Owing Taxes SUCKS!

… Have you (or someone you know) filed your taxes and ended up owing taxes back? I have.
  

Yes, owing taxes SUCKS, especially when it is an absolute surprise.  Some of us have owed taxes for several years. Owing the IRS is sometimes an unexpected bill that can’t fit in our already tight budget. Despite how we may “feel” about it, owing taxes is essentially another "Loan" that is owed.  Here’s how it is like a “loan," how it can affect your Credit Score and 3 Tips of things to do to avoid having to pay back taxes next year.

 

TOO MUCH, TOO LITTLE, TOO LATE

  

When “not enough” taxes is OR “too much” taxes are being taken out during the course of the year, it means that the exemptions on your W-4 or your tax deductions may be incorrect. But, here is how taxes are like a "loan.”

  

If “too much” taxes are being taken out of your check throughout the year, the government is essentially “borrowing” that money from you.  They pay the amount they “borrowed” in a lump sum called a “Tax Refund.”

 

Conversely, if “not enough” taxes are being taken out of your check throughout the year, you are essentially “borrowing” the money from the government.  The amount you owe in taxes is the “borrowed” money you must pay back.  The great thing is that if you are not able to pay it back in a lump sum, payment plans over a period of time are available to avoid additional fees and penalties.

  

HOW TAXES CAN AFFECT YOUR CREDIT SCORE

 

If the Taxes Owed is not paid within a timely manner, the IRS may report the delinquent taxes as a “Tax Lien” on your credit report under the Public Records section on your credit report. This will negatively affect the Payment History category of your credit score, which is 35% of the calculation. Also, the amount doesn’t matter. Whether you owe $500 or $5,000, the negative affect to the credit score will be the same.

  

If it is reporting on your credit report and you have paid the taxes due in full, make sure you get a copy of the Satisfied Tax Lien notice from the IRS. Also, dispute the information on your credit report, if necessary to have it updated as “Satisfied.”

As promised, here are 3 Tips of things to do to ensure that you don’t owe taxes next year.

 
 

TRUST BUT VERIFY

  

Some people love to DIY (Do It Yourself) everything, including their taxes. And there are great Tax softwares available to help you do your own taxes. You can even do your taxes online. If you choose to do your own taxes, just remember President Ronald Reagan’s quote, “Trust but Verify.”  This is important, especially if you owed taxes for last year.  Simply take your completed taxes to a tax accountant or tax professional so they can make sure that you didn’t leave out any new deductions or, better yet, you didn’t write off something that didn’t qualify.

 

KNOW YOU’RE PLACE

 

One of the reasons why people end up owing taxes is because they have the wrong number of exemptions on their W-4 forms.  Make sure to review, and update if necessary, your W-4 form with your employer annually, preferably at the beginning of each year. Consult with a tax accountant or tax professional for guidance.

 
GIVE YOURSELF CREDIT
 

Many people have turned their hobbies into a business. However, some of those people don’t give themselves credit by not taking advantage of available business tax write offs.  Not taking advantage of every eligible business tax write off is like giving away extra money. So, whether it’s selling your homemade secret recipe cakes or providing consultation, make sure you keep your receipts for all of your business related expense in one place, like an envelope for next year’s tax return.  You never know, certain business meeting meals up to your cell phone bill used for your business may be business tax write offs. Consult with a tax accountant or tax professional to understand what business expenses are tax deductible. 

The moral of the story is that winning the Tax Game is to GET NOTHING and OWE NOTHING! #IJS

   
Financially True,

   
Tarra Jackson ... Making Money Sexy 

Does Jobs Report Indicate More Slowing Growth?

The jobs report did come in much weaker than expected, so this time around the ADP report actually did foreshadow more to come.  March nonfarm payrolls rose just 88,000 versus expectations for something closer to 190,000.  So that is a big drop.

The unemployment rate declined to 7.6%, but that figure is misleading.  The decline was not due to job growth but rather to a drop in the labor force participation rate.  That rate has hit levels not seen since the 1970s.  If the participation rate had remained constant the unemployment rate would have actually risen to 7.9%.

The disappointing jobs report hit the equities market early, with the Dow opening down some 150 points.  We will see the obligatory bounce during the trading session but how the market closes today will have more impact on trader's psyche heading into next week.

The bond market is acting like the jobs report is indicative of a bigger slowdown in the economy.  The 10-year yield has dropped all the way down to 1.69%, back to levels last touched in December.  I think a lot of folks were caught leaning the wrong way on bonds, as most were positioned for rates to go up.  That could be exacerbating today's action, but I don't feel that these low yields are sustainable even in a 2% growth environment.

Asian markets were mixed overnight.  Hong Kong was lower, while Japan continued to rally on QE news from the BofJ yesterday.  China remained closed for a holiday.

Europe is also lower today.  Reports indicate that the troika may delay its next tranche of aid to Greece.  Elsewhere, French President Hollande's approval rating has sunk to a new low of 27%.

The dollar is lower today and commodities are mixed.  Oil prices are lower near $92.50.  Copper prices are also lower.  But gold prices are higher in a flight to safety move, pushing gold back near the $1565 level.

The volatility index spiked higher after the open.  It is currently up 5% near the 15 level that we have been highlighting.

Trading comment: The recent breakdown in the Russell 2000 small-cap index turned out to be a good leading indicator of broader weakness.  The S&P 500 got down to 1540 this morning, while its 50-day average is closer to 1530.  I think folks will be worried about economic growth slowing after today's jobs report.  Also, FFIV lowered its earnings guidance last night, and that is hitting the tech sector.  So there is likely to be some caution ahead of earnings season as well.  Both of these factors likely increases the chances that the market has more work to do in this nascent correction.  The recent uptrend has been in place for months, and some consolidation is certainly overdue.  So we will look to put new money to work in tranches as opposed to all in one fell swoop.

Interview with TeKoa Da Silva

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Japan Ups The US In Quantitative Easing

The markets are mixed this morning in early trade.  The S&P is trading higher, led by materials stocks while the Nasdaq is lagging weighed down by technology issues like AAPL, GOOG, etc.

There hasn't been a whole lot of market moving news this am.  Weekly jobless claims rose more than expected for the week, but some are pointing to seasonal adjustments by the Dept. of Labor as skewing the figures.

Asian markets were mixed overnight.  China and Hong Kong were closed for a holiday.  But the big news was the Bank of Japan stepping up its asset purchase program by almost doubling it.  As a percentage of the country's GDP, Japan's quantitative easing is about 3x as big as the U.S.  The BofJ said it would continue to buy govt bonds, but would also buy REITs and ETFs over the next two years.  So they are really trying to reflate assets in hopes of igniting the wealth effect.

The downside of this action is that it is likely to continue to drive the yen lower, which will make Japan's exports cheaper compared the the U.S.  Global auto companies and manufacturers can't be happy about that.

The other news in Asia is the escalating tensions with N. Korea.  Yesterday the US announced it was moving a missile defense system to Guam as rhetoric heats up that N. Korea has long range missiles and is beefing up its nuclear capabilities.  Fun.

European markets are generally higher this morning.  The ECB met and held rates unchanged at 0.75%.  The Bank of England also held its rates steady at 0.50%.  ECB President Draghi said weak economic conditions seen in Q4 of 2012 have persisted this year so far, but the bank stands ready to act if needed. 

The dollar is slightly higher today while commodities are mostly weak.  Oil prices are lower near $92.70 and gold prices have fallen to $1550.  Silver prices are also lower but copper prices are higher.

The 10-year yield continues to slide, falling to 1.77% today. And the volatility index is higher again to 14.50, nearing the 15 level we have been looking for.

Trading comments: Markets continue to be choppy.  The S&P 500 has alternated between up one day down the next for the last 11 sessions.  I heard that the longest such streak of choppiness on record is 12 days.  So the market is looking for direction.  Yesterday's selloff came on higher volume, indicating some distribution.  Also, the small-cap Russell 2000 has become the first index to break below its 50-day average.  So right now it looks like this recent pullback could have some more room to run its course.  That has been a difficult strategy all year, so it wouldn't surprise me to see dip buyers come in again soon.  For its part, the 50-day average for the S&P 500 is currently around 1530 while the index still trades near 1555.  Food for thought.

KAM Advisors has long positions in AAPL and GOOG

Markets Lower After Disappointing Economic Data

Stocks are lower in early trading after some weaker than expected economic data.  The March
ISM Services index came in at 54.4, which was below expectations and down from last month's level of 56.0.

Additionally, the ADP Employment report showed the addition of 158,000 private business jobs in March.  This figure was well below consensus estimates.  We get the official jobs report on Friday, and it does not always follow the direction of the ADP report.

In early trading, financial stocks are the weakest while defensive utilities are holding up best.  The tech sector is faring 2nd best as stocks like AAPL and FB buck the weakness so far.

Overnight Asian markets were mixed.  China was slightly lower after Beijing officials introduced a 20% capital gains tax on property sellers to curb rapidly rising property prices.  But Japan shot up 3% overnight after BoJ governor suggested the need for bold action and reports that aggressive asset purchases will begin in January 2014.

European markets are weaker today after the Italian Treasury said it expects the country's GDP contraction this year to be worse than last month's forecast by about 1.5%.  That's a big dropoff and isn't going to help the debt crisis among peripheral Europe.  Italy is the biggest debt market in southern Europe so investors have been holding their breath that the wheels don't fall of in that market.

The dollar is lower today but that isn't helping commodities.  Oil prices are down near $95.50 and gold prices have declined near the $1570 level.  Ag prices are higher but copper prices are lower.

The 10-year yield is lower again and has hit 2-month lows at 1.82%.  The decline in yields normally would coincide with concerns about slowing economic growth, but with the Fed doing QE purchases this indicator may be skewed.

The volatility index is higher by 5% so far to the 13.51 level.  I still expect it to get back to around the 15 level if the market continues to chop around, but we shall see.

Trading comment: With slower economic growth, no pickup in Europe, and China trying to curb property price appreciation we might finally be at the point where the stock market is due for a little more of a breather.  The constant stair-step action has been surprisingly resilient.  But prudent investors know that it can't go on indefinitely.  We also have Q2 earnings season around the corner, so the next leg in the market could be dictated by what we hear from CEOs in terms of their outlooks.

KAM Advisors has long positions in AAPL and FB

Good Article on 'Money' Advice

I thought this quick article had some good suggestions for money smart decision-making--

http://finance.yahoo.com/news/five-really-dumb-money-moves-you-ve-got-to-avoid-164637870.html

Stocks Follow European Lead And Rally

Stocks are higher in early trading after a lackluster start to the new quarter yesterday.  In economic news, factory orders rose 3.0% for February which was better than expected.

Healthcare stocks are leading the early action after the Centers for Medicare announced a 2014 rate increase for prescription drug benefits.  Stocks like HUM, UNH, etc. are up more than 5% on the day.

Asian markets were mixed overnight.  Japan reported its monetary base expanded 19.8% vs. last year.  The Reserve Bank of Australia left its key interest rate unchanged at 3.00%.  They also said there may be room for more cuts as inflation remains tame.

Europe's markets rallied nicely this morning on the heels of some manufacturing data that was released.  Overall the eurozone manuf. PMI came in above expectations at 46.8.  Eurozone unemployment was reported at an all-time high of 12.0%.  French PMI was 44.0, Germany 49.0, Italy 44.5, etc.  The notable trend here is that all of the readings are still below the key 50 level that marks the difference between expansion and contraction.

The dollar index is higher today and weighing on commodities.  Gold prices are lower to $1580.  Silver and copper prices are also lower.  Oil prices are down near $96.48 and gasoline is also lower.  Gas prices at the pump here in LA are still above $4 a gallon, but hopefully the recent tick down is gasoline futures will translate into lower prices at the pump.

The 10-year yield is higher today to 1.86%.  And the VIX is down nearly 5% back below the 13 level.

Trading comment: This market continues to frustrate those looking for a better buying opportunity.  Many stocks remain extended on the charts but refuse to pull back.  The same can be said for most of the major indexes.  The S&P 500 is now within striking distance of its all-time highs from 2007.  That could lead to another round of buying or short covering.  The remains due for a correction, but the timing of which remains elusive.  Better to add to stocks that have at least consolidated recently while saving some cash to put to work if we do get a better pullback.