Posts made in September 2019

The IRS started the Volunteer Income Tax Assistance program to provide free tax advice, preparation, return filing help, and other assistance to military members and their families. This also includes specific tax advice for military members, such as combat zone tax benefits, special extensions, and other special rules. The VITA has convenient locations on and off base and even has offices overseas.

These offerings are just one way the IRS is striving to make tax information available to all. They also offer other free assistance programs to taxpayers who qualify, including the elderly, through their Tax Counseling for the Elderly (TCE) program.

If you or someone you know wants to take advantage of this service, find the location closest to you with the IRS’s location search tool. Simply enter your zip code and how far you want to travel.

* 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[9]

[9] www.irs.gov/newsroom/free-tax-help-available-for-the-military

The Week on Wall Street
Investors reacted to two major news items last week, one far more of a surprise than the other. The Federal Reserve did indeed make a rate cut, matching Wall Street expectations. Drone strikes on two of the world’s largest oil fields brought a shock to the global oil market.
At Friday’s closing bell, stocks wound up with weekly losses after news broke that Chinese trade officials were heading home from the U.S. sooner than planned. The S&P 500 retreated 0.51% week-over-week; the Dow Jones Industrial Average lost 1.05%, and the Nasdaq Composite dipped 0.72%. In developed foreign markets, shares tracked by the MSCI EAFE index fell 0.31%.[1][2][3]

Another Quarter-Point Cut
Wednesday, the Federal Open Market Committee voted 7-3 to lower the benchmark interest rate by another 0.25%, to a range of 1.75% to 2.00%.

While traders looked for signs of future guidance on monetary policy, little emerged from the latest Fed policy statement and Fed chair Jerome Powell’s subsequent press conference. The updated dot-plot forecast showed that seven Fed officials anticipated at least one more cut before 2020, while ten did not.[4]

Oil Prices Jump
As last week began, crude oil futures spiked in response to an attack that interrupted roughly 5% of the world’s oil production. The value of West Texas Intermediate crude, the U.S. benchmark, spiked 14.7% in a day, or $8.05 to $62.90 at Monday’s close.

This was oil’s biggest one-day leap since September 2008. Prices came down from there: Friday, WTI crude settled at $58.48.[5][6]

Final Thought
So, what day last week saw the biggest loss or gain for stocks? Not Monday, when the market absorbed news of the Saudi oil field strike. Not Wednesday, when the Fed rate cut occurred. Instead, it was Friday, when the S&P 500 lost only 0.49%. It just goes to show that stocks may ride through seemingly market-moving events with little daily change.[7]

[1] www.marketwatch.com/story/dow-skids-to-friday-lows-amid-reports-that-chinas-delegation-has-canceled-a-tariff-related-visit-2019-09-20

[2] www.wsj.com/market-data

[3] quotes.wsj.com/index/XX/990300/historical-prices

[4] www.reuters.com/article/us-usa-fed/fed-cuts-rates-on-7-3-vote-gives-mixed-signals-on-next-move-idUSKBN1W32H7

[5] www.marketwatch.com/story/us-oils-10-surge-after-saudi-attack-puts-it-on-track-for-the-biggest-daily-gain-in-312-years-2019-09-15

[6] money.cnn.com/data/commodities/index.html

[7] money.cnn.com/data/markets/sandp/

In an effort to protect heritage sites and other history, the IRS implemented their rehabilitation tax credit. This credit offers an incentive to renovate and restore old or historic buildings. Here are some of the highlights to help you determine if your building is eligible:
• The credit may pay for 20% of the qualifying costs of rehabilitating a historic building.

• This 20% needs to be spread out over 5 years.

• The credit doesn’t apply to the purchase of the building.

• Taxpayers use Form 3468, Investment Credit to claim the rehabilitation tax credit.
Although this credit might not move the needle a significant amount for a lot of situations, it’s still a step in the right direction in trying to preserve our country’s history. These historic buildings are beautiful, and with a little care, they can be restored to their former glory. Whether your office is in a historic building or you just enjoy learning about your area’s past, this tax credit helps give significance to this nostalgia.

* 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[9]
[9] www.irs.gov/newsroom/heres-what-historic-building-owners-should-know-about-the-rehabilitation-tax-credit

The Week on Wall Street
Stocks edged toward all-time peaks during a relatively calm week marked by easing trade tensions. Friday marked the eighth straight daily advance for the Dow Jones Industrial Average.[1]
Small-cap shares, as tracked by the Russell 2000 index, rose 4.85% in five days. The S&P 500 improved 0.96% for the week, while the Dow and Nasdaq Composite respectively advanced 1.57% and 0.91%. Foreign shares added 1.22%, according to the MSCI EAFE index.[2][3][4]

A Delay for Planned October Tariff Hikes
Existing tariffs on $250 billion of Chinese imports were slated to rise from 25% to 30% on October 1, but the White House decided Thursday to postpone the increase until October 15, in a “gesture of good will” honoring a request from Chinese Vice Premier Liu He.

Bloomberg reported last week that some White House officials were considering an “interim” trade agreement that could pause some import taxes on Chinese products, so long as China agrees to buy specific U.S. crops and address intellectual property concerns.[5]

More Risk Appetite
Last week’s conciliatory gestures between the U.S. and China influenced the bond market. By Friday’s close, the 10-year Treasury yield had climbed to 1.90%, up 0.35% for the week after a big selloff. (A rise in bond yields generally reflects a drop in bond prices.)[6]

Inflation Pressure Increases
Yearly core inflation reached a 13-month peak of 2.4% in August, according to the federal government’s Consumer Price Index. Core inflation (which excludes volatile food and fuel costs) has now increased for three straight months.[7]

What’s Next
This week, traders await the Federal Reserve’s latest policy announcement. Whether the Fed chooses to cut short-term interest rates, any guidance in the statement will be highly scrutinized, as Wall Street is eager to discern any hints about whether the Fed is prepared to continue cutting short-term rates.
[1] www.cnbc.com/2019/09/13/stock-markets-dow-sp-500-close-to-all-time-highs-on-wall-street.html

[2] money.cnn.com/data/markets/russell/

[3] www.wsj.com/market-data

[4] quotes.wsj.com/index/XX/990300/historical-prices

[5] finance.yahoo.com/news/stock-market-news-september-12-2019-121421711.html

[6] www.treasury.gov/resource-center/data-chart-center/interest-rates/Pages/TextView.aspx?data=yield

[7] www.investing.com/economic-calendar/core-cpi-736

All this back-to-school season excitement might make you want to consider furthering your own education, and the IRS might be able to help. Tax credits, deductions, and savings plans can help taxpayers with their expenses for higher education.
• Tax credits help with the cost of higher education by reducing the amount of income tax you may have to pay. The two tax credits available are the American Opportunity Tax Credit and the Lifetime Learning Credit.

• Some education savings plans allow your earnings to grow, tax free, until the money is taken out; some allow the deduction to be tax free; some do both.

• You may be able to deduct higher-education costs, such as tuition, student loan interest, and qualified education expenses, from your tax return.
If you’ve always dreamt about going back to school, whether to further your career or just learn something new, knowing your potential tax benefits may be able to save you money.

* 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[9]

[9] www.irs.gov/newsroom/tax-benefits-for-education-information-center

The Week on Wall Street
Stocks rose last week, with help from two developments: the announcement of further U.S.-China trade talks as well as August hiring and manufacturing numbers that seemed to bolster the argument for a rate cut by the Federal Reserve
The broad U.S. equity market, as represented by the S&P 500, added 1.79% during a 4-day trading week. The Dow Jones Industrial Average improved 1.49%; the Nasdaq Composite, 1.76%. Foreign shares tracked by the MSCI EAFE index gained 1.69%.[1][2][3]

Trade Talks Poised to Restart
Trade representatives from the U.S. and China are planning to head back to the negotiating table early next month. This news came Thursday from China’s ministry of commerce, which confirmed a verbal agreement among Secretary of the Treasury Steven Mnuchin, U.S. Trade Representative Robert Lighthizer, and Chinese Vice Premier Liu He.

Formal trade discussions between the U.S. and China last happened in July. China has said that it wants punitive U.S. tariffs on its products removed in the event of a deal.[4]

Weaker Hiring & Manufacturing Data
Payrolls expanded with just 130,000 net new jobs in August, according to the Department of Labor; 25,000 were temp jobs linked to the federal government’s 2020 Census. The main jobless rate stayed at 3.7%. The U-6 rate, which measures both unemployment and underemployment, rose 0.2% to 7.2%.

A key gauge of U.S. factory activity, the Institute for Supply Management’s manufacturing purchasing manager index, fell to 49.1 in August. A number below 50 indicates factory sector contraction. Some investors took these hiring and manufacturing reports as hints of a slowing economy, one which the Federal Reserve could potentially try to stimulate with an interest rate cut.[5][6]

What’s Ahead
August inflation data arrives this week, and if looks especially mild, it may amount to another suggestion that the Fed should ease. The European Central Bank concludes a meeting on Thursday, and Fed officials will certainly pay attention to its latest policy statement.[7]

[1] www.wsj.com/market-data

[2] www.wsj.com/market-data

[3] quotes.wsj.com/index/XX/990300/historical-prices

[4] www.cbsnews.com/news/u-s-china-trade-talks-scheduled-for-october-beijing-says-2019-09-05/

[5] www.bloomberg.com/news/articles/2019-09-06/u-s-payrolls-rise-130-000-boosted-by-25-000-for-census-count

[6] tradingeconomics.com/united-states/business-confidence

[7] www.cnbc.com/2019/09/06/stocks-look-to-reclaim-their-all-time-highs-in-the-week-ahead.html

We wanted to bring you a quick summary about the differences between self-employed individuals, independent contractors, and employees. Here are the key takeaways:
• If you provide services to other businesses, you are generally considered self-employed.

• If you own a business, you must decide whether the people you hire are independent contractors or employees. This designation will determine what tax requirements both you and the individual have.

• According to the IRS, a quick way to decide if the person you’re working with is an independent contractor or an employee is to decide whether you have a say in how the work gets done. They share that “an individual is an independent contractor if the payer has the right to control or direct only the result of the work and not what will be done and how it will be done.” For example, if you hire an individual to manage your social media pages, but they work their own hours and only deliver the content to you, they’re likely an independent contractor. If you hire someone in your office to run your social media pages and you dictate when and how that work should be done, they’re likely an employee.

* 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] www.irs.gov/businesses/small-businesses-self-employed/independent-contractor-self-employed-or-employee

The Week on Wall Street
Fears of an impasse in the U.S.-China trade dispute lessened last week. While additional U.S. tariffs on Chinese imports were scheduled to take effect on September 1, China’s government communicated that it would refrain from taking retaliatory measures for the moment.
U.S. stock benchmarks advanced during the week. The S&P 500 rose 2.79% across five trading days, and the Nasdaq Composite and Dow Jones Industrial Average respectively gained 2.72% and 3.02%. The MSCI EAFE international index added just 0.25%.[1][2]

Positive News in the Trade Dispute
Thursday, a spokesman for China’s commerce ministry said that negotiations could resume this month, and that discussions need to focus on “removing the new tariffs to prevent escalation.”

In addition, officials in Beijing indicated they would hold off on responding to the U.S. tariff hikes announced Friday by the White House.[3]

Mixed Consumer Confidence Signals
The Conference Board’s monthly consumer confidence index was at 135.1 in August. Analysts polled by Reuters had projected a reading of 129.5. Consumers’ view of the present economic situation was the best since November 2000.

On the other hand, the University of Michigan’s monthly consumer sentiment index (based on a different collection of survey data) dropped 8.6 points during August to 89.8; that was its biggest monthly descent in nearly seven years.[4][5]

What’s Next
After a pause for the Labor Day holiday, U.S. financial markets have an abbreviated trading week. The August jobs report may influence Friday’s Wall Street session, and any news pertaining to U.S.-China trade talks could also influence the markets.

[1] www.wsj.com/market-data

[2] quotes.wsj.com/index/XX/990300/historical-prices

[3] www.marketwatch.com/story/dow-futures-up-over-250-points-as-china-tamps-down-fears-of-further-trade-war-escalation-2019-08-29

[4] www.cnbc.com/2019/08/27/us-consumer-confidence-august-2019-index-dips.html

[5] www.sca.isr.umich.edu/

[6] spicysouthernkitchen.com/southern-potato-salad/