Posts made in April 2023

Lots of questions can come up about income taxes after retirement. Listed are answers to just a few common questions from retired taxpayers.

What types of income are taxable?
Some common types of taxable income include military retirement pay, all or part of pensions and some retirement accounts, unemployment compensation, gambling income, bonuses and awards for work, and alimony or prizes.

What types of income are non-taxable?
A few examples of non-taxable income are veteran’s benefits and disability pay for specific military or government-related incidents, worker’s compensation, and cash rebates from a dealer or manufacturer of an item you purchased.

Why is my pension taxed?
It might depend on how the money was put into the pension. For example, if the money was not taxed before going into the plan, it may be taxable. Conversely, if your contribution is from already-taxed dollars, that portion of the pension may not be taxed.

*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.gov⁶

Footnotes and Sources

6. ^{IRS.gov, 2023}

Stocks remained resilient last week amid mixed earnings reports, hawkish Fed-speak, and lingering recession fears, closing out the five trading days with small losses.

The Dow Jones Industrial Average slipped 0.23%, while the Standard & Poor’s 500 lost 0.10%. The Nasdaq Composite index fell 0.42% for the week. The MSCI EAFE index, which tracks developed overseas stock markets, added 0.10%.1,2,3

Stocks Hold Firm

Stocks traded most of last week around the flatline as investors grappled with several headwinds.

The first was disappointing earnings results, coupled with the absence of earnings guidance from some companies due to an uncertain economic climate. Weak economic data, including declines in housing and leading economic indicators, also weighed on investor sentiment. Finally, multiple Fed officials spoke last week, signaling that inflation remained too high and that further rate hikes may be likely.

Underneath the seemingly placid surface of the major market indices, there was substantial price action at the individual stock and sector level. Poor earnings results hit communication services stocks and regional banks, while margin pressures put pressure on auto stock valuations.

Housing Weakness

Two housing reports reflected ongoing fragility in the housing market and fed prevailing economic slowdown worries.

Sales of new homes fell 0.8% in March, dragged down by a 5.2% slide in new multi-family home construction. Sales of single-family homes were a bright spot, rising 2.7% to a three-month high, though that hopeful note was tempered by an 8.8% drop in new application permits–an indicator of future new home building.⁴

Existing home sales also suffered a month-over-month decline in March, falling 2.4%. Sales plummeted 22% from March 2022 levels as higher mortgage rates and tight inventories impacted affordability.⁵

Footnotes and Sources

1. ^{The Wall Street Journal, April 21, 2023}
2. ^{The Wall Street Journal, April 21, 2023}
3. ^{The Wall Street Journal, April 21, 2023}
4. ^{YahooFinance, April 18, 2023}
5. ^{CNBC, April 20, 2023}

As a small business owner, your recordkeeping is of utmost importance. These records show your income, expenses, business transactions, and much more. You can choose whatever recordkeeping system you want if you and the IRS have the necessary information.

As a business owner, you will need to keep track of supporting documents such as:

• Purchases
• Sales
• Payroll
• Sales slips
• Paid bills
• Invoices
• Receipts
• Deposit slips
• Canceled checks
• Travel, transportation, entertainment, and gift expenses
• Assets

Keeping your records well-organized will save you time, effort, and money.

*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.gov⁶

Footnotes and Sources

6. ^{IRS.gov, August 8, 2022}

The combination of an improving inflation outlook resulted in a week of uneven, albeit positive, performance, in which cyclical and financial stocks rallied while technology, real estate, and utilities lagged.

The Dow Jones Industrial Average gained 1.20%, while the Standard & Poor’s 500 rose 0.79%. The Nasdaq Composite index increased 0.29% for the week. The MSCI EAFE index, which tracks developed overseas stock markets, added 2.08%.^1,2,3

Inflation Retreat

Stocks treaded water ahead of last week’s inflation data and the start of a new earnings season. Stocks rallied on a favorable March consumer inflation report, only to falter after the release of last month’s Federal Open Market Committee (FOMC) meeting minutes, which hinted at a potential recession later this year.

After reports of a more pronounced slowdown in producer prices on Thursday, stocks surged higher, with technology and communication services companies leading the charge. A weak retail sales number on Friday shaved the gains to close out the week.

Trending Lower

Last week provided fresh insight into inflation, and the news was encouraging.

The Consumer Price Index (CPI) rose a very modest 0.1% in March, while the year-over-year increase in consumer prices was 5.0%, down from February’s 12-month rise of 6.0%. Declines aided the March report in groceries, gasoline, medical care, and utilities.⁴

The read on supplier prices was even more positive. The Producer Price Index (PPI), which many economists see as a signal of future consumer prices, declined 0.5%–the most significant monthly decline since 2020. The 12-month increase as of March was 2.7%, an easing from February’s year-over-year climb of 4.9%.⁵

Footnotes and Sources

1. ^{The Wall Street Journal, April 14, 2023}
2. ^{The Wall Street Journal, April 14, 2023}
3. ^{The Wall Street Journal, April 14, 2023}
4. ^{The Wall Street Journal, April 12, 2023}
5. ^{The Wall Street Journal, April 13, 2023}

It’s essential to choose a tax preparer that is suitable for your needs as well as reliable and ethical. After all, taxpayers are responsible for the info on their return, regardless of who prepared it.

Here are some tips from the IRS on how to choose a tax preparer who meets your needs:

• Check the IRS Directory of Federal Tax Return Preparers
• Check the preparer’s history with the Better Business Bureau
• Ask about fees
• Ask if the preparer plans to use e-file
• Make sure the preparer is available
• Ensure the preparer signs and includes their preparer tax identification number
• Understand the preparer’s credentials

Choosing a reputable and reliable tax preparer can help protect you and your tax return.

*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, September 20, 2022}

Stocks ended a shortened week of trading mixed amid revived recession fears on Wall Street triggered by weak economic data.

The Dow Jones Industrial Average gained 0.63%, while the Standard & Poor’s 500 slipped 0.10%. The Nasdaq Composite index lost 1.10% for the week. The MSCI EAFE index, which tracks developed overseas stock markets, advanced +0.37%.^1,2,3

Recession Fears Resurface

Renewed recession worries dented investor sentiment, and the week kicked off with a weekend announcement by OPEC+ nations of their intention to cut oil production.

The prospect of higher oil prices not only revived inflation fears, possibly hurting the chances of a rate-hike pause by the Fed, but it raised concerns over future consumer spending. Stocks weathered the news well but buckled on weak manufacturing and services data in subsequent days. Stocks trended lower again after a lower-than-expected open-jobs number and a slowdown in private-sector hiring.

Stocks stabilized to close on Thursday, despite an increase in jobless claims and a pick up in March layoffs.

Cooling Labor Market  

A string of labor reports last week reflected signs of a cooling labor market, beginning with an unexpectedly significant decline in the number of open jobs (falling below 10 million for the first time in nearly two years). The JOLTs report preceded payroll processor ADP’s employment report that saw a rise in private sector hiring of 145,000 (short of the consensus forecast of 210,000) and smaller wage gains.^{4, 5}

After reports of a jump in initial jobless claims on Thursday and a 15% rise in layoffs in March, Friday’s March employment report showed the smallest increase in nonfarm payrolls (+236,000) since December 2020.⁶

Footnotes and Sources

1. ^{The Wall Street Journal, April 6, 2023}
2. ^{The Wall Street Journal, April 6, 2023}
3. ^{The Wall Street Journal, April 6, 2023}
4. ^{CNBC, April 4, 2023}
5. ^{CNBC, April 5, 2023}
6. ^{CNBC, April 7, 2023}

The IRS Alternative Media Center offers a variety of resources and accessibility services for visually impaired taxpayers. Using this platform, they provide tax-related content in several formats, including:

• Text-only
• Braille-ready files (available in English and Spanish)
• Browser-friendly HTML
• Accessible PDF (available in English and Spanish)
• Large print PDF (available in a variety of languages)

The IRS also offers enhanced accessibility services. Taxpayers can complete Form 9000, Alternative Media Preference, to choose how they would prefer to receive their tax notices (ex: in Braille, large print, audio, or electronic formats). They also have an accessibility helpline that can answer questions related to accessibility services.

*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.gov⁵

Footnotes and Sources

5. ^{IRS.gov, January 4, 2023}

Stocks rallied last week on receding fears of a widening banking crisis, led by resurging investor interest in technology and communication services names.

The Dow Jones Industrial Average gained 3.22%, while the Standard & Poor’s 500 added 3.48%. The Nasdaq Composite index rose 3.37% for the week. The MSCI EAFE index, which tracks developed overseas stock markets, advanced by 3.34%.^1,2,3

Tech Leads Rally

An absence of further bad news in the banking sector made for a good week, with high-quality technology and communication services stocks leading the market. While easing banking worries laid the groundwork for the week’s positive gains, growing conviction that Fed rate hikes were ending and positive inflation data out of Europe helped support the renewed enthusiasm for stocks.

Encouraging inflation data on the domestic front on Friday also added to the gathering optimism, igniting further gains to cap a satisfying week for investors.

Inflation Grinds Lower 

In an otherwise news-light week, Friday saw the release of February’s personal income and outlays report, which provides insight into inflation and consumer expenditures, the dominant contributor to economic growth.

The Personal Consumption Expenditures Price Index (PCE), the Fed’s preferred measure of inflation, rose 0.3% for the month, below market expectations and below the prior month’s 0.6% jump. The year-over-year increase of 5.0% improved from January’s rise of 5.3%. Energy prices declined, partially offsetting increases in food, goods, and services. Personal income rose 0.3%, while consumer spending increased 0.2%.⁴

Footnotes and Sources

1. ^{The Wall Street Journal, March 31, 2023}
2. ^{The Wall Street Journal, March 31, 2023}
3. ^{The Wall Street Journal, March 31, 2023}
4. ^{CNBC, March 31, 2023}