2021 Vs 2022 Vs 2023 Federal Income Tax Brackets

2020 Vs 2021 Vs 2022 Federal Income Tax Brackets

The US tax system is progressive, meaning that the more you earn the more you pay. For the years 2021-2023 there are seven different brackets for each year (2020 was the same structure as well). Which bracket you are in depends on your taxable income; however, your bracket does not equal your tax rate.

Tax brackets work so that you pay part of your income at each level bracket as you move-up in income. In other words, someone in the 32% marginal rate bracket will pay 10% on part of their income, 12% on another part, then 22% on another band of income, 24% on the next tranche and finally, 32% on everything else. In other words, moving into a higher tax bracket does NOT mean you pay higher taxes on all your income.

Below are comparative tables for the taxable years 2021 – 2023. This way you can not only see the tax brackets that apply 2023 taxable income, but the trend changes over time.

Updates to 2023 Tax Rates and Brackets

Over the 3-year period shown below, there are seven brackets with progressive rates ranging from 10% up to 37% and they are the same overall years.

Federal income tax rate brackets are indexed for inflation. The brackets are adjusted using the chained Consumer Price Index (CPI). There were no structural changes to the tax brackets in any of the periods, so the only impact are increases year-over-year due to the inflation indexing.

The inflation adjustment factor for 2023 was 7% for example, raising income thresholds applied to the tax brackets across the board.

Tax Rates and Brackets

Below are the 2021-2023 tables for personal income tax rates. Note, that the 2023 figures below are the amounts applicable to the income earned during 2023 and paid in 2024 when you file your taxes.

 

Tax Brackets & Rates

Single Taxpayers
2021 2022 2023
10% 0 – $9,950 10% 0 – $10,275 10% 0 – $11,000
12% $9,951 – $40,525 12% $10,276 – $41,775 12% $11,001 – $44,725
22% $40,526 – $86,375 22% $41,776 – $89,075 22% $44,726 – $95,375
24% $86,376 – $164,925 24% $89,076 – $170,050 24% $95,376 – $182,100
32% $164,926 – $209,425 32% $170,051 – $215,950 32% $182,101 – $231,250
35% $209,426 – $523,600 35% $215,951 – $539,900 35% $231,251 – $578,125
37% $523,601and Over 37% $539,901 and Over 37% $578,126 and Over

 

Married Filing Jointly and Surviving Spouses
2021 2022 2023
10% 0 – $19,900 10% 0 – $20,550 10% 0 – $22,000
12% $19,901 – $81,050 12% $20,551 – $83,550 12% $22,001 – $89,450
22% $81,051 – $172,750 22% $83,551 – $178,150 22% $89,451 – $190,750
24% $172,751 – $329,850 24% $178,151 – $340,100 24% $190,751 – $364,200
32% $329,851 – $418,850 32% $340,101 – $431,900 32% $364,201 – $462,500
35% $418,851 – $628,300 35% $431,901 – $647,850 35% $462,501 – $693,750
37% $628,301and Over 37% $647,851 and Over 37% $693,751 and Over

 

Married Filing Separately
2021 2022 2023
10% 0 – $9,950 10% 0 – $10,275 10% 0 – $11,000
12% $9,951 – $40,525 12% $10,276 – $41,775 12% $11,001 – $44,725
22% $40,526 – $86,375 22% $41,776 – $89,075 22% $44,726 – $95,375
24% $86,376 – $164,925 24% $89,076 – $170,050 24% $95,376 – $182,100
32% $164,926 – $209,425 32% $170,051 – $215,950 32% $182,101 – $231,250
35% $209,426 – $314,150 35% $215,951 – $323,925 35% $231,251 – $346,875
37% $314,151and Over 37% $323,926 and Over 37% $346,876 and Over

 

Heads of Housholds
2021 2022 2023
10% 0 – $14,200 10% 0 – $14,650 10% 0 – $15,700
12% $14,201 – $54,200 12% $14,651 – $55,900 12% $15,701 – $59,850
22% $54,201 – $86,350 22% $55,901 – $89,050 22% $59,851 – $95,350
24% $86,351 – $164,900 24% $89,051 – $170,050 24% $95,351 – $182,100
32% $164,901 – $209,400 32% $170,051 – $215,950 32% $182,101 – $231,250
35% $209,401 – $523,600 35% $215,951 – $539,900 35% $231,251 – $578,100
37% $523,601and Over 37% $539,901 and Over 37% $578,101 and Over

 

 

Conclusion

While the tax brackets are the same in 2023 as the prior year, the income thresholds increased 7% following hot inflation in the CPI. You can lower your marginal rate or at least reduce the amount of taxable income subject to it by optimizing itemized deductions.

How to Write an Awesome Accounting Bio

How to Write an Accountant Bio, How to write CPA Bio, How to write a Tax Preparer Bio, How to write a Bookkeeper bioEven though numbers are probably the biggest thing in an accountant’s wheelhouse, getting people in the door with the right words in your bio can make all the difference in the world. Here are a few tips to make sure that how you present yourself to the public via your wording is powerful, succinct, and engaging.

Make it Short and Engaging

Yes, attention spans in our world are woefully short, much like that of gnat. You have seconds to grab someone’s attention. Write your bio as if you were looking for an accountant. How would you word it? What would catch your eye? Of course, you’d start with your name and title, but what after that? Spend time thinking about this.

Don’t Use First Person

While social media is all about saying “I this” and “I that,” when it comes to bios, it’s best not to do that, use the third person as if you were talking about someone else. For instance, “John Davis is a CPA at Ernst & Young.” After that, you can launch into telling the world just how awesome you are.

Use Active Voice

And avoid passive voice. An example of this would be something like, “John’s team was involved in the overhaul of the payroll system.” For active voice, you’d write it like this:  “John’s team overhauled the payroll system.” See the difference? You’ve cut out extra words and adjusted your verb to be active. A quick way to check your writing for passive voice is to do a search in your document for an “of.” If you spot these babies, fix them right away.

Update Your Social Media Profiles

While most people use LinkedIn, many others who are looking for a job include their bios on their social media pages. In fact, you might update your bio on your LinkedIn page and then share it on Facebook, Instagram, or other platforms you use. This way, when employers are casually scrolling, you’ll appear in their feed. And if they’re looking for someone, all the better.

End Strong

The abbreviation in the marketing world is CTA, or Call to Action. You see it on nearly every digital ad as a button. But if you reimagine it in terms of the last sentence of your bio, it can leave a lasting impression and, hopefully, trigger a response. You might end your bio with a short, friendly statement, your email, and your phone number: “John is actively seeking employment, can be reached at [FILL IN INFO], and is just a ping or phone call away.” No matter what you choose to end with, it should reflect you and your personality.

If you need a little help to get started, here are two different samples:

Sally Smith is a CPA and a Senior Accountant at ABC Company, a full-service tax and bookkeeping firm in Home Town, USA.

John Jones joined ABC Company in 2000. In his current role, he is a seasoned tax preparer with a focus on international taxes. This involves staying up-to-date with current and future tax regulations for foreigners living and working in the United States and abroad, as well as state tax regulations in California and Florida.

Writing an accountant bio that will stand out from the crowd will take a bit of time, but it is well worth it. You want to present yourself in the best possible light to your audience. When you do this, you’ll get more traction and, in turn, more business.

How Businesses Can Leverage Data and Personalization for Targeted Campaigns and Growth

Data and Personalization, Targeted CampaignsMarketing efforts today depend on collecting, analyzing, and leveraging data to make informed decisions. Therefore, business owners need to understand how to harness the power of data and personalization to create targeted campaigns that drive growth.

Importance of Data and Personalization in Modern Business

Businesses today collect loads of data, enabling them to understand their customers’ preferences, behaviors and interests. The data comes from different channels, such as a business website, emails, or social media. It is then used to identify patterns and trends to make informed marketing decisions. This yields valuable insights that help craft highly personalized and effective marketing strategies.

Data is the foundation of personalization strategies. Personalization involves tailoring customer experiences to meet individual interests, needs, and preferences. It aims to build strong customer relationships, encourage engagement, and drive revenue and growth.

Personalization takes different approaches, such as recommendations based on previous purchases, creating unique landing pages, or sending emails based on customer browsing behavior. For example, e-commerce websites recommend products based on user browsing history and search queries.

Business owners can’t afford to ignore personalization since customers today are more informed, can easily access information, have more options, and have more control over purchase decisions. Furthermore, customers are more demanding and want to be recognized as individuals, expecting to receive personalized experiences. This has rendered traditional, one-size-fits-all marketing strategies obsolete.

How Businesses Can Use Data and Personalization for Targeted Campaigns and Growth

Using a data-driven approach, a business can create campaigns that deliver the right message to the right audience at the right time by doing the following:

1. Audience segmentation

Capturing the attention of a specific audience segment leads to higher conversion rates. To do this, a business can leverage data insights to segment the target audience. This means it is possible to categorize potential customers based on demographics, interests, or browsing behavior.

2. Crafting personalized content

Once segmentation is complete, it becomes possible to create tailored campaigns that resonate with each segment’s unique preferences. Aside from addressing customers by their names, it involves delivering content that speaks directly to their needs, interests, and pain points. This could include product recommendations based on past purchases or sending targeted offers that align with customer browsing history.

3. Omnichannel personalization

Customers interact with businesses using various channels, such as a business website, social media, emails, and mobile apps. A business can integrate data and personalization efforts to ensure a seamless journey for customers, regardless of where they engage. Additionally, it is crucial to deliver consistent and personalized experiences across these channels.

4. Continuous improvement in data-driven campaigns

Data insights also help guide businesses on the most suitable content and distribution strategies. They can analyze types of content performing well and in which channels. For example, a business can conduct A/B testing to compare campaign and content variations to identify the most effective approach for each segment.  

5. Measuring and analyzing results

To establish the effectiveness of personalized campaigns, a business will need to develop clear key performance indicators (KPIs) and measurement methods. One way to measure the impact of personalization is through customer engagement. This is done by measures such as click-through rates on personalized emails, customer retention rates, customer lifetime value, customer feedback, and number of sales.

It is worth noting that to make the most out of data insights. It is helpful to invest in advanced analytics tools or collaborate with data experts.

6. Adapting to changing trends

The digital landscape is evolving constantly, with new technologies and trends emerging regularly. Businesses must stay updated on these changes and adapt their personalization strategies accordingly. Remaining flexible and open to innovation ensures that the company’s targeting efforts are relevant and effective.

Data Privacy and Security

Although personalization in modern business is crucial, it must be balanced with privacy concerns. First, a business must be transparent about the data it collects and how it will be used. In addition, businesses need to be careful with the data they collect. They must ensure data security by safeguarding data storage and using safe transmission methods, have access control limits, and regularly audit data privacy policies and practices. Customers should be allowed to opt out of data collection and personalization efforts easily.

Customer data must be well protected to ensure compliance with relevant regulations. It also helps build trust with customers. Besides, a breach of trust can severely affect a business’s reputation and growth.

Monitoring Trade Agreements with Taiwan, Promoting Plain-Language Rules, and Expanding Recruiting and Training for Law Enforcement

United States-Taiwan Initiative on 21st-Century Trade First Agreement Implementation Act (HR 4004) – This bipartisan bill was introduced on June 12 by Rep. Jason Smith (R-MO). The purpose of this bill is to convey approval by Congress of the June 1 trade agreement between the United States and Taiwan. The bill addresses customs administration and regulatory practice issues, as well as dictates conditions for negotiations of subsequent trade agreements. Among its provisions, the bill requires that the U.S. Trade Representative share all negotiating texts with Congress prior to being sent to Taiwan or any parties outside of the executive branch. The bill passed in the House on June 21 and in the Senate on July 18. It was signed into law by the President on Aug. 7.

Providing Accountability Through Transparency Act of 2023 (S 111) – This bill, which was signed into law on July 25, requires each agency to provide a 100-word plain language summary of each new proposed rule posted at regulations.gov. The legislation was introduced by Sen. James Lankford (R-OK) on Jan. 26; passed in the Senate on June 22; and in the House on July 17.

Securing the U.S. Organ Procurement and Transplantation Network Act (HR 2544) – This bipartisan bill was introduced by Rep. Larry Bucshon (R-IN) on April 10. It modifies operations of the Organ Procurement and Transplantation Network, which is managed by the Health Resources and Services Administration (HRSA). In the past, the network of professionals was managed by only one organization, but this new bill allows the HRSA to award multiple grants, contracts or cooperative agreements for network management. The legislation was passed in the House on July 25, in the Senate on July 27 and is currently awaiting signature by President Biden.

Strong Communities Act of 2023 (S 994) – Introduced by Sen. Gary Peters (D-MI) on March 28, this bill permits funding by the Community Oriented Policing Services (COPS) grant program to be used to train officers and recruits who agree to serve in law enforcement agencies in their local communities. The bipartisan bill passed in the Senate on July 26 and is currently under consideration in the House.

Recruit and Retain Act (S 546) – Introduced by Sen. Deb Fischer (R-NE) on Feb. 28, this bill expands the Community Oriented Policing Services (COPS) grant program to enable law enforcement agencies to use funding for recruitment activities such as career and job fairs, as well as lower application fees for things like background checks, testing and psychological evaluations. The Act passed in the Senate on July 26 and has been forwarded to the House.

 

 

Department of Veterans Affairs Office of Inspector General Training Act of 2023 (S 1096) – This Act would require new Veterans Affairs (VA) employees to undergo training on how to report misconduct, respond to requests from and cooperate with the Office of the Inspector General. The bill was introduced on March 30 by Sen. Margaret Hassan (D-NH) and was passed in the Senate on July 13. Its fate now rests in the House.

IRS Ruling: Crypto Currency Staking Rewards Are Taxable When Received

Crypto Currency Staking Rewards Are TaxableThe IRS recently issued an important ruling on the taxability of cryptocurrency staking rewards, determining that staking rewards are essentially “income” and, therefore, taxable upon receipt and not deferrable until sale or swapping. Below, we will look at the ruling in more detail and what it means for taxpayers. But first, let us revisit the concept of cryptocurrency staking as a refresher.

Crypto Staking 101: What Is Staking?

Staking, at its most basic form, is a way for holders of cryptocurrencies to earn rewards or passive income on their digital assets without needing to sell.

One way to think of staking is like a high-yield savings account. When you stake digital assets, you deposit and lock up your coins. This helps run and maintain security on different blockchains (depending on the asset staked). In return, you typically receive more of the digital asset staked. 

Rates of return on digital asset staking can be lucrative; however, staking is not without risks.

Staking risks include:

The inherent volatility of cryptocurrencies, where the rewards earned can be less than the change in the underlying digital asset price (causing an overall loss).

Minimum lock-up periods, where staked assets cannot be unstaked and sold or swapped and therefore are illiquid for a period.

Counterparty risk if operating as part of a staking pool, where rewards can be negated as a bad actor and therefore never paid out.

The staking pool or underlying digital asset can be hacked, leading to a loss of funds (remember, there is such a thing as FDIC insurance to protect depositors in the cryptocurrency realm).

Taxability of Staking Rewards

The tax treatment of buying and selling cryptocurrencies is clear. In IRS Notice 2014-21, the government declares that crypto trades should be treated as property, resulting in capital gains treatment like other property bought and sold. Staking, however, is different than trading.

To clarify, given the vague mechanisms of crypto staking, the IRS recently issued a ruling declaring that crypto staking rewards need to be included when received in a taxpayer’s gross income. This ruling formalizes the position taken by the IRS in the Jarrett case.

The argument in the Jarrett case was that the coins received as staking rewards are new property that was created and not the same as income, interest, etc. Essentially, this means the staking rewards are zero-basis assets that would be taxed when sold and not upon receipt. They made the argument that staking rewards were like the products of a baker, where each new cake, although from the same recipe, is a newly created product/asset and, therefore, taxable upon sale.

The court determined that staking rewards, due to their proof-of-stake creation mechanism, are not a new asset, but compensation for helping to maintain and provide validation of the underlying blockchain, with the staked assets used as collateral.

Conclusion

As a result, staking rewards are income when “received.” The taxable amount is the fair market value of the coins when the taxpayer receives the staking reward in an “unlocked” manner. In other words, once the taxpayer controls the staking rewards, the taxpayer is capable (regardless of exercising this capability) of selling them.

Evaluating Net Operating Loss Considerations

Net Operating Loss, what is Net Operating LossWhen it comes to determining if a business is eligible to claim a net operating loss (NOL), it depends on the financial situation. If a business’ taxable income is less than its allowable deductions in a set tax period, usually a year, then the business can utilize the NOL deduction on future tax obligations. Since some businesses’ profits and losses result from uneven cycles, the Internal Revenue Service (IRS) Code permits businesses to find a balance with their tax obligations.

How a Net Operating Loss Works

Here is an example showing a business’ situation with annual profit/loss summaries:

Year one: High profits and big tax payments due

Year two: Net operating loss incurred

Year three: High profits and big tax payments due

The way a NOL deduction works in the example above is that the losses from year two can be used to offset taxes due in year three.

Net Operating Loss (NOL) = Taxable Income – Allowable Tax Deductions

Referring to the income statement, if the company’s bottom line is a net loss, then the company might be eligible to take advantage of the NOL deduction.

It’s important to keep in mind there have been modifications to what and how businesses may use this. Until recently, the IRS let businesses utilize the carryback method to offset losses to prior years’ tax bills (up to 24 months of tax liabilities), resulting in an immediate refund. However, with the passage of the Tax Cuts and Jobs Act, NOLs were modified. Effective Jan. 1, 2018, or later, the two-year carryback provision was removed (except for select farming losses), but allowed for an indefinite carryforward period. The TCJA also limits carryforwards to 80 percent of each subsequent year’s net income. Additionally, if a business records a net operating loss in more than one tax year, they must be exhausted in the order that the losses occurred. 

The Coronavirus Aid, Relief and Economic Security (CARES) Act permitted NOLs occurring in tax years 2018, 2019, and 2020 to be carried back five years and carried forward indefinitely. However, the exemptions have now expired. Losses that occurred in pre-2018 tax years are still subject to former tax rules, with any remaining losses expiring after 20 years. Beginning with the 2021 tax year, when the Tax Cuts and Jobs Act (TCJA) passed in 2017, it permitted carryforwards of NOLS indefinitely. However, only 80 percent of taxable income can be “carried forward” during a single tax period.

2021 and Forward NOL Example

Year one: NOL $10 million

Year two: Taxable income of $3 million

Year three: Taxable income of $5 million

For year two, with the taxable income’s carryover limit (80 percent) of $3 million is $2.4 million. With the carryover limit subtracted ($3 million – $2.4 million = $600,000), the company’s taxable income will be $600,000 for year two. The remaining NOL of $7.6 million will be considered a “deferred tax asset.” Looking at year three, 80 percent of the year’s $5 million in taxable income equals $4,000,000 in a carryover limit. Subtracting $4 million from $5 million in year three’s taxable income, the business will have $1 million in taxable income, and $3.6 million will be the remaining NOL balance at the end of year three. 

With the tax code continuing to evolve, businesses that stay up-to-date with changes in the IRS Code will make the most of their ability to maximize deductions and reduce liabilities.

2023 Sales Tax Holidays for Back-to-School Shopping

2023 Sales Tax Holidays for Back-to-School ShoppingNow that we are heading into the backend of summer, it’s time for many states to host their annual sales tax holidays for returning to-school shopping. Numerous states with sales tax (remember, not all states have a sales tax) provide the reprieve to help families with the cost of annual school supplies and clothing.

According to the National Retail Federation, nearly 80 percent of shoppers are expecting increased costs this year versus last year; so more than ever, consumers are looking for ways to save. Furthermore, about two-thirds of back-to-school shoppers take advantage of these tax-free shopping periods.

The vast majority of states offer some type of tax-free shopping for a limited time period, frequently taking place over a weekend. Below, we will look at each state that offers a sales tax holiday for back-to-school shoppers, along with their details. Note that several states, including Alabama, Mississippi, and Tennessee, have their programs in July – and those are excluded from this article due to the timing of publication.

State Programs

Arkansas: From Aug. 5-6, the following items are tax-free for shoppers: clothes and shoes under $100 per piece, fashion accessories $50 and less per piece, as well as electronics, art, and school supplies.

Connecticut: From Aug. 20-26, clothes and shoes priced at $100 or less per piece are tax-exempt. Fashion accessories and sports gear are fully taxable, though.

Iowa: Aug. 4-5, clothes and shoes priced at $100 or less per piece are exempt.

Maryland: From Aug. 13-19, clothes and shoes priced at $100 or less per piece are exempt.

Missouri’s back-to-school tax breaks come Aug. 4-6. Clothes that cost less than $100 per piece are exempt. Also tax exempt on a “per purchase basis” are school supplies under $50, software under $350, and PCs under $1,500.

New Jersey: From Aug. 26 to Sept. 4 all art supplies, instructional materials, school supplies, and sports equipment sold to individuals are sales tax exempt. In addition, computers priced at $3,000 or less are also tax-free.

New Mexico cuts its sales tax charges from Aug. 4-6. Included are clothes, shoes, and backpacks costing $100 or less per piece; school supplies costing $30 or less per piece; and computers costing less than $1,000.

Ohio’s back-to-school deals are during Aug. 4-6. Clothes costing $75 or less per piece; school supplies less than $20; and other instructional materials priced at $20 or less are all tax-free.

Oklahoma from August 4-6; only clothes and shoes costing $100 or less per piece are exempt.

Texas: During Aug. 11-13, clothing, footwear, school supplies, and backpacks priced below $100 per piece are exempt. The exemption applies to both brick-and-mortar sales and those made online or via catalog.

West Virginia: From Aug. 4-7, no sales tax is charged for clothing priced at $125 or less; laptops and tablets costing $500 or less; school supplies purchased for $50 or less; and also certain sports equipment costing $150 or less.

Expirations and Details

If you notice, most states have an exemption for clothes and footwear in a moderate price range. Some are more liberal with their exemptions, while others offer a tax break on a broader scope of items, such as electronics and supplies.

Keep in mind that a few states’ sales tax holidays are permanent, while others are temporary. Also, remember that certain states are very specific about what is exempt from sales tax, so visit your state’s tax revenue website for details. It’s also important to note that some states allow counties or towns to exempt themselves, so check for this provision as well.

How to Reduce Common Payroll Errors

Common Payroll ErrorsAccording to the Internal Revenue Service (IRS) and the National Federation of Independent Businesses (NFIB), almost one-third of companies see penalties due to payroll issues. Understanding a few examples, according to the NFIB, of how companies can better comply and avoid penalties is essential to smoother operations.

Underpayment of Estimated Tax by Corporations Penalty

As long as there’s a reasonable expectation of at least $500 in estimated taxes owed, corporations are required by the IRS to file. If, however, a corporation doesn’t satisfy its estimated tax payments or pays them after their quarterly submission deadline, the IRS will assess penalties. This can occur even if the IRS owes filers a refund.

The IRS recommends the easiest way to avoid the penalty is to pay the quarterly estimated taxes by the 15th day of April, June, September, and January of the following year (the following month after each quarter). If the 15th is on a weekend (Saturday or Sunday) or it’s a legal federal holiday, payment would be due on the next regular business day.

When it comes to assessing penalties for underpayment of estimated taxes, the IRS determines the penalty based on how much-estimated taxes are underpaid, the time frame of when the payment was due and underpaid, and the IRS’ current quarterly interest rates.

Based on 2023’s third-quarter data from the IRS, the federal agency charges a 7 percent penalty annually, compounded daily.

Failure to Deposit Penalty

Another payroll tax mistake businesses may make is the Failure to Deposit Penalty. The NFIB reported that nearly 50 percent of small businesses see fines on average of $850 annually because they’re late or missing payments. In order for businesses that must make employment tax deposits, it’s imperative to do so either on the IRS’ monthly or semi-weekly basis.

Required employment tax deposits cover Social Security, Medicare, and federal income taxes, along with Federal Unemployment Tax. Employers on the monthly route are required to deposit employment taxes on payments for the prior month by the 15th of the following month. For the semi-weekly route, deposits for employment taxes on payments made between Wednesdays and Fridays are to be made by the following Wednesday. For deposits done on a Saturday, Sunday, Monday, or Tuesday, employment tax deposits must be made by the following Friday.

Beginning with the due date of the employment tax deposit, the penalty is calculated by the number of calendar days the deposit is late.

Between one and five calendar days, there’s a 2 percent penalty on the unpaid deposit. Between six and 15 calendar days, the penalty increases to 5 percent of the unpaid deposit. If it’s late by more than 15 calendar days, the penalty is 10 percent of the unpaid deposit amount.

If more than 10 calendar days have passed after the first written contact from the IRS notifying the filer of failing to deposit their employment taxes or the day the business receives correspondence requiring immediate payment of employment taxes, the penalty increases to 15 percent of the unpaid deposit. It’s also subject to interest on the penalty.

While these are only two ways businesses can incur payroll-related tax penalties, it’s illustrative of how businesses need to keep on top of their federal (and state) obligations.

Sources

https://www.irs.gov/payments/failure-to-deposit-penalty

https://www.irs.gov/payments

https://www.irs.gov/businesses/small-businesses-self-employed/employment-tax-due-dates

https://www.irs.gov/faqs/estimated-tax/individuals/individuals-2

https://www.irs.gov/payments/underpayment-of-estimated-tax-by-corporations-penalty

https://www.irs.gov/newsroom/interest-rates-remain-the-same-for-the-third-quarter-of-2023

https://www.irs.gov/payments/underpayment-of-estimated-tax-by-corporations-penalty

https://www.nfib.com/content/partner-program/money/are-you-guilty-of-committing-these-5-payroll-mistakes/  

The Ins and Outs of a Reverse Stock Split

Reverse Stock Split, What are Reverse Stock SplitWhen a company decides to conduct a reverse stock split, also referred to as a stock consolidation, the number of shares available to investors is reduced.

In a normal (forward) stock split, a company increases its number of outstanding shares without changing their market value. For example, one share of stock valued at $200 may split into two shares, with the shares then valued at $100 each. So, with a shareholder who holds 10 shares for a total of value of $2,000, a traditional one-to-two (1:2) stock split would change his holding to 20 shares – still valued at $2,000. The difference is that the value of each stock would change from $200 to $100.

The opposite occurs with a reverse stock split; a company decreases its number of outstanding shares without changing their market value. Using the same example, a shareholder who owns 10 shares at $200 would hold only five shares after a 2:1 reverse stock split. However, the worth of each share would double in value to $400.

Why Conduct a Reverse Stock Split?

A reverse stock split often indicates that a company is in financial distress, its stock price is on a downward spiral and it wants to reverse that momentum by giving investors a higher share value. This makes individual stocks more valuable to sell. In many cases, the company’s sinking stock price puts it in danger of losing its place on a stock exchange, which would then limit the pool of possible buyers – particularly fund managers and stock brokers. In most cases, companies that conduct a reverse stock split are small, lightly traded companies as well as some exchange-traded funds.

Impact on Small, Retail Investors

Smaller investors are more likely to be negatively impacted by a reverse stock split because they are more likely to own fewer numbers or fractional shares. For example, if a company conducts a 20:1 reverse stock split, investors receive only one share for every 20 they hold. However, if a shareholder owns less than 20 shares, he will simply be paid cash for his shares and his position would dissolve. This also holds true if the investor owns an uneven multiple of the reverse split. In the scenario of a 20:1 stock split, if the investor held 110 shares, he would receive five new post-split shares and be paid in cash for the remaining 10 shares.

How Do Stocks Perform After a Reverse Split?

While the total value of a shareholder’s holding would not change after a reverse stock split, history has shown that share prices after a reverse split tend to stagnate or continue to drop. After all, the company was likely already in financial distress, and this action serves to increase the price of a failing stock. It does not usually entice new investors or motivate current ones to invest more money in the company.

Potential Advantages and Disadvantages of Reverse Splits

To remain listed on a major stock exchange such as the NYSE or Nasdaq, a company’s share price must trade at $5 or higher. The advantage of a reverse stock split is that it increases the value of shares, which may allow them to remain listed on a major exchange. This offers value to both the investor and the company, as exchanges attract far more investors whose interest can help drive up the stock price.

Another scenario in which a reverse stock split is advantageous is if a corporation is planning to spin off a portion of its business into a separate company. By conducting a reverse stock split before the spinoff, shares of the new company are assured of having a high enough stock price to be listed on a major stock exchange.

However, a reverse stock split is most often a signal that the company is failing, is worried about a pervasive decline in its stock price, and is seeking a way to artificially increase investor share prices.

7 Best Money Moves for 2023

7 Best Money Moves for 2023In light of our current economy, making sure your money works hard for you is one of the best things to do this year. Here are some ways you can navigate your financial situation, keep tabs on where you are, and adjust if you need to.

Shop for a higher return on savings. These days, every extra cent counts. That’s why it pays to look around for higher rates on savings accounts. Several places to check out are PNC (4.65 percent APY), Sofi (up to 4.4 percent APY), and American Express (4 percent APY). Here are a few others. Rates may increase even more with the Federal Reserve’s rate hike announcement on July 27.

Open an HSA account. When you have one of these, it will help you pay for expenses that your health insurance plan doesn’t cover. If you’re enrolled in a high-deductible insurance plan, you and possibly your employer can contribute pre-tax dollars into this account, from which you’ll use funds you’ve stocked away for qualified medical expenses. Whatever money you don’t use will roll over to the next year, unlike FSA accounts.

Consolidate debt. Why pay a bunch of different interest rates on all your credit cards? If you have debt, find one card with a very low-interest rate and do a balance transfer. Some credit cards offer 0 percent APR as an introductory rate, which will be a big savings to get a jumpstart on becoming debt-free. Here are a few good ones: Bank of America® Travel Rewards Credit Card now offers 0 percent APR for 18 months. Discover it® Cash Back offers 0 percent APR for 15 months. Find other great deals here.

Cut how much you pay on car insurance. Have you shopped around lately? We know this might seem like a pain, as it takes a lot of time, but here’s some good news, and it’s called The Zebra. This amazing site has done all the heavy lifting for you. Here, you’ll find dozens of real-time comparisons from many trusted companies.

Max out your 401K. This year, the maximum yearly contribution limit has been raised by $200 to $22,500 (up from $20,500 in 2022). Even better, if you’re over 50, you can set aside catch-up contributions of $7,500, allowing a total contribution of up to $30,000. This allowance lets older workers add as much as they can so that when they retire, they’ll be in a better financial situation.

Update your W-4. No one likes a shock when it comes to paying taxes. That’s why this is such a smart idea. And the IRS actually has a tool that can help you: The Tax Withholding Estimator. Go here to find out if your employer is taking enough money out for taxes. If you’re falling short, you’ll know. Better to learn and fix this before it’s too late.

Create a net worth statement. When you have a realistic idea of your assets and liabilities, you’ll be able to see whether or not you’re on the right track with retirement. This way, you’ll be able to set up new goals for yourself if you feel you need to.

Keeping up with your finances, while time-consuming, really pays off. If you try one (or all) of these hacks, you’ll be better off in no time.

Sources

https://www.moneytalksnews.com/slideshows/15-of-the-best-money-moves-you-can-make-in-2021/