It’s Tax Time
Tax season is underway, and April 15th will be here before you know it. If you haven’t already done so, please reach out to your advisor or call us at (203) 967-2231 to schedule your tax appointment. If you have friends or family on the lookout for top-tier independent tax prep or financial services, we’d be honored if you refer them to us.
The Markets
What do dieters have in common with the Federal Reserve?
If you’ve ever dieted, you may be familiar with the weight-loss plateau. Many people experience steady progress. The bathroom scale moves lower week by week – until it doesn’t – and that can be discouraging.
The Federal Reserve has been trying to reduce inflation, and it has had significant success. Its actions are credited with bringing headline inflation from a peak of 9.1% in June 2022 to 3.2% in February 2024, as measured by the Consumer Price Index.
Looking back over the last few months, it seems as though inflation hit a plateau (and, perhaps, indulged in a bit of holiday excess).
- September 2023: 3.7%
- October 2023: 3.2%
- November 2023: 3.1%
- December 2023: 3.4%
- January 2024: 3.1%
- February 2024: 3.2%
However, the Fed is not discouraged. After inflation data was released last week, Chair Jerome Powell commented:
“The report that came out this morning is pretty much in-line with our expectations. Our hand is a steady hand in this. We’ve been saying all through last year and this year, we’re making progress… The economy is strong. We see very strong growth… That means we that don’t need to be in a hurry to cut [rates]. It means we can wait and become more confident that, in fact, inflation is coming down to two percent on a sustainable basis.”
United States stock markets were unfazed by the inflation news and delivered a stellar performance for the first quarter. The Standard & Poor’s 500 Index experienced 22 record closes during the first three months of the year, reported Teresa Rivas of Barron’s.
Major U.S. stock indices finished the week higher, and U.S. Treasury yields were mixed.
| Data as of 3/28/24 | 1-Week | Y-T-D | 1-Year | 3-Year | 5-Year | 10-Year |
|---|---|---|---|---|---|---|
| Standard & Poor's 500 Index | 0.4% | 10.2% | 32.3% | 9.8% | 13.3% | 11.0% |
| Dow Jones Global ex-U.S. Index | 0.1 | 3.9 | 13.1 | -0.9 | 3.6 | 2.0 |
| 10-year Treasury Note (yield only) | 4.2 | NA | 3.6 | 1.7 | 2.4 | 2.7 |
| Gold (per ounce) | 2.0 | 6.5 | 12.8 | 9.1 | 11.3 | 5.5 |
| Bloomberg Commodity Index | 0.8 | 0.9 | -4.7 | 5.8 | 4.2 | -3.0 |
S&P 500, Dow Jones Global ex-US, Gold, Bloomberg Commodity Index returns exclude reinvested dividends (gold does not pay a dividend) and the three-, five-, and 10-year returns are annualized; and the 10-year Treasury Note is simply the yield at the close of the day on each of the historical time periods.
Sources: Yahoo! Finance, MarketWatch, djindexes.com, London Bullion Market Association.
Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly. N/A means not applicable.
Three Reasons Taxpayers Get Notices From the IRS
Receiving a notice from the Internal Revenue Service can be daunting. While some notices are resolved fairly easily, others require an audit.
So, how does the IRS determine who gets a notice? Michelle Singletary of the Washington Post reported, “The IRS examines returns to ensure that income, expenses, deductions, and credits are reported accurately. When an inconsistency is found, a taxpayer may undergo an audit or be notified that adjustments were made that could result in a refund or a required tax payment.”
Here are three issues that can bring a tax notice to your mailbox:
- Math mistakes. Taxes are a great example of the importance of math in real life. In 2022, the IRS issued more than 9 million notices because of math errors. The top triggers were calculations related to the Recovery Rebate Credit and the Child Tax Credit. Most notices simply adjusted taxpayers’ returns and indicated whether additional amounts were owed, or higher refunds were due.
- Missing income. Tax returns are supposed to account for all income a tax filer earned over the tax year. Income typically is reported by employers, mortgage companies, banks (or other sources of income) on Forms W-2 and 1099, and other forms. The IRS Automated Underreporter program systematically matches tax returns and informational tax forms. When the information does not match, the tax filer gets a notice.
- Unusual tax deductions. The IRS uses statistics to determine normal levels for various deductions. If your deductions are higher-than-average, your return may be flagged. Joy Taylor of Kiplinger Personal Finance reported,
“If the deductions, losses, or credits on your return are disproportionately large compared with your income, the IRS may want to take a second look at your return. Taking a big loss from the sale of rental property or other investments can also spike the IRS's curiosity. Ditto for bad debt deductions or worthless stock.”
That doesn’t mean you shouldn’t take a deduction or tax credit, just make sure you have proper documentation.
If you have any questions about taxes, talk with a tax professional. They can help minimize the chance that your tax return will trigger an audit or a notice from the IRS.
Weekly Focus – Think About It
“A man who carries a cat by the tail learns something he can learn in no other way.”
—Mark Twain, author
Wishing you and your families well,
Sean M. Dowling, CFP, EA
President, The Dowling Group Wealth Management
Please feel free to forward this commentary to family, friends, or colleagues. If you would like us to add them to the list, please reply to this e-mail with their e-mail address and we will ask for their permission to be added.
- Government bonds and Treasury Bills are guaranteed by the U.S. government as to the timely payment of principal and interest and, if held to maturity, offer a fixed rate of return and fixed principal value. However, the value of fund shares is not guaranteed and will fluctuate.
- Corporate bonds are considered higher risk than government bonds but normally offer a higher yield and are subject to market, interest rate and credit risk as well as additional risks based on the quality of issuer coupon rate, price, yield, maturity, and redemption features.
- The Standard & Poor's 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. You cannot invest directly in this index.
- All indexes referenced are unmanaged. Unmanaged index returns do not reflect fees, expenses, or sales charges. Index performance is not indicative of the performance of any investment.
- The Dow Jones Global ex-U.S. Index covers approximately 95% of the market capitalization of the 45 developed and emerging countries included in the Index.
- The 10-year Treasury Note represents debt owed by the United States Treasury to the public. Since the U.S. Government is seen as a risk-free borrower, investors use the 10-year Treasury Note as a benchmark for the long-term bond market.
- Gold represents the afternoon gold price as reported by the London Bullion Market Association. The gold price is set twice daily by the London Gold Fixing Company at 10:30 and 15:00 and is expressed in U.S. dollars per fine troy ounce.
- The Bloomberg Commodity Index is designed to be a highly liquid and diversified benchmark for the commodity futures market. The Index is composed of futures contracts on 19 physical commodities and was launched on July 14, 1998.
- The DJ Equity All REIT Total Return Index measures the total return performance of the equity subcategory of the Real Estate Investment Trust (REIT) industry as calculated by Dow Jones.
- International investing involves special risks such as currency fluctuation and political instability and may not be suitable for all investors. These risks are often heightened for investments in emerging markets.
- Yahoo! Finance is the source for any reference to the performance of an index between two specific periods.
- Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance.
- Economic forecasts set forth may not develop as predicted and there can be no guarantee that strategies promoted will be successful.
- Past performance does not guarantee future results. Investing involves risk, including loss of principal.
- You cannot invest directly in an index.
- Stock investing involves risk including loss of principal.
- The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly. Economic forecasts set forth may not develop as predicted and are subject to change. Investing involves risk including loss of principal.
- The Price-to-Earning (P/E) ratio is a measure of the price paid for a share relative to the annual net income or profit earned by the firm per share. It is a financial ratio used for valuation: a higher P/E ratio means investors are paying more for each unit of net income, thus, the stock is more expensive compared to one with a lower P/E ratio.
- These views are those of Carson Group Coaching, and not the presenting Representative or the Representative’s Broker/Dealer, and should not be construed as investment advice.
- This newsletter was prepared by Carson Group Coaching. Carson Group Coaching is not affiliated with the named broker/dealer.
- The foregoing information has been obtained from sources considered to be reliable, but we do not guarantee it is accurate or complete.
- Consult your financial professional before making any investment decision.
Sources:
https://www.mayoclinic.org/healthy-lifestyle/weight-loss/in-depth/weight-loss-plateau/art-20044615
https://www.dol.gov/newsroom/economicdata/cpi_07132022.pdf
https://www.bls.gov/news.release/cpi.nr0.htm
https://www.bls.gov/news.release/archives/cpi_10122023.pdf
https://www.bls.gov/news.release/archives/cpi_11142023.htm
https://www.bls.gov/opub/ted/2024/consumer-price-index-2023-in-review.htm
https://www.youtube.com/watch?v=Y1DwQ8AZ74k
https://www.barrons.com/articles/stock-market-performance-quarter-outlook-0e5168a0?mod=hp_LEAD_2
https://www.barrons.com/market-data?mod=BOL_TOPNAV
https://www.washingtonpost.com/business/2024/five-irs-audit-triggers/?_pml=1
https://www.taxpayeradvocate.irs.gov/get-help/issues-errors/underreported-income/
https://www.kiplinger.com/taxes/tax-returns/602068/irs-audit-red-flags
https://www.brainyquote.com/quotes/mark_twain_105031
ADV & Investment Objectives: Please contact The Dowling Group if there are any changes in your financial situation or investment objectives, or if you wish to impose, add or modify any reasonable restrictions to the management of your account. Our current disclosure statement is set forth on Part II of Form ADV and is available for your review upon request.
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