Day: January 6, 2023

What’s Happening with Enrollment in New York Public Schools?

Welcome to 2023 and the annual budget planning season. In addition to a myriad of factors that may play into budget discussions – from inflation and staff shortages to COVID, learning losses, mental health, and more – you may want to be prepared to speak about what’s going on with public school enrollment nationally, regionally, statewide, and in your district.

As reported in The New York Times, “School funding is tied directly to enrollment numbers in most states, and while federal pandemic aid has buffered school budgets so far, the Biden administration has made it clear that the relief is finite. Some districts are already bracing for budget shortfalls.”

It all starts with the biggest picture – U.S. population growth. On December 22, the U.S. Census Bureau provided an update. After 2020-2021 showed historically low population growth in the U.S., 2022 started to show a rebound with .4% population growth due largely to international immigration (more people moving to the U.S. than leaving) and natural causes (more births than deaths).

However, the Northeast region of the country experienced a decline, largely due to negative net domestic migration (more people moving out of the region than into it). New York state showed the biggest decline in the country. While New York was one of 26 states with the highest natural increase (about 35,000 more births than deaths), it wasn’t enough to offset the huge losses due to net domestic migration (almost 300,000 more people moving out of the state than into it).

New York’s declining population is impacting the state’s public school enrollment. As reported by the Office of the New York State Comptroller, “Statewide, public school enrollment fell by a full 3 percent in the 2020-21 school year and a further 2 percent in the 2021-22 school year. This is significant, as student enrollment is a key factor in determining how much education aid districts receive from the State.”

The New York Empire Center reinforces these findings and reports a decline of over 5% since 2020 (it also has maps where you can see 2021 to 2022 enrollment numbers and percent change by district, county, and more).

New York is not alone. According to Return2LearnTracker.net, between Spring of 2020 and 2022, U.S. public school enrollment shrunk by nearly 1.3 million students. Five states saw net gains from 2020 to 2022, while 19 experienced a 3% decline or more. In terms of demographics, it appears the youngest students – a.k.a. kindergarten – experienced the largest decrease. (Remember, however, these youngsters were also among the last approved to receive COVID vaccines.)

No doubt, COVID impacted these numbers and resulted in more students being homeschooled, as well as increases in private and parochial school enrollments. (That doesn’t even get into the number of students who relocated to other parts of the country thanks to new flexibilities afforded to families via the option to work remotely.) However, New York’s declining public school enrollment started long before COVID.

According to the National Center for Education Statistics, from 2006 to 2011, New York State enrollment in public elementary and secondary schools dropped by 3.7% and the downward slide continued between 2011 and 2023 with another decrease of 1.9%.

What about the future? As reported by districtadministration.com, “Enrollment is projected to fall further, by about 4%, through 2030 as the school-aged population is expected to keep shrinking. Whereas half of U.S. states actually saw increases from 2009 to 2020, the future declines will be far more widespread, the analysis found. Enrollment in pre-K through grade 8 is projected to decrease by 5% with high school enrollment falling by 2%.” It’s projected New York will be the 10^th state for largest declines at 8%. (Learn more in the National Center for Education Statistics 2022 Report on the Condition of Education.)

However, not all New York public school districts are in the same situation. As reported by SiLive.com, “The state Board of Regents outlined its budget and legislative priorities, which include proposals like universal pre-K, universal access to Career and Technical Education (CTE), expanding opportunities for services and programs, supporting districts with rapid enrollment growth, and expanding access to school meals.”

If enrollment change is a growing concern in your district, you may want to consider conducting a demographic study and forecast to help inform your budget process and community stakeholders. While that’s outside RBT CPAs’ wheelhouse, our experts are available to help your district with accounting, taxes, audits, and more. To learn what RBT CPAs – a leading accounting firm in the Hudson Valley for over 50 years – can do for you, give us a call.

IRS Delays 1099-K $600 Threshold for a Year

If you were worried about your business being inundated with 1099-K Forms this upcoming tax filing season, take note!

On December 23, the IRS announced third-party settlement organizations (TPSOs) “will not be required to report tax year 2022 transactions on a Form 1099-K to the IRS or the payee for the lower $600 threshold amount enacted as part of the American Rescue Plan of 2021.”

Instead, the existing 1099-K reporting threshold of $20,000 in payments from over 200 transactions will remain in effect for 2022. This will give taxpayers and tax professionals additional time to understand the new reporting requirements and help ensure a smooth transition. The new threshold of $600 – regardless of the number of transactions – will apply to business transactions that occur January 1, 2023 or later.

So, if you accepted a business-related payment from a TPSO like eBay, PayPal, Venmo or Etsy in 2022, you will not receive a 1099-K from that TPSO for this upcoming tax season, unless aggregate payments were $20,000 or more from over 200 transactions. For 2023, you will receive a 1099-K from a TPSO totaling $600 or more; then, you will need to include it as part of your tax filings.

More information, with additional details – like what you should do if you already received a 1099-K based on the lower $600 threshold – should be forthcoming from the IRS soon. We will share that information as it becomes available. In the meantime, if you have any questions, please refer to the Q&As that follow or give RBT CPAs a call.

Q&As

What Is a 1099-K Form? The form, technically known as Form 1099-K Payment Card and Third-Party Network Transactions, is used to report payments your business receives from third-party settlement organizations (TPSOs) – like eBay, PayPal, Venmo, or Etsy – if those payments exceed certain thresholds. Any 1099-K you receive becomes part of your annual tax filings and considered taxable income.

What Changed? As part of the American Rescue Plan Act, the threshold for issuing 1099-Ks changed. Before 2022, a 1099-K was issued if over 200 transactions totaled more than $20,000. Starting in 2022, that threshold was reduced to $600, regardless of the total number of transactions. However, the IRS’ recent decision to delay the adoption of the $600 threshold until 2023 will give payees, accounting firms, and the IRS another year to prepare.

Who Is Impacted? In 2023, companies like PayPal, Venmo, Square, and Stripe will be sending you a 1099-K if you receive more than $600 in annual payments for goods or services rendered. As a result, if you sell small amounts of merchandise on selling platforms like eBay or Etsy, for example, you may find yourself responsible for increased taxes. Small or midsized business owners who receive most of their customer payments from credit cards, cash, or checks will most likely be unaffected.

What About Personal Transactions? The reporting requirements are limited to goods and services, so it won’t affect funds you receive for splitting that vacation rental or dinner with family or friends. Just be sure to keep accurate records when you are paying for personal items, so it isn’t incorrectly reported to the IRS.

What’s RBT’s Advice to You?

Start planning now: If you receive payments for goods or services through third-party networks, you may end up receiving a tax form for the first time for 2023. This is going to be an administrative burden and likely complicate your tax situation. It is best to be prepared and plan for any potential tax consequences by adopting strategies to minimize your tax bill early in the year.

Keep detailed records of income/expenses related to sales activity: If you sell goods or services and get paid through a third-party network, you may be eligible to deduct expenses related to that activity. Learn more by speaking with an RBT CPA professional.

It’s always good practice to consult your tax advisor to determine how best to use the information on your Form 1099-K when filing your income tax return. As always, our team of professionals at RBT CPA’s is happy to help you navigate this and other IRS updates. Give us a call.

Secure 2.0: Kicking Off 2023 with Thoughts of Retirement

While most of us were putting the final bows on holiday presents, on December 23 Congress passed the Secure 2.0 Act, with promises of adding tens of billions of dollars to retirement savings and offering new retirement plan features over the next decade. On December 29, President Biden signed the Act into law.

With nearly 100 different provisions potentially phasing in between 2023 and 2033, the new law will give employees and employers new tools and opportunities to build retirement (and emergency) savings. From plan rules and administration to tax credits and startup costs, Secure 2.0 will result in a broad swath of changes for a variety of plans – including 529 plans, IRAs, 401(k)s, 403(b)s, 457(b)s, SIMPLE plans, pension plans, employee stock ownership plans, and more.

In general, small employers, non-profit organizations and government agencies will have the opportunity to participate in plans previously available to large for-profit employers only. In fact, employers with 50 or fewer employees can get a tax credit for 100% of the cost of implementing a new retirement plan.

A number of penalties will be relaxed for certain eligible populations, while contribution and saving opportunities will increase (including catch-up contributions for participants over age 60). There are special provisions for private sector firefighters, part-time employees, seasonal employees, military spouses, survivors of domestic abuse, adoptive parents, first responders, domestic employees, and others. Administration of certain plan features will ease.

Here are highlights of just a few of Secure 2.0’s most notable features:

Retirement plan minimum required distribution age increases to 73 (and later to 75).
Lost and Found The Department of Labor must create a national, online, and searchable database enabling savers who may have lost track of vested retirement plan assets to search for plan administrator contact information.
Employer matching based on student loan payments Under a 401(k), 403(b) or SIMPLE IRA, an employer may make matching contributions based on “qualified student loan payments.” (The same holds true for government employers in a 457(b) or similar plan.)
Penalty-free early withdrawals for emergency expenses Unforeseeable or immediate financial needs relating to personal or family emergency expenses will be an exception to the 10% early withdrawal tax from tax-preferred retirement accounts.
New emergency savings account linked to retirement plans Non-highly-compensated employees can be automatically enrolled for up to 3% in contributions (with a $2,500 cap).
529 Rollover to Roth IRA Under certain conditions, tax- and penalty-free rollovers from 529 accounts to Roth IRAs will be allowed. 529 college savings account beneficiaries will be able to rollover up to $35,000 over the course of their lifetime from any 529 account in their name to their Roth IRA, subject to Roth IRA annual contribution limits and if the 529 account was open for more than 15 years.
Automatic 401(k) and 403(b) enrollment for new plans Employers must automatically enroll employees at a 3% minimum contribution but no more than 10%. Employees can opt out. Employers with less than 10 employees or in business for less than three years are exempt. (Stay tuned about how this may interact with NY regulations requiring private employers to automatically enroll employees in New York State’s Secure Choice Savings Plan.)
Starter 401(k) Employers without a plan can offer a starter 401(k), with deferrals only, capped at $6,000.

As mentioned earlier, Secure 2.0 provisions will phase in over the next decade. You can view a complete copy here and a summary here.

RBT CPAs – and its affiliates – are available to help you understand what the new Act will mean to you, your business, and employees:

Our Spectrum Pension and Compensation professionals specialize in serving the retirement needs of diverse companies, especially in the Hudson Valley and all major Northeastern urban centers. As a third-party administrator for clients ranging from sole proprietors to corporate plans, Spectrum professionals can help your organization with plan design; actuarial and recordkeeping; compliance services; and participant education.
Our Visions Human Resources Services professionals support the entire employee life cycle and all related HR services, including benefit analysis, compliance audits, and more.
Your RBT CPAs contact can help you understand potential accounting, tax, and audit implications.

As is the case with any legislation, we strongly recommend you consult the appropriate legal counsel. Watch for more information and updates in the days and weeks to come.