The IRS begins accepting tax returns on Friday. Millions of people received subsidies and unemployment benefits last year – but they will be treated differently for tax purposes. In this week’s “Your Financial Advisor” column, Ann Carnes describes the implications for both.
- The good news is that you do not have to pay income tax on grant checks, also known as “Economic Impact Payments.” If you received the expected amount and your family situation has not changed, you do not have to report the payments on your 2020 tax return, according to the IRS.
- If you were entitled to the benefits but for some reason did not receive them – or did not receive the full amount – you can still get the money by requesting a “refund” on your 2020 tax return. To get the credit, you must file for a refund, even if it is not required.
- Also, if your life changes in 2020 – for example, with the birth of a child or if you are self-sufficient and no longer rely on your parents’ tax returns – you may be entitled to an additional amount by requesting a reduction in your income for 2020.
- Unlike stimulus packages, unemployment benefits are taxed by the federal government as ordinary income. (However, you do not pay taxes on unemployment benefits like you do on wage income.)
- You must receive a Form 1099-G showing your unemployment income and the taxes withheld on your tax return.
- You will also likely have to pay state income tax on unemployment benefits unless you live in one of the nine states that do not have a state income tax or in several other states that exempt unemployment benefits, including California, Montana, New Jersey, Pennsylvania, and Virginia. According to the Tax Foundation, residents of the state of Wisconsin are exempt from the unemployment benefits tax and nonresidents are exempt from the benefits tax.
Newcastle, in the north of England, in December. The UK service sector, which has been closed for most of the past year due to closures, fell 8.9%. The credit… Mary Turner for the New York Times.
To understand the severity of the economic impact of the pandemic in Britain, we must go back three centuries. The economy contracted by 9.9 percent in 2020, the Office for National Statistics said Friday, based on initial estimates from the National Bureau of Statistics. An examination of historical data from the Bank of England shows the recession was the worst since 1709, the year of the “Great Freeze,” Europe’s exceptionally cold winter.
Even with spending of nearly 300 billion pounds, the equivalent of about $415 billion, the economy was reduced to the size of a pandemic. The restrictions imposed to contain the pandemic have reduced the economy to the size of 2013, spending nearly $300 billion on businesses, employment and public services, including the national health service.
The service sector in the UK, which makes up four-fifths of the economy, contracted by 8.9%. But the pain was unevenly distributed: restaurants, hotels, theaters and other leisure venues were hit particularly hard, while professional, financial and health services were less affected. A recent survey found that about half of companies in the hotel and restaurant sector have less than three months of cash reserves.
To some extent, the economic costs reflect the broader devastation of the pandemic. More than 115,000 deaths from covicidosis have been reported in the UK, a devastating difference from the highest number of deaths in Europe.
But the outlook is improving, both for public health and the economy. The country hopes to avoid a double-dip recession, which would have been caused by two consecutive quarters of negative growth after a growth slowdown in the spring of 2020. In the last three months of the year, gross domestic product grew by 1% from the previous quarter, more than most forecasters had expected, according to the statistics office.
Despite the discovery of a more contagious variant of the coronavirus in the UK, the economy grew throughout the year as more businesses adapted to the restrictions, schools remained open, and contact tracing and extensive testing contributed to economic activity. Warehousing and transportation services also contributed to growth, as consumers spent more time online during the holidays and businesses stocked up for the end of the Brexit transition period.
The economy is expected to start shrinking again in the early months of 2021 as much of the UK is closed and trade is disrupted by the Brexit, but the rapid introduction of vaccines has raised hopes of recovery later in the year. The Bank of England expects the economy to return to its pre-recession size in early 2022 as consumers spend their accumulated savings while services such as restaurants, hairdressers and hotels close.
Snowy fields near Tideswell, England, Thursday. The great frost of 1709 caused a 13% contraction in the British economy. Credits. Oli Scarff/ Agence France-Presse – Getty Images
As the harsh winds continue to blow through Britain, the country’s central bank said Friday that last year’s recession was the worst since 1709, the year of the “Great Freeze.”
That winter, 312 years ago, was terribly cold, as the frost reached from Britain to the Mediterranean. The frost lasted three months, causing tremendous hardship to the 6.5 million British people: people froze to death, crops were destroyed, seaports froze, and the economy fell into recession.
The average temperature in January in central England reached -1.5 degrees Celsius, or about 30 degrees Fahrenheit, said Stephen Burt, a visiting researcher at the University of Reading’s Institute of Meteorology. The 2018 cold snap, also called the “beast of the east,” lasted several days and brought temperatures of -30 degrees Celsius, or -22 degrees Fahrenheit, he said. But that doesn’t compare to the winters of the 1800s, he said.
“I believe that this monarch was more (if not more) universal than any other in the memory of mankind,” William Derham, an English clergyman and philosopher at Upminster near London, wrote in January 1709, after measuring the lowest thermometer since 1697.
The unusual cold wave of 1709 was part of the Little Ice Age, which lasted from the early 14th century to the mid-19th century. Scientists point to many factors involved in extreme weather events: low solar activity, increased volcanic activity, the expansion of glaciers and more vegetation due to colonization led to lower temperatures in the northern hemisphere.
As the disaster spread to Germany, Italy, Denmark and France, it also affected local life and agriculture: birds “fell in the sky” and fish froze in ponds. When the Thames froze, it became the site of an “ice fair” where Londoners enjoyed roast lamb and gingerbread on ice.
Only a pandemic can cushion the economic damage of the Great Frost. The British economy will shrink by nearly 10% in 2020, the Office for National Statistics said Friday. Historical figures from the Bank of England show that the 2020 recession was the worst since 1709, when the economy shrank by 13%.
“We haven’t had anything like 1709 for 200 years or more,” Burt said Friday from the University of Reading. “If we had a winter like that today, I wouldn’t want to think about how the country would react.”
Janet Yellen in the Oval Office in January. Ms. Yellen said the United States is “focused on deepening our international engagement and strengthening our alliances. The credit… Anna Moneymaker for the New York Times.
Treasury Secretary Janet L. Yellen told world business leaders Friday that the United States plans to deepen international alliances and renew the fight against climate change.
Yellen’s remarks were made at her first G-7 meeting as Treasury Secretary and reflected the efforts of the Biden administration to embrace the kind of multilateral institutions that the Trump administration has generally treated with little respect. The meeting of the leaders of industrialized nations took place at a time when the global economy continues to struggle with the effects of the coronavirus pandemic and countries are struggling to obtain vaccines.
The United States “attaches great importance to deepening our international engagement and strengthening our alliances,” Yellen said.
Ms. Yellen told finance ministers and G7 central bank governors that additional fiscal support was needed: “We need to do a lot now,” the Treasury Department said in a summary of her remarks. This sentiment echoed what Yellen said to U.S. lawmakers when President Biden appeared to push through a $1.9 trillion stimulus package.
Yellen emphasized that climate change is an issue in which the United States will regain its position as a global leader, noting that “we understand that the United States has a critical role to play in global efforts to combat climate change.” She said the Treasury Department’s involvement in this issue would differ greatly from the position of its predecessor, Steven Mnuchin.
At the G20 summit a year ago, Mnuchin opposed the inclusion of “climate change” in the joint statement drafted at the end of the meeting.
Yellen plans to appoint a senior climate change official to the Treasury Department and establish a center within the agency that will focus on measures to combat climate change.
The G7 summit will be held in the UK this year. Finance Minister Rishi Sunak said climate issues should be on the agenda this year, with the goal of a “truly green economic recovery.”
Maria Bartiromo (left), Lou Dobbs and Jeanine Pirro are among the defendants involved in the Fox.Credit trial…Associated Press
A trio of Fox presenters who were among the defendants in a $2.7 billion lawsuit accusing them of helping to spread lies about the election information technology company Smartmatic have filed motions to dismiss the case.
The motions, filed separately Thursday night by presenters Maria Bartiromo, Jeanine Pirro and Lou Dobbs, whose economics show on Fox was deleted last week, followed a motion to delete filed Monday by the Fox Corporation.
The moderators’ arguments are a version of those proposed by Fox. They claim to have fulfilled a journalistic duty by providing a platform for Rudolph Giuliani and Sidney Powell, the legal representatives of former President Donald J. Trump, to make false statements about Smartmatic and its role in the 2020 election. In addition to the three moderators and Fox Corporation, Smartmatic sued Mr. Giuliani, Ms. Powell and Fox News for defamation.
For example, in her motion, Ms. Pirro claimed that her comments “focused on the most important developments, namely the fact that the outgoing president refused to accept the results of the presidential election.”
The three motions were drafted by a group of lawyers representing Fox Corporation, a group led by Paul D. Clement, a partner in the Washington office of the law firm Kirkland & Ellis.
The petition, filed on behalf of Mr. Dobbs, admitted that he expressed skepticism about the election in his program and quoted him as saying, “Only an idiot would try to pretend that there are no irregularities, that there are no anomalies.” According to petitioner, such statements “constitute animated commentary on an opinion that viewers of ‘Lou Dobbs Tonight’ know and expect.”
The Federal Reserve uses a stress test to assess the health of the country’s largest banks and provide a snapshot of how they will behave in a crisis. The credit… Chris Watty/Reuters.
The health of the big banks will be tested in 2021 in a more difficult economic scenario than in previous years, as the Federal Reserve tries to paint a realistic picture of what an economic turnaround would look like at a time when unemployment has already risen due to a pandemic.
Under the Fed’s “very unfavorable” scenario, in which the unemployment rate typically reaches 10%, it would rise by 4 percentage points to 10.75% by the third quarter of 2022. In this scenario, asset prices also fall sharply, with inventories falling by 55%.
The Fed uses a stress test to assess the health of the country’s largest banks and provide a snapshot of how they would behave in a crisis. Last year’s severe scenario was quickly overtaken when the coronavirus crisis hit. Therefore, the Fed tested the banks against a second scenario and conducted a special analysis published in December.
The Fed temporarily reduced distributions to shareholders, but allowed them, with some restrictions, to acquire profitable banks after the December 2020 cycle.
The Fed typically conducts stress tests once a year for the major bank holding companies it oversees, a practice introduced by the Dodd-Frank Financial Reform Act enacted after the 2008 financial crisis.
Nineteen large banks are being tested this year, while several smaller banks are going through a two-year testing cycle. You can participate in this year’s test and have until April 5 to do so.
Bill Michael, chairman of KPMG UK, will leave the firm at the end of February, KPMG UK…Credit…Suzanne Plunkett/Reuters
The chairman of KPMG’s UK division resigned Friday after calling on staff earlier in the week not to sit back and “complain” about the impact of the pandemic on their working lives.
Bill Michael, who held the position since 2017, will leave the audit and advisory firm at the end of February, KPMG UK has announced.
The comments led to internal complaints that they were insensitive. Britain is strictly closed, and for much of the past year the government has ordered people to work at home if possible. As the pandemic progresses, concerns are growing about the mental health impact of the containment.
These comments were made at an online staff meeting on Monday, where employees expressed concern about the reduction in their salaries and pension contributions. Michael also told staff not to play the victim card,” the Financial Times reported on Tuesday.
In response to this report, KPMG announced that Mr. Michael was suspended while he reviewed his comments.
But the situation worsened on Thursday when the Daily Mail published a recording of the meeting. In the video, Michael also said, “Unconscious prejudice doesn’t exist. I don’t believe that. Because after every training on unconscious bias, nothing has improved”. He also said that unconscious bias is “total nonsense.”
Last week, U.K.-based KPMG, which employs just over 15,000 people, announced its annual results and said it will invest 44 million pounds ($61 million) to shift to a hybrid work model in which employees work from home as well as in the office. The results also highlighted the company’s diversity and inclusion efforts, including reporting on pay gaps based on gender, ethnicity, sexual orientation and disability.
“Thousands of talented people at KPMG bring a wealth of perspectives and experience,” Michael said in a statement accompanying the earnings report. “We do not want gender, ethnicity, identity, disability or background to be a barrier to a career at KPMG.
Mr. Michael, 52, has been with KPMG for three decades. “I love this company and I sincerely regret that my words have hurt my colleagues and the impact this week’s events have had on them,” he said in a statement Friday. “In light of this, I believe that my position is untenable and I have therefore decided to leave the company.”
DC revives Milestone Comics, a revolutionary brand focused on black, Asian, Latino and gay….DC superheroes.
Superman, Batman and Wonder Woman, the superheroes who are part of the DC WarnerMedia universe, will be reunited with former colleagues starting this spring: Static, Hardware, Icon and Rocket.
On Friday, D.C. announced details of the rebirth of Milestone Comics, the groundbreaking comic book brand that flourished in the 1990s and spawned black, Asian, Latino and gay superheroes.
Milestone’s characters, first released in 1993 and running through 1997, return in a series of six episodes that will be released online and as 20-page comic books for $4. Static returns on April 12, followed by Icon, Rocket and Hardware in the summer.
The rebirth of Milestone DC has been going on since 2015, but new stories featuring the characters didn’t come until last year with the release of Milestone Returns, paving the way for a comeback. On February 23, DC will release an expanded version of the comic, with 24 additional pages. The new material will recount the events of the “Big Bang,” a protest against police brutality that somehow unleashed a wave of superpowers in the fictional town of Milestone, the showcase of Dakota. The print version goes on sale May 25.
The new material was written by director Reginald Hadlin, a partner of Milestone Media. The company was originally founded in 1993 by Denis Cowan, Michael Davis and Derek Dingle and Dwayne McDuffie. One of its biggest successes is the character Static, who starred in the WB network’s animated series Static Shock and returned to the comic book world in 2008.
- Wall Street recouped its earlier losses on Friday. Most Asian markets were closed due to the New Year vacation.
- The S&P 500 rose half a percent. In Europe, the Stoxx Europe 600 benchmark index was up 0.6% and Britain’s FTSE 100 was up 0.9%.
- The outlook for President Biden’s $1.9 trillion stimulus package may have improved after the Congressional Budget Office on Thursday projected a budget deficit of $2.3 trillion for fiscal 2021, down from last year’s $3 trillion deficit.
- Biden’s proposal was not included in the assessment, but “Democrats felt the report gave them a chance to borrow more money because it predicted a better economic situation than last fall,” wrote Jim Tankersley and Emily Cochrane in the New York Times.
- The U.S. economy is recovering faster than expected, thanks to a $900 billion bailout package approved in December and the fact that businesses have found ways to adapt to the pandemic.
a small economic recovery in Britain
- Data released on Friday shows that the UK economy grew by 1% in the last three months of 2020 compared to the previous quarter. This result is better than expected and will help the UK avoid a double-dip recession in 2020.
- Double dip or not, 2020 will be a decidedly bad year in British economic history: the economy’s 9.9% contraction is the worst since 1709.
- Oil prices rose more than 2%, with Brent, the world benchmark, trading above $62.50 per barrel and West Texas Intermediate, the U.S. benchmark, just above $59.50 per barrel.
- The International Energy Agency’s monthly report on the oil market, often considered an indicator of global economic activity, revised downward the estimate of world oil demand by 0.2 percent to 96.4 million barrels per day.
- “Economic growth and projected growth in oil demand are highly dependent on progress in vaccine distribution and application and on the easing of travel restrictions in the world’s major economies,” the report said.
“We have no intention of investing in Bitcoin, so stop there,” said Mary Barra, CEO of General Motors….Rebecca Cook/Reuters.
Bitcoin has set another record, with the price approaching $49,000 per unit, as widespread adoption of cryptocurrency appears to be gaining momentum. This week, Tesla announced it was buying Bitcoin for $1.5 billion, Mastercard said it would soon be supporting cryptocurrency, and The Bank of New York Mellon announced it would be offering storage services for digital assets.
As a result, CEOs of all companies began to wonder if they would consider cryptocurrency. “Just a follow-up,” Morgan Stanley’s analyst asked G.M. Mary Barr about the automaker’s recent phone call. “It’s all about Bitcoin. It’s inevitable.”
This is how Ms. Barra and others responded:
- “We don’t plan to invest in Bitcoin, so stop there. It’s something we’re going to monitor and evaluate.” – Mary Barra, CEO of General Motors.
- “This conversation ended quickly. We’re going to save our money.” – Dara Khosrowshahi, CEO of Uber, on CNBC.
- “My current understanding is that accounting is different from other currencies and can cause a lot of volatility. So we’re not working on that at this time.” – Leslie Barbee, Director of Investments, American Reinsurance Group
- “We’re probably not going to put corporate money into these types of financial assets.” – John Rainey, CFO of PayPal, on CNBC.
- “The quick answer is no.” – Christine Hertsellers, managing director of Voya Investment Management
Frequently asked questions
Has the IRS started accepting refunds today?
The IRS will begin accepting and processing 2020 tax returns on Friday, February 12, more than two weeks later than last year. This is because the IRS has had to program its systems more extensively to adapt to the new tax rules.
Does the IRS update the status of tax returns daily?
The IRS updates your refund status only once a week, on Wednesdays. If you file your tax return by mail, wait at least 72 hours after the IRS acknowledges receipt of your return before checking the status of your refund, and at least three weeks if you mail your return.
What time does the IRS update my tax refund status?
The IRS only updates tax returns once a weekday, usually between midnight and 6am. They do not update status more than once a day, so checking during the day will not produce different results.
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