Author: Ramsay Capital Group

People with disabilities can use an Achieving a Better Life Experience (ABLE) account to help pay qualified disability-related expenses. Here are some things to know about ABLE accounts:

• This tax-advantaged savings account doesn’t affect their eligibility for government assistance programs.
• The 2022 annual contribution limit is $16,000.
• ABLE account-designated beneficiaries may be eligible to claim the saver’s credit for a percentage of their contributions.
• Eligible beneficiaries must be 18 years old at the close of the taxable year, are not dependent or full-time students, and meet the income requirements.
• Families may roll over funds from a 529 plan to another family member’s ABLE account.
• Disability-related expenses include housing, education, transportation, health, prevention and wellness, employment training and support, assistive technology, and personal support services.

* 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.gov⁷

Footnotes and Sources

7. ^{IRS.gov, July 20, 2022}

Hawkish comments by Fed Chair Jerome Powell, following the announcement of another 75 basis points interest rate hike last week, cast a pall over financial markets, sending yields higher and stocks lower.

The Dow Jones Industrial Average slipped 1.40%, while the Standard & Poor’s 500 declined 3.35%. The Nasdaq Composite index lost 5.65% for the week. The MSCI EAFE index, which tracks developed overseas stock markets, fell 1.04%.^1,2,3

Powell Disappoints

The official statement released following the Federal Open Market Committee (FOMC) meeting appeared to suggest a potential for future easing of interest rates. Investors cheered the news, sending stocks higher. But the optimism was crushed 30 minutes later on hawkish comments by Fed Chair Powell during his post-meeting press conference.

Losses accelerated into Thursday, led by technology names, which were under pressure due to rising bond yields. The yield on the two-year Treasury note rose to its highest level since 2007. The sentiment took damage from workforce reduction/freeze news from multiple technology companies; some considered it a sign of a pending recession. Stocks managed to erase some of the week’s losses on Friday following a strong employment report and a drop in the U.S. dollar.⁴

From Dove to Hawk in 30 Minutes

In the statement accompanying the 75 basis point rate increase, the FOMC said that future increases would consider the cumulative monetary tightening to date and the lag in impact such tightening involves.⁵

But in his post-meeting press conference, Fed Chair Powell struck a more hawkish tone. He said that current inflation data did not support any slowdown in rate increases and that the terminal rate (the point at which rates will no longer rise) may be higher than initially expected.⁶

Footnotes and Sources

1. ^{The Wall Street Journal, November 4, 2022}
2. ^{The Wall Street Journal, November 4, 2022}
3. ^{The Wall Street Journal, November 4, 2022}
4. ^{The Wall Street Journal, November 3, 2022}
5. ^{The Wall Street Journal, November 2, 2022}
6. ^{The Wall Street Journal, November 2, 2022}

Did you know that the IRS has an app that makes it easy to check some things off your tax to-do list? Using the app, you can:

• Check your refund status. Your refund status is available within 24 hours after the IRS receives your e-filed return (or four weeks after receiving a paper return).
• Access IRS Free File. Free File is a tax prep software for taxpayers whose 2021 total adjusted gross income was $73,000 or less.
• Find payment options, including IRS Direct Pay which allows you to pay tax bills directly from your bank account.
• Get tax help.
• Stay up to date with updates from the IRS.

* 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

6. ^{IRS.gov, July 25, 2022}

Stocks overcame poor earnings results from some of America’s largest companies to post gains last week as investors cheered positive earnings surprises, easing inflation and a rebound in economic growth.

The Dow Jones Industrial Average rose 5.72%, while the Standard & Poor’s 500 advanced 3.95%. The Nasdaq Composite index added 2.24% for the week. The MSCI EAFE index, which tracks developed overseas stock markets, gained 4.89%.1,2,3

A “Spook-tacular” Week

Some mega-cap technology companies were under pressure last week on weak earnings and tepid fourth-quarter guidance. They reported multiple headwinds, including declining advertising revenues, loose expense control, and a slowdown in cloud growth.

Meanwhile, positive earnings surprises from “old economy” companies powered markets higher. This market bifurcation was evident in the divergence in the performance of the Dow Industrials and the Nasdaq. The S&P 500 posted a substantial gain despite its disproportionate weighting of mega-cap stocks, which helped illustrate the power of the rally. Momentum accelerated into Friday, aided by an easing in inflation and a solid third-quarter Gross Domestic Product (GDP) report.

Economic Growth Exceeds Expectations

After two straight quarters of negative economic growth, the initial estimate of the third quarter’s GDP came in at a solid 2.6%, exceeding economists’ 2.3% estimate. The surprising economic performance was largely attributable to an increase in exports, which narrowed the trade deficit, a development that may not repeat going forward.⁴

Particularly encouraging was the personal consumption expenditure price index, a report used by the Fed to track inflation. It increased 4.2%, well below the 7.3% jump from a quarter ago.⁵

Footnotes and Sources

1. ^{The Wall Street Journal, October 28, 2022}
2. ^{The Wall Street Journal, October 28, 2022}
3. ^{The Wall Street Journal, October 28, 2022}
4. ^{CNBC, October 27, 2022}
5. ^{CNBC, October 27, 2022}

Federal and state excise taxes are for specific goods, services, and activities, such as fuel, tobacco, alcohol, airline tickets, and more.

If your business is subject to excise tax, you must file a Form 720, Quarterly Excise Tax Return, to report the tax. You must also file this form every quarter. The due dates as of 2022 are April 30 for Q1, July 31 for Q2, October 31 for Q3, and January 31 for Q4.

You can electronically file Form 720. Each industry may have its forms (ex: Form 2290, Heavy Highway Vehicle Use Tax).

* 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.gov⁵

Footnotes and Sources

5. ^{IRS.gov, August 1, 2022}

Federal and state excise taxes are for specific goods, services, and activities, such as fuel, tobacco, alcohol, airline tickets, and more.

If your business is subject to excise tax, you must file a Form 720, Quarterly Excise Tax Return, to report the tax. You must also file this form every quarter. The due dates as of 2022 are April 30 for Q1, July 31 for Q2, October 31 for Q3, and January 31 for Q4.

You can electronically file Form 720. Each industry may have its forms (ex: Form 2290, Heavy Highway Vehicle Use Tax).

* 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.gov⁵

Footnotes and Sources

5. ^{IRS.gov, August 1, 2022}

A positive start to a new earnings season and late-week hopes for a near-term easing in Fed rate hikes lifted investors’ spirits and powered stocks to gains for the week.

The Dow Jones Industrial Average jumped 4.89%, while the Standard & Poor’s 500 advanced 4.74%. The Nasdaq Composite index added 5.22% for the week. The MSCI EAFE index, which tracks developed overseas stock markets, gained 1.66%.^1,2,3

Earnings, Fed Spark Rally

The stock market narrative shifted last week from Fed interest rate hikes (a persistent drag on investor sentiment) to corporate earnings, which boosted investor enthusiasm with better-than-expected results. Stocks surged in the first two days of trading on the strength of positive earnings surprises, aided by a modest pullback in bond yields and news that the U.K. was scrapping its tax cut plans.

Mid-week, stocks surrendered some gains on a stronger U.S. dollar and rising bond yields. But on Friday, comments by a Fed official that hinted at a possible relaxation in Fed rate hikes sent stocks soaring to close out a good week.

Better Than Expected

Investors were approaching the new earnings season with a fair amount of trepidation amid an environment of higher interest rates and a slowing economy. The concern has been that poor earnings may drag stock prices lower from current levels.

Early earnings results have provided investors with mostly positive surprises. With 88 companies comprising the S&P 500 index reporting, 75% reported profits above analysts’ expectations, well above the 66% long-term average.⁴

Footnotes and Sources

1. ^{The Wall Street Journal, October 21, 2022}
2. ^{The Wall Street Journal, October 21, 2022}
3. ^{The Wall Street Journal, October 21, 2022}
4. ^{Refinitiv, October 20, 2022}

You might hire employees and independent contractors for similar work, but there are important differences in how they are classified. Here are a few questions to consider:

• Does the company have the right to control what the worker does and how the worker does the job?
• Does the business direct or control the financial and business aspects of the worker’s job?
• Are the business aspects of the worker’s job controlled by the payer?
• Are there written contracts or employee-type benefits such as a pension plan, insurance, and vacation pay?
• Will the relationship continue, and is the work performed a key aspect of the business?

Correctly classifying your workers is essential to avoid issues with taxes or 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

^{8. IRS.gov, August 2, 2022}

Stocks were mixed last week amid wide intra- and inter-day price swings, as technology shares bore the brunt of the downdraft.

The Dow Jones Industrial Average gained 1.15% for the week. Meanwhile, the Standard & Poor’s 500 slipped 1.55%, and the Nasdaq Composite index dropped 3.11%. The MSCI EAFE index, which tracks developed overseas stock markets, lost 2.48%.^1,2,3

Breathtaking Volatility

An above-consensus consumer inflation number sent stocks tumbling in early Thursday trading before inexplicably surging higher in a stunning reversal that saw the Dow Jones Industrial Average rally 1,500 points from its intraday low. Before reversing, stocks had touched levels last seen in 2020. Friday surrendered much of the previous day’s gains, sending stocks mostly lower for the week.⁴

The stock market began the week on a volatile note, with the Nasdaq hitting a two-year low. Recession fears and new export controls may limit U.S. companies from selling advanced semiconductor chips and related manufacturing equipment to China.⁵

Sticky Inflation

September’s inflation reports provided little evidence that inflation was moderating meaningfully. The Producer Price Index’s first report on inflation showed a 0.4% increase in supplier prices over August and an 8.5% increase 12 months ago. While down from August’s 8.7% rise, it was higher than market expectations.⁶

The subsequent release of the Consumer Price Index showed consumer prices rising 0.4% in September and 8.2% year-over-year. More troubling was core inflation (excludes energy and food prices), which gained 0.6% in September and registered an increase of 6.6% from a year ago–the biggest 12-month increase since August 1982.⁷

Footnotes and Sources

1. ^{The Wall Street Journal, October 14, 2022}
2. ^{The Wall Street Journal, October 14, 2022}
3. ^{The Wall Street Journal, October 14, 2022}
4. ^{CNBC, October 13, 2022}
5. ^{CNBC, October 10, 2022}
6. ^{CNBC, October 12, 2022}
7. ^{CNBC, October 13, 2022}

A powerful two-day stock rebound cemented a positive week for investors as a new trading month began.

The Dow Jones Industrial Average rose 1.99%, while the Standard & Poor’s 500 added 1.51%. The Nasdaq Composite index increased 0.73% for the week. The MSCI EAFE index, which tracks developed overseas stock markets, gained 3.42%.^1,2,3

Stocks Start Strongly 

Stocks opened the week posting their best two-day rally since March 2020, as the U.K. prime minister’s decision to reverse a tax cut proposal that had upended financial markets the previous week lifted investors.⁴

Falling yields further lifted investor enthusiasm, as did new economic data indicating a cooling economy. Losses in the last two days erased much of the gains as concerns about higher rates and recession once again moved front and center. The selling pressure was due to a stream of hawkish comments by Fed officials and labor market data that suggested the Fed would likely stick with its rate-hike plans.

A Mixed Labor Picture

Employment-related reports offered conflicting signals on the state of the labor market. In a sign of cooling, the number of open jobs in August fell 10%, while a subsequent report from Automated Data Processing (ADP) showed continued labor market strength. ADP reported private employers added a higher-than-anticipated 208,000 jobs in September, and annual wages rose 7.8% from a year ago.^5,6

Jobless claims rose to 219,000, up from the previous week’s 190,000 and in line with 2019’s average. September’s employment report showed that employers added 263,000 jobs–slightly lower than expectations. The combination of new hiring and lower labor force participation led to a drop in the unemployment rate to 3.5%.^7,8

Footnotes and Sources

1. ^{The Wall Street Journal, October 7, 2022}
2. ^{The Wall Street Journal, October 7, 2022}
3. ^{The Wall Street Journal, October 7, 2022}
4. ^{CNBC, October 3, 2022}
5. ^{The Wall Street Journal, October 4, 2022}
6. ^{CNBC, October 5, 2022}
7. ^{The Wall Street Journal, October 6, 2022}
8. ^{CNBC, October 7, 2022}