Posts made in July 2022

Many business owners do the necessary due diligence when hiring a company to handle payroll and payroll tax. But not all choices are the same. A business needs to pick this service wisely because it could fall out of the IRS guidelines if they don’t.

To avoid missed deposits for employment taxes and other important bills, here are some choices to help ensure business owners have a trusted payroll service:

• Use a certified professional employer organization.
• Use a reporting agent.
• Enroll in the Electronic Federal Tax Payment System (EFTPS) to ensure your payroll service providers use EFTPS to max tax deposits. This free platform gives employers quick access to their payment history for deposits under their EIN.

* 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.gov⁷

Footnotes and Sources

7. ^{IRS.gov, May 11, 2022}

Stocks rallied last week as investor spirits lifted thanks to a better-than-expected start to the second-quarter earnings season.

The Dow Jones Industrial Average gained 1.95%, while the Standard & Poor’s 500 added 2.55%. The Nasdaq Composite index jumped 3.33% for the week. The MSCI EAFE index, which tracks developed overseas stock markets, advanced 3.54%. ^{1, 2, 3}

Earnings Propel Stocks

Earnings season kicked off last week, with major banks reporting second-quarter results. While their results were mixed, they appeared to indicate that consumers and businesses remained reasonably healthy–a perspective that helped erase some negative sentiment overhanging the market.

As the week progressed, stocks gained momentum as earnings results poured in from different sectors of the economy, showing that businesses were navigating higher inflation and slowing growth better than investors feared. Technology and other gloomier sectors were among the market’s best performers for the week. A few disappointing corporate reports and a weak economic report sent stocks lower to close out a solid week.

Cracks in the Foundation 

Data released last week indicated more trouble in the housing market. The latest monthly homebuilder sentiment survey showed the single largest monthly drop in its 37-year history, except for April 2020. The sentiment report preceded a drop in June housing starts and issued building permits. Housing starts declined for the second month, falling 2.0% and surprising economists who had expected an increase.^4,5

Housing weakness made itself known through a 5.4% month-over-month decline in June’s existing home sales, representing the slowest pace since June 2020. Increasing prices and higher mortgage rates demonstrated drags on buyer demand.⁶

Footnotes and Sources

1. ^{The Wall Street Journal, July 22, 2022}
2. ^{The Wall Street Journal, July 22, 2022}
3. ^{The Wall Street Journal, July 22, 2022}
4. ^{CNBC, July 18, 2022}
5. ^{The Wall Street Journal, July 19, 2022}

In an effort to extend health care benefits to more people, the IRS introduced the small business healthcare tax credit. This credit may benefit employers that have fewer than 25 full-time equivalent employees, offer a qualified health plan through a Small Business Health Options Program Marketplace, and pay at least 50% of the cost of the employee-only health care coverage. There may also be some average wage requirements.

The maximum credit covers:

• 50% of premiums paid for small business employers
• 35% of premiums paid for small tax-exempt employers

The credit may also be available for two consecutive taxable years.

* 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.gov⁵

Footnotes and Sources

5. ^{IRS.gov, July 30, 2021}

In a holiday-shortened trading week, stocks rallied despite mixed economic data and vacillating energy prices and bond yields.

The Dow Jones Industrial Average increased 0.77%, while the Standard & Poor’s 500 rose 1.94%. The Nasdaq Composite index picked up 4.56% for the week. The MSCI EAFE index, which tracks developed overseas stock markets, edged 0.46% higher.^1,2,3

Stocks Move Higher

In advance of Friday’s much-anticipated employment report, stocks enjoyed successive daily gains despite ongoing concerns about a recession. Recession fears were supported by an inversion in the yield curve and updated second-quarter Gross Domestic Product projections indicating the economy is ready to contract.

Technology shares were the week’s big winners as investors appear to have turned to companies with earnings growth potential during a weakening economic environment. Stocks bounced along the flatline following the strong jobs report on Friday to close out a positive week.

Employment’s Mixed Signal

One of the holes in the “imminent-recession” narrative has been the labor market’s strength. Historically, recessions have been preceded by or concurrently with a weakening jobs market.

Friday’s employment report reflected a job market that continues to belie Wall Street’s recession fears. Employers added 372,000 jobs in June, a number that was above economists’ estimates of 250,000. Wage gains were robust (+5.1% year-over-year), though still below the inflation rate. The unemployment rate was unchanged at 3.6%.⁴

Footnotes and Sources

1. ^{The Wall Street Journal, July 8, 2022}
2. ^{The Wall Street Journal, July 8, 2022}
3. ^{The Wall Street Journal, July 8, 2022}
4. ^{CNBC, July 8, 2022}

Two education credits are available to American taxpayers: the American Opportunity Tax Credit (AOTC) and the Lifetime Learning Credit (LLC). The IRS has lots of information about these two credits on their site, but here are some helpful highlights:

• The AOTC is allowed for expenses for course-related books, supplies, and equipment not necessarily paid to the educational institution but needed for attendance.
• There is a four-year limit on claiming the AOTC but no limit on the number of years you can claim the LLC.
• To claim either credit, use Form 8863.
• The AOTC is worth up to $2,500.
• To claim the full credit, your modified adjusted gross income must be $80,000 or less.

* 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.gov⁶

Footnotes and Sources

6. ^{IRS.gov, March 20, 2020}