Posts made in May 2023

Taxpayers who work in the gig economy may benefit from having a better understanding of how their work affects their taxes.

People involved in the gig economy earn income as freelancers, independent workers, or employees. They use technology to provide goods or services, including renting out a home or spare bedroom and providing car rides.

Here are some things taxpayers should know about the gig economy and taxes:

• Money earned through this work may be taxable.
• Tax implications exist for the company providing the platform and the individual performing the services.

This income may be taxable even if the taxpayer providing the service doesn’t receive a Form 1099-MISC, Form 1099-K, or Form W-2. This income may also be taxable if the activity is only part-time, side work, or if you’re paid in cash.

*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, April 4, 2023} 

Stocks rallied last week, propelled by growing optimism over reaching a deal on raising the debt ceiling and avoiding a technical debt default by the U.S.

The Dow Jones Industrial Average edged 0.38% higher, while the Standard & Poor’s 500 gained 1.65%. The Nasdaq Composite index advanced 3.04% for the week. The MSCI EAFE index, which tracks developed overseas stock markets, lost 0.47%.1,2,3

Possible Debt Deal

After stumbling on weak April retail sales and a combination of disappointing earnings and weak guidance from a major retailer, stocks moved higher mid-week as the news on the debt negotiations turned more positive.

The prospect of an agreement helped to lift a cloud of uncertainty that had weighed on markets in recent weeks and sparked sufficient optimism to shake off comments by the Dallas Fed President, who indicated that economic data may not support a pause in rate hikes yet. Aiding the market’s upbeat mood was a positive update on deposit growth at a troubled regional bank.

Stocks surrendered some of the week’s gains on Friday following reports of an impasse on debt talks and comments by Fed Chair Powell.

Housing Mixed

Recent updates have suggested that the housing market may be staging a turnaround after a long period of contraction. Last week’s data contained some fresh evidence of revival and caution that any potential recovery may remain further out.

The first positive sign was an increase in home builder sentiment that put the National Association of Home Builders Housing Market Index’s confidence level at the midpoint for the first time since July 2022. An unexpected 2.2% rise in housing starts in April followed. These encouraging reports, however, were followed by a disappointing 3.4% decline in April existing home sales.^{4, 5, 6}

Footnotes and Sources

1. ^{The Wall Street Journal, May 19, 2023}
2. ^{The Wall Street Journal, May 19, 2023}
3. ^{The Wall Street Journal, May 19, 2023}
4. ^{National Association of Home Builders, May 16, 2023.}
5. ^{Fox Business, May 17, 2023}
6. ^{The Wall Street Journal, May 18, 2023}

Taxpayers should understand their filing status well and at least be familiar with the other choices.

When preparing and filing a tax return, the filing status affects:

• If the taxpayer is required to file a federal tax return
• Their standard deduction amount
• If they can claim certain credits
• The amount of tax they should pay

Here are the five filing statuses:

Single: Normally, this status is for taxpayers who are unmarried, divorced, or legally separated under a divorce or separate maintenance decree governed by state law.

Married filing jointly: If a taxpayer is married, they can file a joint tax return with their spouse. When a spouse passes away, the widowed spouse can usually file a joint return for that year.

Married filing separately: Married couples can choose to file separate tax returns when doing so may result in more favorable treatment.

Head of household: Unmarried taxpayers may be able to file using this status, but special rules apply.

Qualifying widow(er) with dependent child: This status may apply to a taxpayer if their spouse died during one of the previous two years and they have a dependent child. Other conditions also apply.

*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 were mixed last week as good inflation news was offset by mounting debt ceiling concerns and rekindled regional banking fears.

The Dow Jones Industrial Average lost 1.11%, while the Standard & Poor’s 500 slipped 0.29%. The Nasdaq Composite index rose 0.40% for the week. The MSCI EAFE index, which tracks developed overseas stock markets, fell 0.67%.1,2,3

Uncertainty Weighs on Stocks

The week got off to a quiet start as investors waited on April’s two key inflation reports scheduled for release on Wednesday and Thursday. When consumer prices rose less than forecasted, stocks broke out of their lethargy and moved higher. Stocks also got a boost on Wednesday afternoon from comments from the White House, hinting at an opening for negotiation on the debt ceiling.

Despite a substantial cooling in producer price increases, stocks turned mixed on Thursday amid a disappointing earnings report from a Dow Industrial component and new data that reignited investor anxiety over regional banks’ financial health. Stocks ended the week the way they began, largely drifting in an otherwise directionless fashion.

Inflation Pressures Ease

Consumer prices rose 4.9% year-over-year, the tenth consecutive month that the headline inflation rate has declined. This was a slight improvement over March’s 12-month increase of 5.0%. April’s monthly inflation rate was 0.4 percent, above March’s 0.1 percent rise. April’s increase was driven by higher housing, gasoline, and used car costs.⁴

Inflation progress extended into wholesale prices, which rose 0.2% in April–below the consensus forecast of a 0.3% rise. For the last twelve months, producer prices increased 2.3%, an improvement from last month’s 2.7% year-over-year gain and the lowest recording since January 2021.⁵

Footnotes and Sources

1. ^{The Wall Street Journal, May 12, 2023}
2. ^{The Wall Street Journal, May 12, 2023}
3. ^{The Wall Street Journal, May 12, 2023}
4. ^{The Wall Street Journal, May 10, 2023.}
5. ^{CNBC, May 11, 2023}

Help is available for taxpayers who need tax information for prior years but who did not keep copies of their returns. There are ways to get the information you need.

Keep in mind the Internal Revenue Service (IRS) recommends that taxpayers keep copies of their returns and any documentation for at least three years after filing:

• Ask your software provider or tax preparer. This is often the easiest way to get a copy of your tax returns.
• Order a tax transcript. Taxpayers who cannot get a copy of a prior-year return may order a tax transcript from the IRS. This document partially masks personally identifiable information such as names, addresses, and Social Security numbers to protect taxpayers’ identities. All financial entries, including the filer’s adjusted gross income, are visible. These are free and available for the most current tax year after the IRS has processed the return. People can also get these records for the past three years.
• Pay for a copy from the IRS. As a last resort, you can purchase a copy of your tax return from the IRS.

*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}

A Friday rebound, triggered by a big tech company’s earnings beat and a strong jobs report, shaved much of the week’s accumulated losses.

The Dow Jones Industrial Average fell 1.24%, while the Standard & Poor’s 500 lost 0.80%. The Nasdaq Composite Index was flat (+0.07%) for the week. The MSCI EAFE index, which tracks developed overseas stock markets, slipped 0.62%.1,2,3

Stocks See-Saw

Renewed regional bank concerns weighed on investor sentiment last week, despite the rescue of a troubled bank before the start of the trading week.

But worries were not isolated to regional banks. Secretary of the Treasury Janet Yellen commented that the federal government may hit its debt ceiling earlier than expected, heightened investor jitters over a potential technical default. The stock market also slipped in the wake of the latest rate hike decision by the Federal Open Market Committee (FOMC).

Solid earnings from one mega-cap tech firm and a strong employment report steadied investors, resulting in a Friday bounce that ended a volatile week on a positive note.

Fed Hikes Rates

Amid concerns in the regional bank sector and tightening credit conditions, the Fed elected to increase interest rates by 0.25%, citing elevated inflation and robust job gains. Investors were more focused, however, on what the Fed signaled about its plans since the expected rate hike.

The Fed indicated it may pause further rate hikes, suggesting that future decisions will be based on economic data and prevailing financial conditions. Following the announcement, interest rate traders assigned an 89% probability that rates would remain unchanged following the next meeting of the FOMC in June.^{4, 5}

Footnotes and Sources

1. ^{The Wall Street Journal, May 5, 2023}
2. ^{The Wall Street Journal, May 5, 2023}
3. ^{The Wall Street Journal, May 5, 2023}
4. ^{The Wall Street Journal, May 3, 2023.}
5. ^{CMEGroup.com, May 3, 2023}

The Internal Revenue Service has certain special tax breaks and programs for members of the U.S. Armed Forces. Here are a few.

Earned Income Tax Credit
You may include nontaxable combat pay in your taxable income. Including it may boost your earned income tax credit, resulting in you owing less and potentially a larger refund.

Signing Joint Returns
As a rule, both spouses normally must sign a joint income tax return. If your spouse is absent due to military duty, you may be able to sign for your spouse. However, you may need a power of attorney to file a joint return.

Job Search
The Tax Cuts and Jobs Act suspended the deduction for moving and job search expenses for most taxpayers through January 1, 2026. This suspension does not apply to members of the Armed Forces on active duty who move under a military order related to a permanent change of station.

*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}

Strong earnings from several mega-cap technology companies offset renewed regional banking jitters and weak economic data, leaving stocks higher for the week.

The Dow Jones Industrial Average gained 0.86%, while the Standard & Poor’s 500 added 0.87%. The Nasdaq Composite index rose 1.28% for the week. The MSCI EAFE index, which tracks developed overseas stock markets, lost 0.60%.1,2,3

Earnings Drive Rebound

It was a very busy week of earnings reports, but none more important than those from the Big Tech names. After two days of sharp losses on revived regional banking fears and otherwise lackluster earnings results, stocks rallied powerfully on a succession of positive earnings surprises from several mega-cap companies.

Also aiding the sentiment was last week’s first quarter Gross Domestic Product (GDP) report. Though the report showed muted economic growth that fell short of expectations, investors were encouraged by strong consumer spending.

Slowing Growth

In a sign that higher rates are slowing economic growth, first-quarter GDP slowed to a 1.1% annualized growth rate as healthy consumer spending helped offset a decline in business investment and a slowdown in nonresidential investment.

Economists had expected first-quarter GDP growth to come in at 2%. The business inventory investment slowdown reduced the headline GDP number by 2.26%.⁴

The initial estimate of GDP also reported some disappointing inflation news as the quarter-over-quarter Personal Consumption Expenditures Price Index, the Fed’s preferred inflation measure, rose 4.2%, which was higher than the 3.7% forecast.⁵

Footnotes and Sources

1. ^{The Wall Street Journal, April 28, 2023}
2. ^{The Wall Street Journal, April 28, 2023}
3. ^{The Wall Street Journal, April 28, 2023}
4. ^{CNBC, April 27, 2023}
5. ^{CNBC, April 27, 2023}