High Hopes!

And exhale….I think it’s safe to say we all let out a little sigh of relief after the market finally showed a pulse this week.

Now I will forewarn you, we are not out of the woods yet.  I most eagerly expect us to either retest the lows or find new ones in the coming months.  This is not something to be scared of, just part of the process.

Now in the coming months we surely may see a massive spike in unemployment and decline in Gross Domestic Product (GDP), which is to be clearly expected with the shutdown of the American economy.

However, some media outlets have zeroed in on these numbers and portrayed it in a manner that implies the Great Depression is indeed upon us.

This is absolutely ludicrous!

To quote former Federal Reserve Chairman Ben Bernanke’s interview on CNBC:

“This is a very different animal than the Great Depression…The Great Depression, for one thing, lasted for 12 years, and it came from human problems: monetary and financial shocks that hit the system.”

“This has some of the same feel of panic, some of the feel of volatility…It’s really much closer to a major snowstorm or a natural disaster than it is to a classic 1930s-style depression.”

In fact, I liken what the Federal government is doing to the same thing as a corporation taking a one-time charge on their balance sheets.  They are simply accelerating the expense and pain to get it over with.  St. Louis Federal Reserve President James Bullard so much as alludes to this in his post the other day.

So simply put, if your source of news is pushing the D word, change the channel – they are selling you fear.

Relief Bill….

The Senate finally passed their 883-page version of the bill and it’s packed with things that impact us all.  Thanks to Jeff Levine, CPA for his breakdown of this legislation (mind you some things may change once the house passes it; this is just some points to focus on):

– Individuals will get a check for $1,200 and couples $2,400. In addition, there is $500 for every qualifying child under 16.

However, there is a phaseout for single/married that starts at 75k/150K and for every dollar over the threshold you lose $5 until you get nothing.  So, the cap for single/married is 99k/198k

The numbers are based on AGI from your 2019 return, and if that has not been filed, your 2018 return.

Funds will be direct deposited into your most recent bank account authorized for a refund.

– 2020 Required Minimum Distributions are waived for Traditional/401k/403b/457/ and inherited IRA’s.  If you already took your RMD for 2020 there is no reversal – it is what it is.

– New exception to the 10% early distribution penalty:

  • The distribution can be from an IRA or a plan
  • It can be up to $100k
  • It must be taken in 2020
  • By default, the income is spread over 3 years, unless you proactively elect to include it all in 2020
  • To be eligible you must be diagnosed w/ COVID-19, OR have a spouse or dependent similarly diagnosed OR experience adverse financial consequences as a result of being quarantined, furloughed, laid off, reduced hours, unable to work b/c of childcare issues, and a handful of other similar reasons.  It’s also important to note that beginning on the day after receipt of a “Coronavirus-Related Distribution”, an individual has up to 3 years to repay the amount as qualified rollover contributions (in 1 or multiple payments).
  • Amended return(s) can be filed to claim refunds!

– Retirement Plan Loans

  • The max amount of a plan loan is doubled from 50k to 100k
  • The loan may be for up to the present value of the participant’s account
  • Loan payments due from enactment until 12/31/20 can be delayed for up to 1 year
  • Above the line charitable deduction of $300.  This has to be cash, and no other item
  • These are some of the highlights, and once Jeff finishes his final analysis, will link directly to it.

These are some of the highlights, and once Jeff finishes his final analysis, will link directly to it.

Again, this is not final, but awaiting completion by the House of Representatives.  Before implementing anything please confirm these strategies with your tax professional.

Tax Cha-, Cha-, Changes

I wanted to share with you a summary of some tax changes that were recently implemented as part of the governments response to the coronavirus along with some thoughts from Jason Dinesen, of Dinesen Tax & Accounting:

– The Treasury Department announced today that the filing deadline for tax returns has been pushed back to July 15th. There is no extension to submit and nothing special to do; July 15th is simply the “new April 15th” this year. 

– If you owe the IRS — and many, many people do this year — the deadline for paying the IRS is now July 15th as well. This extension of time to pay is penalty-free and interest-free. If you owe money to the IRS and your return has not been filed yet, there really is no reason to file until closer to July 15th unless you really want to file and pay before July 15th.

– For the self-employed and others who make estimated tax payments, your 1st quarter estimate for 2020 (originally due 4/15) is now due 7/15.  As of right now, any business with employees still must file their 1st quarter 941 by April 30, 2020.

As of now, your 2nd quarter estimate, due 6/15, will be due on 6/15 as usual. This means you will have a strange situation of your 2nd quarter estimate coming due first on 6/15, and then your 1st quarter estimate coming due 7/15. (I will keep watching on this because the 6/15 payment situation may change as that date gets closer.)

– The big one: Individual Retirement Account & Health Savings Accounts for 2019 can be funded up until July 15, 2020.

– Please refer to your individual state Department of Revenue website for changes in your state.

For more answers to your questions please visit https://www.irs.gov/newsroom/filing-and-payment-deadlines-questions-and-answers or feel free to reach out to Jason.

Green Shoots!

In my post late last week, I mentioned Oakmark fund manager Bill Nygren, and his comments as to one of the reasons I was so optimistic.  Well I wanted to let you hear Bill’s comments directly, and here is a video from his appearance yesterday on CNBC:

I have been following Bill for over 20 years, and one of the things I respect most about him is that they invest their own money in their own funds, right alongside investors.

Another area that has shown some sparks is in the fixed income markets.  Earlier this week, I mentioned the Federal Reserves extraordinary measures which they deployed to unseize the credit markets, and at first look it appears they are beginning to succeed.

Under a normal interest rate environment, the longer you borrowed money for, the higher your interest rate would be.  However last year, the yield curve inverted, and it cost you more to borrow for say 2 years than it did for 30.

Action Step:

Unless absolutely necessary, please stay home.  I have had the good fortune to work with a lot of healthcare workers, and they are wonderful people.  I can not imagine what they or their families are dealing with at this unprecedented time in our nation’s history.  In honor of them, wash your hands and practice social distancing.  The sooner we all follow this, the quicker the quarantines will be lifted and we can go on with our lives.  I was just asked, ‘is the stimulus is going to be enough?’, and my response was: ‘I am no longer worried about the stimulus, but releasing the restrictions too early’.  I know that in the financial sector I am not the only one with these concerns, as this is the greatest threat to our bounce back.


For those readers out there, I highly recommend Bob Iger’s ‘A Ride of A Lifetime’. 

Additionally, if you can find it on your streaming service: ‘Becoming Buffett’. It’s a couple of years old but well worth the watch!


The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual, nor should it be construed as tax advice.

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