January 2022 Newsletter
IRS News: The filing deadline is back to April 15, where it used to be. There will be no change on filing dates unless officially announced. Because we have less time than before and have been receiving a tidal wave of new complex returns [we turn some down], please inform our office ahead of time if you would like us to file extensions for you. We prefer that you send us a note via email or regular mail of your request for extension attaching either your W-2 or pension form. We will be unable to file an extension if we do not have any of these forms or a check payable to IRS if you believe you owe taxes.
The IRS recently warned us of new scam e-mail attempts to steal Electronic Filing ID numbers [EFINs]. You must not respond to “Verifying your EFIN before e-filing.” I recently briefly intercepted a 7am call from a scammer who claimed to be the IRS. Always call us if there are any questions about a possible scam by phone or e-mail.
The third round of Economic Impact Stimulus Payments received last year must be reported. You should receive IRS letterform 6475 to remind you of the amounts paid. Advanced Child Tax Credit payments should also be reported. IRS letterform 6419 will show the amounts received. Both amounts must be reported on the 1040 tax returns and the IRS will compare the actual amounts paid.
Lastly, If you retired before age 60 due to Covid related illness, your 10% retirement pension distribution penalty can be waived.
Out of State filers: Many clients have moved out of state these past years. We do taxes for all 50 states and try to retain client relationships with all our distant neighbors. Besides appointments, we have been completing taxes received by FedEx, E-mail, Priority Mail, and dropped off at the front door. Every physical and electronic method works fine. All states accept electronically filed returns so our services work for everybody everywhere. Credit cards are now accepted so payment is not a problem. We welcome your business and friendship anywhere in the world.
Federal Reserve Governorship: This agency controls the money supply in the country. According to recent WSJ reports, the current directorships are in play for new members and the Administration has forwarded applications for radical leadership. The political attitude is for money distribution and control by banks to force them to finance more green energy in minority communities and steer capital from fossil fuels. They do this by allocating capital toward sustainable investments that do not depend on carbon and fossil fuels. An example would be a favorable approval for solar panel financing while gas stations would run out of gas because gasoline deliveries halted when the bank denied the truckers’ new tanker truck loan. The Feds should not be subjected to political pressure for lending restrictions but to remain independent.
Social Security & Medicare: The current system originated during Great Depression under President Franklin Delano Roosevelt. It has worked relatively well over the many years since its inception and is the main source of retirement income for most Americans. Over the years because people now live longer, remain retired longer, and are overall older than before, the funding dynamics are radically changing. For many years there was an annual surplus of funds into the system which was invested in special Treasury securities. The interest has averaged about 2 1/2 % which is low but reflects the fact that present ten-year Treasury notes earn less than 2% today.
In 2021 for the first time, there was a drain on the Treasury reserves. People were drawing more funds than had been contributed from wages during the year. The beginning of the year there were $2.9 trillion of outstanding reserves to draw on. The fund earned $70 billion in interest this past year. But the SSA spent $120 trillion more than it collected in taxes. This is a trend that will continue in the future The CBO anticipates a cumulative trust fund deficit of $2.3 trillion by 2030 to offset the balance forward from 2020. After that, they continue to anticipate 78% of benefits received to cover payments for the future.
Medicare, a separate fund, began with $303 billion in 2020 reserves and dropped $30 billion last year. It has been given a very short actuarial life.
The Congressional Budget Office anticipates all their pension and trust fund reserves to be exhausted by 2030 and the Covid-19 economic disruptions are not part of their historic data yet. The promises, not law, made are to continue payments.
An observation is that the Treasury reserves for these funds are a Federal liability. They are not shown as part of the $30 Trillion ballooning national deficit. Accordingly, if the Government draws a Trillion to cover a shortage of wage funds to cover payments, they must borrow another trillion to offset the liability. There is no liquidity.
As the stock market flounders and cryptocurrency becomes a roller-coaster fantasy, we still offer solid insurance annuities which guarantee initial contributions and continuing earnings. They are ideal for retirement and pensions which require long-term planning.
Please make your appointments early or arrange to send your work in because it will be a short tax season for all. Also, fill in the attached form and include it with your tax documents when you visit or send your paperwork to our office.
Phillip B Chute, EA & Staff