19 in the future, with the remaining unvaccinated respondents unable to decide whether they will take the vaccination. With vaccine hesitancy a concern, how can employers encourage more people to get the vaccine?
It is important to understand why some view vaccines skeptically in order to overcome vaccine hesitancy among employees.
The Johns Hopkins University Coronavirus Resource Center attributes vaccine hesitancy to these factors:
The first factor is safety. Since the vaccine was developed faster than most vaccines have been traditionally, many individuals are concerned about reactions, side effects and quality assurance. More can be read from the CDC VAERS Report.
The second reason has to do with the vaccine’s effectiveness, and how well it works against the coronavirus.
The other reasons for hesitancy are due to things like religious beliefs, vaccine phobias and current health issues of the unvaccinated.
This phenomenon is not isolated to the United States. Based on a global survey of 32 nations that Johns Hopkins cites, 98 percent of Vietnamese would get the vaccine, while only 38 percent of those in Serbia would get the vaccine once it’s available.
Navigating Vaccinations in the Workplace
Requesting a Vaccine Exemption Due to Religious Beliefs
Businesses that fall within the purview of Title VII (Civil Rights Act of 1964), must accommodate an employee’s sincerely held religious belief, practice or observance unless it causes an undue hardship on the business.
The CDC says that once a company is aware of a worker’s “sincerely held religious belief, practice or observance [that stops him from accepting the flu shot], the employer has to provide a reasonable accommodation [except if it causes] an undue hardship.” While this refers to influenza, the reasoning behind it applies equally to an employee expressing their religious objection to a COVID-19 vaccination.
Accommodations for Disabled Employees
According to the Equal Employment Opportunity Commission (EEOC), the Americans with Disabilities Act (ADA) covers employers in the private sector and state and local governments that employ 15 or more workers. The ADA offers guidance for employers when an employee requests to be exempt from a COVID-19 vaccination due to a disability. This Act says that employers are able to implement a workplace standard specifying that a person cannot “pose a direct threat to the health or safety of individuals in the workplace.”
If, however, this workplace standard either sorts out or will likely sort out a disabled person from meeting the workplace safety standard by being unvaccinated, the employer must demonstrate that such person without a vaccine would pose a direct threat of risk to another person in the workplace that cannot be reduced by a reasonable accommodation.
The Equal Employment Opportunity Commission (EEOC) believes a direct or proximate threat exists from the unvaccinated person through four tests: length of the danger, how severe and the type of harm that could occur, the chances of the potential harm that will happen, and proximity of the realistic harm.
When it comes to determining if a reasonable accommodation exists, the EEOC lists three criteria: the worker’s professional responsibilities, if there is a different job the worker could transition to in order to make the vaccination less necessary, and how serious it is to the company’s function that the worker be vaccinated.
How to Encourage More Vaccinations
The U.S. Chamber of Commerce cautions that employers who are contemplating mandating their workers take the COVID-19 vaccination, state law varies on how far they can go. However, a good way to get employees vaccinated is by encouraging and not requiring vaccination. Forcing employees to get the COVID-19 vaccination might make workers look for new employment or face a lack of motivation. Depending on the state laws, a vaccine mandate from an employer might lead to a legal battle if employees refuse to get vaccinated or in rare cases an employee dies from the vaccine.
One way to incentivize employees to get the COVID-19 vaccine is by offering them a cash payment to do so. Average incentives range from $50 to $500 with most being $100.
Based on recommendations from the Centers for Disease Control and Prevention (CDC), there are many things employers can do to help get their employees vaccinated against COVID-19.
One recommendation is to have management explain to employees why it’s important to get the vaccination by creating flyers, posters and other forms of communication when staff are entering and leaving the building.
Offering workers, the ability to get vaccinated onsite could encourage people who are on the fence, especially after they see their co-workers get vaccinated.
One part of the American Rescue Plan, which passed in 2021, as the Internal Revenue Service (IRS) outlines, permits businesses to claim tax credits if they give their workers paid time off to get vaccinated. This tax credit is eligible for employer reimbursement through paid sick and family leave. It also provides an employer tax credit if employees need time off to recover from any post-COVID-19 vaccine side effects.
Businesses with fewer than 500 employees are eligible for this tax credit for paid sick and family leave that occurs between April 1, 2021, and Sept. 30, 2021. This includes for-profit, tax-exempt organizations and some government employers. Self-employed taxpayers also are eligible for an equivalent tax credit.
Taking the time to encourage workers to get vaccinated, learning how to navigate certain aspects of employment laws and state laws, and making sure to maximize one’s business balance sheet are all essential tools to make the most of 2021 and set up an even better 2022 fiscal year.
These articles are intended to provide general resources for the tax and accounting needs of small businesses and individuals. Service2Client LLC is the author, but is not engaged in rendering specific legal, accounting, financial or professional advice. Service2Client LLC makes no representation that the recommendations of Service2Client LLC will achieve any result. The NSAD has not reviewed any of the Service2Client LLC content. Readers are encouraged to contact a professional regarding the topics in these articles. The images linked to these articles are protected by copyright and should not be copied for any reason.
With the economy reopening and more Americans receiving COVID-19 vaccinations, the economy is expected to be operating on all cylinders. However, some economists and market analysts are afraid The Federal Reserve may create a “taper tantrum” if and when it starts to reduce its purchase of U.S. Treasury debt. The Fed’s current track of purchasing $120 billion of U.S. Treasury debt every month has kept the 10-year yield moderated. However, if The Fed signals fewer monthly purchases from current levels, recent history has already seen higher 10-year yields and increased market volatility.
As the Federal Reserve Bank of St. Louis outlines, the Federal Open Market Committee (FOMC) holds meetings eight times a year to evaluate the country’s economic conditions and determine the forward monetary policy. This includes what they will do (or not do) to the federal funds rate, which is the rate that financial institutions charge each other for overnight interbank lending.
Whatever the FOMC decides to do with the federal funds rate, it’s important to know that any changes to the federal funds rate impacts short-term interest rates, such as the three-month Treasury bill. Depending on how it’s modified (increased or decreased), the rate change impacts consumer and business loans and longer-term debt.
When the FOMC raises or lowers the federal funds rate, it sends a policy directive specifying the new target range to the trading desk of the New York Fed. Depending on the target rate of the new fed funds rate, more government securities will be bought to lower the rate, or government securities will be sold to raise the new target. This is accomplished through its open market operations (OMO).
OMO is made up of two parts. The Fed buying or selling U.S. Treasury bonds, for example, consists of the operations part of OMO. Since the Fed relies on the trading desk of the New York Fed to accomplish its goals, it uses the open market to purchase these securities through the traditional bid and offer trading method. It’s one tool in its toolbox to accomplish the dual mandate policy of maximizing employment and maintaining price stability.
Depending on which way the Fed goes – either tightening or loosening its policy – it tries to steer the level of the banking system’s reserves, creating a shift in interest rates. For example, when the Fed buys Treasury bonds, it adds capital to the purchasing bank’s reserve balance to increase lending through lower interest rates. When the Fed sells its U.S. Treasury bonds, it moves the federal funds rate upward. This lowers banks’ reserves, causing financial institutions to increase lending costs.
When it comes to the term “quantitative easing,” the Federal Reserve Bank of St. Louis defines it as “large-scale operations of the purchase of large amounts of longer-term U.S. Treasury securities and mortgage-backed securities.” One noteworthy consideration for OMO is that when the federal funds rate is near zero, which occurred during the 2008-2009 financial crisis, quantitative easing is one more tool in the Fed’s toolbox to help the economy dig itself out of a downturn and provide liquidity.
Tapering in Action
According to the Federal Reserve Bank of St. Louis, when tapering was even mentioned, it had negative effects on the markets. After continued quantitative easing was instituted to rescue the economy from the 2008-2009 financial crisis through part of 2013, the Fed made comments regarding these efforts in its FOMC meeting and during its press conference on June 19, 2013. It indicated that it would begin “tapering” (gradually lessening) its monthly bond purchases during the end of 2013, assuming economic conditions were improving. However, the market reacted badly to these comments.
U.S. 10-year bond yields spiked to 2.35 percent within hours of the FOMC meeting and press conference on June 19, 2013. On June 21, 2013, the 10-year bond yields climbed farther to 2.55 percent. Similarly, the same meeting prompted a spike in “normalized foreign exchange per USD rates,” according to the St. Louis Fed. In the two days from June 19-21, 2013, the U.S. dollar gained between 2 percent and 3 percent in value against the Euro, the British pound, the Canadian dollar, and the Japanese yen.
Conclusion
Looking at markets on June 19, 2013, when the Fed announced the tapering, the Dow Jones fell more than 200 points, the S&P dropped 1.4 percent and the Nasdaq finished 1.1 percent lower.
Retail and institutional investors can’t predict the future, but they can look at the past and monitor upcoming Federal Reserve events to see what it might end up doing to the stock market.
Will The Federal Reserve Create a Taper Tantrum in 2021?
June 1, 2021 · Blog, Stock Market News
⏱ 4 min read
With the economy reopening and more Americans receiving COVID-19 vaccinations, the economy is expected to be operating on all cylinders. However, some economists and market analysts are afraid The Federal Reserve may create a “taper tantrum” if and when it starts to reduce its purchase of U.S. Treasury debt. The Fed’s current track of purchasing $120 billion of U.S. Treasury debt every month has kept the 10-year yield moderated. However, if The Fed signals fewer monthly purchases from current levels, recent history has already seen higher 10-year yields and increased market volatility.
As the Federal Reserve Bank of St. Louis outlines, the Federal Open Market Committee (FOMC) holds meetings eight times a year to evaluate the country’s economic conditions and determine the forward monetary policy. This includes what they will do (or not do) to the federal funds rate, which is the rate that financial institutions charge each other for overnight interbank lending.
Whatever the FOMC decides to do with the federal funds rate, it’s important to know that any changes to the federal funds rate impacts short-term interest rates, such as the three-month Treasury bill. Depending on how it’s modified (increased or decreased), the rate change impacts consumer and business loans and longer-term debt.
When the FOMC raises or lowers the federal funds rate, it sends a policy directive specifying the new target range to the trading desk of the New York Fed. Depending on the target rate of the new fed funds rate, more government securities will be bought to lower the rate, or government securities will be sold to raise the new target. This is accomplished through its open market operations (OMO).
OMO is made up of two parts. The Fed buying or selling U.S. Treasury bonds, for example, consists of the operations part of OMO. Since the Fed relies on the trading desk of the New York Fed to accomplish its goals, it uses the open market to purchase these securities through the traditional bid and offer trading method. It’s one tool in its toolbox to accomplish the dual mandate policy of maximizing employment and maintaining price stability.
Depending on which way the Fed goes – either tightening or loosening its policy – it tries to steer the level of the banking system’s reserves, creating a shift in interest rates. For example, when the Fed buys Treasury bonds, it adds capital to the purchasing bank’s reserve balance to increase lending through lower interest rates. When the Fed sells its U.S. Treasury bonds, it moves the federal funds rate upward. This lowers banks’ reserves, causing financial institutions to increase lending costs.
When it comes to the term “quantitative easing,” the Federal Reserve Bank of St. Louis defines it as “large-scale operations of the purchase of large amounts of longer-term U.S. Treasury securities and mortgage-backed securities.” One noteworthy consideration for OMO is that when the federal funds rate is near zero, which occurred during the 2008-2009 financial crisis, quantitative easing is one more tool in the Fed’s toolbox to help the economy dig itself out of a downturn and provide liquidity.
Tapering in Action
According to the Federal Reserve Bank of St. Louis, when tapering was even mentioned, it had negative effects on the markets. After continued quantitative easing was instituted to rescue the economy from the 2008-2009 financial crisis through part of 2013, the Fed made comments regarding these efforts in its FOMC meeting and during its press conference on June 19, 2013. It indicated that it would begin “tapering” (gradually lessening) its monthly bond purchases during the end of 2013, assuming economic conditions were improving. However, the market reacted badly to these comments.
U.S. 10-year bond yields spiked to 2.35 percent within hours of the FOMC meeting and press conference on June 19, 2013. On June 21, 2013, the 10-year bond yields climbed farther to 2.55 percent. Similarly, the same meeting prompted a spike in “normalized foreign exchange per USD rates,” according to the St. Louis Fed. In the two days from June 19-21, 2013, the U.S. dollar gained between 2 percent and 3 percent in value against the Euro, the British pound, the Canadian dollar, and the Japanese yen.
Conclusion
Looking at markets on June 19, 2013, when the Fed announced the tapering, the Dow Jones fell more than 200 points, the S&P dropped 1.4 percent and the Nasdaq finished 1.1 percent lower.
Retail and institutional investors can’t predict the future, but they can look at the past and monitor upcoming Federal Reserve events to see what it might end up doing to the stock market.
Disclaimer
These articles are intended to provide general resources for the tax and accounting needs of small businesses and individuals. Service2Client LLC is the author, but is not engaged in rendering specific legal, accounting, financial or professional advice. Service2Client LLC makes no representation that the recommendations of Service2Client LLC will achieve any result. The NSAD has not reviewed any of the Service2Client LLC content. Readers are encouraged to contact a professional regarding the topics in these articles. The images linked to these articles are protected by copyright and should not be copied for any reason.
Even before the pandemic began, the U.S. residential real estate market was short on houses, with more people looking to buy than those who were selling. And yet, unlike the 2008 recession, any economic woes related to the pandemic did not undercut housing prices. If anything, real estate had a banner year as home prices continued to rise. In April of this year, the median sale price of existing homes rose by 19.1 percent to a record high of $341,600.
There are several reasons we haven’t seen a repeat of the housing crisis that we experienced during the Great Recession. Today’s market is different from 2007, when the economic decline was launched by a housing bubble that sent many homeowner values underwater – followed by job losses and the inability to pay their mortgage. This time around, the government stepped in to ensure Americans didn’t lose their homes when they lost their jobs. The stimulus-relief packages included a moratorium on foreclosures and evictions. This, too, has contributed to the low inventory of existing homes, which normally would be put up for sale when owners become cash strapped.
The Homebuyers’ Market
However, in addition to the cash-strapped – we now have the cash-rich. Among the gainfully employed, savings rates increased during 2020. This means there are now several types of eager homebuyers: millennials trying to buy their first home; mid-career professionals looking to trade up; and retirees (or near-retirees) looking to make a cash offer for a smaller or second home.
The coronavirus contributed to this fiercely competitive market of buyers. Some are looking to take advantage of the newly mainstreamed remote work model and move to rural areas for a more affordable lifestyle. People who are nearing retirement are rethinking moves to large metropolitan areas or continuum of care retirement communities, where future outbreaks can spread more quickly.
The point is, there are millions of people looking to buy a home right now and not enough housing stock There are 72 million millennials alone, the oldest of who are approaching their 40s, with Generation Z right at their heels. Over the next 10 years, the demand for first-time homebuyers alone will persist regardless of how conditions change in the housing market.
The Home-Sellers’ Market
While the buyers’ market is booming with demand, the sellers’ market is starting to grow as well, just not as fast. Rising real estate values due to low inventory have presented an attractive opportunity to cash-in on home equity. In fact, according to a recent NerdWallet survey, about
17 percent of today’s homeowners say they plan to put their home on the market within the next year and a half.
The seller’s market is boosted by historically low mortgage rates, which when compared to renting make taking out a home loan even more appealing. Sellers also benefit from the near-desperation of buyers, many of whom are willing make offers before seeing the property, for as-is condition and above offer price. Not only can sellers take their pick of multiple offers, but they can often skimp on home repairs and upgrades before putting their house on the market.
In recent months, existing homes have stayed on the market for an average of only 20 days. Sellers also have the luxury of making their buyers wait under contract until the owner can buy another home. But here’s the tricky part: due to low inventory, it can be very difficult to find a replacement. Sellers who become buyers enter the fray of contract wars just like everyone else.
New Home Building
The single-family homebuilding industry recovered from last year’s economic decline quickly. In March of this year, new home starts swelled 15.3 percent to 1.238 million units. But even with the surge, real estate agents say that new builds need to range between 1.5 million and 1.6 million units per month to meet demand.
Unfortunately, one factor that is holding this market back is access to building materials. Low supply of lumber due to increased demand for new homes and renovations has catapulted lumber prices to record highs. According to the National Association of Home Builders, the cost of lumber has driven up the price of the average new single-family home by more than $35,000 within the past year.
While more inventory will come onto market as people emerge from their lockdowns and the economy fully reopens, one thing is certain: demand in the home-buying market is expected to remain high among Millennials and Gen Z for at least another decade. The momentum for high prices is expected to continue through 2021, so it may be a better time to sell than buy.
Real Estate Opportunities in 2021
June 1, 2021 · Blog, Financial Planning
⏱ 4 min read
Even before the pandemic began, the U.S. residential real estate market was short on houses, with more people looking to buy than those who were selling. And yet, unlike the 2008 recession, any economic woes related to the pandemic did not undercut housing prices. If anything, real estate had a banner year as home prices continued to rise. In April of this year, the median sale price of existing homes rose by 19.1 percent to a record high of $341,600.
There are several reasons we haven’t seen a repeat of the housing crisis that we experienced during the Great Recession. Today’s market is different from 2007, when the economic decline was launched by a housing bubble that sent many homeowner values underwater – followed by job losses and the inability to pay their mortgage. This time around, the government stepped in to ensure Americans didn’t lose their homes when they lost their jobs. The stimulus-relief packages included a moratorium on foreclosures and evictions. This, too, has contributed to the low inventory of existing homes, which normally would be put up for sale when owners become cash strapped.
The Homebuyers’ Market
However, in addition to the cash-strapped – we now have the cash-rich. Among the gainfully employed, savings rates increased during 2020. This means there are now several types of eager homebuyers: millennials trying to buy their first home; mid-career professionals looking to trade up; and retirees (or near-retirees) looking to make a cash offer for a smaller or second home.
The coronavirus contributed to this fiercely competitive market of buyers. Some are looking to take advantage of the newly mainstreamed remote work model and move to rural areas for a more affordable lifestyle. People who are nearing retirement are rethinking moves to large metropolitan areas or continuum of care retirement communities, where future outbreaks can spread more quickly.
The point is, there are millions of people looking to buy a home right now and not enough housing stock There are 72 million millennials alone, the oldest of who are approaching their 40s, with Generation Z right at their heels. Over the next 10 years, the demand for first-time homebuyers alone will persist regardless of how conditions change in the housing market.
The Home-Sellers’ Market
While the buyers’ market is booming with demand, the sellers’ market is starting to grow as well, just not as fast. Rising real estate values due to low inventory have presented an attractive opportunity to cash-in on home equity. In fact, according to a recent NerdWallet survey, about
17 percent of today’s homeowners say they plan to put their home on the market within the next year and a half.
The seller’s market is boosted by historically low mortgage rates, which when compared to renting make taking out a home loan even more appealing. Sellers also benefit from the near-desperation of buyers, many of whom are willing make offers before seeing the property, for as-is condition and above offer price. Not only can sellers take their pick of multiple offers, but they can often skimp on home repairs and upgrades before putting their house on the market.
In recent months, existing homes have stayed on the market for an average of only 20 days. Sellers also have the luxury of making their buyers wait under contract until the owner can buy another home. But here’s the tricky part: due to low inventory, it can be very difficult to find a replacement. Sellers who become buyers enter the fray of contract wars just like everyone else.
New Home Building
The single-family homebuilding industry recovered from last year’s economic decline quickly. In March of this year, new home starts swelled 15.3 percent to 1.238 million units. But even with the surge, real estate agents say that new builds need to range between 1.5 million and 1.6 million units per month to meet demand.
Unfortunately, one factor that is holding this market back is access to building materials. Low supply of lumber due to increased demand for new homes and renovations has catapulted lumber prices to record highs. According to the National Association of Home Builders, the cost of lumber has driven up the price of the average new single-family home by more than $35,000 within the past year.
While more inventory will come onto market as people emerge from their lockdowns and the economy fully reopens, one thing is certain: demand in the home-buying market is expected to remain high among Millennials and Gen Z for at least another decade. The momentum for high prices is expected to continue through 2021, so it may be a better time to sell than buy.
Disclaimer
These articles are intended to provide general resources for the tax and accounting needs of small businesses and individuals. Service2Client LLC is the author, but is not engaged in rendering specific legal, accounting, financial or professional advice. Service2Client LLC makes no representation that the recommendations of Service2Client LLC will achieve any result. The NSAD has not reviewed any of the Service2Client LLC content. Readers are encouraged to contact a professional regarding the topics in these articles. The images linked to these articles are protected by copyright and should not be copied for any reason.
Let’s face it. Saving money is a challenge at best – and really hard the rest of the time. But what if you made it a fun game to inspire yourself to save? Here are a few ways to do just that.
Keep the Change Challenge
Anytime you receive or find loose change in your pockets or house, put it in a jar. Don’t touch it for a year, and then see how much you save. But here’s a great plus-up for this habit: download a money-saving app like Acorns and watch your savings grow. Anytime you buy something, Acorns will round up the total and deposit the difference into a diversified investment portfolio. Talk about easy.
Weather Wednesday Challenge
This is great idea. Every Wednesday,look up the highest temperature in your state and deposit the amount into your savings account. For example, if it’s 100 degrees, deposit $100. If it’s 32 degrees, deposit $32. You’ll probably save more during the summer than the winter, but after 52 weeks, you could’ve socked away several thousand dollars. Pretty sweet.
Kick-a-Bad-Habit Challenge
Do you go to Starbucks every day for your Double Chocolatey Chip Crème Frappuccino with extra whip? How about guzzling those sodas every day? Are you a smoker? Whatever it is that you’d like to cut down on or even stop, this challenge has two great benefits: you’ll not only get healthier, but you will also save money.
The No-Spend Challenge
Start with a weekend (or even a week) and make a vow not to spend any money on anything except bills or other necessities. The idea is to save money by not spending it. It might cause you to be more creative. For instance, do you really need a new dress for that special occasion? Dig a little deeper into your closet instead of buying a new frock. Or maybe you decide to drive less and not put gas in the tank. This way, you’ll either bike or walk to your destination (if doable) and do more fun things at home.
The Pantry Challenge
Look inside your refrigerator and pantry. How much food do you have that you haven’t eaten? What about that spaghetti sauce or sesame oil? As long as the food isn’t expired, it’s your chance to get creative and whip up a new dish or revive an old favorite. This challenge is related to the “No-Spend Challenge,” and again, the intention is to save money by not spending it.
The 365-Day Nickel Challenge
Nickels are currency, too! But seriously, if you can remember to do this (set a timer on your phone), you’ll be rewarded handsomely. Here’s how it works: On day one, deposit 5 cents into a jar. The next day, 10 cents. The next day, 15 cents. And so on. By day 365, the total deposit will be $18.40. At the end of the year, you’ll have saved a whopping $3,339.75. Not bad, huh?
While saving money might feel restrictive, you’re actually planning ahead to be very happy. When you’ve been able to stick to a habit, or in some cases give one up, you’ll see that anything is possible if you just put your mind to it. And that’s a great feeling.
Let’s face it. Saving money is a challenge at best – and really hard the rest of the time. But what if you made it a fun game to inspire yourself to save? Here are a few ways to do just that.
Keep the Change Challenge
Anytime you receive or find loose change in your pockets or house, put it in a jar. Don’t touch it for a year, and then see how much you save. But here’s a great plus-up for this habit: download a money-saving app like Acorns and watch your savings grow. Anytime you buy something, Acorns will round up the total and deposit the difference into a diversified investment portfolio. Talk about easy.
Weather Wednesday Challenge
This is great idea. Every Wednesday,look up the highest temperature in your state and deposit the amount into your savings account. For example, if it’s 100 degrees, deposit $100. If it’s 32 degrees, deposit $32. You’ll probably save more during the summer than the winter, but after 52 weeks, you could’ve socked away several thousand dollars. Pretty sweet.
Kick-a-Bad-Habit Challenge
Do you go to Starbucks every day for your Double Chocolatey Chip Crème Frappuccino with extra whip? How about guzzling those sodas every day? Are you a smoker? Whatever it is that you’d like to cut down on or even stop, this challenge has two great benefits: you’ll not only get healthier, but you will also save money.
The No-Spend Challenge
Start with a weekend (or even a week) and make a vow not to spend any money on anything except bills or other necessities. The idea is to save money by not spending it. It might cause you to be more creative. For instance, do you really need a new dress for that special occasion? Dig a little deeper into your closet instead of buying a new frock. Or maybe you decide to drive less and not put gas in the tank. This way, you’ll either bike or walk to your destination (if doable) and do more fun things at home.
The Pantry Challenge
Look inside your refrigerator and pantry. How much food do you have that you haven’t eaten? What about that spaghetti sauce or sesame oil? As long as the food isn’t expired, it’s your chance to get creative and whip up a new dish or revive an old favorite. This challenge is related to the “No-Spend Challenge,” and again, the intention is to save money by not spending it.
The 365-Day Nickel Challenge
Nickels are currency, too! But seriously, if you can remember to do this (set a timer on your phone), you’ll be rewarded handsomely. Here’s how it works: On day one, deposit 5 cents into a jar. The next day, 10 cents. The next day, 15 cents. And so on. By day 365, the total deposit will be $18.40. At the end of the year, you’ll have saved a whopping $3,339.75. Not bad, huh?
While saving money might feel restrictive, you’re actually planning ahead to be very happy. When you’ve been able to stick to a habit, or in some cases give one up, you’ll see that anything is possible if you just put your mind to it. And that’s a great feeling.
These articles are intended to provide general resources for the tax and accounting needs of small businesses and individuals. Service2Client LLC is the author, but is not engaged in rendering specific legal, accounting, financial or professional advice. Service2Client LLC makes no representation that the recommendations of Service2Client LLC will achieve any result. The NSAD has not reviewed any of the Service2Client LLC content. Readers are encouraged to contact a professional regarding the topics in these articles. The images linked to these articles are protected by copyright and should not be copied for any reason.
Slowly, our world is changing. A percentage of the population has been vaccinated and many employees are headed back to the office. However, this may cause a bit of anxiety – and understandably so. Here are few ways to help take the edge off of returning to the workplace.
Auditing is crucial to ensure the accuracy and fairness of financial information. However, one of the biggest threats to audit reputation today is data quality. This is because of the large volumes of data that businesses produce today. To deal with so much data, auditors are now turning to data analytics.
Juneteenth National Independence Day Act (S 475) – This bill authorizes Juneteenth National Independence Day on June 19 as a legal public holiday. The bill was introduced by Sen. Ed Markey (D-MA) on Feb. 25. It was passed by both the House and the Senate on June 16 and signed into law by the president on June 17.
Equity compensation is becoming more mainstream and is not just for executives anymore. Grants of restricted stock or restricted stock units (RSUs) are getting to be more common than stock options – and the rules are different, as is the tax planning. Below we will look at some of the particulars of how restricted stock and RSUs operate, how to understand a grant, planning for the tax consequences, and what to do after the shares vest.
According to a Prudential survey, 87 percent of respondents said they would prefer to work remotely at least one day per week. This is compared to 13 percent of respondents preferring to work at the office all the time. The same survey found that one-third of respondents wouldn’t want to work for a business that had a 100 percent on-site work policy.
President Biden presented his $1.8 trillion American Families Plan, which focuses on expanding benefits for education, children and childcare. The Biden administration intends to pay for the plan with a series of tax hikes on certain individual taxpayers. Depending on your income and source of wealth, there are some clear winners and losers of this proposal, so let’s look at each and start with those who lose.
According to a Tufts University survey, six in ten of those surveyed are now vaccinated against COVID-19. However, almost 40 percent of the unvaccinated respondents said they won’t get the vaccine. Only 28.5 percent of the remaining unvaccinated respondents said they will get vaccinated against COVID-19 in the future, with the remaining unvaccinated respondents unable to decide whether they will take the vaccination. With vaccine hesitancy a concern, how can employers encourage more people to get the vaccine?
With the economy reopening and more Americans receiving COVID-19 vaccinations, the economy is expected to be operating on all cylinders. However, some economists and market analysts are afraid The Federal Reserve may create a “taper tantrum” if and when it starts to reduce its purchase of U.S. Treasury debt. The Fed’s current track of purchasing $120 billion of U.S. Treasury debt every month has kept the 10-year yield moderated. However, if The Fed signals fewer monthly purchases from current levels, recent history has already seen higher 10-year yields and increased market volatility.
Even before the pandemic began, the U.S. residential real estate market was short on houses, with more people looking to buy than those who were selling. And yet, unlike the 2008 recession, any economic woes related to the pandemic did not undercut housing prices. If anything, real estate had a banner year as home prices continued to rise. In April of this year, the median sale price of existing homes rose by 19.1 percent to a record high of $341,600.
Let’s face it. Saving money is a challenge at best – and really hard the rest of the time. But what if you made it a fun game to inspire yourself to save? Here are a few ways to do just that.