Posts made in September 2022

The educator expense deduction allows eligible teachers and administrators to deduct part of the cost of technology, supplies, and training from their taxes. In this case, an “eligible educator” is a taxpayer that is a kindergarten through grade 12 teacher, instructor, counselor, principal, or aide. They must work at least 900 hours a year at a school that provides elementary or secondary education.

In 2022, educators can deduct up to $300 of trade or business expenses not reimbursed by their employer, a grant, or another source. Some examples of covered expenses include:

• Professional development course fees
• Books
• Supplies
• Computer equipment
• Other classroom equipment
• Personal protective equipment (masks, disinfectant, etc.)

* 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.gov⁸

Footnotes and Sources

8. ^{IRS.gov, February 24, 2022}

Last week, Fed Chair Powell said the U.S. would not tame inflation without economic pain. This week heightened recession fears and sent stocks broadly lower.

The Dow Jones Industrial Average dropped 4.00%, while the Standard & Poor’s 500 lost 4.65%. The Nasdaq Composite index fell 5.07% for the week. The MSCI EAFE index, which tracks developed overseas stock markets, declined 3.05%.^1,2,3

Yields Surge, Stocks Tumble

Last week’s meeting of the Federal Open Market Committee (FOMC) proved unsettling for the financial markets. It wasn’t only the widely expected announcement of another rate hike but a more hawkish message that rates may be heading higher for longer than anticipated. Fed officials indicated that any policy change might be further off than investors had contemplated.

The latest rate hike caused bond yields to rise, with two-year and ten-year Treasury note yields touching levels not seen in over a decade. Global central banks moved in tandem with the Fed, as the Bank of England, Swiss National Bank, and Norway’s Norges Bank, among others, also hiked rates.^4,5

Another Rate Hike

In its effort to cool inflationary forces, the Federal Reserve raised interest rates by 0.75% last week—the third consecutive rate increase of that size. Projections by FOMC members suggested that interest rates may increase by as much as 1.25 percentage points before year-end.⁶

The FOMC also projects that unemployment will rise to 4.4% by December 2023. This projection is up from its current level of 3.7%, and that core inflation will be 4.5% by year-end. In June, Fed officials projected core inflation would be at 4.3% by year-end. They also indicated that interest rates may reach as high as 4.6% in 2023, without any rate cut likely until 2024.⁷

Footnotes and Sources

1. ^{The Wall Street Journal, September 23, 2022}
2. ^{The Wall Street Journal, September 23, 2022}
3. ^{The Wall Street Journal, September 23, 2022}
4. ^{The Wall Street Journal, September 22, 2022}
5. ^{CNBC, September 22, 2022}
6. ^{The Wall Street Journal, September 21, 2022}
7. ^{CNBC, September 21, 2022}

The IRS currently translates important and helpful tax information in seven languages, including:

• Spanish
• Chinese (Traditional)
• Chinese (Simplified)
• Korean
• Russian
• Vietnamese
• Haitian Creole

Some multilingual resources include The Taxpayer Bill of Rights, important filing information, e-file resources, forms and publications, and the IRS2Go mobile app.

For access to information in these languages, taxpayers can click on the English dropdown tab in the top menu bar on the IRS.gov home page. The dropdown will list the other languages a taxpayer can choose to view IRS.gov pages. In addition, the IRS also offers interpreter services in more than 350 languages.

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

Tip adapted from IRS.gov⁷

Footnotes and Sources

7. ^{IRS.gov, March 16, 2022} 

A hotter-than-expected inflation report sent stocks sharply lower last week as investors faced the prospect of more aggressive interest rate hikes by the Federal Reserve for perhaps a longer period.

The Dow Jones Industrial Average fell 4.13%, while the Standard & Poor’s 500 lost 4.77%. The Nasdaq Composite index dropped 5.48% for the week. The MSCI EAFE index, which tracks developed overseas stock markets, dipped 1.78%.^1,2,3

Inflation Deflates Markets  

Stocks suffered their worst day in more than two years last Tuesday as markets were caught off-guard by a higher-than-anticipated August inflation report.

Markets expected the August report to show a substantial cooling of inflation, potentially allowing the Fed to ease up on interest rate hikes. Instead, the elevated inflation number not only undercut those easing hopes but raised the possibility of a more significant rate hike. On Tuesday, traders assigned a 28% probability of a 100 basis point hike, from a 0% chance just the day before. Price action remained choppy for the remainder of the week, closing the week with additional losses as a global package-delivery company warned of a worldwide recession.⁴

August CPI Disappoints

August’s Consumer Price Index (CPI) rose 8.3% from a year ago, showing a continued deceleration in price increases (July’s CPI was 8.5%, and June’s was 9.1%). Despite moderating price increases, traders were disappointed, given the general expectation of a more substantial slowdown in inflation.⁵

Core inflation (excluding food and energy) was particularly alarming to investors, which jumped 6.3% year-over-year. That number was well above the 5.9% rate from June and July. From the market’s perspective, sufficient inflationary pressures exist for the Fed to maintain its hawkish interest rate policy for possibly longer than investors had hoped.⁶

Footnotes and Sources

1. ^{The Wall Street Journal, September 16, 2022}
2. ^{The Wall Street Journal, September 16, 2022}
3. ^{The Wall Street Journal, September 16, 2022}
4. ^{The Wall Street Journal, September 13, 2022}
5. ^{The Wall Street Journal, September 13, 2022}
6. ^{The Wall Street Journal, September 13, 2022}

The IRS has a few resources to help you file an error-free return. They suggest making an online account to see estimated tax payments, prior year adjusted gross income, and more.

They also offer the option to request a tax transcript online. There are five types of tax transcripts, each used for different purposes, so make sure to see which one best fits your needs. A Tax Return Transcript, for example, shows most line items from your original Form 1040. You can request a tax transcript online, by mail, or by phone.

Tip adapted from IRS.gov⁵

Footnotes and Sources

5. ^{IRS.gov, March 24, 2022}

In a holiday-shortened week of trading, stocks posted healthy gains despite more tough talk on monetary policy from Fed officials.

The Dow Jones Industrial Average rose 2.66%, while the Standard & Poor’s 500 gained 3.65%. The Nasdaq Composite index picked up 4.14% for the week. The MSCI EAFE index, which tracks developed overseas stock markets, lost 1.26%. ^1,2,3

Stocks Rise

Stocks fell coming off the Labor Day weekend, dragged down by news that Russia was cutting off natural gas supplies to its European customers. Stocks also were under pressure due to a surprisingly strong report on business conditions, which heightened fears of continued Fed hawkishness.

Sentiment quickly improved as bond yields turned lower and oil prices fell. Investors reacted positively to comments by Fed Vice Chair Lael Brainard, who reiterated the Fed’s commitment to quashing inflation while acknowledging the risks of going too far. Stocks added to their gains on Thursday as the market digested another speech from Fed Chair Powell and a 0.75% hike by the European Central Bank. The markets surged on Friday amid little news, ending a positive week on an upbeat note.

No Inflation Walk Back

In his first public comments since his speech at Jackson Hole that sent markets into a tailspin, Fed Chair Powell did not seek to soften the edges of the Fed’s commitment to fighting inflation. In an interview on Thursday, Powell reaffirmed the need for sustained and robust actions to bring down inflation. He emphasized that it was critical that “the longer inflation remains well above target, the greater the risk the public does begin to see higher inflation as the norm, and that has the capacity to really raise the costs of getting inflation down.”⁴

With the Federal Open Market Committee (FOMC) set to meet on September 20-21, these comments may indicate that market expectations of a rate hike of 0.75% this month align with the Fed’s plans.

Footnotes and Sources

1. ^{The Wall Street Journal, September 9, 2022}
2. ^{The Wall Street Journal, September 9, 2022}
3. ^{The Wall Street Journal, September 9, 2022}
4. ^{The Wall Street Journal, September 8, 2022}

The IRS can scan tax returns for potential fraud, and if a tax return seems suspicious, they will flag it for further review. In these cases, the IRS will send the taxpayer a letter notifying them of potential identity theft. Because the tax return won’t be processed until you respond to the letter, it’s essential to follow the steps outlined. The letter will likely have everything you need to know.

The three different types of identity theft letters that the IRS may send out include:

1. A letter that asks the taxpayer to verify their identity online
2. A letter that asks the taxpayer to call the IRS to verify their identity
3. A letter that asks the taxpayer to verify their identity in person.

* 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

Footnotes and Sources

7. ^{IRS.gov, April 12, 2022}

The overhang of Fed Chair Powell’s Jackson Hole speech the previous week carried over into last week as investors recalibrated stock valuations amid a seemingly more assertive monetary policy stance.

The Dow Jones Industrial Average fell 2.99%, while the Standard & Poor’s 500 stumbled 3.29%. The Nasdaq Composite index lost 4.21%. The MSCI EAFE index, which tracks developed overseas stock markets, slid 4.90%. ^1,2,3

Stocks Extend Losses

Investors remained unnerved by the aggressive tone of Jerome Powell’s speech and subsequent comments from Fed officials suggesting a higher rate hike than the market expected at the Fed two-day meeting ending September 21. The probability of a 75 basis point hike in September rose to nearly 65%, up from just 28% a month ago. ⁴

Stocks moved steadily lower before finding some footing on Thursday. Friday’s employment report appeared to strike a “goldilocks” note (i.e., labor gains not so strong that it might trigger greater Fed hawkishness but robust enough to allay imminent recession fears). After early gains, stocks turned lower ahead of the holiday weekend.

Employment Shines

Employers added 315,000 jobs in August, maintaining the labor market’s remarkable resiliency amid a contracting economy. The unemployment rate rose to 3.7%, up from last month’s 3.5%. The gain followed an uptick in the labor participation rate, which expanded from 62.1% to 62.4%. Wages continued to grow, rising 0.3% in August and 5.2% from 12 months ago. ⁵

Sectors seeing the most significant increases in new jobs were professional and business services, healthcare, and retail. Lagging sectors were manufacturing, financial, and wholesale trade. ⁶ 

Footnotes and Sources

1. ^{The Wall Street Journal, September 2, 2022}
2. ^{The Wall Street Journal, September 2, 2022}
3. ^{The Wall Street Journal, September 2, 2022}
4. ^{The Wall Street Journal, August 29, 2022}
5. ^{CNBC, September 2, 2022}
6. ^{CNBC, September 2, 2022}

Filing taxes has become more seamless in recent years due to e-filing. It’s also easy to check the status of your refund if you anticipate one. The IRS has a tool called Where’s My Refund? where taxpayers can check the status of their refund within 24 hours of the IRS acknowledging the taxpayer’s e-filed return. You can also see a personalized refund date after the return is processed.

You can access the tool online on the IRS website or via their app. You will see three phases: return received, refund approved, and refund sent. The IRS recommends setting up direct deposit to receive your refund even faster. They update the tool once a day.

* 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, April 19, 2022}