December 2021 Year End Newsletter
First the Good News: Gold bullion is now cheaper. The WSJ reported at year-end that the futures for gold were $1,827, down from $2,050 two years ago. With inflation at 10% it will be affordable in a few years. Please note that the dealers buy your gold at bullion prices but sell at a 5% markup. If gold bullion was at $2,000 per troy [31 grams] ounce, they would buy your Eagle Pure ounce coins at $2,000 or sell them at $2,100. Accordingly, Gold will get 15% cheaper annually if the price continues to decline with inflation. Platinum is cheaper than gold now and will be much cheaper in the future because electric cars do not need the precious metal in catalytic converters.
The IRS Story: At this point, we are back to the April 15th filing deadline. That is unless Congress passes retroactive tax legislation which has happened in the last few years. As of December 18th, the IRS said it was finally on schedule opening their mail. They had processed all returns which didn’t require special processing received by April last year. That left a backlog of 6.3 million returns received afterward and 2.3 million amended returns unprocessed. “The pandemic has created unique challenges for the IRS,” the IRS spokesperson noted. The March 2021 Stimulus payments must be reported on the 2022 returns to be matched by the IRS computers and if you had not received a payment, will be refunded with your returns. The new Advanced Child Tax Credit received last year must also be reported and will be matched, as well. We have included a Questionnaire form with this newsletter. Please complete and bring it with you when you make your tax appointment.
Another Identity Theft scheme reported by a client: Recently a client received a letter from Ally Bank stating that his new account opened on 12/16/2021 online had been “Restricted” due to “unusual activity” on 12/20/2021. What new account? The client had never heard of the bank. Someone had opened the account online and had the client’s correct name, old address, and correct Social Security number. The client notified all his financial and credit sources that someone had fraudulently accessed his Social Security number. Watch out for anything from any bank you do not recognize!! Do not give your phone number and your SS number out except when absolutely required and keep it out of your wallet. It would be wise also to shred all documents that may contain personal information such as account numbers and SS number.
More on the subject: Somebody stole my wallet stolen ten years ago. A year later I received a call from a car dealer in Oceanside about a credit question. Somebody was buying a car under my
name and with the old address which was on my CDL when the wallet was stolen. The dealer actually qualified the fraudulent buyer without my Social Security number and was able to produce a preliminary credit report from Experian. I never got the whole story from the dealer who may have been part of the plot. This shows what lengths the fraudsters will go to access credit based on good victims. Very scary, indeed.
New Year Tax Changes: The terrifying part of the New Tax Year is floating around the Democratic Halls of Congress or rather their side of the House of Representatives. Everything is hung up, but it will come down on us later this year. Many tax deductions and exemptions are inflation-adjusted for the new year. No need to expose all that data now. It lives in our computers for the number-crunching time.
The new charity deduction without itemizing is now $300. Non-cash donations are not accepted here. Business meal deductions of 100% are allowable if you find a good restaurant to go to. Very many local favorites did not supply the government shutdowns.
Environmental News: A disturbing graph showed up in the WSJ lately shows the downward spiral of oil demand, per global policy scenarios, to arrive at net demand in 25 years at only one-quarter of today’s usage. Meanwhile, the stated policy arm of the graph is up over the same years. This is imagination versus the real world. Meanwhile, Biden is now investigating local major oil companies for oil prices based on foreign imports and present control of the markets. After he shut pipelines/oil/gas/fracking production as much as possible.
Solar energy residential panels: A new huge change in the buyback of excess solar energy to Edison companies to cover transmission overhead costs will shift the upfront cost recovery of the installation from seven to eleven years. The pay rate per KWH will shift from 17-44 cents to 3-4 cents. In the past, the overhead was borne entirely by the other 85% of residential clients.
Coal usage increases: Coal usage in the world increased only 6% last year, mostly in China and India. They use coal to generate electric power, especially for energy-intense solar panel production, computer chip production, and now Tesla electric cars in China. We still use coal when we run out of electricity.
California environmental news for the new year: Our pork will be more costly, but the porkers will have a better lifestyle due to a new law which grants them more living space. The same
rules have improved lives of chickens in the past which resulted in higher poultry and egg costs. Everything has a cost.
The California electric problem: After the big San Onofre nuclear plant outside Carlsbad shut down operations prematurely several years ago; two gigawatts of electric power was removed from the grid. Now another large nuclear plant up north, the last remaining in California, will be shut down prematurely this Summer. The costs are enormous because they cost immense amounts to build. Now that the gas-fired 19 electric Peaker plants are shut down, we now have power shortages which result in us firing up and restarting old oil-burning facilities in Huntington Beach and importing power from out of state [remember Enron?]. What will happen with the transition to all-electric motor vehicles?
Hydrogen Fuel Burns Clean: So, goes the mantra. Burned hydrogen exhausts heat and water vapor. There is no pollution. Simple. When the electrons from other non-existent sources such as coal, wood, oil, and natural gas are not here we will turn to hydrogen gas. Really simple? Water is oxidized hydrogen so just reverse the process and you get hydrogen to burn. The solution is so simple that even the politicians are talking about it. All you must do is take a source of pure clean water [H20], put the anode in one end of the pot and a cathode in the other and turn the switch. The switch will bring direct electric power to the pot and hydrogen gas will flow off one terminal and oxygen off the other. Only one problem remains; the amount of electrical energy required to release the gasses is exactly equal to the amount of energy that will be produced by burning the hydrogen gas. Turn the switch to start the process and you will get nothing [-0-], nada, because there is no power to draw on. A trip to nowhere, like the fast train North from Bakersfield.
Alarming California Tax Legislation : Proposed legislation ACA 11 dated January 05, 2022 is a new Constitutional Amendment creating Comprehensive Health Care coverage for Californians. The cost would be borne by an increased personal payroll tax add-on, a levy on gross sales receipts for businesses, and a surtax on taxable income. The sum of these three additional taxes would be $183 Billion, which is the same as taxes already collected this last year which resulted in a large surplus. Yes, it DOUBLES STATE TAXES!!
World-wide News from China: Evergrande, the gigantic construction firm is in default. The firm mostly subsidized by the Chinese Government, built thousands of high-rise apartment-condos all over China to support recent huge manufacturing and economic growth. Whole cities were constructed by them with abandonment of building codes and normal construction practices. To start this New Year right they were ordered to abandon a man-made resort city island for environmental purposes. The default on the empty city put the firm in catastrophic financial condition because like their other unfinished projects, many of the units had already been sold. The Chinese stock market Hang Sen dropped 5% in one day this week.
Remember that we offer safe insurance annuities which have up-front bonuses to offset early cashing in penalties. All investments have costs except annuities unless you are a day trader. The principal is guaranteed, and interest rates are now rising. Bitcoin dropped 8 ½% this week and that is guaranteed to be a volatile portion of any other portfolio.
Please call soon for appointments because this will be a compressed filing season and we have added many new clients from last year.
Last but not least, we hope you have survived the Covid 19 epidemic unscathed. Many people recently have been ill, probably with variations of the virus, but are doing well with their vaccinations.
Best wishes for a BETTER New Year!
Phil Chute, EA & Staff