Learning Center for Tax and Financial Insights

Newspapers and media reports have been filled with talk of inflation and recession. Experts are arguing about the definition of the latter. Pundits are pondering whether the slow down reflected in the latest consumer price index report means that inflation has peaked. You, in the meantime, are still staring in disbelief at the numbers that are rolling by as you fill your tank with gas or the total tally when you buy a few bags of groceries.Are We in a Recession?It really doesn’t matter what anyone calls the nation’s economic condition when you’re having trouble paying your household bills – or worrying that’s where you’ll find yourself soon. Though gas prices have been dropping steadily and retailers like Walmart, and Home Depot are reporting strong financial results, there is some concern that higher prices may be driving their gains, and there is only so long that consumers will be able to maintain their spending habits.That diminished spending on goods and services is one of the top signs of recession, along with cuts in manufacturing and production, increases in unemployment, and stagnating or dropping income. As frightening as each of these elements sounds, it is when you personally experience a combination of them that you feel a real impact. The good news is that there are steps you can take to prepare.Can You Recession-Proof Yourself?Recessions impact everybody one way or another, but they are definitely more painful for those who aren’t prepared. Here are a few things that you can do to minimize the financial impact on your family:

As the saying goes, hope for the best but prepare for the worst. With concerns about a recession on the rise, now is the time to start thinking about how you would weather an economic downturn. There are a number of steps you can take to recession-proof your finances, and it's important to have a plan in place in case the economy takes a turn for the worse.

Article Highlights: • Relief Amounts• Income Limitations • Dependents of Another• Pell Grant Recipients• Repayment Pause• Monthly Payment Reduction • Cancellation of Debt IncomeOn August 24, President Biden announced a three-part plan to deal with student loan debt which includes, among other things, $20,000 in loan relief to borrowers with loans held by the Department of Education whose individual income is less than $125,000 ($250,000 for married couples) and who received a Pell Grant. Borrowers who meet those income standards but did not receive a Pell Grant in college can receive up to $10,000 in loan relief. Current students with loans are eligible for this debt relief.TARGETED STUDENT LOAN DEBT RELIEFPell Grant RecipientsOthersAmount To Be ForgivenUp to $20,000Up to $10,000Income Limit Married Filing Jointly $250,000Others $125,000Note: This is not a phaseout, $1 over the income limit ends the qualification.Dependents of Another - Borrowers who are dependent students will be eligible for relief based on parental income, rather than their own income.Who Will Benefit? – Since the forgiveness is targeted to lower income families, per a White House Fact Sheet, nearly every Pell Grant recipient comes from a family that made less than $60,000 a year. Based on that at least 93% of Pell Grant recipients have income less than $60,000 and would qualify for the $20,000 forgiveness.DISTRIBUTION OF PELL GRANT RECIPIENTS BY INCOMEFamily IncomePercent$30,000 or Less66%$30,001 through $59,99928%$60,000 or more7%Apparently the White House used rounded numbers thus the total is not 100%

Article Highlights:Penalty Relief2019 & 2020 Tax ReturnsIncludes 1040, 1120, Certain 1099 Series FilingsRefunds Are AutomaticSeptember 30, 2022, DeadlineThe First-Time Abatement Penalty ReliefTo help struggling taxpayers affected by the COVID-19 pandemic, the IRS has issued a notice, which provides penalty relief to most people and businesses who file or filed certain 2019 or 2020 returns late.This includes nearly 1.6 million taxpayers who will automatically receive more than $1.2 billion in refunds or credits. Many of these payments will be completed by the end of September. Besides providing relief to both individuals and businesses impacted by the pandemic, this action is designed to allow the IRS to focus its resources on processing backlogged tax returns and taxpayer correspondence to help return to normal operations for the 2023 filing season.The relief applies to the Failure to File Penalty. The penalty is typically assessed at a rate of 5% per month and up to a maximum of 25% of the unpaid tax when a federal income tax return is filed late. This relief applies to Form 1040 (Individual) and 1120 (Corporate) series, as well as others. To qualify for this relief, any eligible income tax return must be filed on or before Sept. 30, 2022. So to take advantage of this relief contact this office immediately if you have not already filed your 2019 or 2020 returns. In addition, the IRS is providing penalty relief to banks, employers and other businesses required to file various information returns, such as those in the 1099 series. To qualify for relief, the notice states that eligible 2019 returns must have been filed by Aug. 1, 2020, and eligible 2020 returns must have been filed by Aug. 1, 2021.Because both deadlines fell on a weekend, a 2019 return will still be considered timely for purposes of relief provided under the notice if it was filed by Aug. 3, 2020, and a 2020 return will be considered timely for purposes of relief provided under the notice if it was filed by Aug. 2, 2021. The notice provides details on the information returns that are eligible for relief.

There have been instances where scammers have posed as IRS representatives in order to extract money from unsuspecting victims. Here are a few tips on how to protect yourself from these scammers. First, be aware of the different methods that the IRS uses to contact taxpayers. If you receive a phone call or email from someone claiming to be from the IRS, do not reply or give out any personal information. Second, remember that the IRS will never threaten you with arrest or demand immediate payment. Finally, if you are unsure about whether or not a contact is legitimate, you can always call the IRS directly to confirm or ask for assistance from a professional office.

Article Highlights:Assembly Requirement August 15 DeadlineTransition RuleThe New LawIncome LimitManufacturer's Suggested Retail Price LimitationNew Vehicle DefinitionTransfer of Credit to the DealerCredit for Used VehiclesWith the recent passage of the Inflation Reduction Act of 2022, the electric vehicle credit has undergone some major changes. Although most of the changes take effect in 2023, to qualify for the current credit, vehicles purchased after August 15, 2022, are required to meet the final assembly requirement of the new law. That requirement necessitates vehicles sold after August 15, 2022, undergo final assembly in North America. "Final assembly" means the manufacturer must produce new clean vehicles at a plant, factory, or other place located in North America from which the vehicle is delivered to a dealer with all component parts necessary for the mechanical operation of the vehicle included with the vehicle.The U.S. Department of Energy has prepared a preliminary list of Model Year 2022 and early Model Year 2023 vehicles that may meet the final assembly in North America requirement. Although the current law phasing out the credit once a manufacturer has produced 200,000 vehicles has been eliminated beginning in 2023, it still applies for vehicles sold in 2022. Even though those vehicles meet the final assembly requirement, because of the 200,000 limit they may not qualify for credit or reduced credit in 2022 but will again qualify in 2023 under the new rules. The U.S. Department of Energy list tags those that have reached the 200,000 limit. Visit the IRS site for a list of qualifying vehicles to see if a vehicle might still qualify for a reduced credit.Transition Rule - The legislation also provides a transition rule where a taxpayer who, from January 1, 2022, and before August 16, 2022, purchased, or entered a written binding contract to purchase, a new plug-in electric drive motor vehicle and placed that vehicle in service on or after August 16, 2022, may elect to use the credit rules in effect before the Inflation Reduction Act changes, thus avoiding the final assembly and other requirements of the new law. The New Law – The new law, generally effective beginning January 1, 2023, includes some new stringent requirements including that the critical minerals and other battery components used in the manufacture of a qualifying vehicle be from North America. Because of the current limited availability of these critical minerals this requirement is being phased in through 2029, giving manufacturers time to develop North American sources for these materials.Also beginning 2023, the law imposes income limits on who qualifies for the credit, as well as limiting the cost of the vehicles eligible for the credit as follows: Income limit - No credit is allowed for any tax year if the lesser of the modified adjusted gross income (MAGI) of the taxpayer for the: