IRS Tax Refunds: Interest Free Loan to Federal Government

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“We contend that for a nation to try to tax itself into prosperity is like a man standing in a bucket and trying to lift himself up by the handle.” – Winston S. Churchill

Most Americans perceive a tax refund as a government benefit, rather than recognizing it as an interest-free loan they provided to the government.

According to the IRS, “If you paid more in federal taxes throughout the year than you owe in tax, you may get a refund after you file your tax returns. Even if you didn’t pay tax, you may still get a refund if you qualify for a refundable credit.”

Tax refund, or a refund of overpayment of taxes, are often a source of joy for many U.S. households. For calendar year 2023, the average refund check is expected to be approximately $3,050 according to the IRS.

People use these refunds to pay bills, start emergency funds, or treat themselves to something special. However, it’s essential to understand that these refund checks aren’t free money from the government. Instead, they represent reimbursements from the IRS for overpaid income taxes throughout the year. In fact, last year alone, taxpayers overpaid by a staggering $360 billion.

Essentially, a tax refund isn’t free money. Here’s why:

  • Overpaid Taxes: Throughout the year, you pay income taxes based on your earnings. Sometimes, due to various factors (like incorrect withholding or changes in income), you end up paying more than your actual tax liability.
  • Refund Process: When you file your tax return, the IRS calculates your actual tax liability. If you’ve overpaid, they issue a refund—sending back the excess amount you paid.
  • Interest-Free Loan: Essentially, the refund represents an interest-free loan you provided to the government. Instead of having that money in your pocket throughout the year, you lent it to the IRS without earning any interest.
  • Financial Implications: From a financial perspective, it’s better to adjust your withholding so that you receive more in your paycheck each month. This way, you can use the extra funds for savings, investments, or other financial goals.

Interest-Free Loan Perspective:

Many experts caution that tax refunds essentially represent interest-free loansgiven to the federal government. When you overpay your taxes, you’re effectively lending money to the IRS without earning any interest.

Financially, it’s better to have that money in your paycheck throughout the year. For instance, if the average tax refund is $3,079, that’s equivalent to a $3,000 interest-free loan you’ve provided to the government. Instead, you could have had an extra $250 per month in your budget.

Enforced Savings Perspective:

Some financial professionals argue that receiving a refund can serve as an enforced savings plan. For individuals who struggle to save money, having a lump sum at tax time can be helpful.

However, it’s important to note that adjusting your withholding during the current tax year can impact next year’s refund. If you want to avoid overpaying, consider adjusting your withholding with your employer.

In summary, while tax refunds may feel like a windfall, it’s financially wiser to have that money in your paycheck throughout the year. Ultimately, the choice between a refund and a net-zero tax return depends on individual circumstances and financial goals.

When to expect your refund 

To process your refund, it usually takes:

  • Up to 21 days for an e-filed return
  • 4 weeks or more for amended returns and returns sent by mail
  • Longer if your return needs corrections or extra review. However, you’ll receive interest for delayed tax refund.

References:

  1. https://www.irs.gov/refunds

Small-Cap and Micro-Cap Stocks

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Small-cap and micro-cap stocks outperform large-cap counterparts in the long term but show particular strength after economic shakiness

A small-cap stock is defined as shares of a company with a market capitalization between $300 million and $2 billion.

Small-cap stocks offer an attractive risk-reward profile, as these companies usually have a higher growth potential than large-cap stocks. Although small-cap stocks have a high amount of volatility, they appear to be lucrative bets when the economy is expected to boom.

Micro-cap stocks represent companies with a market capitalization between $50 million to $300 million. Micro-cap stocks have a world of potential. Often they are in niche markets with emerging business ideas or technologies, so there’s a massive growth window for a company that can manage to it its stride.

Also, micro-cap stocks aren’t nearly as well-known as the blue-chip names. If you’re an astute investor, you can get in early before the average investor buys in.

Small-cap and micro-cap stocks are inherently more volatile than those blue-chip established names. That means potentially greater reward and greater risk. To invest in these micro-cap stocks, you should have a pretty high risk tolerance and be ready to ride the waves.

Most companies start out as small-caps or micro-caps, but by continually growing their earnings, their share prices appreciate. This can increase the market capitalization (share price times shares outstanding) of the company to large, or even mega-sized, while investors along for the ride reap the profits.

Big names like Microsoft, Apple and Amazon were all small-caps at one point. But not all small-caps flourish like those giants have. Many fail or stop growing, which means losses or little profit for investors. Great companies reveal themselves over many years and decades by continually producing quality earnings and sales growth.

You can find the best small-cap stocks by looking for companies with strong earnings and sales growth. Analysts must also be forecasting continued growth into the future. In addition, weed out companies with erratic earnings or that are issuing shares excessively, which dilutes earnings and shareholders’ equity.

All stocks should trade on U.S. exchanges, have a share price above $2, a market cap between $250 million and $2.5 billion and have three-month average daily volume of at least 200,000 shares.

Expected EPS growth. Companies are only included if analysts predict at least 7.0% yearly average growth over the next five years. Current-year EPS growth is also expected to be positive (above 0%).

Recent EPS and sales growth. Earnings and sales have increased an average of at least 7.0% per year over the last five years. Earnings were also higher than the prior year for each of the last three years.
Profitable. All stocks on this list have had positive earnings for the last three years.
This methodology focuses on companies that are already profitable. While unprofitable companies can see their share prices rise too, profitable and growing companies have already proven they can do it. It is a less speculative way to play this segment of the market, as opposed to hoping a struggling company can eventually turn it around.

investing in stocks is all about returns, the next step when analyzing small cap stocks is to see how their performance differs from large or mega cap behemoths.

Humana TRICARE and Medicare

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Tricare for Life coverage will be effective when your Medicare is effective. Medicare Part A is free for eligible beneficiaries, but there will be a premium for Medicare Part B. The premium amount varies yearly and may be based on your income.

Humana TRICARE and Medicare are two programs that play crucial roles in providing health coverage to different groups of individuals. Here’s what you need to know:

  1. TRICARE and Medicare Interaction:
    • TRICARE is the health care program for uniformed service members, retirees, and their families. It provides comprehensive coverage for medical services, prescriptions, and more.
    • Medicare, on the other hand, is a federal health insurance program primarily for people aged 65 and older, as well as certain younger individuals with disabilities or specific medical conditions.
  2. Becoming Medicare-Eligible:
    • At Age 65:
      • If you’re age 65 and entitled to Medicare, you are automatically covered by TRICARE For Life (TFL). TFL acts as a wraparound coverage, paying your out-of-pocket costs in Original Medicare for TRICARE-covered services.
      • You are not eligible to enroll in other TRICARE health plans.
    • Under Age 65:
      • If you’re under age 65 and Medicare-eligible, you have options:
        • Enroll in a TRICARE Prime option or use TRICARE For Life.
        • TRICARE-eligible family members under 65 can also enroll in different TRICARE health plans.
        • Request enrollment changes within 90 days of the Medicare-eligible family member’s Medicare effective date.
  3. Medicare Basics:
    • Original Medicare (Parts A and B):
      • Part A: Hospital insurance (financed by payroll deductions during working years).
      • Part B: Medical insurance (primarily covers outpatient services; you pay a premium based on income).
    • Medicare Supplement Insurance (Medigap):
      • Optional coverage that pays out-of-pocket costs in Original Medicare.
    • Medicare Advantage (Part C):
      • Offered by private companies, it provides all Part A and Part B services, often with Part D pharmacy coverage.
    • TRICARE For Life:
      • Coordinates with Medicare, eliminating the need for you to file claims.
  4. Important Considerations:
    • Medicare Part B Requirement:
      • To maintain TRICARE coverage, you must have Medicare Part B, even if you live overseas.
      • Failure to have Part B may result in losing TRICARE coverage.
      • Sign up for Part B during your Medicare Initial Enrollment Period.
    • Veterans and Medicare Advantage Plans:
      • Humana Medicare Advantage (MA) plans complement VA coverage.
      • They offer additional benefits, affordable costs, and options for care closer to home.

Medicare Part B

For 2024, the standard monthly premium for Medicare Part B enrollees will be $174.70, which is an increase of $9.80 from the 2023 premium of $164.901. Additionally, the annual deductible for all Medicare Part B beneficiaries will be $240 in 2024, up from $226 in 20231.

If your income is above a certain threshold, you may be subject to an Income-Related Monthly Adjustment Amount (IRMAA), which is an additional charge on top of the standard monthly premium. The IRMAA affects individuals with an income of more than $103,000, or couples filing jointly with an income above $206,0002. The exact amount of the IRMAA depends on your income level.

Please note that these figures are based on the information available as of now and could be subject to change. It’s always a good idea to check the latest details from the official Medicare website or contact Medicare directly for the most current information.

Understanding the intricacies of TRICARE and Medicare is essential!

Purchasing Power Risk

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“Inflation is taxation without legislation.”

Inflation reduces the value of money held by the public, similar to a tax. The impact of inflation on purchasing power acts as a hidden cost on consumers’ wealth.

Inflation functions like a tax because it diminishes the real value of money. When prices rise, the same amount of currency buys less, effectively reducing people’s wealth if their income doesn’t increase at the same rate. This erosion of purchasing power affects everyone who holds money, making it a universal ‘tax’.

However, unlike traditional taxes imposed by governments, which are debated and legislated, inflation can occur without any direct legislative action. It’s often the result of complex economic factors, including monetary policy decisions by central banks, supply and demand dynamics, and changes in production costs.

Purchasing power risk, also known as inflation risk, refers to the potential decrease in the value of money over time due to inflation. When inflation occurs, the general price level of goods and services rises, meaning that each currency unit can buy fewer items than before. This risk is particularly relevant for investors holding cash or fixed-income securities, as the real return on their investments may be reduced when inflation is high.

In simpler terms, if you have a certain amount of money today, you might be able to buy a basket of goods with it. However, if prices increase over time due to inflation, that same amount of money will buy you a smaller basket of goods in the future. This erosion of purchasing power can affect not only personal finances but also investment returns and overall economic health.

Central banks often adjust interest rates to try to control inflation and maintain the currency’s purchasing power. One common measure of purchasing power in the U.S. is the Consumer Price Index (CPI), which tracks the average price change over time for a basket of goods and services, including transportation, food, and medical care3. Monitoring CPI and other economic indicators can help individuals and policymakers understand and mitigate the impact of purchasing power risk.

Source:  https://haikhuu.com/education/purchasing-power-risk

Short Interest and Short Selling

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Short interest provides investors a sense of the degree to which investors are betting on the decline of company’s stock price.

It’s easy for investors to understand that you can make money after buying shares of a stock when the stock price increases (going long).

Traders can also profit from a declining market by using a strategy called shorting stock.

Short selling is when a trader sells shares of a company they do not own, with the hope that the price will fall. Traders make money from short selling if the price of the stock falls and they lose if it rises.

Shorting a stock first involves borrowing the stock you wish to sell at a market-determined interest rate and then selling the borrowed equities to take advantage of a future market decline.

You profit by selling the borrowed stock at a higher price and subsequently buying it back at a lower price if the stock price falls.

The profit consists of the difference between the price at which the trader sold the stock and the price they buy it back at less any borrowing and transaction costs.

To successfully short sell, you need to identify stocks that are likely to decrease in value. Look for companies with weak financials, negative news, or a downtrend in their stock price.

When short selling, market timing is crucial. You want to enter the trade when the stock price is likely to decrease, and exit before it rebounds. Pay attention to technical indicators and price action to make informed decisions.

Why Short Interest Matters

Short interest is the number of shares that have been sold short but have not yet been covered or closed out.

Short interest is important to track because it can act as an indicator of market sentiment towards a particular stock. An increase in short interest can signal that investors have become more bearish, while a decrease in short interest can signal they have become more bullish.

Source:

  1.  https://www.benzinga.com/insights/short-sellers/24/03/38010258/pypl-analyzing-paypal-holdingss-short-interest
  2. https://www.benzinga.com/money/how-to-short-a-stock

Persistent Inflation and Loss of Purchasing Power

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U.S. Consumer Price Index (CPI) data was hotter than expected.

March 2024 U.S.CPI annual inflation rose 3.5%, above expectations of 3.4%.

Core CPI inflation increased 3.8% year-over-year (Y/Y), compared to forecasts for a gain of 3.7%.

The March 2024 Consumer Price Index for All Urban Consumers (CPI-U) report marked a third consecutive 0.4% month-over-month (MoM) increase. On a year-over-year (YoY) basis, inflation rose by a stronger-than-expected 3.5% in March

  • The slightly stronger March Consumer Price Index (CPI) report was driven by rises in shelter and energy prices.
  • March’s stronger year-over-year (YoY) rise in the headline CPI suggests the path to the Fed’s 2% target could take longer than expected.

Persistent Inflation occurs when the U.S. money supply grows more rapidly (to pay for huge fiscal deficits) than the country’s economic output.

Money Supply and Inflation:

When the Federal Reserve (the Fed) increases the money supply, it leads to inflation.

Imagine an economy with $100 and 100 bananas. If the government increases the money supply by 10% to $110, but the banana output only grows by 5% to 105 bananas, we have more money chasing fewer goods. As a result, the average price per banana increases from $1 to roughly $1.05. Thus, the purchasing power of the currency is reduced.

The quantity theory of money (QTM) suggests that the value of money is determined by supply and demand. When the money supply grows faster than economic output, inflation occurs.

Monetarist View:

Monetarists believe that inflation results from too many dollars chasing too few goods. As the money supply grows, the value of money decreases due to supply and demand dynamics.

In summary, managing the money supply is imperative for the Fed. Too much growth can lead to persistent inflation, affecting the purchasing power of the dollar.

Taking Risks

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“Do the one thing you think you cannot do. Fail at it. Try again. Do better the second time. The only people who never tumble are those who never mount the high wire. This is your moment. Own it.” — Oprah Winfrey

The greatness you desire, the success you dream about, is on the other side of your doubts and fears, explains media mogul Oprah Winfrey. You must confront and manage your self-doubts and unrealistic fears if you ever expect to live a life of purpose and meaning. You must believe in yourself, be courageous in your actions, and be grateful for your current life.

You don’t find life’s purpose and meaning, you create them!

The kind of life you were created to live, a life of purpose and meaning, will require you to leave your comfort zone and take risks. Staying within your comfort zone and avoiding risks may seem safe, but they can also lead to missed opportunities for growth, learning, and progress.

Every decision involves an opportunity cost—the value of what you could have gained by choosing an alternative path. Taking risks involves making decisions or engaging in actions where the outcome is uncertain but there is a potential benefit or reward.

Not taking risks is a risk in itself. Many people are not living their dreams because they are living their fears.

Fear of failure often prevents people from taking risks. However, failure itself is a valuable teacher. You will never amount to anything if you let your doubts and fears hinder you from trying things.

Embracing failure as a stepping stone toward growth and learning is essential.

“I’ve failed over and over and over again in my life, and that is why I succeed.” — Michael Jordan

Your pursuit of security is what’s hindering you from reaching greatness. You can’t be safe and still be great because greatness will require you to take risks and try things you’ve never done before. But it’s in taking risks that you find security because proper security is having no fear of trying.

Nothing great is built in your comfort zone. Life is all about taking risks. It’s a daring adventure or nothing at all.

What’s stopping you? In the face of death, life’s fears hold no meaning. So live while you are still alive.

Go out, try things, do what scares you, let go of your doubts and fears, and embrace the uncertainties. What’s life if we aim for less because we fear more?

Take the risk; it’s a part of life, not part of it. Never take the risk of missing the chance to live.

People tend to regret missed opportunities more than failed attempts.

“Winners are not afraid of losing. But losers are. Failure is part of the process of success. People who avoid failure also avoid success.” — Robert Kiyosaki

2024 SoFi NBA Play-In Tournament

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The 2024 SoFi NBA Play-In Tournament will include teams with the 7th through 10th-highest winning percentages in each conference and take place April 16-19.

The SoFi NBA Play-In Tournament will determine the teams that fill the seventh and eighth playoff seeds in each conference for the 2024 NBA playoffs.

The Play-In Tournament will take place Tuesday, April 16 – Friday, April 19, with the games played after the regular season concludes and before the first round of the NBA playoffs begins.

While the teams that finish Nos. 1-6 in the standings of each conference are guaranteed a playoff spot, the teams that finish Nos. 7-10 in the standings will enter the Play-In Tournament. These teams will battle for the seventh and eighth playoff seeds.

Each conference’s No. 7 team in the standings will host the No. 8 team. The winners secure the No. 7 seed in the playoffs. The losers will get another chance to earn a playoff spot.

Each conference’s No. 9 team in the standings will host the No. 10 team. The winners will advance to the final stage of the Play-In Tournament. The losers are eliminated.

The losers of the No. 7 vs. No. 8 matchups will host the winners of the No. 9 vs. No. 10 matchups. The winners secure the No. 8 seed in the NBA playoffs for its conference. The losing teams are eliminated.

If the regular season ended after games played on April 7, the matchups would be:

Western Conference:  (7) Pelicans vs. (8) Kings and (9) Lakers vs. (10) Warriors

Eastern Conference:  (7) 76ers vs. (8) Heat and (9) Bulls vs. (10) Hawks

Self-Worth

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Your self-worth is your ceiling! ~ Jamie Kern Lima, author of Worthy!
Eighty percent (80%) of people hear their inner voice telling them they’re not enough. Jamie Kern Lima’s book WORTHY helps you unlearn the lies that lead to self-doubt and enables you to ignite your self-worth!
‘Worthy’ is a confidence-building compass, empowering you to conquer self-doubt and embrace your authentic self.
Do you allow yourself to dream big, love deeply, and pursue your most audacious goals? Remember, you are inherently worthy of all the beauty life has to offer. Embrace your worth, reach for the stars, and let your belief in your limitless potential guide you writes Jamie Kern Lima.
To craft a life filled with self-love, purpose, and unstoppable empowerment, you must believe in yourself and believe you are worthy of your hopes and dreams and of living this one precious, beautiful life as who you indeed are, states Jamie Kern Lima!
You are deserving of all the greatness that awaits!

“In life, you don’t soar to the level of your hopes and dreams, you stay stuck at the level of your self-worth. In your business, leadership, relationships, friendships, and ambitions, you don’t rise to what you believe is possible; you fall to what you believe you’re worthy of. When you build your self-worth, you change your life.” – Jamie Kern Lima.

REWIRING YOUR SUCCESS

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BOOK TITLE : REWIRING YOUR SUCCESS:  |  AUTHOR : JOHN QURESHI
Success is not a matter of luck.
Successful people are not just lucky; they make their luck by taking action and persevering through setbacks.
Success is a journey, not a destination.
There is no one-size-fits-all formula for success. What works for one person may only work for one person. The important thing is to find your path to success and to be willing to make the necessary sacrifices along the way.
Success is not about money.
Money is important, but it is not the only measure of success. Successful people also find fulfillment in their work and make a positive impact on the world.
Success is a habit.
Successful people have developed habits that help them achieve their goals. These habits include setting goals, taking action, and never giving up.
Success is a choice.
You choose to be successful or not. It is not something that happens to you; it is something you create.
Success is a mindset.
Successful people have a positive mindset that allows them to see possibilities instead of obstacles.
Success is about personal growth.
Successful people are constantly learning and growing. They are unafraid to step outside their comfort zones and try new things.
Success is about giving back.
Successful people use their success to help others. They know they are not alone and feel responsible for giving back to the community.
Success is about leaving a legacy.
Successful people want to make a difference and be remembered for their positive contributions.
Success is possible for everyone.
You can achieve your dreams no matter where you come from or your circumstances. It takes hard work, dedication, and perseverance, but you can reach your full potential.

10 Lessons from The 80/20 Principle: The Secret to Success by Achieving More with Less
  1. Identify the critical 20% of activities or efforts that yield 80% of the desired outcomes and prioritize them over less important tasks.
  2. Work smarter, not harder. Focus on maximizing efficiency in the tasks that deliver the most significant results rather than trying to do everything.
  3. Streamline processes and eliminate unnecessary complexity to increase effectiveness and productivity.
  4. Develop a strategic mindset by focusing on high-leverage activities that align with long-term goals and objectives.
  5. Recognize that not all decisions are equally important. Focus your time and energy on decisions that have the most significant impact on your goals and outcomes.
  6. Identify and leverage resources, talents, and opportunities that contribute the most to your success.
  7. Embrace a continuous improvement mindset by regularly evaluating and refining your strategies and processes.
  8. Remain flexible and adaptable in the face of changing circumstances. Be willing to adjust your approach as needed to stay aligned with your objectives.
  9. Recognize and mitigate potential risks that could derail your progress toward your goals.
  10. Seek balance and harmony in your life by focusing on what truly matters and letting go of unnecessary distractions or obligations.