What do dieters have in common with the Federal Reserve?
If you’ve ever dieted, you may be familiar with the weight-loss plateau. Many people experience steady progress. The bathroom scale moves lower week by week – until it doesn’t – and that can be discouraging.
The Federal Reserve has been trying to reduce inflation, and it has had significant success. Its actions are credited with bringing headline inflation from a peak of 9.1 percent in June 2022 to 3.2 percent in February 2024, as measured by the Consumer Price Index.
Looking back over the last few months, it seems as though inflation hit a plateau (and, perhaps, indulged in a bit of holiday excess).
September 2023: 3.7 percent
October 2023: 3.2 percent
November 2023: 3.1 percent
December 2023: 3.4 percent
January 2024: 3.1 percent
February 2024: 3.2 percent
However, the Fed is not discouraged.
After inflation data was released last week, Chair Jerome Powell to comment, “The report that came out this morning is pretty much in-line with our expectations. Our hand is a steady hand in this. We’ve been saying all through last year and this year, we’re making progress…The economy is strong. We see very strong growth…That means we that don’t need to be in a hurry to cut [rates]. It means we can wait and become more confident that, in fact, inflation is coming down to two percent on a sustainable basis.”
United States stock markets were unfazed by the inflation news and delivered a stellar performance for the first quarter. The Standard & Poor’s 500 Index experienced 22 record closes during the first three months of the year, reported Teresa Rivas of Barron’s.
Major U.S. stock indices finished the week higher,and U.S. Treasury yields were mixed.
3 REASONS TAXPAYERS GET NOTICES FROM THE IRS. Receiving a notice from the Internal Revenue Service (IRS) can be daunting. While some notices are resolved fairly easily, others require an audit.
So, how does the IRS determine who gets a notice? Michelle Singletary of the Washington Post reported, “The IRS examines returns to ensure that income, expenses, deductions, and credits are reported accurately. When an inconsistency is found, a taxpayer may undergo an audit or be notified that adjustments were made that could result in a refund or a required tax payment.”
Here are three issues that can bring a tax notice to your mailbox:
- Math mistakes. Taxes are a great example of the importance of math in real life. In 2022, the IRS issued more than 9 million notices because of math errors. The top triggers were calculations related to the Recovery Rebate Credit and the Child Tax Credit. Most notices simply adjusted taxpayers’ returns and indicated whether additional amounts were owed, or higher refunds were due.
- Missing income. Tax returns are supposed to account for all income a tax filer earned over the tax year. Income typically is reported by employers, mortgage companies, banks (or other sources of income) on Forms W-2 and 1099, and other forms. The IRS Automated Underreporter program systematically matches tax returns and informational tax forms. When the information does not match, the tax filer gets a notice.
- Unusual tax deductions. The IRS uses statistics to determine normal levels for various deductions. If your deductions are higher-than-average, your return may be flagged. Joy Taylor of Kiplinger Personal Finance reported,
“If the deductions, losses, or credits on your return are disproportionately large compared with your income, the IRS may want to take a second look at your return. Taking a big loss from the sale of rental property or other investments can also spike the IRS’s curiosity. Ditto for bad debt deductions or worthless stock.”
That doesn’t mean you shouldn’t take a deduction or tax credit, just make sure you have proper documentation.
If you have any questions about taxes, talk with a tax professional. They can help minimize the chance that your tax return will trigger an audit or a notice from the IRS.
Weekly Focus – Think About It
“A man who carries a cat by the tail learns something he can learn in no other way.”- Mark Twain, Author
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