Author: 16783607

Tax Tips: You Have the Right to Confidentiality

According to the Taxpayer Bill of Rights, the IRS won’t share any information that a taxpayer gives with outside parties unless allowed by the taxpayer themselves or the law. This right to confidentiality is one of the 10 rights found in the Taxpayer Bill of Rights.

Also included in the confidentiality clause:

  • The IRS can’t contact third parties, including employers, friends, or banks, for information without giving the taxpayer reasonable notice first.
  • The same confidentiality you have with an attorney also applies to tax professionals working with the IRS on your behalf.

Confidential communications include conversations, messages, and documents that are considered private or restricted between a taxpayer and their attorney or the IRS.

* This information is not intended to be a substitute for specific individualized tax advice. We suggest that you discuss your specific tax issues with a qualified tax professional.

Tip adapted from IRS.gov[8]
[8] IRS.gov, October 9, 2020

Stocks Rise, Stimulus Uncertain – WEEKLY UPDATE – OCTOBER 12, 2020

The Week on Wall Street
Stocks staged a powerful rally last week, riding a wave of optimism over the prospect of the passage of a new fiscal stimulus bill.

The Dow Jones Industrial Average rose 3.27%, while the Standard & Poor’s 500 increased 3.84%. The Nasdaq Composite index gained 4.56% for the week. The MSCI EAFE index, which tracks developed overseas stock markets, advanced 2.23%.[1][2][3]

Stimulus Stalemate?
The anticipation of lawmakers passing a new round of economic stimulus was a decisive driver of market action all week.

A mid-week tweet by President Trump announcing that he was ending stimulus negotiations sent stocks lower. Losses were exacerbated by sharp declines in some mega-cap technology companies as details emerged from a House Judiciary subcommittee report on its investigation into their competitive practices.[4]

Stocks quickly reversed direction, climbing after the President tweeted that he would sign a limited stimulus bill, but lawmakers appeared to reject a piecemeal approach.

Stocks consolidated on Friday, helped by continuing stimulus talks and new election polls that suggested that the risk of a contested outcome appeared to be fading.

Small Cap Rally
The outperformance of large cap stocks relative to small cap stocks has been both wide and persistent during the last ten years. Last week’s action in small cap stocks, as represented by the Russell 2000 Index, indicates that smaller companies may finally be making up some ground.[5]

Last week, the Russell 2000 Index rose 6.33%, outperforming the S&P 500 by 2.4%.[6]

While this outperformance may be fleeting, a potential broadening of the stock market rally may be considered a healthy development.

Final Thoughts
This week begins the third-quarter earnings season, with companies from a variety of industry sectors reporting (see below). Early earnings reports start predominantly with the major banks, whose earnings results may provide insight into the general health of American consumers.

As is often the case, company guidance about the future earnings may be of greater interest to investors than past results.

[1] The Wall Street Journal, October 9, 2020
[2] The Wall Street Journal, October 9, 2020
[3] The Wall Street Journal, October 9, 2020
[4] CNBC.com, October 6, 2020
[5] The Wall Street Journal, October 8, 2020
[6] The Wall Street Journal, October 9, 2020

Tax Tips: What to Do If You Need to Amend Your Tax Return

Mistakes happen, which is why the IRS offers taxpayers the choice to make amends to their tax returns. You may want to file an amended return if you used the wrong filing status, entered information incorrectly, have unreported income, or have changes to your deductions. Here’s how to get started:

  • If you do need to file an amended return, fill out Form 1040-X, Amended US Individual Income Tax Return.
  • Mail the form to the address listed under Where to File on Form 1040-X.
  • Attach copies of any forms or schedules affected by the change.

After filing, they should expect to pay additional tax owed as soon as possible. You can track the status of your amended return with the “Where’s My Amended Return?” resource.

*This information is not intended to be a substitute for specific individualized tax advice. We suggest that you discuss your specific tax issues with a qualified tax professional.

Tip adapted from IRS.gov[23]
[23] IRS.gov, October 28, 2019

Special Update: Quarterly Report – WEEKLY UPDATE – OCTOBER 5, 2020

The Week on Wall Street
Stocks advanced last week, propelled by hopes that legislators may reach an agreement for a new fiscal stimulus package and optimism generated by a few corporate deal announcements and initial public offerings.

The Dow Jones Industrial Average rose 1.87%, while the Standard & Poor’s 500 increased 1.52%. The Nasdaq Composite index gained 1.48% for the week. The MSCI EAFE index, which tracks developed overseas stock markets, advanced 1.56%.[1][2][3]

The Quarter in Brief
The summer brought an economic rebound and a continuation of the stock market rally that began in spring. In late September, the Federal Reserve Bank of Atlanta’s GDPNow tracker estimated real Gross Domestic Product (GDP) growth of 32.0% for the third quarter. All three of the major Wall Street benchmarks advanced in Q3; the S&P 500 added nearly 8%, ending the quarter up about 4% for the year. Even so, U.S. equities slumped in September as traders worried that the stock market might be getting ahead of the economy.[4][5]

In Washington, the Federal Reserve altered its monetary policy stance and forecast low-interest rates for the near future. Hopes for another economic stimulus dimmed in Congress. On Main Street, the coronavirus pandemic remained top of mind, but improvements in hiring, consumer confidence, and retail sales were evident.

Entering the fourth quarter, analysts wondered how adroitly the financial markets might manage some unknowns: a potential uptick in COVID-19 cases in the fall, the pace of vaccine development, the outcome of the presidential election, and undetermined prospects for additional economic support of businesses and households.

The U.S. Economy
Many positive signals appeared in the quarter. Millions of Americans went to work again; monthly net job growth topped 1.7 million in July and 1.3 million a month later. Unemployment, which had hit 14.7% in April, fell from 10.2% in July to 8.4% in August, and the U-6 rate counting both underemployed and unemployed Americans declined from 16.5% to 14.2%.[6][7]

Consumer confidence, as measured by the Conference Board’s monthly index, leaped to 101.8 in August from 86.3 in July. Households kept up their buying-retail sales were up year-over-year through August even though supplemental unemployment benefits expired at the end of July.[8]

Industries also grew, according to research from the Institute for Supply Management. When ISM’s Monthly Purchasing Manager Index for the manufacturing and services sector surpasses 50, those sectors are judged by ISM to be expanding. ISM’s services PMI was at 58.1 in July and 56.9 in August; its manufacturing index reached 54.2 in July (a month that saw a 6.4% rise in U.S. factory orders) and 56.0 in August.[9]

Home sales soared as summer began, and although that momentum tailed off, sales did not retreat. Residential resales were up 24.7% in July, and another 2.4% in August. New home buying increased 4.8% for August after a 14.7% July climb. Housing starts and building permits were both up 17.9% in the first month of the quarter, but then they both declined; permits dipped 0.9% and starts 5.1% in the eighth month of the year.[10]

For more than a century, the Federal Reserve has had two primary monetary policy objectives: to manage inflation and to guide the economy toward a state of maximum employment. Historically, managing inflation has come first. So, it made news on August 27 when Fed Chairman Jerome Powell announced that the central bank would “seek to achieve inflation that averages 2 percent over time,” rather than proactively adjust short-term interest rates when inflation approaches that established target. In other words, it would tolerate a little more inflation than it had in the past as a trade-off for spurring the economy. The Fed kept the federal funds rate in the 0%-0.25% range in the quarter, and its September consensus interest rate forecast showed it expected no change for short-term interest rates through 2022.[11][12]

The Global Economy
As economies worldwide continued to labor under the coronavirus pandemic, the International Monetary Fund (IMF) and Organization for Economic Cooperation and Development (OECD) revised their estimates of global economic activity for 2020 and 2021. The IMF sees a 3.0% contraction for global Gross Domestic Product (GDP) this year, with the global economy growing 5.8% next year. The OECD estimates a 4.5% pullback for global GDP in 2020, and then a 5.0% rebound in 2021.[13]

The quarter ended with no agreement yet on a post-Brexit trade deal between the United Kingdom and the European Union, as the post-Brexit transition period ends December 31. Complicating matters, U.K. lawmakers introduced a bill that would disregard conditions for trade with Northern Ireland established as part of Brexit, which the E.U. has hotly protested. U.K. Prime Minister Boris Johnson wants both parties to reach a free trade agreement this month; Johnson is aiming for a pact without quotas or tariffs attached, similar to the arrangement the U.K. has with Canada.[14]

Looking at foreign stock exchanges, some significant quarterly gains stand out. South Korea’s Kospi index rose 11.2% in three months; no other consequential overseas benchmark advanced double digits in Q3l. China’s Shanghai Composite added 7.82%, Taiwan’s TWII 7.70%, Argentina’s Merval 4.69%, Japan’s Nikkei 225 4.02%, and Germany’s DAX 3.65%. On the other side of the ledger, Hong Kong’s Hang Seng retreated 3.96%, and Spain’s IBEX 35 dipped 7.12%. MSCI’s EAFE index, which tracks large companies across developed countries in Europe and Asia, rose 4.90% in Q3.[15][16]

Looking Back, Looking Forward
Stocks powered through July and August, entering historic territory in mid-summer. In particular, August saw a powerful rally. The Nasdaq Composite climbed 9.59% in August, and the Dow Jones Industrial Average gained 7.57%, finishing with its best August since 1984. Advancing 7.01% to cap a 5-month winning streak, the S&P 500 had its best August since 1986. September got off to a good start, with a new record close for the S&P: 3,580.84.[17][18]

Then, reservations about the rally surfaced. Traders began to question the sustainability of the summer economic recovery, and whether a fall uptick in coronavirus infections might hurt business and consumer spending. The S&P ended September at 3,363.00, retreating 3.92% for the month. The Dow lost 2.28% in September to fall to 27,781.70, and the Nasdaq gave up 5.16%, declining to 11,167.51.[19][20]

The 10-year Treasury yield spent all of Q3 between 0.52% and 0.74%, reaching the top of that range in late August.[21]

Wall Street enters the fourth quarter with a bit of uncertainty. The November election results may produce any number of reactions. There are only educated guesses as to when coronavirus vaccines may appear, and how effective they may be. The first reading on 3rd-quarter Gross Domestic Product growth is on October 27, roughly one week before election day.

Federal Reserve officials expect low-interest rates and very little inflation through 2022. Sustained low-interest rates could drive more borrowing and business investment, and improve the outlook for the housing market.

[1] The Wall Street Journal, October 2, 2020
[2] The Wall Street Journal, October 2, 2020
[3] The Wall Street Journal, October 2, 2020
[4] Federal Reserve Bank of Atlanta, September 25, 2020
[5] CNN Business, September 30, 2020
[6] Investing.com, September 30, 2020
[7] Forbes, September 16, 2020
[8] Investing.com, September 30, 2020
[9] Investing.com, September 30, 2020
[10] Investing.com, September 30, 2020
[11] Forbes, September 16, 2020
[12] New York Times, August 27, 2020
[13] Nasdaq.com, September 30, 2020
[14] Associated Press, September 29, 2020
[15] Barchart.com, September 30, 2020
[16] Wall Street Journal, September 30, 2020
[17] CNBC, August 31, 2020
[18] Business Insider, September 2, 2020
[19] CNBC, September 30, 2020
[20] Google Finance, September 30, 2020
[21] Treasury.gov, September 30, 2020

Tax Tips: Check Out the IRS YouTube Channel for Tips

Did you know that the IRS has its own YouTube channel? The channel is full of informational videos that answer common questions from taxpayers. They cover everything from filing a tax return for the first time to what to do if you don’t receive a W-2.

In addition, the IRS also posts videos in multiple languages for multilingual taxpayers. They even have videos in American Sign Language to accommodate taxpayers of all languages and ability levels. They have their videos separated into different categories including Tax Tips, Identity Theft, Small Business, and IRS Tax Pros. Now it’s easier than ever to get your tax questions answered online.

* This information is not intended to be a substitute for specific individualized tax advice. We suggest that you discuss your specific tax issues with a qualified tax professional.

Tip adapted from IRS.gov[7]
[7] IRS.gov, March 19, 2020

Stocks Mixed Amid Uncertainty – WEEKLY UPDATE – SEPTEMBER 28, 2020

The Week on Wall Street
Stocks were mixed last week as worries that stretched from Washington D.C., where prospects of a new fiscal stimulus bill dimmed, to Europe, which saw an increase of new COVID-19 cases.

The Dow Jones Industrial Average declined 1.75%, while the Standard & Poor’s 500 fell 0.63%. The Nasdaq Composite index gained 1.11% for the week. The MSCI EAFE index, which tracks developed overseas stock markets, slumped 4.20%.[1][2][3]

Late Friday Rally Pares Losses
Dwindling chances of a federal fiscal stimulus, pre-election jitters, and worries over a second wave of coronavirus infections in Europe weighed heavily on investors.

The weakness in technology persisted. The Department of Justice proposal to curb legal protections for internet companies and require them to take greater responsibility for the content on their sites adding to that sector’s woes.[4]

Energy stocks were also hit hard on concerns of a slowdown in economic growth hurting oil demand.

The week wasn’t entirely absent of good news. Investors focused on reports of new progress in developing a vaccine and the passage in the House of Representatives of a bipartisan continuing resolution bill to fund the government through December 11th.[5]

Absent any apparent catalyst, stocks rallied in the final days of the week, cutting losses on major indices and powering the NASDAQ Composite to a weekly gain.

Fiscal Stimulus on Life Support

Market hopes for an additional fiscal stimulus bill, which were already fading, suffered another setback as events in Washington, D.C., appeared to make it more unlikely that lawmakers and the president could come together to fashion a compromise spending bill.

Many economists and market observers, along with Federal Reserve Chairman Jerome Powell, believe that further spending may be needed to maintain the momentum of the current economic recovery.

[1] The Wall Street Journal, September 25, 2020
[2] The Wall Street Journal, September 25, 2020
[3] The Wall Street Journal, September 25, 2020
[4] The Wall Street Journal, September 23, 2020
[5] CNN.com, September 22, 2020

Tax Tips: Can You Benefit From the Earned Income Tax Credit?

The earned income tax credit may be able to help taxpayers put more money in their pocket. There are a few groups of people that should consider looking into the credit more. These groups may include:

  • Native Americans – If a Native American taxpayer receives income as an employee or from owning a business, they may be eligible for the earned income tax credit.
  • Grandparents – Grandparents who are raising grandchildren may be able to benefit from the earned income tax credit. They should make sure that the child meets the qualified child requirements. There are also a few other considerations and special rules for this segment.
  • Taxpayers in Rural Areas – If you live in a rural area, you may be eligible for the credit.

The IRS has prepared the EITC Assistant to help taxpayers determine if they qualify for the EITC.

* This information is not intended to be a substitute for specific individualized tax advice. We suggest that you discuss your specific tax issues with a qualified tax professional.

Tip adapted from IRS.gov[8]
[8] IRS.gov, February 3, 2020

Tech Sector Slip Continues – WEEKLY UPDATE – SEPTEMBER 21, 2020

The Week on Wall Street
Stocks slipped as the technology sector remained under pressure and a mid-week announcement by the Federal Reserve failed to inspire investors.

The Dow Jones Industrial Average declined 0.03%, while the Standard & Poor’s 500 fell 0.64%. The Nasdaq Composite index dropped 0.56% for the week. The MSCI EAFE index, which tracks developed overseas stock markets, rose 0.75%.[1][2][3]

Technology Pulls Stocks Lower
As has been the case in recent weeks, technology stocks led the market higher, then lower in an otherwise turbulent week of trading.

Merger and acquisition activity announced at the start of the week generated a rush back into technology stocks, sparking a rebound from the previous week’s drop. Stocks continued to advance until Wednesday, when investors began to digest comments from the Fed’s Federal Open Market Committee meeting. The Fed delivered a message that coupled assurances of continued low rates with concerns about the health of the economic recovery.[4]

The Fed Stays the Course
In the last Federal Open Market Committee (FOMC) meeting before the November election, the Fed signaled that interest rates would not be increased “until labor market conditions have reached levels consistent with the committee’s assessments of maximum employment and inflation has risen to 2% and is on track to moderately exceed 2% for some time.”[5]

Most Fed officials do not see this happening until 2023.

While the Fed maintained its view on the importance of fiscal stimulus to help American workers and businesses, it did improve its outlook for unemployment in its latest economic outlook. The Fed now expects unemployment would average around 7-8% in the final three months of the year, down from its June prediction of around 9-10%.[6]

[1] The Wall Street Journal, September 18, 2020
[2] The Wall Street Journal, September 18, 2020
[3] The Wall Street Journal, September 18, 2020
[4] The Wall Street Journal, September 16, 2020
[5] The Wall Street Journal, September 16, 2020
[6] The Wall Street Journal, September 16, 2020

Tax Tips: How Long Should I Keep Records?

One of the most frequently asked questions by taxpayers is, “How long should I keep my tax records?”

On its website, the Internal Revenue Service (IRS) offers some guidelines.

Note: The IRS suggests taxpayers keep copies of your filed tax returns. They help in preparing future tax returns and making computations if you file an amended return.

    1. Keep records for 3 years if situations (4), (5), and (6) below do not apply to you.

    2. Keep records for 3 years from the date you filed your original return or 2 years from the date you paid the tax, whichever is later, if you file a claim for credit or refund after you file your return.

    3. Keep records for 7 years if you file a claim for a loss from worthless securities or bad debt deduction.

    4. Keep records for 6 years if you do not report income that you should report, and it is more than 25% of the gross income shown on your return.

    5. Keep records indefinitely if you do not file a return.

    6. Keep records indefinitely if you file a fraudulent return.

    7. Keep employment tax records for at least 4 years after the date that the tax becomes due or is paid, whichever is later.

Tip adapted from IRS.gov[7]
[7] IRS.gov, September 10, 2020

Stocks Continue Downward Slide – WEEKLY UPDATE – SEPTEMBER 14, 2020

The Week on Wall Street
Stocks traveled a volatile path last week as investors appeared concerned about the upcoming elections, an uncertain economy, and more delays with additional fiscal stimulus.

The Dow Jones Industrial Average slid 1.66%, while the Standard & Poor’s 500 slumped 2.51%. The Nasdaq Composite index plummeted 4.06% for the week. The MSCI EAFE index, which tracks developed overseas stock markets, rose 1.44%.[1][2][3]

Stocks Continue To Slip
In a holiday-shortened week of trading, stocks resumed their slide from the prior week, with the technology-heavy Nasdaq slipping into correction territory in a three-day span ended on Tuesday, September 8th. (A correction is defined as a decline of at least 10% from a recent high.)[4]

After staging a strong rebound on Wednesday, stocks once again headed lower as the Senate failed to pass another coronavirus stimulus bill. Mega-cap technology companies remained under pressure throughout the week. Energy stocks added to investors woes, plunging on data showing an unexpected build-up in inventories.[5]

The market ended the week on a mixed note, as technology companies lost additional ground.

Final Thought
On Friday the nation commemorated the tragic events of September 11, 2001.

We join all Americans in remembering the lives we lost that day and the profound impact on the victims’ families. We are reminded that it was the unity, kindness, and warmth that we collectively rediscovered in the wake of 9/11 that saw us through that difficult period.

[1] The Wall Street Journal, September 11, 2020
[2] The Wall Street Journal, September 11, 2020
[3] The Wall Street Journal, September 11, 2020
[4] CNBC, September 8, 2020
[5] CNBC, September 9, 2020