The Pandemic, Your 2021 Benefits and Year-End Planning Tips

Posted by Haddad Nadworny on Tue, Nov 03, 2020 @ 06:00 AM

The Special Needs Financial Planning Team at Affinia Financial Group John Nadworny, CFP, CTFA | Cynthia Haddad, CFP, ChSNC | Alexandria Nadworny,  CFP, CTFA

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The Pandemic,Your 2021 Benefits and Year-End Planning  

2021-pexels-olya-kobruseva-5408689When making decisions and planning for 2021, it makes sense to consider the residual effects on your life and current circumstances created by Covid-19.  The degree to which life has changed since February 2020 will vary from person to person but the key thing is to look at your decisions for the future through the lens of your new reality.  

 Here are a few things to consider:  

It’s open enrollment period for employee benefits.   

open-enrollment-clipart-2 (1)In 2020, Covid-19 caused many doctors, dentists and other health providers, as well as dependent care programs, including programs supporting people with disabilities, to close their offices to all but emergency situations. Given the uncertainties of the current environment, be sure to consider how the pandemic may affect you and your family when reviewing and making decisions regarding your benefits elections for 2021 

Flexible spending accounts (FSAs)They are use it or lose it 

Many employers offer flexible spending accounts funded with pre-tax dollars from your paycheck that may be used to pay for qualified health (FSAs, HSAs), dependent care (DCAP) and commuting expenses The trade-off for being able to use these tax-free dollars is that you are required to spend them within a specified time period, most often the calendar year you are deferring in. If you do not use the funds, you will lose the money in the account (it reverts back to your employer).  

At this time imay make sense to: 

  • Change your elections to reflect your new or the situation you project for 2021. 
  • Check the remaining balances in your employee benefit accountsDepending on your plan, you may be able to carry-over up to $550 to next year (to be used by March 15, 2021) and this may bring about a change in your election amounts for 2021.  
  • If you have a balance you may use up your remaining FSA dollars to stock up on supplies you use on a regular basis. Here is a list of FSA qualified expenses. 

 Job change? It’s important thing to know:  

  • If you lose your job during a calendar year and do not elect COBRA, you will not be able to access the funds in your FSA after your employment is terminated.   
  • If you change jobs or leave your job, you will not be able to access the funds in your FSA after your employment is terminated.   


Step up the 401K election, if possible. There are many things in your budget that you probably did not get to do during the pandemic: travel for vacation, dine in restaurants, send your child to camp, or go to concerts, ballgames or conferences. As a result, you may have accumulated some cash in your accounts that can step in to cover an increased retirement plan contribution.  

If you are not already contributing the amount that is matched by your employer- this is in essence “free money”- this is a great time to up your contribution. If possible, max out your 401K contribution; for 2021 the maximum contribution is $19,500, or $26,000 if you are age 50 or over.  

Your taxes: It’s not too late to act for 2020 

 A charitable deduction for all.  

Everyone may take an “above the line $300 charitable deduction- This year, the Coronavirus Aid, Relief, and Economic Security (CARES) Act provides that all tax filers, whether they itemize or not, may take an “above the line” (meaning direct deduction) from their adjusted gross income or AGI,  of up to $300 in cash donations they make to qualified charities.  And if you can itemize, the tax benefits are even better. You can deduct all of your cash donations, up to 100% of your adjusted gross income (AGI). Normally, this limit is 60% of AGI.  

Retirement Accounts 

Consider contributing to an IRAYou can contribute a maximum of $6,000 to an IRA for 2020, plus an extra $1,000 if you are 50 or older. You will have until the filing deadline (right now, April 15, 2021) to make the IRA contributions, but the sooner you get your money into the account, the sooner it has the potential to start to grow tax-deferred. 

Is your current tax rate lower than your anticipated future tax rate? A Roth conversion may make sense for your IRA.   

Retired and want to convert your retirement savings to a tax-free legacy for your heirs? If you have space in your marginal tax bracket, it may make sense to convert some retirement savings to a Roth this year.  

Don’t need the $ from your RMD?  Don’t take it. Thanks to the CARES Act, let the money grow tax-deferred another year and it will not be added to your taxable income this year.  

 We hope you found this helpful and are here to answer questions and help you plan for the future.  

Contact us with questions about how these and other changes may impact your  planning. 


SHRM: Planning 2021 Benefits Changes for the Covid-19 era 


This material is for general information only and is not intended to provide specific advice or recommendations for any individual. There is no assurance that the views or strategies discussed are suitable for all investors or will yield positive outcomes.  

 Investing involves risks including possible loss of principal. 

 Traditional IRA account owners have considerations to make before performing a Roth IRA conversion. These primarily include income tax consequences on the converted amount in the year of conversion, withdrawal limitations from a Roth IRA, and income limitations for future contributions to a Roth IRA. In addition, if you are required to take a required minimum distribution (RMD) in the year you convert, you must do so before converting to a Roth IRA. 

 Contributions to a traditional IRA may be tax deductible in the contribution year, with current income tax due at withdrawal.  Withdrawals prior to age 59 ½ may result in a 10% IRS penalty tax in addition to current income tax. 

This information is not intended to be a substitute for specific individualized tax advice. We suggest that you discuss your specific tax issues with a qualified tax advisor. 

Affinia Financial Group, Special Needs Financial Planning, and LPL Financial do not provide tax advice. 

















Tags: Retirement Planning, Taxes and special needs families, financial planning

Tax Tips for People with Special Needs and Their Families

Posted by Patty Manko on Fri, Mar 21, 2014 @ 12:32 PM

tax time resized 600April 15th is right around the corner, which means that it is time to file yet another personal income tax return. Although some people with disabilities may not have enough income to necessitate an income tax filing, most people will need to file a return based on their earned and unearned income. Beneficiaries and trustees of special needs trusts may have additional filing requirements. If you or a loved one think that you need to file a return, here are several tax tips to keep in mind that could save you time and money.

Not All Income Is Taxable

Although the rules about taxable income can be complicated, several provisions affecting people with disabilities are easy to understand. First, Supplemental Security Income (SSI) benefits are not considered taxable income. Second, if a beneficiary receives only Social Security Disability Insurance payments (SSDI), and no other income from any other source, then those SSDI benefits are probably not taxable either. Third, funds paid through a qualified Dependent Care Assistance Program are not included as taxable income, up to certain limits. Finally, Veterans Administration disability benefits do not count as taxable income for the beneficiary.

Special Deductions for People with Disabilities Are Available

For starters, taxpayers who have visual impairments may qualify for a higher standard deduction than the average taxpayer, depending on their level of impairment. All other taxpayers with disabilities who itemize their deductions may be able to take advantage of deductions for medical expenses, including deductions for special telephones for people with hearing impairments, wheelchairs and motorized scooters, guide dogs or other animals that aid people with disabilities, the cost of some schools that provide special education services for relieving mental or physical disabilities, and premiums on long-term care insurance, up to certain amounts. People with disabilities who require special goods or services in order to work may also be able to deduct these expenses as business expenses, provided the good or service has not already been counted as a medical expense.

Tax Credits Can Help People with Disabilities and Their Relatives

Several types of tax credits apply to people with disabilities. If you care for a child or other dependent person with disabilities, you may qualify for a child and dependent care tax credit for up to 35 percent of your expenses related to his or her care. People under 65 who have retired with a permanent disability can also claim a special tax credit that is also available to the elderly. Many people with disabilities who work and who do not have children who qualify for an Earned Income Tax Credit may still qualify for the credit themselves. If they obtain a tax refund due to an Earned Income Tax Credit, the refund will not count against the taxpayer for purposes of determining SSI or Medicaid eligibility. Also, parents of a child with disabilities may also be able to claim an Earned Income Tax Credit, depending on the family's income.

Special Needs Trusts Have Special Rules

Tax season can be especially difficult for the trustees of special needs trusts because the tax rules for trusts vary greatly depending on the type of trust created. As a very general rule, income generated by a first-party special needs trust (a type of trust designed to hold a person with special needs' own funds) is typically considered to be taxable income attributable to the trust beneficiary, regardless of whether the income is actually distributed from the trust. On the other hand, a third-party special needs trust established by a friend or relative for a person with special needs may generate taxable income for the grantor of the trust, the beneficiary of the trust, the trust itself, or all three at once, depending on the circumstances. Furthermore, in certain situations, trustees have to file income tax returns for the special needs trust itself, and other, more complicated forms pertaining to distributed income may have to be prepared for the beneficiary.

Because tax time often creates more problems than solutions, it is best to consult with your qualified special needs planner about these complicated questions, even if you or your family are already working with a good accountant.

This material was prepared by the Academy of Special Needs Planners
This information is not intended to be a substitute for specific individualized tax advice. We suggest that you discuss your specific tax issues with a qualified tax advisor.

 Contact us for  further information


Tags: Taxes and special needs families

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