Know These 4 Economic Terms to Sound Like an Economist

Do you want to better understand what is happening in the economy and sound extra smart? Here are 4 terms you should know and understand.

Inflation: Inflation is the decrease of purchasing power of your money. What used to cost $10 now costs $12 because your money is not as valuable. Good economists know that inflation is caused by a growth in the money supply.

Money supply: This is the amount of money in circulation. For example, if more money is “printed” then this will increase the supply of money and increase inflation. There are also other ways to increase the money supply by having the Fed buy government securities.

The Fed: The Fed is short for the Federal Reserve System. This is the central banking system. The Fed has the power to set interest rates, more specifically the federal funds rate, which is the rate at which banks lend to each other overnight.

Unemployment: You probably already know this one, but you should know how it is measured. Technically, to be considered unemployed, you have to not have a job, have not actively looked for work in the past 4 weeks, and are currently not available for work. Technically, unemployment can go down while less people are working.

And here’s a bonus term:

Stagflation:  This is a period of high inflation and slow economic growth.

 

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How Many Returns Are Unprocessed by the IRS?

Can you guess how many tax returns are unprocessed by the IRS as of the middle of March?

The number is 7 million unprocessed individual returns. It is taking the IRS more than 21 days to issue any related refunds and in some cases it can take 90 to 120 days. If there are any issues related to items such as the Recovery Rebate Credit or Child Tax Credit, the IRS will send taxpayers an explanation. You can also view the Where’s My Refund tool at the irs.gov website.

 

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How Does the Recovery Rebate Credit Work?

The recovery rebate is a credit for taxpayers who either did not receive or received less than the full amount of their Economic Impact Payments. Here’s how it works for the 2021 tax year:

Economic Impact Payments and plus-up payments were issued during 2021 from March through December. If you received the full amount of the third Economic Impact Payment, then you do not need to include any information about this when you file your return.

However, if you didn’t qualify for the payment or received less than the full amount, then you can claim this as a credit on your 2021 tax return.

If you are missing any of the first and second stimulus payments, then you will need to claim this as a credit on your 2020 tax return.

 

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Your Refund Will Be Delayed Unless . . .

Your refund may be delayed if you don’t report this properly on your tax return this year:

Unfortunately, some of the information sent to you may not be accurate. You need to do this instead:

  • If you have children, then go to irs.gov/account to retrieve information regarding the Advance Child Tax Credit. Even if you received a letter, the letter may not be correct.
  • Use the information from Letter 6475, which shows the amount of the third economic. If you do not have the third economic payment letter, then you can retrieve this online as well. Make sure to retrieve one for your spouse if you are married.

 

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Challenges at the IRS

The IRS is facing many challenges that have carried over from last year. According to the IRS, its workforce has shrunk by 17% from 2010, while its workload, as measured by the number of individual return filings, has increased by 19 percent. What are some issues and what can you do for this tax filing season?

  • Avoid filing anything by paper when possible. The backlog at the IRS is in the millions. Even returns that were e-filed last year were suspended during processing, which was mostly due to Recovery Rebate Credit discrepancies.
  • Use the ‘Where’s My Refund?” tools at irs.gov. However, this does not provide information on unprocessed returns or explain delays. Also, contacting the IRS for your refund status will probably be a waste of time. Supposedly, they will not be able to explain more than the “Where’s My Refund?” tool.
  • Telephone service was the worst it has ever been and only about 11% of calls were answered. If you need to contact the IRS, then try various days and times. Mondays are not a good day.
  • Make sure to provide all of your information to your tax preparer to avoid any discrepancies between IRS records and your tax return.
  • If you received advance Child Tax Credits, the IRS encourages you to go to your online account with the IRS to obtain the amount because Letter 6419 that was sent out may not be accurate. If you report an inaccurate amount, then this will cause a delay with processing your tax return.

 

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Tax Deadline & Updates

You may have heard that the IRS extended the individual tax deadline by one month to May 17th, but there are important updates to know as follows:

  1. The deadline to file corporate taxes has not been extended and is still April 15th
  2. States are expected to extend their deadline, but we’ll have to wait and see
  3. Tax payments for the year 2020 are now due on May 17th
  4. The extension does not apply to first quarter 2021 estimated tax payments, which are still due on April 15th

 

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PPP Deadline Approaching

The deadline for the PPP loan is March 31st, so do not wait to apply if you qualify. Some tips are as follows:

  1. Apply through your existing bank
  2. You must have 300 or fewer employees
  3. Have already used or plan to use your original PPP funds
  4. Can demonstrate at least a 25% reduction in revenue during a least one quarter of 2020 when compared to 2019.

Is there a possibility of extension? Possibly, but if you qualify, why take the chance?

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Possible Extensions

There have been major challenges with being able to file tax returns, especially business returns, which are due soon on March 15th for s-corporations and partnerships. This relates to new tax laws, loan forgiveness, and delays with states approving tax forms and software. Additionally, New Jersey has new complexities with its new BAIT (Business Alternative Income Tax) forms.

We may have to file extensions for your business and possibly individual returns due to these delays.

 

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Increase & Conserve Your Mental Energy in 5 Ways

What exactly is mental energy? A good definition can be found at PubMed.gov and can be described as “ . . . the ability or willingness to engage in cognitive work.” Why is this important what can you do to manage your mental energy?

Importance of Mental Energy

Using your mental energy wisely can help you to make better decisions, both at work and at home. From a technical perspective, especially for someone who is considered a “knowledge worker,” the quality and quantity or your work will increase. Better decisions equate to more success.

5 Ways to Increase & Conserve Your Mental Energy

  1. Get enough sleep, especially good quality sleep.
  2. Exercise consistently. It does not have to be an hour each day, but get your body moving. And of course eat healthier.
  3. Focus on one thing at a time. Better yet, minimize the number of tasks that you handle each day to focus on what’s most important.
  4. Minimize tasks that drain your energy levels, both physically and mentally. Delegate these items and on the personal side, get someone else to do them.
  5. Take a deep breath and say a prayer when dealing with difficult people. You can try to avoid them, but more will eventually show up.

It looks like my mental health clients are rubbing off on me, and please feel free to offer additional suggestions.

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IRS Delays Tax Season Plus Important Deadline Reminders

With all of the last minute tax law changes the IRS needs more time to program their systems. Here are important filing dates:

February 12th: IRS begins 2021 tax season. Individual tax returns begin being accepted and processing begins.

February 22nd: Projected date for the IRS.gov Where’s My Refund tool being updated for those claiming EITC and ACTC, also referred to as PATH Act returns.

First week of March: Tax refunds begin reaching those claiming EITC and ACTC (PATH Act returns) for those who file electronically with direct deposit and there are no issues with their tax returns.

March 15th: Deadline for filing S-corp and partnership returns

April 15th. Deadline for filing individual and corporate tax returns.

May 15th. Deadline for filing exempt organization returns.

September 15th. Deadline for filing extended S-corp and partnership returns

October 15th. Deadline for filing extended individual and corporate returns

 

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