| | |
Steven L. Cox, CPA
Telephone: (919) 469-1773
Online at: carycpa.com or stevenlcoxcpa.com
Cary Office: 1135 Kildaire Farm Road
Suite 200
Cary, NC 27511 (year round)
Pictured Staff Left to Right:
Steve Cox, CPA
Mrs. Robbie Cox, Admin Asst
| | Providing Updates and Perspective to Help Clients Navigate These Challenging Times | | |
2025 has been a year of dramatic change in our great nation, and this has created anxiety among the citizenry as well as the financial markets as everyone tries to determine where things will go from here. There are new proposals being put forth almost daily, many of which have both significant support and opposition, and yet it is nearly impossible to tell which proposals will become law and which ones are just "political posturing".
Here is a rundown from the front lines of the political battlefield:
TAXES:
Republicans in Congress are trying to use a process called "reconciliation" where only a simple majority is required to pass one or two large "omnibus" budget/tax bills to include most of the objectives of the Trump Administration without any Democratic Party support. Included would be an extension of most of the provisions of the 2018 tax overhaul passed by the first Trump Administration. The most recent proposed bill would include massive cuts to the Medicaid program, which provides healthcare to millions of low-income Americans, many living in politically red states. Many GOP members of Congress have received an earful at their local town hall meetings about possibly taking away the healthcare safety net for millions of Americans. In fact, there currently appear to be enough opposing Republican members in both the House & Senate to keep that version of the budget bill from passing.
Other priorities in the current proposed budget bill include staffing increases at the US-Mexico border, a new system to discourage immigration to the US, a gigantic missile defense shield, new fees targeting electric cars and also a pivot away from federal student loans.
More "provocative" proposals being floated include replacing the entire income tax system with tariffs, even though tariffs currently only generate a small portion of the revenue that the tax system generates. Congress is also evaluating Trump campaign promises to eliminate taxes on tips, overtime and Social Security benefits. The proposals related to tips and overtime could possibly bring about widespread fraud, as unethical types might try to reclassify much of their income as tips and time worked as overtime. Eliminating taxes on Social Security payments would provide a significant financial benefit to a significant percentage of Americans, but making up the lost Social Security revenue (SS taxes go back into the SS funds) is a major sticking point. Note that any elimination to taxes on SS benefits would not be effective until 2026.
The Direct File program from the IRS, which truly allows taxpayers under a certain income limit to file their taxes for free, is still in operation as of today although the lobbying efforts of companies like Intuit (which makes competing TurboTax software) may end up paying off for them as it appears that the highly popular Direct File program will be discontinued for future tax seasons.
SOCIAL SECURITY / MEDICARE:
The current Social Security system infrastructure is in the process of being severely scaled back by the DOGE group, and it is felt that this process will continue even as Elon Musk returns to spending most of his time at Tesla in an effort to rescue their tarnished brand. As of early May, 47 local Social Security offices have been closed and the Social Security Administration has lost more than 3,000 employees. Claims of "extreme levels of fraud" by DOGE staff were never substantiated.
The Republican Study Committee has proposed raising the Social Security full retirement age from 67 to either 69 or 70, phasing in the change over several years and not impacting current retirees or those "near retirement" (one proposal used age 59 and above).
There is a great deal of uneasiness among Americans regarding the Social Security system and its future, as President Trump has said that he will defend the system but Elon Musk referred to the system as a Ponzi scheme. There has been an increase in Americans drawing benefits early due to uncertainty about the future of the program, although the general view from financial advisors is to "stay the course" as far as deciding when to start drawing benefits. That is a decision that each person must make based on their own circumstances and outlook, although consulting a financial professional such as a CFP is generally a smart move.
Most of the Medicare/Medicaid headlines recently have focused on proposed cuts of hundreds of billions of dollars over 10 years to the Medicaid program, included in the current proposed GOP budget in Congress. These cuts, if enacted, would likely cause the immediate closure of 190 rural hospitals located in 34 states that expanded Medicaid.
INFLATION / MISC:
Trump's "on again, off again" tariff policy with Canada and Mexico (resumed on May 3rd) has caused tension and reciprocating actions from some of our historically reliable ally nations. There were recently some carved out exceptions to the tariffs, mainly related to auto parts & metals.
There was also talk of a "DOGE refund check" of possibly as much as $5,000 going to American households to return some of the DOGE government cutback savings to the taxpayers. However, Elon Musk had a goal of cutting as much as $2 trillion from the federal government, but now his target is down to $150 billion, or only 7.5% of the initial target. DOGE refund checks appear to be extremely unlikely to be approved by Congress as they wrestle with the budget proposals. Here's an interesting fact - total government spending under the current Trump Administration is actually up 6.3% from the previous administration.
INTEREST RATES:
Interest rates have remained basically unchanged during the new Trump Administration, as the Federal Reserve Board has fears that lowering the rate will add to inflationary pressures. On the other hand, the first quarter GDP numbers show the economy shrinking slightly, so there is a balancing act that the Federal Reserve must navigate.
SUMMARY:
My overall recommendation to clients right now is to focus on those things that you can control. If watching the news is negatively impacting your mental and physical health, turn it off or watch something else. Focus on your own well-being and find outlets where you can make a difference, but also do your best to make your voice heard.
----------------------------------------------------------------------------------------------------
| | | |
2025 Government Update
Omnibus Tax Bill Proposed
Education Dept Dismantling
NC Income Tax Rate Trends
| | |
As noted above, Congress is working to pass some type of omnibus budget/tax bill to support President Trump's agenda, while also working to avoid a possible government shutdown if a budget is not in place by September 30th. This process should become more clear in the coming weeks and months.
President Trump has taken steps to move forward with the process of dismantling the US Department of Education, although officially eliminating the department would have to be approved by Congress. It appears that the GOP wants the federal government to move toward a role of just being a "guarantor" of student loans but not an actual lender as the lending process would be privatized. There are certainly good arguments on both sides of this issue, as the government would eliminate loan losses but opponents argue that privatization would remove access for many borrowers.
The North Carolina "flat tax" rate for all income levels is 4.25% for 2025 tax returns and will drop to 3.99% for 2026. For 2027 and beyond, there are certain economic "triggers" that must be met for the rate to be lowered further.
| | Thanks for a Great Tax Season | |
Thanks to all clients for another great tax season just ended. I still enjoy (at age 67) working with all of you to compile an accurate tax return and hopefully keep you off of the IRS radar (always my #1 goal).
I plan to keep my practice going for as long as I am enjoying the work itself as well as the social interaction with clients. As I have done annually in recent years after each season, I have trimmed a certain number of clients from my database in order to make room for new clients and also slowly move toward the right number of clients as I "glide" toward an eventual retirement.
A few notes to help keep things running smoothly:
-
The client questionnaire that I ask all clients to complete each year provides me with valuable alerts as to changes in your life that may impact your tax return, as well as logistical data such as making sure the bank account number on file is still current. Please take the questionnaire seriously.
- Along those same lines, a signed engagement letter provides both you and I with a clear binding agreement of the services to be provided and how they will be accomplished. Please sign and return this document with your other tax documents.
-
Beginning next tax season, payment by check will only be available to "paper document" clients who pick up their final tax packages at the Cary office with the receptionists, along with other payment methods. Clients who upload their documents digitally to Sharefile will have all other payment options (except check payment), which includes direct draft of bank account, credit/debit card, PayPal and Venmo. The Sharefile paperless process is meant to be quick and efficient, so wrapping up the process with a check payment is a bit like riding the last leg of the Tour de France on a tricycle (weird analogy, but you get the point).
- On a similar note, Sharefile users, who currently receive a final PDF of their return uploaded to their Sharefile folder, will no longer have the option of a printed paper copy of the return. This eliminates redundancy because the client can print the PDF at any time and it contains the exact same information that is found in a paper "green folder" copy of the return.
-
The new form for submitting medical and charitable itemized deductions category totals worked out well - please use this form (I don't want to see your routine medical receipts just as badly as you don't wish for others to see them). I will likely ask for some receipt copies if you have enough deductions to take the itemized total over the standard deduction, but that will typically be receipts over a certain dollar limit, such as charitable contributions over $1,000, etc.
-
When I send a draft copy of a return for your review (paper or Sharefile client), I will typically check back in with you if I haven't heard anything within a week. I know that my clients live busy lives. However, if I have to send multiple check-in emails over multiple weeks to get feedback on the draft, that might be something noted for post-tax season review of the potential trim list. A good time for a reminder that if you have a substantial balance due to the government, you can still e-file the return now and wait to make the tax payment until April 15th. Dragging out the tax preparation process gives you NO additional benefit as far as paying any government balance owed.
Again, thanks to all of my wonderful clients. If I prepared your 2024 tax return AND you are receiving this newsletter, it means that I am looking forward to having you return as a client for your 2025 tax return. If you discover or decide that you will not be returning, please send me an email so that I won't hold your spot. I turn away quite a few potential clients once I have reached a target number of clients, so please be respectful and let me know if you will not be using your spot. THANKS VERY MUCH !!
| This Quarter's Visual Puzzler | |
Speaking of "spots", what parking space number is the car occupying, based on the pattern of numbers??
(Hint that leads to answer at bottom of newsletter)
| | |
By The Numbers
1. SLEEPING WITH ONE EYE OPEN - Dolphins are known to be one of the smartest animals on the planet – possibly due to the fact that they can conserve their brain power. Because they must constantly be on the lookout for predators, the marine mammals have developed a neat trick of maintaining partial consciousness in one hemisphere of their brain while the other hemisphere sleeps. Researchers have tested whether this "half sleep" negatively impacts the animals' alertness during the day but have found that even after five consecutive days of round-the-clock vigilance, there is no noticeable decline in cognitive performance. [source: nationalgeographic.com]
2. TIME TRAVEL - Russia, the largest country in the world by land area, contains 11 time zones; however, much smaller France has the most of any country, with 12. France’s main landmass, France métropolitaine, keeps Central European Time, while its many dependencies observe 11 others. Those other regions include French Polynesia (Tahiti Time), Martinique (Atlantic Standard Time), and Mayotte (Eastern Africa Time), to name just a few, and when the French archipelago of Saint-Pierre and Miquelon observes daylight saving time, the total number of time zones goes up to 13. The U.S. has 9 official time zones, 4 of which are contiguous – the rest are found in Alaska, Hawaii, Puerto Rico, Guam, and the U.S. Virgin Islands. [source: timeanddate.com]
3. STICKER SHOCK - The proposed new 25% tariffs on all vehicles assembled and imported from Mexico and Canada (resumed as of May 3rd / some exemptions for auto parts, steel & aluminum added) could significantly raise prices. Assuming the full tariff were to be passed on to consumers, price increases for non-luxury brands assembled outside the U.S. would include: Chevrolet Silverado & GMC Sierra ($8,000–$12,000); Toyota Tacoma ($6,000–$8,000); Nissan Sentra ($4,000–$5,000); Honda CR-V ($6,000–$7,500); and Ford Fusion ($5,000–$6,500). The luxury segment would include BMW 3 Series ($9,000–$11,000); Audi Q5 ($10,000–$12,000); Infiniti QX50 & QX55 ($9,000–$11,000); Lexus RX & NX ($10,000–$12,500). In 2024, the average price of new non-luxury cars sold in the U.S. was $44,000, and new luxury vehicles averaged $61,000. [source: wsj.com]
4. TUNES TO TREASURE - In 2024, Spotify paid out a record $10 billion in royalties to artists – more than any retailer ever in a single year, and over 10x the top CD-era royalties from record stores. Nearly 1,500 artists earned $1M+, typically requiring 4-5M monthly listeners or 20-25M monthly streams. 70 artists earned over $10M, a 600% increase since 2017. The top 5 were Taylor Swift (96B streams at $388M); Drake (82B streams at $331M); Bad Bunny (81B streams at $325M); The Weekend (67B streams at $270M); and Ed Sheeran (51B streams at $205M). [source: nbcdfw.com]
5. THE LONG HAUL - Atlas Energy Solutions, a Texas-based oil company, has built a $400 million conveyor belt that stretches for 42 miles across state lines into New Mexico, transporting millions of tons of sand for fracking. The snaking behemoth, which the company named the “Dune Express,” delivers sand more safely and efficiently than hauling it in trucks. The world’s longest conveyor – at 61 miles long – carries phosphorous from a mine in Western Sahara in northwest Africa. [source: apnews.com]
6. WHEN DUTY CALLS - A tariff is a government-imposed tax that is paid by the importer (usually a domestic business that ordered the goods from an overseas supplier), and is not paid by the foreign exporter, manufacturer, or originating country’s government. Most tariff duties are passed on to consumers in the form of higher prices for those goods. Income raised from a tariff is real cash revenue paid directly to the national government imposing the tariff. If all the U.S. administration’s recently announced tariffs were to become effective and stay in place for the next decade, it is projected the total revenue to the U.S. Federal Government would be approximately $1.5 trillion over the next decade. [source: taxfoundation.org]
7. ON THE RISE - Since economists generally consider tariffs a tax, the newly implemented U.S. tariffs constitute the largest tax hike in the U.S. since 1982. The new tariffs could affect the prices of all products made outside the U.S. and would be experienced by American citizens as higher prices on things like consumer electronics, clothing, home goods, furniture, appliances, and automobiles, as well as imported food products, like meat, seafood, beer, wine, coffee, bananas, berries, tomatoes, avocados, nuts, oils, sugar, and rice. [source: ers.usda.gov]
8. SLINGSHOT MOONSHOT - SpinLaunch, a California startup, is pioneering a novel satellite launch method using a giant centrifugal accelerator where a high-speed arm spins a rocket to speeds nearing 5,000 mph. Upon release, the rocket ascends powerlessly to an altitude of 37 miles before igniting its rocket engine for the remaining distance into low-Earth orbit. This technique significantly reduces reliance on fuel and traditional rocket stages, potentially lowering launch costs and environmental impact. SpinLaunch plans to deploy hundreds of flattened microsatellites, stacked like pancakes in a "launch bus," into low-Earth orbit as part of its Meridian Space constellation, in direct competition with SpaceX Starlink’s constellation. [source: impactlab.com]
9. ET PHONE HOME - The James Webb Space Telescope has found an exoplanet (K2-18b) with the most promising signs of a biosignature. It recently detected the presence of dimethyl sulfide (DMS) and potentially dimethyl disulfide (DMDS), which on Earth, are molecules produced exclusively by microbial life, typically marine phytoplankton. Earlier research on K2-18b had detected carbon dioxide and methane in its atmosphere, furthering the possibility of a life-supporting environment. K2-18b is located 124 light-years from Earth in the Milky Way Galaxy, resides within the habitable zone of its star, and is considered a potential "Hycean" world – a habitable planet entirely or mostly covered in liquid water with a hydrogen-rich atmosphere. K2-18b is 2.6x wider than Earth. [source: reuters.com]
10. FAIRWAY TO HEAVEN - Landmand Golf Club in Homer, Nebraska has swiftly risen to prominence since its 2022 debut, captivating golfers with its breathtaking vistas and dramatic topography. Perched atop the Loess Hills, the course rises over 200 feet above the surrounding plains, providing panoramic views that stretch for 50 miles on clear days. Golfers are treated to sweeping sights of rolling farmland and the expansive Nebraska sky, creating a serene and majestic backdrop for play. The course's design harmoniously integrates with the natural landscape, featuring wide fairways and massive greens that mirror the grandeur of the terrain, making it a visual journey through one of the Midwest's most picturesque settings. The club's popularity is evident in its tee time sales: the 2023 season sold out in two months, 2024 in two hours and 40 minutes, and the entire 2025 season was fully booked in just 50 minutes. [source: wsj.com]
| | |
Winter Wolf Howl
NEWS YOU CAN USE:
-
One major reason that this quarterly newsletter is coming out a few weeks earlier than scheduled is the May 7th national deadline for a REAL ID-compliant form of identification. Beginning May 7th, travelers flying within the US will need a REAL ID- compliant driver's license, passport, or other acceptable form of identification to pass through TSA security checkpoints. Other acceptable forms of identification include military IDs, certain trusted traveler cards, plus some states issue "enhanced driver's licenses", which are REAL ID-compliant - look for a star or other icon in the upper right corner of the license. Those without an acceptable ID may be allowed to go through a separate identity verification / screening process. If identity cannot be confirmed, the person will not be allowed to board the aircraft.
- The NC Dept of Motor Vehicles has taken steps to try and help citizens get a REAL ID, including increased hours, more walk-in appointments available, priority to those who are traveling soon, and reminding citizens of other acceptable IDs, such as passports or military IDs. And yet, appointments are hard to obtain and lines are long. My wife and I drove from Cary to Winston-Salem (2 hours) a few weeks ago because it was the closest appointment. The process itself was very easy and we were in and out in 20 minutes. The folks in Winston-Salem had a very efficient process in place.
- Most consumers know that purchasing an item with a credit card provides additional protections versus a debit card (or cash in many cases), just in case something goes wrong with the purchase. Here is a list of 9 items where it is recommended that you use a credit card versus a debit card: 1. Online purchases (if cybercriminals intercept your debit card number, they can immediately drain your account), 2. Gas (card skimmers are often attached to gas pumps), 3. Dining out (try to use cash or credit card when dining out unless the waiter brings a handheld payment system to the table so that your card never leaves your sight), 4. Hotel Reservations - travel changes are more difficult to manage with a debit card, 5. Car Rentals (many rental companies do extra credit checks on customers paying with a debit card), 6. Other Rentals (deposits will always be withdrawn from your account immediately with a debit card), 7. Big-Ticket Items (furniture, appliances, etc.) (handling issues such as scratches, defects much better with credit card protections), 8. Subscriptions and Automatic Purchases (monitoring recurring charges and unsubscribing easier with credit card), and 9. Cash Withdrawals at Freestanding ATMs (these machines are less likely to be monitored than ATMs in banks, which means criminals could compromise the machines more easily).
- For those over 50 who may be looking for part-time work to supplement income or for social reasons, many seniors are finding work with caregiver services, medical transportation, administrative or bookkeeping services, customer support, teaching & tutoring, retail and hospitality. Websites to assist with a search in this area include retirementjobs.com and also the AARP Job Board.
- For those with government-based student loan balances, the new administration has significantly rolled back many repayment assistance programs, such as those based on income level or for those in a public service job, especially working for an organization that the new administration deems to be "inappropriate", such as immigrant support services or non-profits providing gender-affirming care. Contact the appropriate government lending agency if you have questions as to any possible changes in the repayment rules.
- One of the most recent trends in scams are "relationship-based" scams where scammers contact people on social media or send a text message and then pretend they sent the message to the wrong person. They then try to strike up a conversation that they hope will become a trust relationship. Once trust is established, the scammer will suggest some reason for sending money to them or investing in cryptocurrency, etc. Be vigilant and stay away from these scams!
-
Best Purchase I Have Made Since Last Newsletter - I was one of those "crazy" kids in the 1960's who spent almost all of their childhood outdoors (imagine that), so now at an advanced age, I have to go through annual treatments for "pre-skin cancer" areas on my forearms (I have receipts if you want to see them - just kidding). Fortunately, light, long-sleeve t-shirts with UV protection are now available ($15 to $20 each on Amazon). I am a customer for life. Take care of your skin !! (for men, do an Amazon search for "Roadbox Mens UPF 50 Sun Protection Long Sleeve").
| | | |
Client Travel Guide:
Share some of your favorite getaway places !!
Send photos & descriptions to carycpa@nc.rr.com
| | | | NC Aquarium - Fort Fisher - now that Americans are not as "welcome" around the world as they used to be, this edition of the Travel Guide focuses on U.S. locations that can be easily accessed from the NC Triangle area. The NC Aquarium at Fort Fisher near Kure Beach (southern NC coast) offers many amazing aquatic experiences. | | | | Ocracoke Island, NC - Catch the cool ferry ride at Swan Quarter, NC over to Ocracoke Island, recently voted one of the best beaches in the U.S. and also home to the historic Ocracoke Lighthouse. | | | | Morehead City, NC - The "Crystal Coast" area of NC is home to many scenic places, including the Morehead City / Atlantic Beach / Beaufort area. For dinner, we have to go to the Sanitary Fish Market in Morehead City, sit out on the outdoor deck and watch the boats go by. Oh, and the seafood there is delicious! | | Answer to Parking Lot Puzzler above - look upside down | | | | |
