Posts made in June 2023

When a household starts a business, couples find themselves learning about the tax responsibilities related to that business. There are some things to consider when working together.

Here are a few items to consider:

• You should first establish if you have a partnership business (where both spouses have an equal say in the affairs, services, and capital of the business) or an employee/employer relationship (one spouse substantially controls management decisions). These relationships face different tax situations.
• If there is an employee/employer relationship, the second spouse (employee) may be subject to income, Social Security, and Medicare
• You may need to file the U.S. Return of Partnership Income form if there is a partnership relationship.

*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, February 22, 2023}

Stocks took a breather last week as investors digested the previous week’s surge and the month-to-date solid gains.

The Dow Jones Industrial Average lost 1.67%, while the Standard & Poor’s 500 fell 1.39%. The Nasdaq Composite index dropped 1.44% for the week. The MSCI EAFE index, which tracks developed overseas stock markets, tumbled 2.00%.^1,2,3

Rally Stalls

The stock market drifted lower last week as the tug-of-war between bulls and bears played out in a week that was light on market-moving news.

After falling in the first days of a holiday-shortened trading week, stocks rebounded on Thursday to recover some of the week’s losses. Stocks looked past Congressional testimony by Fed Chair Powell, who said two more rate hikes are likely in the wake of interest rate hikes by central bankers in the U.K., Switzerland, Norway, and Turkey.

The retreat continued into Friday, fueled by global growth fears from new economic data indicating more robust economic slowdowns in the eurozone, Japan, and Australia.

Housing Sentiment Improves

Home builders’ confidence edged into positive territory for the first time in 11 months, aided by strong demand, low inventory, and a recovering supply chain. May’s new home sales, which rose 21.7%–the most significant percentage gain since October 2016, validated this confidence. The number of new home starts in May (1.63 million) hit a 13-month high, with both single- and multi-family homes up substantially.^4,5

Sales of existing homes in May rose 0.2% month-over-month while declining 20.4% from a year ago. The existing home market continues to suffer from low inventory and still-high prices. The median price of a home sold in May declined 3.1% year-over-year to $396,100.⁶

Footnotes and Sources

1. ^{The Wall Street Journal, June 23, 2023.} 
2. ^{The Wall Street Journal, June 23, 2023.}
3. ^{The Wall Street Journal, June 23, 2023.}
4. ^{National Association of Home Builders, June 19, 2023}
5. ^{Reuters, June 20, 2023.}
6. ^{CNBC, June 22, 2023.}

When you sell a capital asset, like an investment or a piece of property, the sale can result in a capital gain or loss. The Internal Revenue Service (IRS) defines a capital asset as “almost anything you own for personal use or own as an investment.” Here are three facts you should keep in mind:

1. A capital gain or loss is the difference between what you originally paid for the asset (your basis) and the amount you get when you sell an asset.
2. The IRS may allow you to deduct capital losses on the sale of an investment or piece of property.
3. If your total net capital loss is more than the limit you can deduct, you may be able to carry it over to next year’s 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, January 26, 2023}

Stocks climbed last week as reassuring inflation data boosted investor hopes that the rate-hike cycle was nearing an end amid fresh economic data pointing to continued economic resilience.

The Dow Jones Industrial Average rose 1.25%, while the Standard & Poor’s 500 picked up 2.58%. The Nasdaq Composite index gained 3.25% for the week. The MSCI EAFE index, which tracks developed overseas stock markets, advanced 2.42%.^1,2,3

Stocks Rally

Stock market momentum gathered steam last week, blowing past the 4,300 and 4,400 thresholds in the S&P 500–a remarkable feat considering the time it took to break the 4,200 resistance level.

Optimism was high to begin the week, with expectations that fresh evidence of cooling inflation would provide the Fed room to pause on further rate hikes. The data cooperated as consumer prices rose 4.0% year-over-year (the lowest 12-month number in two years), and producer prices increased 1.1% from a year ago.⁴

The Fed’s “hawkish pause” briefly unsettled investors, but after some reassessment and aided by healthy economic data, stocks rallied before slipping on Friday as the market digested the week’s gains.

More Rate Hikes To Come?

Federal Reserve officials kept rates steady at last week’s Federal Open Market Committee (FOMC) meeting. However, a majority of committee members indicated at least two more quarter-point rate hikes were likely before year-end.⁴

Fed Chair Jerome Powell commented that he saw progress in fighting inflation and that no decision was made regarding any future rate increase, saying that members will assess the economic impact of the cumulative rate hikes before the July 25-26 FOMC meeting.⁵

The Fed raised its 2023 economic growth forecast to 1%, up from its March forecast of 0.4%. The Fed also lowered its unemployment projection to 4.1% from its earlier estimate of 4.5%.⁶

Footnotes And Sources

1. ^{The Wall Street Journal, June 16, 2023.} 
2. ^{The Wall Street Journal, June 16, 2023.}
3. ^{The Wall Street Journal, June 16, 2023.}
4. ^{AP News, June 14, 2023.}
5. ^{CNBC, June 14, 2023.}
6. ^{CNBC, June 14, 2023.}

All income you receive is taxable unless the rules explicitly state it isn’t. According to the Internal Revenue Service (IRS), taxable income includes earned income like wages and any income earned by providing a service or the exchange of property or services. Rental income, interest, dividends, and social security benefits are all examples of taxable unearned income.

Some income is only taxable if certain conditions are met. For example, life insurance proceeds are usually not taxable to the beneficiary unless you redeem a life insurance policy for cash. Any amount you receive above the cost of the policy is taxable. State and local income tax refunds may be taxable and should be reported on your federal taxes.

Some forms of income are usually not taxable, like:

• Gifts and inheritances. (State taxes may apply to inheritances.)
• Welfare benefits.
• Damage awards for physical injury or sickness.
• Cash rebates from a dealer or manufacturer for an item you buy.
• Reimbursements for qualified adoption expenses.

Several factors will affect the cost and availability of life insurance, including age, health, and the type and amount of insurance purchased. Life insurance policies have expenses, including mortality and other charges. If a policy is surrendered prematurely, the policyholder also may pay surrender charges and have income tax implications. You should consider determining whether you are insurable before implementing a strategy involving life insurance. Any guarantees associated with a policy are dependent on the ability of the issuing insurance company to continue making claim payments.

*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, November 10, 2022.}

A late-week rally sent stocks into positive territory, with the S&P 500 index closing just shy of the 4,300 mark.

The Dow Jones Industrial Average gained 0.34%, while the Standard & Poor’s 500 added 0.39%. The Nasdaq Composite index improved 0.14% for the week. The MSCI EAFE index, which tracks developed overseas stock markets, rose 0.44%.^1,2,3

Stocks Edge Higher

Stocks bumped along the flatline for much of the week ahead of this week’s two inflation reports and the June meeting of the Federal Open Market Committee.

Amid little news, stocks drifted lower to start the week until Wednesday, when a solid early-day rally evaporated on news of the Bank of Canada’s surprise interest rate hike. Stocks rose again the following day, holding onto their gains, with the S&P 500 hitting a new closing high for 2023.⁴

Stocks added small gains on Friday after weathering some midday weakness, leaving major indices marginally higher for the week.

Better Breadth

One investor concern has been that a handful of mega-cap stocks have driven recent market returns. Last week’s market bucked that trend, with outperformance in small-cap stocks and equally-weighted stock market indices.

For instance, the Russell 2000 index (which measures the performance of 2,000 smaller-cap companies) rose 1.90% this week, outpacing the S&P 500 and the technology-heavy Nasdaq.⁵

Another example of broadening performance was the outperformance of the equally-weighted S&P 500 index, where each stock has equal weighting regardless of size, versus the market-cap S&P 500 index, where mega-cap companies disproportionately impact index performance. Last week’s return of the equally-weighted S&P 500 index exceeded the cap-weighted S&P 500’s return by 0.65%.⁶

Footnotes and Sources

1. ^{The Wall Street Journal, June 9, 2023.} 
2. ^{The Wall Street Journal, June 9, 2023.}
3. ^{The Wall Street Journal, June 9, 2023.}
4. ^{CNBC, June 8, 2023.}
5. ^{The Wall Street Journal, June 8, 2023.}
6. ^{Google Finance, June 9, 2023.}

If you owe federal taxes, you may be required to pay by the April deadline. Remember, if you get an extension to file your taxes, payment is still due by the April deadline. You can set up a payment plan if you can’t pay the full amount you owe now.

Here are some choices for making your payment:

• Use Direct Pay: Internal Revenue Service (IRS) Direct Pay is a free and secure way to pay directly from your checking or savings account.
• Pay by Debit or Credit Card: If you don’t want to link a bank account, you can use your credit or debit card. Remember that you’ll have to pay a processing fee and may incur interest charges.
• Pay When You E-File: If you file your federal tax return electronically, you can pay directly from your bank account using Electronic Funds Withdrawal.

*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, February 15, 2023}

Stocks surged higher in the closing days of a holiday-shortened trading week, ignited by a political resolution on raising the debt ceiling and a strong employment report.

The Dow Jones Industrial Average rose 2.02%, while the Standard & Poor’s 500 advanced 1.83%. The Nasdaq Composite index gained 2.04% for the week. The MSCI EAFE index, which tracks developed overseas stock markets, slipped 0.52%.^1,2,3

A Sigh of Relief

The weight of uncertainty over negotiations to raise the federal debt ceiling was lifted last week by the news of an agreement between President Biden and House Speaker McCarthy and its subsequent passage in Congress.

After a modest gain on Thursday following the House vote, stocks rallied on Friday, responding to the Senate passage of the debt ceiling bill, which eliminated a significant overhang to the market. A robust federal employment report also contributed to the Friday rally. The report exceeded market expectations in the growth of new jobs while reflecting a deceleration in wage growth.

The Irrepressible Labor Market

Last week’s employment data showed that the labor market remains stout after over a year of sharp interest rate hikes.

Job openings in April increased to more than 10 million, reversing three straight months of declines, while private sector employment increased by 278,000 jobs in May, according to a survey by Automated Data Processing (ADP), a significant payroll processor.^4,5

In line with these strong numbers, the Department of Labor reported 339,000 new jobs were added in May. That came above the consensus estimate of 190,000 and marked the 29th consecutive month of positive growth.⁶

Footnotes and Sources

1. ^{The Wall Street Journal, June 2, 2023.} 
2. ^{The Wall Street Journal, June 2, 2023.}
3. ^{The Wall Street Journal, June 2, 2023.}
4. ^{The Wall Street Journal, May 31, 2023.}
5. ^{CNBC, June 1, 2023.}
6. ^{CNBC, June 2, 2023.} 

The Internal Revenue Service is on a constant lookout for tax-related scams. In most cases, “phishing” scams are bogus phone calls and emails that claim to come from the IRS.

Remember, the IRS will never:

• Call you without mailing an official notice first.
• Demand that you immediately pay your taxes over the phone.
• Take a debit or credit card number over the phone.
• Threaten to call law enforcement or immigration services to arrest you for failure to pay.

*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.gov⁴

Footnotes and Sources

4. ^{IRS.gov, April 24, 2023}

Markets moved in sync last week with perceived movement in debt ceiling talks, weakening early in the week and then surging on news of progress. A solid quarterly report and guidance from a mega-cap technology company helped with enthusiasm.

Overall, the markets were mixed, with the Dow Jones Industrial Average down 1.00%, while the Standard & Poor’s 500 gained 0.32%. The Nasdaq Composite index led, picking up 2.51% for the week. The MSCI EAFE index, which tracks developed overseas stock markets, sank 2.92%.^1,2,3

Debt Talks Dominate

Stocks were weighed down for much of the week by stumbling debt ceiling negotiations, which appeared to reach an impasse at one point. Technology stocks, which have led the market this year, were under pressure as traders began to anticipate the possibility of rate hikes in June and July.

Sentiment turned more optimistic after the release of an above-consensus earnings report and strong guidance from a mega-cap chip giant. The momentum continued into Friday as stocks surged on hopes of a debt ceiling agreement, undeterred by an inflation read that may induce the Fed to raise interest rates further.

A Fed Divided

The minutes of the Federal Open Market Committee (FOMC) May meeting reflected division among committee members over whether further rate increases were necessary, with more than half suggesting that they were ready to pause. Those members supporting additional rate hikes said inflation was moving too slowly toward the Fed’s two percent target inflation rate.

The minutes also reaffirmed the Fed’s expectation of a recession beginning around the fourth quarter. In comments last Wednesday, Fed governor Christopher Waller manifested this division, saying that it was a toss-up as to whether rates should be raised, suggesting that he could support a rate hike in June or wait on voting for an increase until July’s meeting.

Footnotes and Sources

1. ^{The Wall Street Journal, May 26, 2023}
2. ^{The Wall Street Journal, May 26, 2023}
3. ^{The Wall Street Journal, May 26, 2023}