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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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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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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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PPP2 Overview

Questions about PPP2? Here is an overview:

How much is the loan amount?

The amount is 2.5 times your average monthly payroll during 2019 or trailing 12 months. For hotels and restaurants the amount is 3.5 times average monthly payroll.

How to qualify?

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

When can you start applying?

You can start applying for a second draw PPP now, however, the SBA will initially only accept loan applications from participating community financial institutions.

What is the deadline?

The deadline is March 31, 2021

What can the proceeds be used for?

The loan proceeds can be used for payroll costs, benefits, mortgage interest, rent, utilities, uninsured property damage costs caused by looting or vandalism during 2020, and certain supplier costs and expenses for operations. The bottom line is that it can be used for many business expenses.

How can it be forgiven?

You must use the entire loan proceeds on covered expenses, stated above, and at least 60% on covered payroll.

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Are You Tired of Overspending on Christmas?

Even with the best of intentions, almost everyone overspends on Christmas. Here are a few ideas to keep overspending to a minimum:

Go easy on electronics: Electronic devices, aside from TV’s, are usually the smallest, most expensive items to purchase. Top of the line smart phones cost more money than computers and laptops. Also go easy on the electronic devices and gaming consoles.

List of gift recipients: Make a list of everyone that you are going to give gifts to, even if it is only a mental list. This will also make shopping easier when you purchase gifts for less people.

Have a rough estimate of spending: Think of how much you want to spend for each person, which will help to prevent buying massive, spur of the moment, super expensive gifts on a whim

You care more about gifts for your kids then they do: Don’t overthink gift giving for your children. If you spend more money on one child, then you do not have to make up for it by spending more for the one you spent less on. Trust me, kids are not calculating how much you spent.

Most importantly, put it all in perspective: To celebrate Christmas is to celebrate the birth of Jesus. Yes, it has become very secular/commercial nowadays, but this is why we celebrate Christmas.

 

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5 Black Friday Mistakes I Made in the Past

Today is Black Friday and there are sales on virtually everything. It can be both a fun and stressful experience, and there are some mistakes I made in the past:

  1. Allowing myself to be convinced to wake up at 5:30 AM or was it 4:30 AM?. Waking up early does not bring out my “best” self.
  2. Not having a plan of which items to purchase or at least having a budget. This relates to shopping the old-fashioned way and online.
  3. Almost getting into a physical confrontation with someone 3 times my size because he thought that I cut in line. I like challenges.
  4. Not enjoying the experience, especially if it wasn’t your idea. Don’t fight over parking spots, run or walk quickly, complain, cut in line, be rude, or put on a frown.
  5. Remember these mistakes for next year!

 

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Are You Ready to Complete Your PPP Loan Forgiveness Application?

Did 24 weeks pass after you received your PPP funds? If so, then now is the time to complete your PPP loan forgiveness application. Here are a few tips from the SBA:

  1. There are several different forms to use, including SBA Form 3508, SBA Form 3508EZ, SBA Form 3508S, or a lender equivalent. To quickly determine which form you should use, take a look if you meet the main criteria for each.
    1. SBA Form 3508EZ is generally for sole proprietors without any employees
    2. SBA Form 3508S is generally used if your loan was $50,000 or less
    3. SBA Form 3508 is used if you do not meet the criteria to use the other forms
  2. Information you may/will need:
    1. Bank statements
    2. Payroll service provider reports
    3. Payroll tax filings filed during the covered period
    4. Payment receipts or cancelled checks to document health insurance, retirement plan expenses, mortgage payments, rent payments, and utility payments
    5. Copies of lender account statements, lease agreements, and invoices
  3. Submit the forgiveness application, along with supporting documentation
  4. Follow-up with your lender. I’m not really sure how long it will take, but I assume that it depends upon your lender, application volume, form used, how you prepared the application, and the amount of the loan.

If you need help completing your application, then let me know.

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Do You Want a Free Credit Report?

Anytime you hear the word “Free” there is usually a catch and the free item isn’t really free. Surprisingly, you can receive a free credit report by doing this:

Type annualcreditreport.com into your browser, click on “Request your free credit reports,” and start the process. It will take you less than 10 minutes and it is completely free. Federal law requires each of the three consumer credit reporting companies, Equifax, Experian, and TransUnion, to give you a free credit report every 12 months if you request it. Technically, you can receive 3 each year if you obtain one from a different credit reporting company every 4 months.

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