Monthly Archives: January 2023

Tax Corner

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1099 Tax Reminders

Once again, it is the time of year for small business owners, self-employed individuals, and rental property owners to consider your filing requirements. When you operate your business for a profit, the IRS considers you engaged in a trade or business, and therefore you are required to file certain informational returns. Information relating specifically to Form 1099-MISC, Miscellaneous Income, and Form 1099-NEC, Nonemployee Compensation, can be found at https://www.irs.gov/instructions/i1099mec.

Form 1099-NEC is due to the recipient and IRS by January 31, using either paper or electronic filing procedures. Form 1099-MISC is due to the recipient by January 31, and to the IRS by February 28 if you file on paper, or March 31, if you file electronically. 

“Your Financial Choices”

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Tune in Wednesday, 6 PM “Your Financial Choices” on WDIY 88.1FM. Laurie and her guest Jonathan Ritter CPA, CFP will be discussing: Tax Changes- The Secure Act 2.0.

Questions can be submitted at yourfinancialchoices.com during or in advance of the live show. Recordings of past shows are available to listen or download at both yourfinancialchoices.com and 

The Numbers & “Heat Map”

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THE NUMBERS

The Sources: Index Returns: Morningstar Workstation. Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly. Three, five and ten year returns are annualized. Interest Rates: Federal Reserve, Mortgage Bankers Association.

MARKET HEAT MAP
The health of the economy is a key driver of long-term returns in the stock market. Below, we assess the key economic conditions that we believe are of particular importance to investors.

US ECONOMY

CONSUMER HEALTH

 NEUTRAL Real GDP for Q2 2022 decreased at an annual rate of 0.6% (up from the first estimate of -0.9%) marking the second consecutive quarter of declining GDP. The second estimate for Q3 2022 shows Real GDP to have increased by an annual rate of 2.9%, up from the previous advance estimate that reported a 2.6% gain.

CORPORATE EARNINGS

 NEUTRAL The earnings growth rate for Q3 2022 was 2.4%, adjusted upwards from 2.2% last week. All the S&P500 companies reported actual results; 70% beat EPS expectations, while 71% beat revenue expectations. For Q4 2022, earnings are expected to decline by -2.8%. This would be the first negative growth since Q3 2020 (-5.7%).

EMPLOYMENT

NEUTRAL

 U.S. Nonfarm Payrolls for November 2022 increased by 263,00, and the unemployment rate remained at 3.7%.  Wages have risen more than expected at a rate of 5.1% Year over Year.  Service sectors contributed the most to the increase in jobs, while industries sensitive to rising rates, such as construction and manufacturing, have started to level off.

INFLATION

NEGATIVE

 The annual inflation rate in the U.S. increased by 7.1% for November 2022 compared to the expected 7.3% — showing some continued signs of deceleration. Core CPI was also reported below expectations at 6.0% versus the estimated 6.1%. Although energy prices have come down, energy, food, and shelter are still the main contributors to inflation.

FISCAL POLICY

NEUTRAL

 Senator Manchin and Majority Leader Schumer agreed on the latest tax and energy bill with incentives for green energy, electric cars, and oil & gas companies for exploration. No changes in private equity taxes or higher tax rates for the very wealthy were enacted. The Senate has officially passed the bill. President Biden announced student loan forgiveness of up to $20,000, subject to income limitations.

MONETARY POLICY

NEGATIVE

 Two weeks ago, the Fed approved a 50-bps rate hike after four consecutive 75 bps hikes taking its target range to 4.25%-4.50%. Although the magnitude of rate hikes has been decreased, rates are likely to be kept higher through 2023 with no reductions until 2024. According to the FOMC’s dot plot, the expected terminal rate is now 5.1%.

GLOBAL CONSIDERATIONS

GEOPOLITICAL RISKS

 NEGATIVE Russia held controversial referendums for the annexation of four Ukrainian regions, and the Russian Parliament unanimously recognized these regions as part of Russia. Ukraine and Western countries have condemned these actions by Russia by declaring them illegitimate and illegal. Additional sanctions are being imposed on Russia by many countries.

ECONOMIC RISKS

 NEGATIVE COVID-19 lockdowns in China are easing, which should help the global supply chain recover. On the other hand, the Russian-Ukraine war does not show signs of abating. Gas supplies from Russia to Europe have decreased by 88% over the past year, and EU countries have agreed to cut gas usage by 15% as gas prices have more than doubled. The U.S. is now dealing with a significant diesel shortage, with national reserves at their lowest levels since 1951 and a ban on Russian products that will intensify the issue.

The “Heat Map” is a subjective analysis based upon metrics that VNFA’s investment committee believes are important to financial markets and the economy. The “Heat Map” is designed for informational purposes only and is not intended for use as a basis for investment decisions.

Tax Corner

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Fourth quarter estimated tax payments are due January 16, 2023. 

Depending on your situation, these estimates may include federal, state, and/or local vouchers. If quarterly estimates were recommended when we prepared your 2021 return, they would be included with your tax return. If you requested a paper copy of your return, the instructions, vouchers, and envelopes were included in your tax folder. If you requested an electronic copy, the instructions and vouchers were included in your action-needed copy posted to your client portal. 

Please follow the applicable instructions previously provided to mail your payment and voucher by January 16, 2023. There may be situations where the estimates were generated, but an overpayment was applied in full or partially. If your income or withholdings have significantly changed since last year and you still need to discuss these changes with your advisor, please get in touch with your tax preparer to review. If you change or do not make the estimate, please inform your tax preparer at tax filing time.