UPDATE: IRS Interest Rates Rising, Currency Inflation and Upcoming Earning Reports, etc.

By Staff Reporters

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IRS: The IRS sent out a notice on February 23rd, warning taxpayers about a price hike coming in the next few months. The tax agency said that interest rates will increase for the calendar quarter starting April 1st, 2022. You can accrue interest on two types of payments: over-payment or underpayment. So starting in April, over-payments will have an interest rate of 4 percent, except for corporations which will earn a 3 percent rate and a 1.5 percent rate for the portion of a corporate over-payment that exceeds $10,000. In terms of underpayments, the interest rate will increase to 4 percent overall and 6 percent for large corporate underpayments.

“Under the Internal Revenue Code, the rate of interest is determined on a quarterly basis,” the IRS website explained. The tax agency did not change interest rates in this last quarter, which began Jan. 1, 2022. Before they get changed in April, the rates are currently 3 percent for general over-payments and 2 percent for corporation over-payments, with a 0.5 percent rate for the portion of a corporate over-payment exceeding $10,000. The underpayment interest is 3 percent right now, expect for large corporations which have a 5 percent rate.

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CURRENCY INFLATION: Inflation may occur when the Federal Reserve, or another central bank, adds fiat currency into circulation at a rate that exceeds that of the economy’s growth rate. That creates a situation in which there are more dollars bidding on fewer goods and services. The result is that goods and services cost more. One reason that inflation has been a constant in the US since 1933 is that the FOMC has continually increased the money supply. In response to the 2008 financial crisis, the Fed dropped its lending rate close to zero as a way to inject more liquidity into the economy, which led to increased inflation but not hyperinflation. While those increases have usually moved in step with growth, that hasn’t always been the case.

CITE: https://www.r2library.com/Resource/Title/0826102549

And so, in response to the COVID-19 pandemic and subsequent lock-downs, the Federal Reserve released the equivalent of $3.8 trillion in new liquidity in 2020. That amount was equal to roughly 20% of the dollars previously in circulation. And it is one reason why many investors were watching the CPI closely in 2021.

EARNING REPORTS:

Monday: India GDP data; Earnings from Lordstown Motors, Groupon, HP, SmileDirectClub and Zoom Video

Tuesday: US and China manufacturing data; Earnings from AutoZone, Baidu, Domino’s Pizza, Hostess Brands, J.M. Smucker, Kohl’s, Target, AMC Entertainment and Salesforce

Wednesday: European inflation data; Earnings from Abercrombie & Fitch, Dine Brands, Dollar Tree, Snowflake and Victoria’s Secret

Thursday: ISM Non-Manufacturing Index; Earnings from Best Buy, Weibo, Costco and Gap

Friday: US jobs report

10-Year: Treasuries rallied to 1.902%.

Oil: The rise in oil prices is spilling over at the gas pump: The average gas price in the US has jumped 10 cents, to $3.64/gallon, in the past two weeks.

Partial SWIFT ban: Western governments put aside their hesitations and proposed banning some Russian lenders from SWIFT, the global messaging service that facilitates cross-border transactions. It’s a move that could cause turmoil across global financial markets.

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CURRENCY: Devaluation versus Depreciation

KNOW THE FINANCIAL DIFFERENCE

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BY DR. DAVID E. MARCINKO MBA CPM®

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Devaluation is the deliberate downward adjustment of the value of a country’s money related to another currency, group of currencies or currency standard. It is often confused with depreciation and is the opposite of revaluation which refers to the readjustment of a currency exchange rate.

CITE: https://www.r2library.com/Resource/Title/0826102549

Definition

The government of a country may decide to devalue its currency and like depreciation it is not the result of non-governmental activities.

One reason a country made devalue its currency is to combat a trade imbalance. Devaluation reduces the cost of a country’s export rendering them more competitive in the Global market which is which in turn increases the cost of imports.

If imports are more expensive domestic consumers are less likely to purchase them further strengthening domestic businesses because exports increase and imports decrease there is typically a better balance of payments because the trade deficit shrinks. In short a country that devalue its currency can produce is difficult because there is a greater demand for cheaper exports.

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Advantages and disadvantages of devaluation - Economics Help

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In accountancy, depreciation refers to two aspects of the same concept: first, the actual decrease of fair value of an asset, such as the decrease in value of factory equipment each year as it is used and wear, and second, the allocation in accounting statements of the original cost of the assets to periods in which the assets are used (depreciation with the matching principle).

Depreciation is thus the decrease in the value of assets and the method used to reallocate, or “write down” the cost of a tangible asset (such as equipment) over its useful life span. Businesses depreciate long-term assets for both accounting and tax purposes. The decrease in value of the asset affects the balance sheet of a business or entity, and the method of depreciating the asset, accounting-wise, affects the net income, and thus the income statement that they report.

CITE: https://www.r2library.com/Resource/Title/0826102549

Generally, the cost is allocated as depreciation expense among the periods in which the asset is expected to be used.

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ORDER TEXT: https://www.routledge.com/Comprehensive-Financial-Planning-Strategies-for-Doctors-and-Advisors-Best/Marcinko-Hetico/p/book/9781482240283

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