Business Update – October 13 2021
Global supply chain delays have become so bad that the biggest U.S. retailers are chartering their own cargo ships to stock shelves this holiday season. Walmart, Home Depot, Costco, and Target are among companies that are paying the additional expense to mitigate holiday disruptions. While the smaller ships these companies will use are far more expensive than the larger ones, they have the advantage of the ability to dock at smaller, less congested ports, and give these retailers added control over shipping schedules. Home Depot will use these smaller ships for only a small percentage of their goods, but will be using them for in-demand items such as holiday décor, heaters, power tools and plumbing supplies.
THE AMERICAN RECOVERY PLAN ACT (ARPA)
Monthly Child Tax Credit Payments
The expansion of the Child Tax Credit from $2,000 per eligible child to as much as $3,600 and the option to receive a portion of those payments in advance has led to many questions. Kiplinger has answered many of those questions in this FAQ article. For example, what does it mean that this credit is fully refundable? This means that families who are eligible will receive the entire amount that they are eligible for, regardless of their income or tax liability.
As a reminder, if you want to opt out of future payments, you must opt out by the deadline for the next month’s payment. Check out the IRS FAQs where you’ll find everything you need to know about opting out in Section J.
While the IRS says it’s on track to process the pandemic-related backlog of 2020 tax returns by year-end, millions of taxpayers are still waiting for refunds. Many have been receiving confusing notices about changes to their refunds or are still waiting for refunds from prior year returns. It may take 90 to 120 days to process tax returns. The Where’s My Refund tool can shed some light but may only show that your return has been received. Calling the IRS may not help much: if you do manage to get through, the phone reps may not have any additional information. As with any correspondence from the IRS or state tax authorities, if you receive a letter notifying you of a 60-day-appeal period for contesting the IRS calculations for stimulus payments, don’t delay your response, and make sure your tax advisor promptly receives a copy.
THE GREAT REASSESSMENT
While unemployment overall fell to 4.8% for September, many women are staying out of the labor market. In September, 26,000 fewer women were employed than the previous month. COVID-19 outbreaks are sending schools into quarantine and remote learning and causing many workers to choose between work and staying home to care for family members. Since the pandemic began, labor-force participation rates have fallen for nearly all groups and are still below pre-pandemic rates. The lowest rate is for women ages 20 to 54, who may want to work, but have been deterred from seeking employment due to the pandemic.
REOPENING THE OFFICE AND REMOTE WORK OPTIONS
Remote work is here to stay, which means new techniques are needed to build a successful corporate culture in a remote world. For example, social events may be best scheduled mid-week as a break from work rather than requiring team members, already worn out from work and online meetings, to log in late on Friday when they’re trying to shift into weekend mode. Investing in in-person events to bring everyone together a few times a year can also help to build engagement.
Economic development for rural areas used to center on luring companies to locate in small towns and provide jobs for locals. With the rise of remote work, that model is shifting to cash incentives and other perks to lure remote workers those communities. Cities and locales, from Topeka, KS, to two counties in Alabama, are offering qualified remote workers incentives that range from cash to help buy a house to free coffee and martial arts classes. Applicants must pass a screening process that may include minimum salary levels from remote work and a commitment to stay in the area for at least one year.
A third of working Americans are paying more for healthcare this year, according to a recent survey. That increase in health care costs is leading some to decrease retirement contributions and to increase their credit card debt. Some are delaying doctor visits or using up accumulated savings to pay for healthcare.
Job growth in September fell to its lowest pace for the year, with only 194,000 jobs added, compared to 366,000 in August. A continuing shortage of workers and the continuing surge of the highly contagious Delta variant of the coronavirus are keeping more people out of the workforce. While consumers have cash to spend and companies are eager to hire, many workers who left jobs during the pandemic have not yet returned to the labor force. The number of workers who cited the pandemic as the reason for not returning to work rose for the first time since January, a sign that the Delta variant is making people skittish about returning to work. Even increasing wages by as much as 30% for cooks has not helped keep restaurants fully staffed.
While the global economy is bouncing back, continuing impacts from the pandemic are keeping growth restrained, according to IMF chief Kristalina Georgieva: “Failure to close the massive gap in vaccination rates between advanced economies and poorer nations could hold back a global recovery, driving cumulative global GDP losses to $5.3 trillion over the next five years.” Nearly 46% of people around the world have received at least one dose of a vaccine for COVID-19, the vaccination rate in some countries is as low as 2.3%.
Rising energy prices may cause a new threat to the U.S. economy. Prices for crude oil and natural gas are both at seven-year highs while the national average for gasoline is a bit over $3 per gallon, almost a dollar higher than a year ago. Heating oil has also risen 68% this year. Higher prices for energy reduce consumer spending for other goods and services because people have little ability to cut their energy consumption in response to sudden increases.
Food prices have also risen in response to the pandemic. Meat, poultry, fish, and eggs have increased by 5.9% over last year, and by 15.7% since before the pandemic. The still-clogged supply chain bears some of the blame, as do weather problems and labor shortages. Hurricanes have disrupted sugar cane refineries, increasing the cost of sweeteners, as well as oil refineries and plastics manufacturing plants, which is leading to increases in the cost of packaging. Economists predict that food price increases will ease next year, and perhaps even decrease a bit. However, prices in restaurants are likely to remain high, due to a combination of increased food prices, higher wages and a shortage of workers.
- IRS resources for stimulus payments:
- IRS information about the Advance Child Tax Credit Payments
- The best source for up-to-date and accurate health information is the Center for Disease Control (CDC)
- Entrepreneur put together a listing of free tech resources for remote work
- The Consumer Financial Protection Bureau has warnings about COVID-related scams
- Fast Company has a listing of the best productivity apps for 2020
- PC Magazine explains how to carry your vaccination card on your phone
- How to create a strong password
We sincerely hope that you and your family are well and remain well. If you have any questions or concerns, don’t hesitate to reach out to us. We are all in this together!