The Infrastructure Investment and Jobs Act was signed into law on Nov. 5, without much fanfare amongst financial planners or tax consultants. The Act was essentially a much more benign version of the proposals and drafts we saw in late summer and early fall. Many of the major tax provisions we were worried about didn’t make the final cut. However, that doesn’t mean that there were not tax provisions you should know about or that tax changes won’t be coming in the future.

Most significantly, investors were worried that the “mega backdoor Roth IRA” conversion would be eliminated. However, the strategy that allows high-income earners to sweep up to $58,000, or up to $64,500 for 50 and older, into a retirement account that grows tax-free by taking advantage of a “loophole” in the Roth conversion rules using your 401(k) was dropped from the infrastructure bill when Congress moved to trim the proposal’s size and scope to win support on Capitol Hill. Unfortunately, the mega backdoor Roth IRA conversion is back on the chopping block in the Build Back Better bill that was approved by the House on Nov. 19, 2021. The Build Back Better bill is currently being debated in the Senate.

After that, the individual provisions were less than headline worthy and seems more like housekeeping: The Act provides automatic 60-day deadline extensions to qualified taxpayers affected by federally declared disasters; Military personnel are entitled to a period of extension for a broader range of tax-related filings, and “Significant fire” was added to the list of events that would allow the IRS to suspend filing and payment requirements for taxpayers affected by federally declared disasters, terroristic, or military actions.

For businesses, the Infrastructure Investment and Jobs Act ended the employee retention credit (ERC) early, retroactive to Sept. 30, 2021. The ERC was created by the Coronavirus Aid, Relief, and Economic Security Act and provided qualifying employers with a refundable credit against certain employment taxes equal to 70 percent of the qualified wages that an eligible employer pays to employees. Only recovery startup businesses can claim the credit for wages paid in fourth quarter 2021.

So, for taxpayers looking for some year-end planning guidance, the Infrastructure Investment and Jobs Act didn’t provide any actionable changes. It appears that any significant changes have the potential to be included in the Build Back Better bill including required minimum distribution requirements for individuals whose combined traditional IRA, Roth IRA and defined contribution retirement account balances exceed $10 million at the end of a taxable year and have income more than $400,000, or more than $450,000 for married filing jointly. Other potential changes include an increase to the state and local tax deduction, an expansion of the earned income tax credit, and a high-income surcharge for modified adjusted gross income in excess of $10 million.

William G. Lako, Jr., CFP®, is a principal at Henssler Financial and a co-host on “Money Talks”—your trusted resource for your money, your future, your life—airing Saturdays at 10 a.m. on AM 920 The Answer. Mr. Lako is a CERTIFIED FINANCIAL PLANNER™ professional.


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