Thanks to our friend Belk at Family Asset Management for sharing!

Click here to see the cafeteria at the IRS.

It’s your favorite CPAs, again, with an update to what our industry is calling “another miserable tax season.” This time it involves Letter 6419 that the IRS began sending last month to reflect the advance payments of the Child Tax Credit. It has been discovered, a bit late in the game, that the amounts on the letters may be outdated.

What does this mean for you? Unfortunately, you will have to do the IRS’ job for them and track down your advanced payments. There are two ways of doing this. The first is to go through your bank account. If you received direct deposits, then the payment codes will look like this:

  1. IRS TREAS 310 CHILDCTC – 2021 Child Tax Credit payments received monthly between July and December
  2. IRS TREAS 310 TAXEIP3 – Economic Impact Payment of up to $1,400 per person
  3. IRS TREAS310 TAX REF – 2020 tax refund, where applicable

If you received the payments by mail, the description on the check will read “Advance Child Tax Credit.” Other payments will have descriptors such as “Economic Impact Payment” or “TAX RELIEF.” You will need to add all amounts with the advance child tax credit coding/description to determine the total advance payments received in 2021.

The second option is to match the Letter 6419 you received to the Child Tax Credit portal. The portal has changed and can be accessed using this link:

If you do not already have access to the CTC portal, then you will need to create an account with the IRS or an IRS account. The portal should reflect a listing of payments processed for 2021. If you use this option, you may want to check these payments against your bank account as the portal may be outdated as well.

After you have confirmed your advance CTC payments using either of the above options, please include the total advance payments received with your tax documents.

We are hoping hiccups like these will not continue throughout busy season, but the dumpster fire has been lit, and it looks like it will keep us warm through April.

Your TLG Tax Team

From our friends at Exceptional SC:
2022 Tax Credit Available!
Hello, friend of Exceptional SC:  

Due to your generosity and hundreds of other individuals and businesses in 2021, we will be able to provide more support to our special needs children than in the previous 3 years!   In 2022, please continue to think of Exceptional SC by sharing our mission and the lifechanging scholarships you empower us to provide to these special children. If each of us convinces just one other person to join this movement, we will collect the entire $12M in 2022.  

It’s simple, it’s fiscally responsible, and it’s lifechanging.   2022 donations can be accepted now. Here you will find a short summary of the law with instructions on how to participate in 2022.   With Exceptional SC you can contribute your appreciated stock and avoid capital gains tax (we’re a 501(c)(3)) while at the same time supporting a trusted organization! Save on taxes while supporting special needs children; it’s a no brainer.  

Remember, you can donate online at the link provided here or complete this form and mail a check to:   Exceptional SC P.O. Box 11305 Columbia, SC 29211  

If you have any additional questions for us, please do not hesitate to connect with us directly.

Please email for any further inquiries.  

Respectfully Yours,  
Exceptional SC    

We are excited to announce the promotion of Allen Johnson from Tax Associate to Tax Senior. Allen joined TLG in 2019 and is an invaluable asset to our tax team. Allen is hardworking, diligent, and always eager to lend a hand. Whether it’s on the kickball field or at the office, Allen is the kind of person you want on your team! Please join us in congratulating Allen on his well-earned promotion. Way to go, Bald Eagle!

We are pleased to welcome Will Clifton to the TLG team. Will has always loved numbers and is currently studying at College of Charleston. “Everything has a place and it has to add up, so there is a very steady and calculated problem and solution.” When Will isn’t problem solving at C of C, you can find him on the golf course.

Please join us in welcoming Will to the TLG team!

We are pleased to announce that Jerrica Hamilton has joined the TLG team as a Tax Intern. Jerrica, who fell in love with accounting in high school, is currently studying at College of Charleston. When she isn’t crunching numbers, she enjoys fishing, an afternoon on the water, and snuggles with her puppy.

Please join us in welcoming Jerrica to the TLG team!

Click HERE to see the original article.

By  Lynnley Browning January 11, 2022, 10:20 a.m. EST6 Min Read

Millions of mass affluent Americans face yet another turbulent tax season this year, as special payments sent out during the COVID pandemic scramble their federal returns — and potentially their refunds.

With Jan. 24 the first day to file a return for last year, according to a Treasury Department announcement on Jan. 10, financial advisors with moderately wealthy clients who have young children or student loans (or both) have a lot to handle. Two multibillion-dollar pandemic-related relief provisions over the last two years — the advance child tax credit and a pause on student loan payments — can cause a return filed this year to show a smaller-than-anticipated refund. Or a larger one.

The third pandemic filing season comes as the IRS is backlogged and understaffed.
The third pandemic filing season comes as the IRS is backlogged and understaffed.

Either way, the result can impact the dollars a client is budgeting to add to her retirement savings. Many Americans typically consider their refund — the average last year was more than $2,800, according to the IRS — a windfall, and most advisors urge them to shove it into their investment and retirement accounts, not spend it on discretionary stuff.

Dan Herron, an accountant, certified financial planner and the founder of Elemental Wealth Advisors, a fee-only advisory firm in San Luis Obispo, California, said that the current filing season “is going to be very similar to how it was last year. You could call it dumpster fire 2.0.”

Last year’s season was delayed to Feb. 12 amid pandemic-fueled staffing shortages at the IRS and tax law changes that the agency had to program into its systems. As of last December, the agency had around 6 million returns that it had still not processed; it’s not clear what the figure is now.

With the IRS now in its third filing season under the pandemic and expecting more than 160 million individual returns, IRS Commissioner Chuck Rettig warned of tangles in a statement on Jan. 10.

Advisors predict a 'disaster' filing season for many taxpayers.
Advisors predict a ‘disaster’ filing season for many taxpayers.

“Having an accurate tax return can avoid processing delays, refund delays and later IRS notices,” his statement said. “This is especially important for people who received advance Child Tax Credit payments or Economic Impact Payments (American Rescue Plan stimulus payments) in 2021; they will need the amounts of these payments when preparing their tax return.”

The agency said that it anticipates most taxpayers will receive a refund within 21 days of filing electronically, if they choose direct deposit and there are no issues with their returns. For some taxpayers, that’s a big if. It’s all but impossible to speak to an agency representative, which means that the filing season is already not looking pretty.

“In many areas, we are unable to deliver the amount of service and enforcement that our taxpayers and tax system deserves and needs,” Rettig’s statement said. “This is frustrating for taxpayers, for IRS employees and for me.” Still, it said to carry on: “Taxpayers generally will not need to wait for their 2020 return to be fully processed to file their 2021 tax returns and can file when they are ready.”

Those darn kids
The complicated child tax credit, and its spawn, the advance child tax credit, are causing some of the biggest tangles.

The 2017 tax code overhaul doubled the child tax credit to $2,000 and boosted the income levels at which it phases out, to $400,000 for married couples and $200,000 for everyone else.

In response to the pandemic’s emergence in early 2020, the federal government temporarily increased the credit to $3,600 for children up to age 5 and $3,000 for those aged 6-17, including 17-year olds for the first time. And it made the credits fully “refundable,” meaning that low-income taxpayers got cash back from the government even if their taxable income wasn’t high enough to zero out their tax bill. The credit reverts back to a maximum $2,000 this year.

Do not enter

The Biden Administration advanced monthly payments of chunks of the credits to 39 million Americans over last July through December. Taxpayers could opt out of receiving them if they anticipated getting a raise, switching to a higher-paying job or selling their home, events that could reduce the amount of credit they’re eligible for, as the benefit gets smaller as income rises.

But some taxpayers who didn’t opt out could end up having to pay some of the money back — a flow that could show up as a lower refund on their returns this year or a check written to the IRS. Meanwhile, taxpayers who had a baby after last March could see bigger refunds, while those who got divorced and saw a child’s primary residence go to the former spouse could see a smaller or no refund.

The $1.9 trillion American Rescue Plan that authorized the child tax credit boost last March also introduced a woolly method for calculating who gets how much. It’s that method that’s going to cause headaches for many taxpayers when they file their returns come Monday, April 18, three days after the normal deadline due to a holiday in Washington, D.C.

“It’s one of the biggest problems of the filing season,” said Sheryl Rowling, the founder of Rowling & Associates, a fee-only investment advisory firm in San Diego and a columnist for Morningstar. “Most taxpayers will estimate what they got, and then it will be up to the IRS to figure out if they’re owed money.”

The IRS has two complicated filters that reduce the child tax credit, depending on how much money you make. The first filter phases out $3,000 to $2,000 once you start making $150,000 if married (half that amount for single filers, and $112,500 for heads of household). For such earners, each $1,000 of income above those thresholds reduces the credit by $50.

The second filter hits higher earners and governs when a taxpayer can receive less $2,000. Once couples make more than $400,000 (more than $200,000 for all other filers), the $2,000 credit falls by $50 for each $1,000 chunk of income over those thresholds. Whip out your calculator.

You’ve got (IRS) mail
Taxpayers also need to make sure they’ve received all three of their economic stimulus payments, known as “stimmie” checks. Two went out in 2020 and a third last year. The last one was $1,400 for individuals and $2,800 for married couples, plus an additional $1,400 for each dependent. People making up to $80,000 (at least $160,000 for couples) get some or all of the full amount, with higher earners getting less. Taxpayers whose incomes changed or who added a child to the family may be owed a bigger or smaller stimmie check. Those who didn’t get a check claim it on their returns as a “Recovery Rebate Credit.

Deparment of justice DOJ IAG

Snail mail from the IRS typically terrifies the recipient, but taxpayers should pay attention if they receive one or both of the following letters. Letter 6419 details the child tax credits you’ve gotten, and letter 6475 details whether you got the third stimulus payment. Both can help your accountant determine whether you are owed more or were paid too much and might have to give money back to Uncle Sam.

“Watch for IRS letters about advance Child Tax Credit payments and third Economic Impact Payments,” the agency said on Jan. 10. But Herron said that many clients hadn’t yet received the letters. “How are you going to have a filing season when those letters haven’t even gone out?” he said. “It’s going to be a huge headache for taxpayers.”

Another variable that can throw a wrench into a return is the federal government’s pause on payments for federal student loans from March 2020 through May 1, 2022. That means no deduction for student loan interest on returns filed for those years. The deduction, taken by nearly 13 million taxpayers in 2019, according to IRS data, is typically worth up to $2,500. Not having it can potentially result in a larger tax bill, even with the out-of-pocket savings that come from the pause in repayments.

“The problem is that when there are complications and people get confused, they’re not going to get through to the IRS,” Rowling, an accountant and certified financial planner, said. “If you have to do anything at all with the IRS, it’s going to be a disaster.”

Lynnley Browning Wealth Editor, Financial Planning

A message from our friends at Exceptional SC.

We hope that you will consider joining this important cause to help us transform the lives of thousands of special needs children in our state. Last year, we were able to support 1,500 students’ statewide attending special education programs within private schools.  

There were some very important changes signed into law this May by Governor McMaster that benefit you as a tax credit donor:  

1) You may now elect to donate 75% of your SC tax liability (instead of 60%); and,
2) You may now carry forward your tax credit donation for 3 years (instead of no carryover).  

This program needs generous people like you to continue to support these special needs children. Please donate before December 31st to ensure this program is sustainable for the future. Presently, over $10.6 M remains available of the $12M statewide tax credit cap with 60 days remaining in the tax year. Let’s close this gap and support these special children!  

Here you will find a short summary of the law and the changes from this May. Please share this information with your friends, family and colleagues.  

Remember, you can donate online at the link provided here or complete this form and mail a check to:   Exceptional SC P.O. Box 11305 Columbia, SC 29211   If you have any additional questions for us, please do not hesitate to connect with us directly.

Please email for any further inquiries.

“On September 13, 2021, the House Ways and Means Committee released the proposed tax provisions of the broader budget reconciliation bill that Democrats hope to pass in the upcoming weeks.”

Click here to view the full article from our friends at UBS.

With all the uncertainty surrounding Biden’s tax policies, we want to be proactive on what could be, yet another, big year for taxes. We know you are hearing the news regarding Biden’s tax proposals and, for some of you, the changes could be significant. We want to assure you that TLG is monitoring all developments and will inform you as needed. Recently, we had the honor of talking with a tax policy lobbyist who is very active on The Hill. He believes that changes will not be as significant as proposed. Infrastructure is the main focus of Congress, and this will, most likely, mean increased tax rates. However, some of the more extreme items that are not instant revenue generators and could result in a loss of votes for moderates – elimination of step-up in basis, significantly decreased estate exemption, elimination of 1031 exchanges, etc. – may not make it further than the idea stage. He does not expect retroactive tax changes to occur, and most of the bills will not be finalized until the Fall meaning even more proposals could drop off. The longer the passage of these bills takes, the fewer things will stick.
This conversation eased a lot of our concerns; however, it is always advisable to plan and ensure your income and estate affairs are in order. Below are some strategies for you to consider.
Life Insurance – Not a Four-Letter Word

It might be time to shift your perspective on life insurance policies. While they have been seen as expensive products that are often sold unnecessarily, when used correctly, they can be a powerful income and estate tax tool. Depending on your age, wealth, and goals, some products to consider are private placement life insurance, premium financing, life insurance as a Roth alternative, and good old universal life. Some benefits include the ability to:

– Invest your policy in alternative investments to strengthen returns

– Withdraw your premiums first so that they come out as a tax-free return of basis (FIFO)

– Borrow from the policy and then repay the loan with your death benefit

– Tax-free growth

– Estate tax-free if set up appropriately

– Benefit from a rate arbitrage by borrowing at a lower rate to pay premiums

With potential tax rate increases and possible estate exemption decreases, life insurance is a product that should be considered. While we know the basics of these policies, we can recommend advisors who specialize in tailoring life insurance products to fit your needs.

Many of you have already set up trusts, but there are some trusts that you may want to consider adding to your estate plan. If you currently have a term life insurance policy, it may be worth putting the policy into an Irrevocable Life Insurance Trust (ILIT) and using your estate exemption while it is still high ($11.7M for 2021 per taxpayer). It also keeps the term policy out of your estate when payable. Crummey Trusts are also an inexpensive strategy to chip away at your annual gift exemption for beneficiaries by utilizing the annual gift exclusion ($15K per taxpayer in 2021). Many married clients have established Spousal Lifetime Access Trusts (SLAT).  SLATs are a way to utilize the higher estate exemption by gifting to your spouse. Not only will the spouse have lifetime access to the assets, but post-gift appreciation will be excluded from the estate of both spouses. There are several other trust structures that are more aggressive for both exemption and/or income tax planning. We recommend that you discuss these strategies, and your overall estate plan, with your attorney.
Charitable Giving

Appreciated Assets: If you are sitting on appreciated securities, there are a couple of options that could save you tax dollars. First, you could donate the appreciated stock to charity. You can donate to an organization directly or into a donor advised fund for distribution to a charity at a later date. Donating long-term stock to charity gives you a deduction at the fair market value without recognizing the capital gain. Another option is to pay your SC taxes by contributing stock to the SC Exceptional Needs Program. The law recently changed to allow an offset of 75% of your tax liability a five-year carry forward of any unused credit. So far, only $750k of $11.25M has been funded, and there are 2,000 students relying on the scholarships.

Conservation Easements: If you own land or historic structures that you would like to conserve, now may be a great time to consider a conservation easement as real estate values are at an all-time high. Conservation easements restrict the use of the land/structure, but in exchange you receive a Federal deduction up to the fair market value of the easement and a potential SC tax credit. You will need to work with a land trust or government agency as well as obtain an appraisal of the property.

Donor Advised Funds or Family Foundations: As mentioned above, donor advised funds (DAFs) are great vehicles to contribute cash or stock for an immediate charitable contribution deduction, but the funds can be disbursed to charitable organizations at a later date. They are easy to set up and do not require any additional filings. Family foundations are another option for charitable giving, but they do require more recordkeeping and an additional tax filing. If you have significant amounts of appreciated stock or are unsure of which charities to make contributions, these options are worth considering. If you do consider these options, keep a watch on The Accelerating Charitable Efforts Act which was recently introduced to Congress.  This Act could more heavily regulate DAFs and private foundations. This bill calls for faster disbursements of funds from DAFs and proposed changes to the minimum payout requirements.
Miscellaneous Ideas

There is a possibility that capital tax rates will increase in 2022 (currently suggested for those with taxable income over $1M), so 2021 may be the year to recognize income and pay tax. If you do have appreciated stock or concentrated positions, you and your advisor may consider selling, recognizing gains at low rates, and either diversifying your portfolio or re-purchasing the stock to achieve a step-up in basis in the event those provisions change.

Another income recognition event to consider is converting a portion, or all, of your traditional IRA to a Roth. The amount converted will be taxed at ordinary rates, but any future distributions from the Roth would be tax free in potentially higher tax rate years.

If you have already experienced a capital gain event and are within the 180-day window, you can defer your gain using an opportunity zone. 2021 is the last year where you can remove 10% of the gain, and any remaining gain will be taxed in 2026 at the rates applicable in that year. If the opportunity zone investment is held for 10 years, any appreciation will be tax-free.

If you are selling rental or investment real estate with significant capital gains and are interested in acquiring other real estate, consider a 1031 exchange to defer the capital gains.

Consider SC tax credits. Contributions to the SCRA Industry Fund provide a 100% credit against SC taxes up to $250k. This credit is applied after all other credits and can be carried forward for 10 years. As mentioned above, contributions to the SC Exceptional Needs program are a way to pay your taxes while helping children in this state receive the education they need for success.  Other state credits include Angel Investor Credit for investing in SC start-up companies, Solar Energy Credit for the installation of solar panels and other alternative energy property (set to expire 1.1.22), and the Retrofit Credit for retrofitting your legal residence to make it more resistant to storm damage. You can also purchase SC credits at a discount from a broker with whom we can make an introduction.

If your business is a Partnership or S-Corp in South Carolina, consider paying state taxes at the entity level. We don’t foresee the $10K SALT cap being repealed anytime soon, so this workaround allows the entity to subject itself to tax and deduct it fully on the entity return. This election gives shareholders the benefit of the tax deduction and excludes the income from taxation at the individual level. For more information, please refer to the blast we sent out on June 4, 2021.
The year is flying by and there is not a lot of time to implement these strategies. We recommend consulting with your advisors as soon as possible as we are anticipating a very busy year-end. Most attorneys have an internal cut-off of October 31 to ensure all plans can be executed by year end. Following suit, we are also implementing a cut-off of October 31 for tax planning. If you will need year-end planning assistance, please email, and we will add you to our year-end planning list. Due to extremely high volume, we cannot take on any additional planning if we do not hear back from you by our deadline.

Stay tuned for our year-end update, and as tax reform unfolds, we will keep you posted.
Enjoy these last few weeks of summer!
Your TLG Team