Tax Reporting – Inflation – Markets

Qualified Charitable Distribution (QCD) Tax Reporting

Your IRA distribution form (1099R) will reflect your total gross distribution and will NOT reflect amounts sent directly to charities under the terms of a Qualified Charitable Distribution (QCD).

When filling our your 2023 1040, include on line 4a the total amount of distributions reported on Form 1099-R. Then subtract the amount that was transferred directly to charity and report the remainder on line 4b. Write “QCD” next to line 4b. If you are using tax software, a drop-down box for line 4b should provide the choice to click QCD.

Please make sure to mention to your CPA, the amounts sent to charity, otherwise, your accountant will have no way of knowing you made a QCD, and you will lose the tax benefit.

Inflation – Challenging

Most investors now believe the Fed will not cut rates in March, as last week’s Consumer Price Index (CPI) came in hotter than expected, rising .3% for January.

Now investors are speculating about a rate cut at the Fed’s June meeting.

Retail sales however, shrunk last month, down .2% from a year ago. For the Fed to cut sooner than later, we’ll need to see additional slowing retail data, an increasing unemployment rate which leads to an economy that is truly slowing.

Be careful what we ask for!!

Markets/Week Ahead

The Fed now has the market looking for direction.

For the week, the Dow Jones was flat, the S&P 500 was down (.25%), the Nasdaq off (1.15%) however the Russell 2000 Small Cap Index was up 1.54%.

Over the pond, markets finished higher as foreign stocks gained 1.10% and emerging markets 1.36%. Perhaps speculation that future rate cuts may strengthen foreign currencies, lifting foreign stock markets.  Something to keep on eye on this year. Keep in mind, the market tends to move prior to the actual event.

Bond yields rose slightly as the 10-Year US Treasury finished last Friday with a yield of 4.281%.

This week is light on corporate and economic data however we’ll hear from Nvidia on Wednesday. Nvidia with Its AI dominance is up 250% over the last 12 months and up 40% year-to-date.

Also, on the docket this week, is the minutes from the last Federal Reserve meeting. Last month’s minutes may be more scrutinized than prior, as investors will be searching for clues about what the Fed will do with rates as the year proceeds.

I’ve been thinking for a while, we may need to learn how to live with inflation in the 3 to 4% range going forward. As the baby boomers eventually start to slow their spending, Millennials will most likely keep the peddle to the metal, and they ARE the largest current generation in the US.

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