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By Steve Hofmann & Rob Torbert


As you get ready for the festivities this time of year, it is a good reminder for individuals and business owners to plan. Once December 31, 2021 is over, the door will close on being able to make some tax changes. Below are a few items to review and consider before the 2021 tax year ends.

Employee Retention Tax Credit (ERTC): This credit can be equal to 70% of an employee’s wage, up to $7,000, per quarter. This can be a significant benefit to companies that were affected by business changes from COVID-19. Keep in mind that companies that took advantage of the PPP program can also qualify for the ERTC.

Payroll Protection Program (PPP): Many companies were able to take advantage of the PPP program from the federal government. Part of this program was potential loan forgiveness. Make sure to work with your bank to ensure your PPP loan is forgiven if it qualifies.

Social Security: Social Security benefits are going up 5.9% next year. This is correlated with the highest inflations we have seen in 30 years. As cash flow increases, along with expenses, be sure to review your income flow from Social Security as well as your other investment buckets.

Deferral of Employment Taxes. For those that are self-employed or small business owners, Section 2302 of the CARES Act deferred the due dates for payment of employer’s share of Social Security Taxes. If you chose to defer the taxes, one-half (½) of the taxes are due December 31, 2021 and the remaining amount is due by December 31, 2022.

Retirement Plans: When looking over your cash flow and investments, it is helpful to look at your retirement plans from two different angles. If you are putting money into your plan or taking money out, you should consider the following:

  • Putting Money In – If you are currently contributing to a retirement plan, you should review to make sure you are taking full advantage of the contributions. Depending on the retirement plan you are participating in, you can put as much as $26,000 into your plan. This is a great way to prepare for retirement and make sure your money is working for you.
  • Taking Money Out – If you are taking Required Minimum Distributions (RMDs) from your retirement plans, be sure to take those funds out by December 31, 2021. In 2020, individuals were not required to take their RMDs. This year you need to take your funds, but keep in mind the idea of using a Qualified Charitable Distribution (QCD) to help your favorite charity.
  • Backdoor Roth Conversion – While we don’t know what will be in President Biden’s tax plan when (or if) it is signed, the plan that recently passed the House eliminated the “Backdoor Roth Conversion” by prohibiting voluntary after-tax (non-Roth) contributions from being converted to Roth after-tax contributions effective December 31, 2021. The Act would also prohibit taxpayers from executing similar backdoor Roth conversions outside of the 401(k) context by rolling over after-tax amounts in traditional IRAs to Roth IRAs. Therefore, if you were thinking about converting an IRA or 401(k) to a ROTH IRA, then you should do so this year before that opportunity is gone.

It is never too early to start thinking about your tax return for next year. Hopefully these items will help generate actions by year-end before they are gone by December 31, 2021. This is for informational purposes only and not tax or legal advice. We encourage you to talk with your advisor, tax professional or legal counsel.


Midland Wealth Management does not provide tax or legal advice. Please consult your tax or legal advisors to determine how this information may apply to your own situation. Whether any planned tax result is realized by you depends on the specific facts of your own situation at the time your taxes are prepared.