Personal Finance

That Roomba vacuum robot you were considering buying – or that’s already patrolling your floors for dust bunnies – will soon have ties to your go-to online shopping service.

Amazon, which recently raised its Amazon Prime subscription price, is spending $1.7 billion to buy iRobot, the maker of the Roomba lineup of robot vacuum cleaners. This is Amazon’s fourth-largest deal to acquire top brands withofferingpopular consumer products. The iRobot purchase, pending shareholder approval at iRobot, follows the recent $3.9 billion acquisition of One Medical, a boutique primary care provider that directs Amazon deeper into the medical field. Amazon also spent $13.7 billion when it bought Whole Foods in 2017 and $8.45 billion buying MGM studios.

What does this mean for you? Just that the dots from famous brand names you know continue to connect to one name-brand owner: Amazon. And Amazon would like to make even more of your everyday and big-ticket purchases through Amazon Prime, not just on Amazon Prime Day. (If Amazon going deeper is a  turnoff, you can always step away from the online giant and seek alternatives to Amazon Prime.)

To recap: Amazon owns a big player in the grocery business, Whole Foods. Amazon owns a big piece of Hollywood, MGM studios, plus its own Amazon Studios as well as IMDB, the internet movie database that’s also a streaming video service. Amazon continues to go deep in healthcare with its purchase of One Medical. It’s got your home covered with Ring doorbells and security products and devices, and now Roomba, which as it scurries about cleaning can map your home and feed information into Amazon’s databases. Want to turn that off? That’s within your control.

So what will Amazon do with Roomba, which has been in the home floor cleaning business for a decade? Wedge its way deeper into the electronics home goods e-commerce space with a well-known, high quality product. Not that Amazon wasn’t already there … sort of. Amazon has its own home robot, although for security monitoring, not cleaning, in its Astro Smart Home Robot – yes, you’re getting the “Jetsons” references – described by The Verge as a mashup of Amazon’s proprietary Echo Show and Roomba’s robot tech. Critics don't like the Astro... maybe buying Roomba will improve the Amazon offerings? 

Read more: https://www.kiplinger.com/personal-finance/shopping/online-shopping/605049/amazon-adds-another-popular-smart-home-brand-to

Service may be part of the IRS's official name, but the tax agency has been lacking in this area, especially over the past couple of years. It's not all the IRS's fault. Credit the perfect storm of the COVID-19 pandemic, lots of stimulus-related tax law changes passed by Congress for the IRS to administer, years of budget cuts, and a shrunken workforce. All of these, plus other factors, has helped lead to the IRS's backlog of millions of unprocessed returns and delayed tax refund payments.

The good news is that the IRS has made progress on its processing of returns, in part because it went on a hiring spree and shifted current personnel from other areas to assist with the backlog. Agency statistics from 2021 and 2022 demonstrate the forward movement made by the IRS. As of June 25, 2021, there were 16.7 million 2019 and 2020 1040 forms that still required manual processing. As of this summer, the IRS finished processing all individual returns it received in 2021 that had no errors, including 2020 e-filed and paper forms.

The bad news is that the IRS still has a backlog of millions of unprocessed 2021 returns that were filed this year, the vast majority of which are paper-filed returns. As of July 29, it had 10.2 million unprocessed 2021 individual returns. Of these, 1.8 million returns require special handling, such as error correction, and 8.4 million are paper 1040s waiting to be processed and reviewed. And there are very, very long waits for tax refunds. Refunds on paper-filed returns, which the IRS usually pays to filers within six to eight weeks in normal years, are taking four months or longer to be paid. The IRS says it will get through its backlog of unprocessed returns by year-end, but this isn't much relief to people who are still awaiting tax refunds on their 2021 returns that they filed months ago.

So, what steps can you take if you filed a return earlier this year and are still waiting for your refund? You can check the IRS's "Where's My Refund" tool on its website. Unfortunately, this tool provides limited information to filers seeking the status of their tax refunds. It will only let you know whether the IRS received the return and if it's still being processed, whether a refund was approved, and when it was sent. It doesn't say whether return processing has been suspended because of a math error or for another reason. The IRS continues to direct Form 1040 filers who are awaiting delayed tax refunds to the Where's My Refund tool for status updates. And filers dutifully check the tool for months on end, but this is obviously frustrating for people who see only a notice that the return is received or in process, but nothing on the status of their tax refunds.

You can try to call the IRS to check on your refund, but there is no guarantee that you'll even get through to a live person on its toll-free phone line. Even if you do get through, the operator may not be able to give you any more information other than what you can see for yourself on the Where's My Refund portal. You might have better luck calling if it's been at least six months since you filed your 2021 paper return.

If you've contacted the IRS about your delayed refund with no results, and not having the money is causing you a financial hardship, you can try calling the IRS's Taxpayer Advocate Service. Unfortunately, TAS can't assist with delayed refunds in most situations, but this is an instance in which it can still be of help.

Another suggestion is to contact your congressional representative. This might sound like a long shot, but we've heard from some people who had success doing this. Much of it depends on how helpful and knowledgeable the congressional aide answering the phone is on this topic. If your representative happens to sit on the House Ways & Means Committee, that's a plus.

A couple of things you should not do: Don't write to the IRS regarding your late tax refund. The IRS is already behind on opening and answering paper correspondence, and your letter will just fall to the bottom of the pile. Also, don't file a second return or an amended return for 2021. This will only confuse the IRS and delay your refund even longer.

Read more: https://www.kiplinger.com/taxes/tax-refunds/605047/waiting-for-tax-refund

Student loans are among the most common sources of debt in America. It has been reported that about one in five Americans have student loan debt-totaling more than $1.7 trillion.

If you’re one of those people, you are probably waiting to hear whether—in these times of high tuition and inflation—some portion of your federal student loan will be forgiven or whether the federal government’s pause on student loan payments and interest will be extended. (Stay tuned: news on the student loan forgiveness front is expected soon from the Department of Education.

In the meantime, though, it may help to refresh your knowledge of some of the ways that having a federal student loan, can affect your taxes.

A typical question surrounding student loan debt is whether a student loan is income for tax purposes. The fortunate answer is no, the IRS doesn’t consider student loans to be income.

Income that is taxable is usually made up of salary and wages. The IRS also considers unearned income (e.g., winnings or profits from sales of assets or stocks) to be taxable. So, because student loans are debts that are intended to be repaid with interest, they are not taxable income and do not need to be reported as such on your tax return.

Additional good news about student loans and taxes is that you may be able to deduct the interest that you pay on your student loan on your tax return. That deduction can potentially save you a little money at tax time.

Right now, due to pandemic relief, payments and interest on student loans are on pause until the end of August. However, normally, when you pay interest, the IRS allows you to deduct either the amount of interest you paid during a given tax year, or $2,500, whichever is less. And, you don’t have to itemize your deductions to claim student loan interest because the IRS considers student loan interest to be an adjustment to your income.

To claim the student loan interest deduction, you must have paid interest on what the IRS calls a “qualified student loan.” That is essentially a loan that was taken out to pay for higher education expenses for you, your spouse, or a dependent.

But whether you can claim a deduction for student loan interest also depends on several other factors including on your filing status and income. That’s partly because the student loan interest deduction phases out depending on the amount of your modified adjusted gross income.

For example, if you are married and want to claim the student loan interest deduction, you cannot file separately, and you and your spouse cannot be claimed as dependents on someone else’s tax returns. Also, your modified adjusted gross income must stay within a specified amount.

In 2022, if your modified adjusted gross income is less than $70,000 (if you’re single) or $145,000 (if you’re married filing jointly), you could deduct the amount you paid or $2,500, whichever is less. However, single filers whose modified adjusted gross income fell between $70,000 and $85,000 or married filers whose income fell between $145,000 and $175,000, would have their student loan interest deduction reduced. This is because their modified adjusted incomes are higher.

More information about the student loan interest deduction can be found on the IRS website.

While it’s important to know whether student loans are income and whether you can deduct student loan interest on your taxes, the question of the day is whether federal student loans will be forgiven soon. And if some portion of your student loan is forgiven, that will be good news—if, of course, the student loan forgiveness isn’t taxable to you.

Whether you will be taxed on the amount of your federal student loan that is forgiven is complicated. This is partly because there are various types of student loan programs and repayment plans. And it’s unclear how a large-scale federal student loan forgiveness program would treat forgiven or cancelled debt for tax purposes.

Typically, the IRS treats cancelled and forgiven debt as taxable income. There are some exceptions to this that have applied recently to student loans, mainly because of legislation passed during the COVID-19 pandemic. For example, the American Rescue Plan Act (ARPA) paused taxes on student loan forgiveness from 2021 through 2025 for people whose student loans are classified under the Income-Driven Repayment program. ARPA also granted similar relief under other repayment programs.

Also, student loan borrowers whose loans were forgiven as part of the Public Service Loan Forgiveness program, are also currently exempt from tax on the forgiven amounts. (Eligibility for that program has also recently been expanded).

As a result, you will have to wait and see whether broad federal student loan forgiveness comes to fruition and if so, whether the amounts forgiven will be taxable.

In light of the pandemic in 2020, Congress passed the CARES Act, which contained provisions allowing employers to contribute money toward the federal or private student loans of their employees.

Under CARES, employers could directly contribute $5,250 each year tax-free to employees’ student loans. This employer student loan repayment assistance has been extended through 2025.

If your employer offers this benefit, it’s currently a way to reduce your student loan debt that is tax-free to you. However, because it’s a form of debt forgiveness, it is unclear-whether after 2025, when the tax relief is set to expire, employer repayment assistance for your student loan will, or won’t, be taxable to you.

Data show that one-third of borrowers have already defaulted on their student loans—some more than once. But because of recent pandemic relief (mentioned previously) many borrowers who defaulted on their loans were able to have their good standing reinstated in the last couple of years. However, with current soaring inflation and looming recession, it’s hard to say whether that so called “fresh start” student loan relief will translate to fewer defaults.

Before default relief was put in place, the penalties associated with student loan default could be significant and included things like high negatives on your credit rating and wage garnishment. Tax consequences for defaulting on your federal student loan were also hefty. For example, the federal government could seize your tax refunds and even some of the refundable portions of certain tax credits.

Even though student loan payments are currently paused, if you think that you might default on your federal student loan, reach out to the Department of Education or your loan servicer to find out about any available loan rehabilitation program.

When you have a student loan, the interest you pay on it is reported to you on Form 1098-E if you paid at least $600 in interest during the tax year. (But remember, you probably didn’t pay interest recently because of the pause on student loan interest and payments).

Normally Form 1098-E is mailed to you, but you can also find a copy of your Form 1098-E on your loan servicer’s website or by contacting your loan servicer. You use the information provided on the form to claim the student loan interest deduction.

Another tax form that can be related to your student loans is Form 1098-T, which shows the amount of qualified tuition and related education expenses that you paid during the tax year. Form 1098-T can be useful in claiming education tax credits that might also help to reduce your tax bill.

Read more: https://www.kiplinger.com/taxes/605043/student-loans-can-affect-your-taxes-what-you-should-know

It is easy to think that something called a “special needs trust” is only used infrequently – after all, the very name implies the need for such a trust is rare. That could not be further from reality. Perhaps a more appropriate name would be “frequently needed trust.” Historically, special needs planning referred to financial planning concerns for individuals who are living with physical or intellectual disabilities diagnosed from birth, and that special needs planning was used by a niche group of individuals and families.

How big an issue is disability in our society? The number is surprising, as is the variety of individual situations for which special needs planning is needed. The Centers for Disease Control and Prevention estimates that 61 million adults in the United States live with a significant disability – that’s just over 1 in 4 adults who have some type of disability, whether a mobility impairment, intellectual and developmental disabilities, brain injuries, mental illness or chronic conditions. And those 1 in 4 adults do not include an untold number of Americans who may be dealing with the yet-unknown effects of “long COVID,” which could result in disability in the future. Given the high number of individuals who are currently living with or may develop a disability in the future, special needs planning is very important to consider when creating your financial plan.

The population of people with a disability is growing rapidly, mainly because of increasing longevity. Fewer than 7% of Americans under the age of 18 have a disability, but for those 65 and older, the incidence of disability leaps to 40% according to CDC research. The goal of effective special needs planning is to not only secure the financial future of the person living with a disability but to also create a meaningful, fulfilling life for that person.

So, what are the steps to create a special needs financial plan?

The first step is to understand the various governmental support options, how to qualify and maintain eligibility of these programs, and which programs are means-tested. Social Security and Medicare are insurance programs that most people are familiar with as retirement programs and are paid for with premiums withheld from wages.  Medicaid provides health coverage for low-income adults, children and people with disabilities and is administered by individual states, according to federal requirements. There is also a Social Security Disability Insurance (SSDI) program for workers who are disabled before retirement age. There are some significant benefits those on SSDI can qualify for that are less frequently known:

In their lifetime, a person with a disability may need all four of these programs to cover their basic needs. It is very important to work with your financial adviser, and in particular an adviser with expertise in special needs planning, to understand which programs are options and how to manage the person with the disability’s financial affairs to abide by the limits of assets that the individual may control before being disqualified from benefits and the specific rules that apply depending on the state you live in. The asset limit is quite low – typically, a person with a disability may not directly own more than $2,000 in assets – and it is easy to accidentally be disqualified from benefits if you are not careful.

The public benefits are valuable but often insufficient. Most people with disabilities cannot afford to lose the benefits, but the benefits alone do not provide enough support for a comfortable life. So, what do you do to add in supplemental support? Frequently, I hear that the “simplest” solution would be to disinherit the person with the disability so they can keep the public benefits, but that solution leaves too much to chance to be viable. Sometimes, family members do not feel the same moral obligation to support the person with the disability, or the funds that were supposed to be set aside may be lost to divorce or lawsuits.

A better way to ensure the orderly transfer of assets for the ongoing support of a person with a disability is to use a discretionary trust, also known as a supplemental needs trust or special needs trust. A discretionary trust of this type has specific language that prohibits the trustee from paying for the basic food, shelter and medical benefits provided by governmental programs and ensures that the assets in such a trust are neither owned by nor controlled by the beneficiary, so the trust assets do not jeopardize the beneficiary’s means-tested governmental benefits.

There are three basic kinds of special needs trusts: third-party trusts, master pooled trusts, and first party Medicaid payback trusts. Depending on the financial and lifestyle needs of the beneficiary and their family, one of these trusts may be better suited than another. Confirm with your financial adviser and estate planning attorney to determine what is best for your personal situation.

Next, you need to ensure that the framework you have created has a thick layer of protection against major causes of financial turmoil for a special needs plan – medical expenses and premature death of the primary breadwinner in the family. In most cases, it is imperative that you understand the health insurance options available for the person with the disability, whether through government programs or via a private insurance policy. Additionally, life insurance is more important to families with disabled dependents than it is for the typical household. Providing for a family member with a disability is one of the best reasons to buy some form of permanent life insurance. Usually, second-to-die or survivorship type policies are the most appropriate product to fund a special needs trust.

The final step in a disaster prevention plan is to create an operation manual for the household, documenting all the information someone would need to step in and carry on as primary case manager and caretaker if needed. This is critically important for a surviving spouse as well as a successor caretaker when someone with a disability moves out on their own or loses the support of a previous helper. A good document filing system, medical records keeper, and a password logbook or password manager software is essential to maintain a reliable operation manual.

People with disabilities need more than the basic financial plan – the same tools and techniques may be applied but likely need to be modified or adapted. First you need to consider the three phases of a financial life cycle – dependency (usually minor children/student years), accumulation (working /family earning years) and distribution (retirement years.)  Someone with a disability may take a little longer to reach their accumulation years and may need to begin the distribution years earlier than the typical peer.

Couples with a loved one with special needs may need to increase their savings rate, considering a 10%-15% minimum savings rate or more to account for a three-person (and possibly two-house) retirement. It is important to make sure these increased savings use the most efficient vehicles for wealth accumulation, including consideration of different types of life insurance and increased amount of annual earnings coverage. Additionally, making sure that employer qualified plans and IRAs have correctly named beneficiaries and consideration of tax treatment upon distribution, noting that trusts reach the highest federal tax rate of 37% at just $13,451 of income in 2022, is important. Your financial adviser and tax professional are key to making sure these factors are optimized.

The ABLE Act of 2014 created a new savings vehicle for people with disabilities that is especially useful. The ABLE account is an inexpensive, flexible savings plan for a person with disability which can be funded with earnings from employment or contributions from family members or friends, subject to annual contribution limits.  There are certain criteria to be eligible to open an ABLE account.  An eligible individual must have developed their disability before the age of 26 and have been living with their disability for at least one year or expect their disability to last for at least one year.  The ABLE account is similar to the structure of a 529 college savings plan where after-tax money is saved, tax-deferred growth happens while the funds are in the ABLE account and tax-free distributions for qualified expenses come out. The ABLE account is an asset that a person with a disability can own directly without disqualifying themselves from Medicaid.  However, if an individual with a disability has more than $100,000 in an ABLE account, then SSI benefits may be suspended so it is a best practice to keep a careful eye on the balance of the account to avoid inadvertently disqualifying from public benefits. The asset limit means the ABLE account can’t take the place of a special needs trust, but it is a great substitute for an IRA or a 401(k) plan for people who are able to work, allowing them to accumulate funds for education, a vehicle or a major purchase.

The goal of special needs planning is the same as the goals we use for all our clients – the opportunity to enjoy a fulfilling life with the chance to be themselves and make a unique contribution to a community that supports and values them. Even if the requirements of governmental programs mean that a person with a disability may never have a direct net worth that exceeds $2,000, a sound and carefully considered financial plan can make those goals happen for every member of a family with the partnership of your financial adviser, estate planning attorney and tax professional.

Special thanks to Christopher Currin, CFP ®, Senior Wealth Advisor, for his invaluable research and expertise in creating this article.

Read more: https://www.kiplinger.com/retirement/estate-planning/605050/create-a-special-needs-plan-that-goes-the-distance

Stocks ended Monday with a whimper as a solidly higher open lost momentum throughout the trading day.

Disappointing earnings announcements from a pair of tech names created selling pressure for the broader market. Most notably, Nvidia (NVDA) shed 6.3% after the chipmaker said its second-quarter revenue will likely come in at $6.7 billion – lower than the $8.1 billion it previously guided for – amid a 33% year-over-year decline in gaming revenue. The company also expects "challenging market conditions" to persist in Q3. NVDA will release its full earnings report on Aug. 24.

Earnings from Palantir Technologies (PLTR) were also on Wall Street's radar. Shares plunged 14.2% after the data analytics firm reported a per-share loss of 1 cent in its second quarter, compared to the consensus estimate for earnings of 3 cents per share. PLTR also gave lower-than-anticipated full-year revenue guidance.

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Not surprisingly, technology was the worst-performing sector today, giving back 0.9%. Meanwhile, the biggest gains were found in the materials (+0.6%) and real estate (+0.7%) sectors. 

As for the major indexes, the Nasdaq Composite (-0.1% at 12,644) and S&P 500 Index (-0.1% at 4,140) finished in negative territory, while the Dow Jones Industrial Average eked out a 0.1% gain to end at 32,832.

YCharts

Other news in the stock market today:

Electric vehicle (EV) stocks were a pocket of strength today after the Senate over the weekend passed the Inflation Reduction Act. The industry is poised to benefit from the spending bill, which aims to commit $369 billion toward green energy investments – including extending a tax credit for purchases of electric vehicles – and reduce carbon emissions by 40% by the end of this decade. 

The efforts to fight climate change are a major part of the roughly $430 billion bill. But as with all things in life, nothing is free. In order to pay for the measures, the plan proposes a 1% tax on stock buybacks and a 15% minimum tax on companies reporting more than $1 billion in revenue.

"We find the potential tax on share buybacks to be particularly interesting," says Sonia Joao, chief operating officer of Houston-based RIA Robertson Wealth Management. "Share buybacks have been a popular way for American companies, and particularly tech firms, to reward their shareholders. This may incentivize them to spend less on payouts and more on dividends or debt reduction. It's early, but we could see this having far-ranging implications for the U.S. market." 

While the bill still has to make it through the House before being signed into law by President Joe Biden, investors will want to keep an eye out for its potential impact to their portfolios. Here, we've put together a short guide detailing some of the best (and worst) stocks from the Inflation Reduction Act. Check them out.

Karee Venema was long PLTR as of this writing.

Read more: https://www.kiplinger.com/investing/stocks/605048/stock-market-today-080822-nvidia-revenue-warning-weighs-on-stocks