January 2020 E-Newsletter

January 2020 Q & A

Q: I'm getting serious-sounding calls from someone who claims to represent the IRS, insisting my social security number is compromised. Should I trust this?

A: No, no and no! The IRS will typically send you a letter, and usually only after they receive a suspicious tax return filed with your social security number or after you file and they flag your return as a duplicate. The Federal Trade Commission recommends that you call the IRS using the telephone number given in the letter. You'll need the letter and a copy of your prior year's tax return when you call to help verify your identity. Get more information at www.identitytheft.gov.

Q: I contributed to a Simplified Employee Pension (SEP) as a self-employed individual for the first time this year and heard there is a special formula for deducting contributions on my tax return. What is it?

A: If you have a SEP-IRA, you can contribute up to 25% of compensation, up to $56,000 in tax year 2019. However, you'll need to make a special computation if you are self-employed. To find your maximum contribution you'll first need to deduct your contributions from income. Many SEP providers offer an online calculator to help you figure this out, and your tax professional can help you do the same.

LACKING CONFIDENCE

Few employers are "very confident" their employees are on the way to becoming retirement-secure, according to the report, "Employers: The Retirement Security Challenge," from the Transamerica Center for Retirement Studies. Only 17% of employers felt very confident, which lined up with 18% of employees who felt the same. About 23% of employers were not too confident and 6% said they weren't confident at all.

RECESSION AHEAD?

Manufacturing activity was the lowest in a decade, according to the Institute for Supply Management, an Association of purchasing managers. Its September manufacturing index fell to 47.8%, down from 49.1% in August. This was its lowest reading since June 2009. Any reading below 50 typically indicates that manufacturing activity is contracting.

CONSUMERS NERVOUS?

The Bureau of Labor Statistics also recently compiled consumer economic information for all of 2018 and found that spending rose 1.9%. During the same period the Consumer Price Index (CPI-U) rose 2.4%. Two bright spots: healthcare expenses rose only 0.8% while education costs fell 5.6%.

BENEFIT CONCERNS

If you wonder what challenges other employers face trying to put together their employee benefit packages, the 2019 Benefits Trends Survey by Willis Towers Watson offers some clues. Over the next three years, the employers surveyed cited rising benefit costs (82%), difficulty communicating benefit choices to employees (53%) and differing wants and needs of a multigenerational workforce (50%) as top concerns.

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