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Financial Planning – First Quarter Summary

Over the last 3 months we have seen many changes implemented into legislation as our government continues to try and goose the economy into more rapid growth as we look to reopen. While some of these changes may not affect all our clients, I wanted to highlight a few that could apply to you. With the new administration working day and night to push their agendas, we believe this is just the start to the new planning changes that will affect our clients.

  1. IRS Extends the Tax Deadline to May 17th, 2021.

Each state announced their separate guidance on the extension, but all taxpayers can now delay filing their Federal taxes up until mid-May. This may be helpful for many pre-retirees as it provides more time to contribute to a traditional IRA, Roth IRA, and Health Saving Accounts. For those who qualify and can make direct contributions to these accounts, you can now make contributions for the 2020 tax year all the way up to May 17th. If you already filed your 2020 tax return you will need to amend them if you decide to contribute to a traditional IRA or Health Savings Account, as these contributions are tax deductible. However, you don’t need to amend your tax return to make a directcontribution to a Roth IRA as this contribution is not tax deductible. Please keep in mind, if you are using the backdoor Roth IRA contribution strategy because your income is too high to qualify for a direct Roth IRA contribution, you will need to report this on form 8606 when you file your taxes.

  1. The American Rescue Plan Act (ARPA) temporarily increased the Dependent Care FSA contribution from $5,000/year (for a married couple filing jointly) to $10,500/year.

We all know kids are expensive and most parents spend more than $5k/year on childcare expenses, so this change could be a huge tax benefit for families. For now, this increase has only been made for the 2021 tax year, but parents should try and take advantage of the increase while they can. According to the legislation, participants are allowed to make changes to their Dependent Care FSA contributions outside of the open enrollment period as long as their plan sponsors implemented these new rules to their plan. If you’d like to participate in this tax-deductible benefit, reach out to your HR contact to find out if and when the changes will go in to affect for your company plan.

In addition to this childcare tax strategy, I’d like to highlight that Dependent Care FSAs can be used for eldercare expenses as well. According to the IRS, expenses for eldercare can be used with Dependent Care FSAs if the elder dependents are claimed on the FSA holder’s taxes and they live with FSA holder for at least 8 hours a day.

  1. The American Rescue Plan provides tax breaks for those who received unemployment income.

Lastly, if you received unemployment income you could qualify for $10,200 of that income to be excluded from Federal taxes. According to the IRS, if your Modified Adjusted Gross Income (MAGI) was less than $150k (no matter what your filing status was) then $10,200 of unemployment income can be excluded for each spouse that received unemployment income in 2020. The IRS has stated that they will begin to refund the difference in taxes paid for those who filed before the tax rules were changed, starting in May. Talk with your CPA to see if amending your taxes is necessary to receive all the benefits this change generates for your situation.

As always, please feel free to reach out if you have any questions on any of the topics discussed above.



Chad Williamson

Koa Wealth Management

11260 El Camino Real, Unit 220, San Diego, CA 92130




This material should not be considered a recommendation to buy or sell securities or a guarantee of future results. Koa Wealth Management, LLC is a registered investment adviser. Registration does not imply a certain level of skill or training. More information about Koa Wealth Management, LLC can be found in our Form ADV Part 2, which is available upon request or by visiting our website at www.koawealth.com/disclosure. Past performance is not a guarantee of future results. All investment strategies have the potential for profit or loss; changes in investment strategies, contributions, or withdrawals may materially alter the performance and results of a portfolio. Different types of investments involve varying degrees of risk, and there can be no assurance that any specific investment will be suitable or profitable for a client’s investment portfolio.


Q1 2021 PDF