Posts made in August 2024

Gig Economy Tax Tips

There are some essential tips to remember if you work as a gig worker, someone who takes temporary work through one or more employers:

  • All income from these sources is taxable, regardless of whether you receive information returns; this includes both full-time and part-time work and if you’re paid in cash.
  • As a gig worker, you must be correctly classified as an employee or an independent contractor; this can depend on where you live, even for the same services.

Lastly, it’s important to remember to pay the correct amount of taxes on this income throughout the years to avoid owing when you file. Because gig employees don’t have an employer withholding taxes from their paychecks, they can either submit a new W-4 and have their employer withhold more from their paycheck (if they have another job as an employee) or make quarterly estimated tax payments throughout the year.

*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.gov9

Footnotes and Sources

  1. IRS.gov, May 8. 2024

Weekly Market Insights: Powell: Fed is Ready for Rate Cut

Stocks notched a solid gain as dovish comments from Federal Reserve officials boosted the market’s recovery from early August lows.

The Standard & Poor’s 500 Index rose 1.45 percent, while the Nasdaq Composite added 1.40 percent. The Dow Jones Industrial Average picked up 1.27 percent. The MSCI EAFE Index, which tracks developed overseas stock markets, gained 2.98 percent.1,2

Dovish Week

Stocks started the week strong, rallying after Wall Street welcomed dovish comments from Minneapolis Fed President Neel Kashkari. The S&P 500 and Nasdaq each posted gains on Monday–the 8th consecutive winning session. The Dow rose for the 5th session in a row.3,4

From there, markets traded in a narrow band until Wednesday afternoon when minutes released from the July 30-31 FOMC Meeting revealed more dovish comments. On Thursday, stocks dipped ahead of Fed Chair Jerome Powell’s annual Jackson Hole, Wyoming, speech.5,6

Well-received comments from Powell on Friday boosted markets, with all three averages closing higher.7

“The Time has Come”

The Fed’s annual symposium for global central bankers started Friday morning with Fed Chair Powell’s much-anticipated speech. Citing the risk of the labor market cooling even further, he said, “the time has come for policy to adjust.”

Investors responded favorably, with the remaining question being how significant a rate cut might be. Powell kept that door open, adding that “the timing and pace of rate cuts will depend on incoming data, the evolving outlook, and the balance of risks.”8

Footnotes and Sources

  1. The Wall Street Journal, August 23, 2024
  2. Investing.com, August 23, 2024
  3. The Wall Street Journal, August 23, 2024
  4. The Wall Street Journal, August 19, 2024
  5. MarketWatch.com, August 22, 2024
  6. Reuters.com, August 22, 2024
  7. The Wall Street Journal, August 23, 2024
  8. The Wall Street Journal, August 23, 2024

Who Qualifies for the Child and Dependent Care Tax Credit?

Let’s outline who the Internal Revenue Service (IRS) defines as a qualifying person under this care credit:

  • A taxpayer’s dependent who is under the age of 13 when the care is provided.
  • A taxpayer’s spouse who is physically or mentally unable to care for themselves and lived with the taxpayer for more than half the year.

In addition to spouses and dependents, the credit may also cover someone who is mentally or physically unable to care for themselves and lived with the taxpayer for six months; this is the case if that person was the taxpayer’s dependent or if they would have been the taxpayer’s dependent except for one of the following:

  • The qualifying person received a gross income of $4,700 or more.
  • The qualifying person filed a joint return.

If filing jointly, the taxpayer or spouse could be claimed as a dependent on someone else’s return.

*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.gov9

Footnotes and Sources

  1. IRS.gov, May 8. 2024

     

    Weekly Market Insights: Markets Rise Thanks to Upbeat Indicators

    Stocks posted solid gains last week, buoyed by robust economic data and constructive comments from Fed officials.

    The Standard & Poor’s 500 Index rose 3.93 percent, while the Nasdaq Composite gained 5.29 percent. The Dow Jones Industrial Average lagged a bit, picking up 2.94 percent. The MSCI EAFE Index, which tracks developed overseas stock markets, powered ahead by 4.31 percent.1,2

    Upbeat Economic News

    Three critical economic data points gave investors what they were looking for: wholesale inflation, consumer prices, and retail sales.

    Both the Producer Price Index and the Consumer Price Index rose less than expected in July, reinforcing a picture of cooling inflation. The July retail sales report on Thursday was stronger than expected, which added more fuel to the week-long rally.3,4,5

    Market action slowed down on the week’s final trading day, with positive consumer sentiment gains countered only by a drop in housing starts.

    It was the S&P 500’s best weekly gain of the year so far and the best since November of 2023. The gains helped erase losses from earlier in the month, when “carry trades” news from Japan unsettled investors.6,7

    Double Assist

    Last week’s market rally saw assists from two places: economic data and constructive Fed comments.

    On Thursday, Atlanta Fed President Raphael Bostic said he had “a lot more confidence that inflation’s sustainably on its way to 2%,” citing steady drops in CPI. And St. Louis Fed President Alberto Musalem said, “the time may be nearing when an adjustment (to the Fed Funds Rate) may be appropriate.8

    Footnotes and Sources

    1. The Wall Street Journal, August 16, 2024
    2. Investing.com, August 16, 2024
    3. The Wall Street Journal, August 13, 2024
    4. The Wall Street Journal, August 14, 2024
    5. The Wall Street Journal, August 15, 2024
    6. The Wall Street Journal, August 16, 2024
    7. CNBC.com, August 16, 2024
    8. The Wall Street Journal, August 15, 2024

    Divorce or Separation Can Affect Your Taxes

    The first thing to consider is alimony payments. Alimony payments paid under a divorce or separation instrument are deductible by the payer, and the recipient must include it in income. Alimony is not subject to tax withholding, so increasing the tax paid during the year may be necessary to avoid a penalty.

    The next thing to consider is IRA contributions. A divorce agreement by the end of the tax year means taxpayers can’t deduct contributions made to a former spouse’s traditional IRA. They can only deduct contributions made to their own traditional IRA.

    Once you reach age 73, you must begin taking RMDs from a traditional IRA in most circumstances. Withdrawals from traditional IRAs are taxed as ordinary income and, if taken before age 59½, may be subject to a 10% federal income tax penalty.

    *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.gov1

    Footnotes and Sources

    1. IRS.gov, May 8. 2024

    Weekly Market Insights: Stocks Stage Comeback After Heavy Monday

    Stocks ended last week with modest losses, masking a volatile five-day trading period that saw investors embrace recession concerns and then dismiss the slow-down talk as speculation as the week progressed.

    The Dow Jones Industrial Average slipped 0.60 percent, while the Standard & Poor’s 500 Index ended flat (-0.04 percent). The Nasdaq Composite dipped 0.18 percent. The MSCI EAFE Index, which tracks developed overseas stock markets, fell 1.21 percent.1,2

    Stocks Stage Comeback

    Monday was the worst day for the S&P 500 and the Dow in nearly two years. As recession talk grew louder, investors took a “risk off” position.

    On Monday, the Japanese market had its worst drop since 1987 as market participants unwound positions from a popular trading strategy called a “carry trade” amid a global sell-off in stock prices.3

    But on Thursday, initial jobless claims fell less than expected—a positive sign for the labor markets— which quieted some of the recession talk. Also, as the week progressed, there was growing speculation that the July jobs report was more of an outlier than a lead indicator of a pending recession.

    By Friday’s close, all three major averages had regained most of the week’s losses.4

    Mortgage Update

    Last Thursday, the average rate on a 30-year fixed mortgage dropped to 6.47 percent—a 15-month low. Many home buyers welcomed the news, and it appeared to help support Thursday’s rally.5

    But the announcement left some wondering whether rates would continue to trend lower. Mortgage rates are tied to the interest rates set by the Federal Reserve. Some speculated the drop was due to market participants anticipating the Fed would adjust rates in September, which remains anything but certain.6

    Footnotes and Sources

    1. The Wall Street Journal, August 9, 2024
    2. Investing.com, August 9, 2024
    3. CNBC.com, August 5, 2024
    4. The Wall Street Journal, August 8, 2024
    5. The Wall Street Journal, August 8, 2024
    6. The Wall Street Journal, August 9, 2024

    Is it Time for a Paycheck Checkup?

    There’s no better time to check your withholding status and make sure your paycheck accurately reflects the taxes you should be paying. These paycheck checkups are a great practice when something happens in your life that may change your tax status, such as getting married or getting divorced, having a baby, getting a new job, or getting a raise or promotion at work. You can also adjust your withholding status if you want to change the tax withheld due to other circumstances.

    Other factors can also be checked during your paycheck checkup, such as how much you contribute to your health insurance retirement plan. These expenses can also impact your tax liability.

    *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

    1. IRS.gov, May 8. 2024

    Weekly Market Insights: Fed Goes Dove; Investors Retreat

    Stocks fell broadly last week as investors looked past upbeat Fed comments and focused on disappointing corporate reports and weaker-than-expected economic data.

    The Dow Jones Industrial Average lost 2.20 percent, while the Standard & Poor’s 500 Index fell 2.06 percent. The Nasdaq Composite Index dropped 3.35 percent. By contrast, the MSCI EAFE Index, which tracks developed overseas stock markets, gained 0.19 percent for the week through Thursday’s close.1

    Volatile Week of Trading

    Stocks were under pressure early in the week as investors appeared to focus on the Fed’s meeting, which ended on Wednesday. It was a big week for Q2 corporate reports, with five of the ten largest names in the S&P 500 (by market capitalization) reporting numbers. But attention was mainly on the Fed’s meeting.2,3

    Stocks rallied on Wednesday when Fed Chair Powell indicated a September interest rate cut was “on the table.”4

    But selling picked up on Thursday as investors’ attention quickly shifted to disappointing corporate reports and weak economic data. Friday morning’s disappointing June jobs report raised even more concerns about the economy’s strength. The Nasdaq ended the week in correction territory, down more than 10 percent from its recent all-time high.5,6

    Economic Concerns

    Fresh economic data suggested weakening manufacturing, construction, and employment outlooks. On Friday, the Labor Department’s July jobs report showed a sharper-than-expected job growth slowdown and an unemployment uptick to 4.3 percent—the highest rate in 2½ years.

    At Wednesday’s Fed press conference, investors welcomed Powell’s unusually candid and upbeat comments. However, as the week progressed, investors started questioning whether the Fed was misreading the economy and moving too slowly in adjusting interest rates.7

    Footnotes and Sources

    1. The Wall Street Journal, August 2, 2024
    2. The Wall Street Journal, August 2, 2024
    3. S&P Global, July 31, 2024
    4. The Wall Street Journal, July 31, 2024
    5. The Wall Street Journal, August 1, 2024
    6. CNBC.com, August 2, 2024
    7. The Wall Street Journal, August 2, 2024

    Start a New Business Off on the Right Foot

    Starting a new business? There are some tax tips to know to get yourself moving in a positive direction something like that the Internal Revenue Service (IRS) shares for new business owners:

    Choose the proper business structure: The form of business determines which income tax return a business taxpayer needs to file. The most common business structures are a sole proprietorship, a partnership, a corporation, an S corporation, and an LLC.

    Apply for an Employer Identification Number (EIN): An EIN is used to identify a business.

    *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

    1. IRS.gov, May 8, 2024

    Weekly Market Insights: Down Corporate Reports Shake Investors

    Stocks had a mixed, see-saw week as disappointing corporate reports unsettled investors who appeared to rotate away from some leading groups in favor of other names.

    The Dow Jones Industrial Average picked up 0.75 percent. Meanwhile, the Standard & Poor’s 500 Index declined 0.83 percent, and the Nasdaq Composite Index dropped 2.08 percent. The MSCI EAFE Index, which tracks developed overseas stock markets, fell 1.49 percent for the week through Thursday’s close.1

    Q2 Corporate Reports Start

    Last week began with some positive momentum, but after Tuesday’s close, two influential tech companies reported disappointing Q2 numbers, which soured sentiment. On Wednesday, the S&P dropped 2 percent, and the Nasdaq fell more than 3 percent.

    Stocks attempted to rebound on Thursday on news that gross domestic product grew much faster than expected in Q2, but sellers swooped in near the close.3

    Stocks rallied broadly on Friday after a positive inflation report. The personal consumption expenditures index, widely considered the Fed’s preferred inflation measure, showed only a slight uptick in June—in line with expectations.4

    Watch the Rotation

    July 26 saw the end of the third consecutive week in which the Dow led the other two averages and its fourth straight week of gains.

    At the same time, the S&P and Nasdaq have been under pressure, with both posting losses for the second consecutive week.

    So far in July, the Dow is up nearly 4 percent, the S&P is down slightly, and the Nasdaq is off by over 2 percent. That’s a marked change from earlier in the year when the Nasdaq led.5

    Footnotes and Sources

    1. The Wall Street Journal, July 26, 2024
    2. The Wall Street Journal, July 26, 2024
    3. The Wall Street Journal, July 25, 2024
    4. CNBC.com, July 26, 2024
    5. The Wall Street Journal, July 26, 2024