Relief checks summary news: 22 february
US Finance: Latest Updates
Headlines: Wednesday, 22 February 2023
- White House announces plan to reduce mortgage payments by $800 a year for over 850,000 homeowners and buyers.
- Meta announces another wave of layoffs, backtracking on their previous commitment
- What you need to know about SALT this tax season
- Morgan Stanley predicts 26% drop in S&P 500 in coming months
- Stocks take a hit on poor retail forecasts and Fed rate hike expectations for 2023
- Department of Labor announces penalties for 13 companies found violating child labor laws
- Inflation data for January shows 6.4% price increase year-on-year
- Michigan to send $180 inflation relief checks: Who qualifies and when will they arrive?
2023 Tax Season
- Which states are still sending relief checks in 2023?
- Did you receive a state stimulus check? No need to report the payment as income to the IRS.
Read more from AS USA:
President Biden wishes Secretary of Labor Marty Walsh goodbye
Through Marty’s leadership, this administration has helped unions secure a historic pay raise for rail workers, continued the fight for paid sick days for all American workers, strengthened workplace protections, and ushered in a historic surge in union organizing. He knows that unions make us all stronger, no matter what we do or where we come from.
My dad used to say that a job is about a lot more than a paycheck, it’s about dignity and it’s about respect. Few people understand that more than Marty. I thank Marty for his work, which has made life better for millions of working Americans, and will serve as a model for all future Labor Secretaries who truly value American working people.
The housing market is one of the sectors most impacted by the Federal Reserve’s decision to rapidly increase interest rates.
The average rate applied to a thirty-year mortgage has risen from 3.92 percent a year ago to 6.32 today. Before these rate hikes took effect, the housing market had been on fire, with prices rising rapidly in cities and towns nationwide. As the price of a mortgage has risen over the last year, demand has begun to fall as low-and-middle-income buyers, and first-time home buyers are priced out of the market.
Mark Zuckerberg and Meta Platform Inc. are planning another job-cutting spree. The company’s CEO announced that the tech giant wants to cut unnecessary and wasteful projects. It is also looking to fire more people even after it laid off 13% of its workforce this past November.
Wall Street rallied behind Meta when they announced their debt restructuring of $4.5 billion back in November. The stock had fallen 62% last quarter, and it closed with a surge of 27% this quarter. However, investors are not so sure about the viability of Meta and are not entirely sold on this rise. The stock perhaps had an increase because of the cutbacks but not because of the service provided.
Read more on the planned job cuts in our full coverage.
Severance agreements with gag clauses deemed illegal by federal labor board
The Democratic majority on the National Labor Relations Board overturned a pair of Trump-era rulings allowing companies “carte blanche” when offering employees severance packages that include gag clauses. The 3-1 decision ruled that that laid-off workers cannot be required to sign agreements that contain confidentiality clauses nor other provisions in exchange for receiving severance which could hinder them from exercising their rights under federal labor law.
The case involves McLaren Macomb, a Michigan hospital operator, which upon closing a surgery center during the pandemic furloughed 11 employees. They were given severance agreements with confidentiality and non-disparagement provisions that were deemed illegal because they could discourage the laid-off workers from filing complaints with the NLRB or publicizing labor disputes.
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Purchasing a home and earning a college degree are some of the last proven ways to build generational wealth in the United States. However, as detailed by the White House, the “nationwide shortfall in the supply of affordable homes” has effectively priced first-time homebuyers out of the housing market in communities across the country.
Today, the White House announced a plan to bring down prices and increase access for “first-generation homebuyers and first-time homebuyers of color.”
Fed minutes on slower interest rate hike policy, members want to assess progress
Investors were waiting for the Federal Reserve minutes from their meeting earlier this month to better understand policymakers feelings about interest rate hikes moving forward. Since last March, rates have gone from near zero to the 4.50%-4.75% range over eight meetings, the fastest increase since the 1980s.
While it should come as no surprise, the majority voted to slow the pace of rate hikes once again this month with a 0.25% increase. However, a “few” wanted another half percentage point boost to get interest rates to a more restrictive level, where policymakers want to be, faster. That means that more than the two members present known to be calling for such a measure were in favor, but how many is unknown.
In the end though, many felt that the slower pace would help assess the economy’s progress in response to the interest rate hikes already in place as well as their effect on inflation as they try to drive it down to their target of 2%. The decision was cast as a “risk management measure” as policymakers try to thread the needle of taming rising prices without throwing the economy into a recession.
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Biden-Harris administration announces plan to reduce mortgages by $800 on average
"Today, the Biden-Harris Administration announced an action that will save homebuyers and homeowners with new FHA-insured mortgages an average of $800 per year, lowering housing costs for an estimated 850,000 homebuyers and homeowners in 2023.
"Vice President Harris and Department of Housing and Urban Development (HUD) Secretary Fudge will travel to Bowie, Maryland, today to announce that HUD, through the Federal Housing Administration (FHA), will reduce its annual mortgage insurance premium by 0.30 percentage points, from 0.85% to 0.55% for most new borrowers...
"Today’s announcement is an important step in making homeownership more attainable. FHA-insured mortgages, which accounted for 7.5% of home sales in the third quarter of 2022, are targeted at homebuyers who otherwise may not be able to achieve homeownership. This cost-lowering measure will make buying a home more attainable and affordable for more low- and middle-income borrowers."
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Tax filers will be eager to know if and when they will be receiving a tax refund. Filing a tax return as soon as possible is the best way to make sure your return is processed promptly; the IRS will be sifting through tens of millions of tax returns on a first-come-first-served basis.
Typically the IRS is able to distribute a tax refund within 21 days so long as the return is filed electronically. Those who file with paper may have to wait up to six months to receive their refund.
Read our full coverage for details on when you can expect your refund and how to track it.
Every tax year millions of Americans qualify for tax refunds. Although the IRS has said they expect refunds to be smaller this year, with the evidence suggesting they are correct, there are opportunities for some taxpayers to receive bumper refunds if they qualify for the Earned Income Tax Credit (EITC) and the California Earned Income Tax Credit (CalEITC).
It is only through qualifying for both of these credits that you can receive the $10,000 deduction.
When filing your taxes, you may be able to apply for any of the tax credits offered by the tax collection agency, including the Earned Income Tax Credit (EITC), which is aimed at low-income individuals and families.
EITC recipients can receive up to $6,935, almost $7,000. However, the exact amount will depend on the situation of each family or individual applying, such as the number of children one has or annual income.
The 2023 Child Tax Credit is available to parents with dependents under 17 as of 31 December 2022 and who meet certain eligibility requirements. In 2021, the American Rescue Plan made big changes to the credit for one year that helped many families by allowing them to receive half of the value of the credit over six months rather than as a bulk sum when they file their taxes.
We take a look at the Child Tax Credit for this year, and who is eligible to receive the support...
The S&P 500 could lose over a quarter of its value in coming months
A new report by Morgan Stanley paints a grim picture for the S&P 500 in the coming months. The stock market index has rallied since the start of the year after a punishing 2022. However, they are now at their most expensive level since 2007 by the measure of equity risk premium, pushing them into what the report’s lead strategist Michael Wilson call the “death zone”.
His team is forecasting that the broad-based index could lose up to 26% in the first half of 2023 as any Federal Reserve “pivot” on rate hikes looks unlikely. The recovery of stock valuations had been driven by the idea that with inflation easing the Fed would slow or end its rate hikes. However, with monetary tightening expected to continue, the risk-reward for equities is now “very poor”.
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Nearly 8 million people have already received a refund, more than twice the amount of mid-February at the same time last year. The total amount of money refunded at this point has increased by about two-thirds, from $9.5 billion last year to nearly $16 billion this year.
“People should absolutely expect smaller tax refunds this year. And frankly, some people might even owe the government money,” financial expert Lynnette Khalfani-Cox told NPR.
We take a look at the factors affecting the size of your payment...
The Social Security Administration (SSA) has begun sending out increased monthly payments for retired workers and Supplemental Security Income (SSI).
Thanks to the 8.7% cost-of-living adjustment (COLA) increase, retiree payments will increase to more than $140 per month on average. According to SSA, average payments in January 2023 are $1,827 dollars. On the other hand, Supplemental Security Income (SSI) recipient payments will increase to approximately $650.
Further interest rate increases pushed for
It has become popular to say, ‘Let’s slow down and feel our way to where we need to be.’ We still haven’t gotten to the point where the committee put the so-called terminal rate. Get to that level and then feel your way around and see what you need to do. You’ll know when you’re there when the next move could be up or down... Let’s be sharp now, let’s get inflation under control in 2023.
Could interest rate hikes increase in speed?
St. Louis Federal Reserve President James Bullard expressed confidence that the central bank can beat inflation and advocated Wednesday for stepping up the pace in the battle, worrying Americans who have outstanding borrowed money.
Bullard told CNBC that a more aggressive interest rate hike now would give a better chance to bring down inflation. The last rate hike was by 0.25 percentage points.
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Around 16.5 million Americans received payments from either Social Security Disability Insurance (SSDI) or Supplemental Security Income (SSI) at the beginning of 2023.
Social Security payments for disability benefits have on average by roughly $119 per month, which works out to an additional $1,428 per year. Those who receive Supplemental Support Income saw the maximum amount they could receive jumped by $73 per month, while for couples the gain was $110.
How to check the status of your tax return
The IRS has a tool called “Where’s My Refund” which is accessible online. This allows taxpayers to check the status of their refund after providing their Social Security Number, the refund total, and their tax filing status. Information is available 24 hours after a filing has been submitted. Another good use of the tool is its notifications if there is an error with an application, allowing filers to make changes quickly. This will require your return to be sent electronically instead of paper.
For those who have not seen any changes to their filing status and filed a paper return, the IRS offers a help line which can be reached at 1-800- 829-4477.
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Housing market slowdown nearing bottom
Home sales are bottoming out. Prices vary depending on a market’s affordability, with lower-priced regions witnessing modest growth and more expensive regions experiencing declines.
US existing-home sales down in January, but end of housing downturn in sight
Sales of existing homes in the United States dropped for the twelfth straight month in January to the lowest level in more than 12 years. The month-on-month decline slowed to 0.7% according to a report from the National Association of Realtors, raising hopes that the housing market downturn could be reaching a bottom.
January also saw the smallest increase in annual house prices since 2012 with the average existing-home price for all housing types at $359,000, an increase of 1.3% from the same time last year.
“Inventory remains low, but buyers are beginning to have better negotiating power,” said Lawrence Yun Chief Economist at NAR. “Homes sitting on the market for more than 60 days can be purchased for around 10% less than the original list price.”
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What will the Fed take into consideration as it decides on further rate hikes?
Next week the US Federal Reserve is expected to announce further changes to the Effective Federal Funds rate.
Many economic factors will influence the decision over the expected increase.
In early February, the Bureau of Labor Statistics reported that in December, 4.1 million people voluntarily left their jobs. This was the highest number recorded in over four months and is a sign that the labor market remains tight. When economic conditions favor workers, many feel more willing and interested in switching roles, companies, or industries.
Additionally, the BLS reported that in January, the economy added over half a million jobs, far exceeding most projections. Officials at the Federal Reserve have said that the tightness of the labor market is one factor pushing up prices.
Chairmen Jerome Powell has warned that the impacts of rate increases have not taken effect. In January Consumer Price Index tracked an average increase of 0.5 percent in goods across the market. It remains to be seen whether or not the Federal Reserve will continue pushing up rates slowly or move more quickly in light of the January inflation report.
Earlier this month, the Internal Revanue Service (IRS) warned taxpayers who had received a stimulus check from their state to postpone filing their tax return until the agency determined if these payments counted as taxable income.
The guidance is now available, and for taxpayers in California, the news is good. Because the Middle-Class Tax Refund is classified as a “payment [...] made for the promotion of the general welfare or as a disaster relief payment,” the checks will not be taxed at the federal level.
The tax authority cited the pandemic emergency declaration that the White House as a justification for these payments to be treated as a relief program. Since the White House plans to end the pandemic emergency declaration in May, in the future, these types of payments may be subject to federal taxes. State governments should be aware that when the pandemic state of emergency is lifted, any payments made to their residents are likely to be taxed, and recipients should be informed of that fact to ensure they are not caught by surprise when filing the federal return.
Interests rates for mortgages are trending upward once again
The average interest rates applied to mortgages in the US have fallen since their high in late 2022 but are, once again, trending upward. The thirty-year fixed mortgage rate stands at 6.3 percent, with the rate applied to a 15-year loan reaching 5.5 percent.
With further rate increases expected in the coming weeks, the rates applied to loans are also likely to rise in tandem.
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AS USA's live blog covering financial news and economic relief
Tax season is underway, and the IRS has informed most residents in states who were distributed stimulus checks that they will not need to pay federal tax on them. Filers have until 18 April to submit their returns.
This week the Federal Reserve is expected to announce further increases, a move that will likely bring down financial markets later in the week. These increases will come after the news that the economy added over half a million jobs in January, coupled with an increase in consumer prices of 0.5 percent. These datapoints are sure to influence the decision of the Fed when determining future rate increases.