Targeted consumption: Buy Black

Monday’s post gave some resources for investing your self-directed retirement funds in your community. Being mindful of where you spend your consumer dollars is another, more common, and easier way to support your community and align your money with your values.

Covid-19 was the prompt that first redirected my attention to supporting local economies, and even before the police murder of George Floyd sparked a human rights war (in the words of Nenna Joiner, founder of Feelmore Adult in Oakland and Berkeley), the effects on small businesses were racially inflected.

I know when these types of things happen, it tends to hit us, black people, the hardest, but it also hits our black-owned businesses the hardest, because we don’t have access to as many funding opportunities as other businesses do. So this is the time to really step up and support your small black-owned businesses.

—Tomara Watkins, founder of Loza Tam

Here are some resources to help you target your consumer dollars to Black communities and Black-owned businesses.

Continue reading “Targeted consumption: Buy Black”

The CARES Act and access to your retirement funds

Monday’s post, about investing your retirement savings in your community rather than Wall Street, mentioned the ability to borrow from your 401(k), 403(b), SEP, SIMPLE, ESOP, or other qualified retirement plan.

I’d like to clarify that you can take such a loan even if you have not taken the plunge into the self-directed retirement pool.

On March 27, the CARES Act temporarily increased the amount you are able to borrow. Ordinarily, you may borrow the lesser of $50,000 or 50% of the vested account balance. The CARES Act increases those limits to $100,000 or 100% of the vested, until September 23, 2020.

You may need the funds for yourself, and it is also possible to lend your wealth to others who need it. Next month, The Next Egg is hosting a webinar on borrowing from your existing qualified plan for community investment. Tuesday, July 17, 12-12:30 EDT.

The CARES Act also waives the ordinary 20% tax withholding imposed on such disbursements. Your plan may also offer a year’s deferral on repayments. Check with your employer or plan administrator for details—employers and administrators may choose not to offer these benefits.

The CARES Act also offers some relief if you need to take a distribution from a plan (for instance, IRAs do not allow borrowing). Any early distribution you make in 2020 will be exempt from the 10% penalty for early withdrawal.

Further, you have options for handling the regular taxation of these disbursements from your traditional IRA. You may choose to allocate the income for taxation across three tax years (and this options is available even if you are not taking early withdrawals). Additionally, you may choose to repay the disbursement within the same timeframe (so, by the end of 2022). Continue reading “The CARES Act and access to your retirement funds”

Crowdfunding and Taxes for Givers

Part 2 of a two-part series.

As covid-19 has shuttered or slowed businesses and the uprising for human rights in the wake of George Floyd’s murder has prompted an outpouring of mutual aid in cities across the US, many people are using crowdfunding who have never used it before.

Just as recipients often wonder if the support they receive is taxable (see Part 1 of this series), givers sometimes wonder about the tax implications of their contributions. The short answer is: there usually aren’t any—so don’t be afraid to give!

Before we go any further, please consider supporting the Du Nord Recovery Fund, which will ensure that POC-owned businesses on Lake Street in Minneapolis will be rebuilt.

In the rare event that giving affects your taxation, what that effect is really depends on what kind of transaction you’re participating in.

A model of the kinds of crowdfunding (donations, gifts, purchases, loans, and equity) anchored on an image of a crowd protesting the police murder of George Floyd.
The five types of crowdfunding transactions are donations, gifts, purchases, loans, and equity. Gifts are the most common transaction in an emergency.

Continue reading “Crowdfunding and Taxes for Givers”

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