Author: Ramsay Capital Group

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}

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}