top of page
Financial District

March 2021 Newsletter

IRS News: 

1.    The new stimulus checks are in the mail. There was a report that all of the Social Security records of people still alive had been sourced for the first wave of stimulus checks.  The amounts are greater than before and will help bring our national debt to $30 TRILLION.

2.    The IRS has completed a computer program to check all the tax returns filed which reported unemployment payments.  Because these payments were taxable income, a Presidential Executive Act created a $10,200 exclusion retroactive to tax year 2020 which caused great confusion but helped correct a real problem for the unemployed to receive a tax bill after losing work.

3.   At this time, the IRS is six months behind reviewing amended returns and other information on paper-filed documents.  Automation has helped with the current filing system, but the rest of the system is in shambles.

4.   Dealing with the IRS over the phone or dealing with correspondence in any way has become a nightmare.  They are dysfunctional and have procedures to dump the callers who wait hours to get through, which cause the callers to…guess what… call again and again afterward.  The employees must be reimbursed per call, not for doing their job which is to resolve the caller’s problems. 

5.   Audits are scarce because of a shortage of auditors.  We have seen two audits this past year, one was a tax return correction which resulted in no taxes due or owed. The other was a completed audit from a new client which required days of wasted time trying to deal with the IRS, not to question the audit but to arrange an installment agreement [see item 4 above]. It took three days of calling the IRS before we could speak to someone capable of resolving the issue over the phone.

6.  The IRS recently approved an extension for individual tax returns until May 17th this year. This automatic extension requires no application submission.  It extends the tax payment due date but does not extend the first quarterly estimate due April 15, 2021.

National News:  The American Rescue Plan, a Covid-19 blowout of $1.9 trillion includes a proposed child tax credit of $3,000 (ages 6 to 17) to $3,500 (age 5 and under) per child, payable beginning July (or later) this year based on filed 2020 returns by May 17th, the new extended filing deadline. This additional stimulus benefit will be made by monthly $250-$300 payments.  There is an income phaseout beginning at $75,000 for single earnings and $150,000 for married couples. The huge spending bill includes $100 million to help fund a new subway system link for San Franciscans traveling to the Silicon Valley.  A welcome relief for rush hour vehicular traffic from navigating around the thousands of homeless, their shelters, and people doo everywhere.

Tax Increases:  Massive tax increases are on the way.  Proposals include increases in corporate taxes (from 21% to 28%), raising the income tax rate on individuals earning more than $400,000, expanding estate taxes, and a higher capital-gains tax for individuals earning at least $1 million annually.

Legal Assistance:  China Long, our local paralegal and notary, has been visiting clients at our office.  She arranges her own appointments and has been involved in creating living trusts and real estate trust deeds.  Our clients are very pleased with her work, which is typically 1/3 to 1/2 the prices charged by the attorneys where she works on a per diem basis.  If she gets involved in something unusually complicated such as a by-pass or complex trust, she has attorneys to complete the task.  She also handles other routine legal matters but don’t expect to see her in court [alone]. If you would like to schedule a meeting with China, please call our office.

Residential Matters: Mortgage interest rates have bottomed out at 3% and are edging upwards.  On a bigger scale Federal Treasuries moved from a historic low rate almost a full point higher to just less than 2% last month. Last week, the Wall Street Journal noted that there were more active real estate agents than houses for sale.  Yes, the housing shortage is so dire that some houses locally have sold on the first day out of the gate. Affordability does not appear to restrain price increases, but rising interest rates will have a telling effect this summer if they keep climbing.  I expect prices to level with the dearth of resale and new housing costs will continue holding prices up.

Life Settlement Insurance Policies:  Policy owners frequently outgrow the usefulness of their life insurance.  Many believe the only options are to let the policy lapse or surrender the policy to the insurance company. You can actually turn your policy into cash with a life settlement.  You can also retain a portion of your policy coverage without further premium payments. Please contact us to see if your policy qualifies or for additional information.

Insurance Annuities: If you have changed occupations or been unemployed you should do something with your pension portfolio.  We can review your IRA, pension, or 401-K to explain how your investment portfolio is working or to answer related questions.  I spent 20 years as a Registered Stockbroker, Registered Principal, OSJ, and Registered Investment Advisor before I retired from the business. There is no charge for a consultation appointment.

We currently sell an insurance annuity for a large company with billions in portfolios.  This highly rated firm offers a 6% sign up bonus, no advisory fees ever charged, no income taxes on non-qualified plan earnings until withdrawn, and guaranteed principal.  They are highly rated for conservative pension plan investments. If you fear the stock market is in a bubble, as I do, this is a good place to take advantage of the market peak to park your savings in a safe place with reasonable earnings for the future.

Medicare Taxes:  There is another congressional proposal to lower the age threshold for Medicare benefits.  These benefits are part of the Social Security System and a person needs to be age 65 to participate.  It is a good plan and has been paid by employers and workers over the years.  The new proposals are to lower the age by five years to age 60 to initiate benefits.  This would certainly benefit many people who would appreciate coverage for a small monthly payment of about $150 monthly.  Only problem is that even if the age was left at 65, the plan will be bankrupt in a few years from people living longer and medical cost escalation.  People simply live much longer than before, and many great medical procedures simply didn’t exist many years ago.  A change of this five-year magnitude would be suicide for the plan which would cut benefits for all.

The National Debt Need Never Be Paid: This is the prevalent philosophy in Congress.  We are now at $30 trillion with another five or more Trill in the works with pending legislation.  The interest rate on the debt was 5% only five years ago.  Now it is less than 2%. Excess spending will cause inflation (we already have increasing housing prices, fuel, lumber, and many other items we buy or need).  Inflation goes hand in hand with interest rates which must be more than inflation. The ultimate consequence is for the government to appropriate your property when the taxes don’t cover the shortages of cash after people don’t buy Treasuries, national securities, or bond debt anymore.  The word is default, renegotiate terms, or bankruptcy.  

Business As Usual:  Thanks for visiting this year; it is truly the highlight of the year for all of us to visit together.  

Best wishes,

Phil, Nett, Leslie, Sarah, and Erin

Subscribe to Updates
bottom of page