Author: Leon Clinton

Two things to know about the Paycheck Protection Program (PPP) first draw enacted on December 27, 2020: 

• The first draw is for those who missed getting in on the original PPP, which expired on August 8, 2020.
• Don’t think of a PPP draw as a loan. It’s not a loan. It’s a cash infusion. You have to repay a loan. You don’t have to repay the PPP funds.

Who qualifies for first-draw PPP money today? You, most likely—if you file a business tax return and have not yet received any PPP monies.

But don’t wait. The money is going to run out fast, and once it’s gone, so is the PPP. And the new PPP ends March 31, even if the money is not gone by then.

You qualify for the PPP if any of the following are true:

• You file your taxes on Schedule C of your tax return. Businesses that file on Schedule C include independent contractors (often called 1099 folks), single-member LLCs, proprietorships, and statutory employees such as life insurance salespeople.
• You file your taxes on Schedule F (ranchers and farmers).
• You are a general partner in a partnership, but the partnership asks for and receives the money based on your and the other partners’ combined self-employment incomes, as adjusted.
• You operate as an S corporation.
• You operate as a C corporation.
• You are the only worker in the business—and if you have employees in the business, you qualify on both your ownership worker status and your employees’ W-2 status.

If you would like to discuss the PPP, please call me on my direct line at 408-778-9651.

• By Leon Clinton
• February 8, 2021

Sixty-one million adults and over 12.6 million children in the United States have some type of disability. 

If you have a disabled or blind child or other family member, or are disabled or blind yourself, you should know about ABLE accounts. These tax-advantaged accounts can be a real game changer for the disabled.

Ordinarily, a disabled person who receives government benefits can only have $2,000 in cash or other countable assets. This can make it impossible for disabled people to save money for emergencies, to buy a house or car, or take a vacation.

This is where ABLE accounts come in. Contributions to ABLE accounts up to certain levels are not counted for purposes of means-tested programs for the blind and disabled. Disabled people can have up to $100,000 in an ABLE account without losing Social Security disability benefits.

Contributions to ABLE accounts are not deductible for federal taxes, but the money in the account grows tax-free. Withdrawals are also tax-free if made for a variety of living and disability-related expenses.

Up to $15,000 in total can be contributed to an ABLE account each year. Contributions can come from the disabled beneficiary, from family, and from friends. Disabled people who work can put in an additional amount limited to the lesser of their compensation or $12,490 in 2021.

A total amount of $300,000 to $500,000 can be deposited into an ABLE account, depending on the state.

There is only one real drawback to ABLE accounts: they are only available for people who became blind or disabled before reaching age 26. This eliminates the majority of the disabled.

ABLE accounts are run by the states. Forty-two states and the District of Columbia have them. You don’t have to set up an account in the state where you live, and it can pay to shop around.

By the way, if you have a special needs trust, you can keep it. An ABLE account can be set up in addition to a special needs trust.

If you have any questions or need my assistance, please call me on my direct line at 408.778.9651.

• By Leon Clinton
• January 20, 2021

If you become an executor of your loved one’s estate, you may have some important tax decisions to make. Here are some quick thoughts.

The decedent’s medical expenses provide you with planning opportunities to

• deduct as itemized deductions (subject to the 7.5 percent floor) not only the medical expenses incurred during the taxable year of death, but also those unpaid at the date of death but paid within one year of death; or 
• deduct in full (no floor) the medical expenses paid after the date of death against the federal estate tax.

You, as the executor, may need to file

• the decedent’s final Form 1040,
• the estate’s Form 1041 income tax return, and
• the estate’s Form 706.

You won’t need to file Form 1041 when all the decedent’s income-producing assets bypass probate and go straight to the surviving spouse or other heirs by contract or by operation of law—assets such as

• real property that is owned by joint tenants with right of survivorship, 
• qualified retirement plan accounts and IRAs that have designated account beneficiaries, and 
• life insurance death benefits that are paid directly to designated policy beneficiaries. 

If the estate is valued at $11.58 million or less and the decedent did not make any sizable gifts before death, you don’t have to file Form 706. But even if you don’t have to file Form 706, you may want to file it anyway to preserve the portability election.

If you have questions on this process, please call me on my direct line at 408.778.9651.

• By Leon Clinton
• January 15, 2021