On It with Offit - November 2021

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NOV | 2021 Wealth Managers Under 40 by Fortune Magzine Congratulations to Offit Advisors Principal Ben Offit on being named a Top Wealth Manager Under 40 by Fortune Magazine. Look out for the February or March issue of Fortune Magazine, where Ben will be featured! Award candidates who satisfied 10 objective eligibility and evaluation criteria were named 2021 Five Star Wealth Managers. Eligibility Criteria - Required: 1. Credentialed as a registered investment advisor or a registered investment advisor representative. 2. Actively employed as a credentialed professional in the financial services industry for a minimum of five years. 3. Favorable regulatory and complaint history review. 4. Fulfilled their firm review based on internal firm standards. 5. Accepting new clients. Evaluation Criteria - Considered: 6. One-year client retention rate. 7. Five-year client retention rate. 8. Non-institutional discretionary client assets administered. 9. Number of client households served. 10. Education and professional designations. Student Loans Update if you were trying to get public student loan forgiveness in the past and were denied, there may be new hope for you!  If you were working for a 501c3 organization or government entity or still are and you had public student loans, between now and next October you may be able to do an audit and get back payments considered as eligible towards the 120 required payments to be considered for Public Student Loan Forgiveness (PSLF)!  If you think this situation may apply to you, you should jump on this immediately because FedLoan is still the servicer on student loans and that may change in January and all of the records could be lost.  If you want to have a deeper consultation about this, please let us know! Schedule a Meeting - This year, the government collected $627 billion more in tax revenue than it did in fiscal 2020, pulling in a record-high $4.05 trillion. TheRightFacts - In seven years, Amazon has grown from a zero share of the U.S. shipping market to 21%, surpassing FedEx at 16%. The US postal service remains dominant with 38%, while UPS accounts for 24%. Yahoo!Life, October 21, 2021 - The wait for micro-chips from order to delivery is now at a record 21.7 weeks. Bloomberg, October 6, 2021 - In the United States, of every dollar spent on food, just 14.3 cents goes to farmers. National Farmers Union - “The reason life works at all is that not everyone in your tribe is nuts on the same day.” Anne Lamott - “I’m giving up drinking until Christmas. Sorry, wrong punctuation. I’m giving up. Drinking until Christmas.” Anonymous Helpful Tax Advice as 2021 Comes to a Close by Ken Savell, Tax Advisor Hi Everyone!   With year-end approaching, it is time to start thinking about moves that may help lower your tax bill for this year and next. This year’s planning is more challenging than usual due to the uncertainty surrounding pending legislation that could, among other things, increase top rates on both ordinary income and capital gain starting next year. Whether or not tax increases become effective next year, the standard year-end approach of deferring income and accelerating deductions to minimize taxes will continue to produce the best results for all but the highest income taxpayers, as will the bunching of deductible expenses into this year or next to avoid restrictions and maximize deductions.   If proposed tax increases do pass, however, the highest income taxpayers may find that the opposite strategies produce better results: Pulling income into 2021 to be taxed at currently lower rates, and deferring deductible expenses until 2022, when they can be taken to offset what would be higher-taxed income. This will require careful evaluation of all relevant factors.     We have compiled a list of actions based on current tax rules that may help you save tax dollars if you act before year-end. Not all of them will apply to you, but you (or a family member) may benefit from many of them.   Please review the following list and contact us at your earliest convenience so that we can advise you on which tax-saving moves might be beneficial:     • Higher-income individuals must be wary of the 3.8% surtax on certain unearned income.  Pending legislative changes to the 3.8% net investment income tax proposed to be effective after this tax year would subject high income (e.g., phased-in starting at $500,000 on a joint return; $400,000 for most others) S shareholders, limited partners, and LLC members.  Accelerating some of this type of income into 2021 could potentially be beneficial. • Long-term capital gain from sales of assets held for over one year is taxed at 0%, 15% or 20%, depending on the taxpayer's taxable income. If you hold long-term appreciated-in-value assets, consider selling enough of them to generate long-term capital gains that can be sheltered by the 0% rate. • Postpone income until 2022 and accelerate deductions into 2021 if doing so will enable you to claim larger deductions, credits, and other tax breaks for 2021 that are phased out over varying levels of AGI. These include deductible IRA contributions, child tax credits, higher education tax credits, and deductions for student loan interest. Postponing income also is desirable for taxpayers who anticipate being in a lower tax bracket next year due to changed financial circumstances. Note, however, that in some cases, it may actually pay to accelerate income into 2021. For example, that may be the case for a person who will have a more favorable filing status this year than next (e.g., head of household versus individual filing status), or who expects to be in a higher tax bracket next year. That's especially a consideration for high income taxpayers who may be subject to higher rates next year under proposed legislation.  • If you believe a Roth IRA is better for you than a traditional IRA, consider converting traditional-IRA money invested in any beaten-down stocks (or mutual funds) into a Roth IRA in 2021 if eligible to do so. Keep in mind that the conversion will increase your income for 2021, possibly reducing tax breaks subject to phaseout at higher AGI levels. This may be desirable, however, for those potentially subject to higher tax rates under pending legislation. • It may be advantageous to try to arrange with your employer to defer, until early 2022, a bonus that may be coming your way. This might cut as well as defer your tax. Again, considerations may be different for the highest income individuals.  • Many taxpayers won't want to itemize because of the high basic standard deduction amounts that apply for 2021 ($25,100 for joint filers, $12,550 for singles and for marrieds filing separately, $18,800 for heads of household), and because many itemized deductions have been reduced or abolished, including the $10,000 limit on state and local taxes; miscellaneous itemized deductions; and non-disaster related personal casualty losses. You can still itemize medical expenses that exceed 7.5% of your AGI, state and local taxes up to $10,000, your charitable contributions, plus mortgage interest deductions on a restricted amount of debt, but these deductions won't save taxes unless they total more than your standard deduction. In addition to the standard deduction, you can claim a $300 deduction ($600 on a joint return) for cash charitable contributions.  • Some taxpayers may be able to work around these deduction restrictions by applying a bunching strategy to pull or push discretionary medical expenses and charitable contributions into the year where they will do some tax good. For example, a taxpayer who will be able to itemize deductions this year but not next will benefit by making two years' worth of charitable contributions this year. The COVID-related increase for 2021 in the income-based charitable deduction limit for cash contributions from 60% to 100% of MAGI assists in this bunching strategy.  • Consider using a credit card to pay deductible expenses before the end of the year. Doing so will increase your 2021 deductions even if you don't pay your credit card bill until after the end of the year.  • If you expect to owe state and local income taxes when you file your return next year and you will be itemizing in 2021, consider asking your employer to increase withholding of state and local taxes (or make estimated tax payments of state and local taxes) before year-end to pull the deduction of those taxes into 2021. But this strategy is not good to the extent it causes your 2021 state and local tax payments to exceed $10,000.  • Required minimum distributions RMDs from an IRA or 401(k) plan (or other employer-sponsored retirement plan) have not been waived for 2021, as they were for 2020. If you were 72 or older in 2020 you must take an RMD during 2021. Those who turn 72 this year have until April 1 of 2022 to take their first RMD but may want to take it by the end of 2021 to avoid having to double up on RMDs next year.  • If you are age 70½ or older by the end of 2021, and especially if you are unable to itemize your deductions, consider making 2021 charitable donations via qualified charitable distributions from your traditional IRAs. These distributions are made directly to charities from your IRAs, and the amount of the contribution is neither included in your gross income nor deductible on Schedule A, Form 1040. • Consider increasing the amount you set aside for next year in your employer's FSA if you set aside too little for this year and anticipate similar medical costs next year.  • If you become eligible in December of 2021 to make HSA contributions, you can make a full year's worth of deductible HSA contributions for 2021.  • Make gifts sheltered by the annual gift tax exclusion before the end of the year if doing so may save gift and estate taxes. The exclusion applies to gifts of up to $15,000 made in 2021 to each of an unlimited number of individuals. These transfers may save family income taxes where income-earning property is given to family members in lower income tax brackets who are not subject to the kiddie tax. • If you were in federally declared disaster area, and you suffered uninsured or unreimbursed disaster-related losses, keep in mind you can choose to claim them either on the return for the year the loss occurred (in this instance, the 2021 return normally filed next year), or on the return for the prior year (2020), generating a quicker refund.  • If you were in a federally declared disaster area, you may want to settle an insurance or damage claim in 2021 to maximize your casualty loss deduction this year.    These are just some of the year-end steps that can be taken to save taxes.  Let us know if you have any questions!   Reprinted with permission from Ken Savell, Tax Advisor, and Bloomberg. Copyright ©2021 www.bloomberg.com New Highs in October as September Volatility is Short-Lived HIGHLIGHTS: As quickly as volatility came, it dissipated in October. After hitting an intraday high of 25.6 in September, the VIX Index, a measure of volatility, traded below 15 in October – the lowest intraday mark since early July. It settled the month at 16.26. Equities bounced back strongly from declines in September. Large-cap growth was particularly in favor in October, but equities across the board advanced. The 10-year U.S. Treasury yield moved modestly higher in October, closing the month at 1.55% compared to 1.52% at the end of September. Yields rose sharply during most of the month, closing 10/21/21 at 1.68%, but the last several days of the month saw yields move lower. The U.S. economy is still recovering, but as expected, the rate of growth has slowed as evidenced by the initial read of 2.0% annualized GDP growth in the third quarter. The Delta variant and ongoing supply chain issues appear to be causing an additional short-term headwind to economic growth, but we expect fourth quarter growth to improve from the Q3 level. Volatility, however, could stay elevated with markets once again at all-time highs and a showdown over government funding looming. EQUITY MARKETS The sharp drop in stocks in September was more than equaled by their strong rebound in October. The Dow Jones Industrial Average, the S&P 500 and the NASDAQ Composite put in new all-time highs in October (and surpassed those with new highs on November 1). Large-cap growth outperformed in October in a bit of a rewind to most of 2020. The year-to-date numbers now favor growth stocks in the large-cap space, but value still rules in the mid and small-cap universe. The VIX Index closed September at 23.14, but that dropped significantly to 16.26 by the end of October. Our expectation of a more volatile second half of 2021 started to materialize in September, but October proved to be much less so. We believe investors should be prepared for ongoing periods of volatility over the next several months with stocks at all-time highs, supply chain issues pushing prices higher, and a Fed likely to announce and begin its tapering of bond purchases in November. Size and style mattered once again in October, but all major categories of equities advanced during the month. We still believe that the value/growth disparity that reached a peak last year will likely continue to shift in 2021 with value improving on a relative basis. We continue to use our disciplined approach of seeking out what we believe to be high-quality companies with improving business conditions at what we believe are good prices. The numbers for October were as follows: The S&P 500 gained 7.01%, the Dow Jones Industrial Average rose 5.93%, the Russell 3000 advanced by 6.76%, the NASDAQ Composite rallied 7.29%, and the Russell 2000 Index, a measure of small-cap stocks, improved by 4.25%. Through ten months of 2021, returns in the same order were as follows: 24.04%, 18.77%, 22.77%, 20.88%, and 17.19%, respectively. We will continue to monitor how trends shift in the coming months and whether the recent gains in large-cap growth stocks develop more footing or whether small and mid-cap stocks, along with value, return to their recent leadership roles. September saw value and small-cap stocks perform relatively better than large-cap growth, but that shifted once again in October with large-cap growth leading the way. Looking closer at style, the headline Russell 1000 Index gained 6.94% for the month with a year-to-date gain of 23.18%. The Russell 1000 Growth Index rallied by 8.66% in October and is up 24.20% year to date. The Russell 1000 Value Index relinquished its leadership position by gaining “only” 5.08% in October, which put the year-to-date total at 22.03%. For small-caps, value continued to outperform growth on a relative basis. The value/growth disparity is much more pronounced in small-caps for the year to date with the Russell 2000 Value Index up 27.60%, while the Russell 2000 Growth Index has gained a mere 7.64% during the same timeframe. International markets lagged U.S. stocks in October, but developed markets were able to recover some of the weakness in recent months. The MSCI Emerging Markets Index gained only 0.99% in October, which keeps this index in negative territory (down -0.27%) for the year to date. The MSCI ACWI ex USA Index, a broad measure of international equities, gained 2.39% in October, which pushed year to date results to 8.43%. Following the trend of recent years, U.S. stocks have continued to outperform their international counterparts. Within international markets, developed countries have done better than emerging markets, which have been weighed down by China. FIXED INCOME After surging higher during the first quarter of 2021, the yield on the 10-year U.S. Treasury dropped over the next four months. That streak ended in August as yields moved higher and that move higher continued in September. October saw a modest continuation in this trend. The yield closed the month of September at 1.52% and it rose to 1.55% by the end of October. Bond sector results were rather mixed with this modest increase in rates. Fixed income returns were as follows for October: the Bloomberg Barclays U.S. Aggregate Bond Index slipped -0.03%, the Bloomberg Barclays U.S. Credit Index gained 0.22%, the Bloomberg Barclays U.S. Corporate High Yield Index was off by -0.17% and the Bloomberg Barclays Municipal Index dropped -0.29%. For the year to date, those index returns in the same order were as follows: -1.58%, -1.09%, 4.36%, and 0.50%, respectively. High yield bonds remained the clear leader year to date and municipals have been able to sneak out a slight gain as well. The 30-year U.S. Treasury Index gained 3.42% for the month, as the 30-year yield dropped during the month, but it is still off by -5.78% year to date. The general U.S. Treasury Index fell by -0.07% in October and is down -2.56% year to date. We continue to maintain our long-standing position favoring credit versus pure rate exposure in this interest rate environment. Source: Clark Capital Benchmark Review, September 2021 S&P 500 Index is an unmanaged group of securities considered to be representative of the stock market in general. You cannot directly invest in the index. Dow Jones Industrial Average - The Dow Jones Industrial Average is a popular indicator of the stock market based on the average closing prices of 30 active U.S. stocks representative of the overall economy.  NASDAQ Composite Index measures all NASDAQ domestic and international based common type stocks listed on The NASDAQ Stock Market. Today the NASDAQ Composite includes approximately 5,000 stocks, more than most other stock market indices. Because it is so broad-based, the Composite is one of the most widely followed and quoted major market indices. Russell 2000® Index measures the performance of the 2,000 smallest companies in the Russell 3000 Index, which represents approximately 8% of the total market capitalization of the Russell 3000 Index which includes the 3,000 largest companies in the U.S., based on market capitalization. As of the latest reconstitution, the average market capitalization was approximately $762.8 million; the median market capitalization was approximately $613.5 million. The largest company in the index had an approximate market capitalization of $2.0 billion and a smallest of 218.4 million.  Russell 1000® Growth Index measures the performance of those Russell 1000 companies with higher price-to-book ratios and higher forecasted growth values.  Russell 1000® Value Index measures the performance of those Russell 1000 companies with lower price-to-book ratios and lower forecasted growth values.  Government bonds are guaranteed by the U. S. Government and, if held to maturity, offer a fixed rate of return and fixed principal value. Securities offered through Kestra Investment Services, LLC (Kestra IS), Member FINRA/SIPC. Investment Advisory Services offered through Kestra Advisory Services, LLC (Kestra AS), an affiliate of Kestra IS. Offit Advisors is not affiliated with Kestra IS or Kestra AS. Offit Advisory Services, LLC is a tax firm but neither Kestra IS nor Kestra AS provide legal or tax advice and are not Certified Public Accounting firms.For more information on the Five Star Wealth Manager and the research/selection methodology go to: www.fivestarprofessional.com. Investor Disclosures: https://bit.ly/KF-Disclosures 9030 RED BRANCH ROAD COLUMBIA, MD 21045, US Phone + Fax:  410 600 PLAN (7526) E – Office@OffitAdvisors.com W- www.OffitAdvisors.com   To schedule an appointment with us, click here! The opinions expressed in this commentary are those of the author and may not necessarily reflect those held by Kestra IS or Kestra AS. The material is for informational purposes only. It represents an assessment of the market environment at a specific point in time and is not intended to be a forecast of future events, or a guarantee of future results. It is not guaranteed by Kestra IS or Kestra AS for accuracy, does not purport to be complete and is not intended to be used as a primary basis for investment decisions. It should also not be construed as advice meeting the particular investment needs of any investor. Neither the information presented nor any opinion expressed constitutes a solicitation for the purchase or sale of any security. Want to change how you receive these emails? You can update your preferences or unsubscribe from this list.

On It with Offit - October 2021

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OCT | 2021 Ben Sits on TREBLE's Business Hotseat Join Ben as he goes on the hotseat as part of TREBLE's Power Networking Business Hotseat event on October 19th.   Get Registered A Different Way of Serving Clients Serving clients should be about more than just net worth or a minimum number of assets. Watch this video to learn more about Ben's philosophy; Financial Planning for everyone. Check out Ben on the "Protecting your Practice" Podcast  Mental health providers work hard, so you want to make sure that your hard work pays off! That's where meeting with a financial advisor comes in! In this guest episode, Ben Offit talks about the importance of financial health as it relates to healthcare providers. He also answers frequently asked questions about working with a financial advisor. Be sure to keep some of these questions in mind if you decide to seek out your own financial advisor after listening! Listen Now Let us Take Your Temperature We are periodically asking our clients to rate our team member's performance to better understand and serve you. Please look out for e-mails from Customer Thermometer asking you to rate an OA team member you have recently interacted with.  - Facebook paid 23.4 million for Mark Zuckerberg’s security detail last year. Google paid out $5.4 million for security for its CEO, Sundar Pichia, while Amazon paid $1.6 million for Jeff Bezos. Apple only paid $470,000 for Tim Cook. Engadget, July 21, 2021 - “Investors remember three things: How much they initially invested, what was it worth at the high-water mark, and what’s it worth today.” Mark Zinder -“You better live every day like it is your last because one day you’re going to be right.” Ray Charles - Because of pandemic stress eating, the CDC reported the number of states in which 35% of the population is obese has soared from nine in 2018 to 16 this year. USA Today, September 15, 2021 - Congress has raised or suspended the debt ceiling 78 times since 1960. Cnet, September 30, 2021 - “No matter what accomplishments you make, somebody helped you.” Althea Gibson   - “Stupidity is always amazing, no matter how used to it you become.” Jean Cocteau - In September the stock market finished in the red, ending an incredible seven-month-long winning streak. These streaks actually tend to be quite bullish for future returns, with the S&P 500 higher six months later 13 out of 14 times. CNBC, September 30, 2021 Roth IRA Conversions – Everyone’s Favorite Tax Topic   Hi everyone, thanks for reading today!  Today I want to talk to you about the nuances of Traditional IRAs and Roth IRAs and how you can understand and take advantage of some strategies here.  But before we do so, let’s just go over the basics of these: Basics of IRAs (Traditional vs Roth) With these accounts – you can contribute up to $6K per year if you are under 50 and $7K per year if you are over 50.  If you are over certain income thresholds you can’t contribute to a Roth IRA, or also a Traditional IRA (if you have a employer sponsored retirement plan).  If you don’t have an employer sponsored retirement plan, you can freely contribute and deduct Traditional IRA contributions. Traditional IRAs are funded with pre-tax dollars, and you get a tax deduction each year that gives you up front tax savings.  Ie. If you contribute $6K to this, that is deducting $6K of income from your tax return that year.  The money grows tax-deferred while it is in the account, and when you take it out it is subject to ordinary income tax rates.  At age 59.5 you can take it out without any penalty (if you take it out prior to 59.5 you are subject to a 10% penalty) and at age 72 you are required to start taking Required Minimum Distributions  (RMDs).   When you pass away your heirs also have to take RMD’s subject to their own ordinary income tax rates.   Roth IRAs are funded with after-tax dollars so there are no up front tax savings, but the savings are on the back end because you pay no tax on any future withdrawal – the growth is all tax-free.  However, you still have to wait until 59.5 to access the growth portion of the money or you will be hit with a 10% penalty, unless you take out for qualified reasons or you take out your basis without penalty.  When you pass away, your heirs will also not be taxed on these accounts.  One caveat is necessary here – you need earned income to contribute to these accounts.  If you are retired and don’t have earned income, you most likely can’t contribute.  If you are filing Married Filing Jointly on your taxes and only one spouse has an income, that is fine and both of you can still contribute.  However, you can only contribute up to the limit of your income.  Ie.  If you only make $4K of income per year, you can’t contribute $6K to an IRA or Roth IRA. Traditional 401k and Roth 401k These are work sponsored plans with the same tax properties as noted above, but have no income limitations!  Also, if you are under 50 you can contribute up to $19,500 in these or up to $26K per year if you are over 50! Roth conversions If you want to get more than $6K per year into a Roth, you can move money from an IRA to a Roth – which is called a Roth conversion and you can do any dollar amount.  However, when you do this, you need to pay ordinary income tax on the amount that you do (ie. if you do $20K conversion, you would add $20K to your ordinary income for that year).  It may make sense to do this if your business has a tough year, or if you are starting a new business and your income may be lower than otherwise it will be, you can do this at a lower tax bracket and try to convert up to the 12% or 22% tax bracket, understanding your tax bracket may be higher in the near future. It also may make sense to do this for Individuals who retire prior to 72 (ie. Retiring at 62 or 65 or 70) and you are not required to take RMDs yet, have no earned income coming anymore, and you can live off of after tax accounts (savings account, taxable account, etc.) your income may be lower and you can convert to Roths to maximize up to 12 or 22% bracket again, and get money working tax free and not take RMDs from those balances in the future! Another option may be to do this if there is a pull-back in the market.  (ie. If the market is temporarily down in value, and your IRA value went from $100K to $70K, and you convert it then you are only paying tax on $70K instead of $100K).   The concept boils back to triggering income today intentionally and paying tax on a lower tax bracket than a higher tax bracket you may be in the future. One other caveat is necessary to consider here, is that once you convert, it cannot be undone.  So it may make sense to wait until December to do these things so you have all relevant tax and income information understood and realized before doing it. ‘Backdoor’ Roth IRAs If you don’t want to convert your IRA to a Roth IRA, you can make new contributions to a non-deductible IRA and ultimately convert to a Roth after that.  There is no tax consequence to doing this if you are converting after-tax funds to a Roth IRA (but only if you have no other IRA accounts including Simple IRAs or SEP IRAs which would trigger something called the pro-rata rule!).  This would make a partially taxable conversion when you do this. Possible changes to Roth IRAs! However, all of this could change in the coming months with tax reform.  Here are some potential changes coming down the road Backdoor Roth IRAs could be removed If your income is over threshold ($400K for single filers, and $450K for married filing jointly) – Roth conversions could go away If your accounts are over $10M and between $20M that the IRS could require RMDs from Roth IRAs to get them under this threshold I hope this is helpful to you and you enjoy the fascinating world of Roth IRAs! Volatility Rears Its Head in September as Equities Decline HIGHLIGHTS: - Volatility returned to the market in September. For the first time since May, the VIX Index, a measure of volatility, broke above 25 on an intra-day basis. The VIX closed the month above 23, the highest end to a month since February. - Equities closed out September in the red. Although declining equities have been a rare occurrence over the last year and a half and might be unsettling for investors, it is important to remember that some back-and-forth movement in equities is normal during a market cycle. - The 10-year U.S. Treasury yield moved higher in September. Early August saw the yield decline to 1.19%, but it moved higher from that point and ended the month of September and the quarter higher at 1.52%. - The U.S. economy is still recovering, but as expected, the rate of growth has slowed. The Delta variant and ongoing supply chain issue appear to be causing an additional short-term headwind to economic growth. - The Delta variant appears to be peaking, so hopefully more progress can be made against the pandemic as we head later into the year and into 2022. - We expect ongoing economic improvements and continued above trend growth to close out 2021 and into 2022. Volatility, however, could stay elevated with markets near all-time highs and pandemic issues ongoing. EQUITY MARKETS Stocks fell rather sharply in September. These declines pushed most major U.S. equity indices into slightly negative territory for the quarter, with one of the few exceptions being the S&P 500, which eked out a fractional gain. In the large-cap space, growth underperformed value for the month, but outperformed it for the quarter. The year-to-date numbers still favor value stocks. Small-caps, which started the year strongly, lagged for the quarter, but outperformed on a relative basis for the month. Similar to the pattern we have seen recently, when interest rates rise, large-cap growth and particularly large-cap tech companies generally struggle, while small-caps and value stocks generally perform better. This was the backdrop for September. The VIX Index closed August just above 16, but it moved higher in September, closing at 23.14. Our expectation of a more volatile second half of 2021 started to materialize in September. We believe investors should be prepared for ongoing periods of volatility over the next several months with stocks near all-time highs, the Delta variant still problematic, a Fed likely to announce and begin its tapering of bond purchases, political strife in Washington DC, and a historically weak seasonal time of the year. Size and style mattered once again in September, but all major categories of equities declined during the month. We still believe that the value/growth disparity that reached a peak last year will likely continue to shift in 2021 with value improving on a relative basis. We continue to use our disciplined approach of seeking out what we believe to be high-quality companies with improving business conditions at what we believe are good prices. These types of companies can be found in both the value and growth universe, but the market’s shift to value stocks since the latter part of 2020 has benefited our focus on quality companies. The numbers for September were as follows: The S&P 500 dropped -4.65%, the Dow Jones Industrial Average fell -4.20%, the Russell 3000 declined by -4.49%, the NASDAQ Composite tumbled -5.27%, and the Russell 2000 Index, a measure of small-cap stocks, slipped by -2.95%. For the third quarter of 2021, returns in the same order were as follows: 0.58%, -1.46%, -0.10%, -0.23%, and -4.36%, respectively. We will continue to monitor how trends shift in the coming months and whether the recent gains in large-cap growth stocks develop more footing or whether small and mid-cap stocks, along with value, return to their recent leadership roles. September saw value and small-cap stocks perform relatively better than large-cap growth once again, but small-caps were the clear laggard for the quarter. Looking closer at style, the headline Russell 1000 Index declined -4.59% for the month but gained a modest 0.21% for the quarter. The Russell 1000 Growth Index fell by -5.60% in September, but it advanced 1.16% for the quarter. The Russell 1000 Value Index declined by a more modest -3.48% for the month, but it was also down for the quarter by -0.78%. For small-caps, value outperformed on a relative basis in September and for the quarter, but regardless of style, small cap stocks were down across the board for the quarter. The value/growth disparity is much more pronounced in small caps for the year to date with the Russell 2000 Value Index up 22.92%, while the Russell 2000 Growth Index has gained a mere 2.82% during the same timeframe. International markets struggled as well in September. The MSCI Emerging Markets Index dropped -3.97% in September, which pushed the year to date into negative territory. The MSCI ACWI ex USA Index, a broad measure of international equities, fell -3.20% in September, which cut the year-to-date gain down to 5.90%. Following the trend of recent years, U.S. stocks have continued to outperform their international counterparts in 2021. FIXED INCOME After surging higher during the first quarter of 2021, the yield on the 10-year U.S. Treasury dropped over the next four months. That streak ended in August as yields moved higher and that move higher continued in September. The yield closed the month of September at 1.52% compared to the August close at 1.30% and the end of Q2 at 1.45%. As would be expected as rates continued to move higher, most bond sectors struggled in September and the third quarter was rather flat. Fixed income returns were as follows for September: the Bloomberg Barclays U.S. Aggregate Bond Index slipped -0.87%, the Bloomberg Barclays U.S. Credit Index declined by -1.07%, the Bloomberg Barclays U.S. Corporate High Yield Index was virtually flat, off only -0.01% and the Bloomberg Barclays Municipal Index dropped -0.72%. For the third quarter, those index returns in the same order were as follows: 0.05%, -0.03%, 0.89%, and -0.27%, respectively. As the data shows, only high yield bonds were able to post positive results for the quarter and they continue to be the clear leader year to date. U.S. Treasuries, including TIPS, were down across the board in September. The general U.S. Treasury Index fell by -1.08% in September and is down -2.50% year to date. We continue to maintain our long-standing position favoring credit versus pure rate exposure in this interest rate environment. Source: Clark Capital Benchmark Review, September 2021 S&P 500 Index is an unmanaged group of securities considered to be representative of the stock market in general. You cannot directly invest in the index. Dow Jones Industrial Average - The Dow Jones Industrial Average is a popular indicator of the stock market based on the average closing prices of 30 active U.S. stocks representative of the overall economy.  NASDAQ Composite Index measures all NASDAQ domestic and international based common type stocks listed on The NASDAQ Stock Market. Today the NASDAQ Composite includes approximately 5,000 stocks, more than most other stock market indices. Because it is so broad-based, the Composite is one of the most widely followed and quoted major market indices. Russell 2000® Index measures the performance of the 2,000 smallest companies in the Russell 3000 Index, which represents approximately 8% of the total market capitalization of the Russell 3000 Index which includes the 3,000 largest companies in the U.S., based on market capitalization. As of the latest reconstitution, the average market capitalization was approximately $762.8 million; the median market capitalization was approximately $613.5 million. The largest company in the index had an approximate market capitalization of $2.0 billion and a smallest of 218.4 million.  Russell 1000® Growth Index measures the performance of those Russell 1000 companies with higher price-to-book ratios and higher forecasted growth values.  Russell 1000® Value Index measures the performance of those Russell 1000 companies with lower price-to-book ratios and lower forecasted growth values.  Government bonds are guaranteed by the U. S. Government and, if held to maturity, offer a fixed rate of return and fixed principal value. Securities offered through Kestra Investment Services, LLC (Kestra IS), Member FINRA/SIPC. Investment Advisory Services offered through Kestra Advisory Services, LLC (Kestra AS), an affiliate of Kestra IS. Offit Advisors is not affiliated with Kestra IS or Kestra AS. Offit Advisory Services, LLC is a tax firm but neither Kestra IS nor Kestra AS provide legal or tax advice and are not Certified Public Accounting firms.For more information on the Five Star Wealth Manager and the research/selection methodology go to: www.fivestarprofessional.com. Investor Disclosures: https://bit.ly/KF-Disclosures 9030 RED BRANCH ROAD COLUMBIA, MD 21045, US Phone + Fax:  410 600 PLAN (7526) E – Office@OffitAdvisors.com W- www.OffitAdvisors.com   To schedule an appointment with us, click here! The opinions expressed in this commentary are those of the author and may not necessarily reflect those held by Kestra IS or Kestra AS. The material is for informational purposes only. It represents an assessment of the market environment at a specific point in time and is not intended to be a forecast of future events, or a guarantee of future results. It is not guaranteed by Kestra IS or Kestra AS for accuracy, does not purport to be complete and is not intended to be used as a primary basis for investment decisions. It should also not be construed as advice meeting the particular investment needs of any investor. Neither the information presented nor any opinion expressed constitutes a solicitation for the purchase or sale of any security. Want to change how you receive these emails? You can update your preferences or unsubscribe from this list.

Roth IRA Conversions; Everyone's Favorite Tax Topic

Hi everyone, thanks for reading today!  Today I want to talk to you about the nuances of Traditional IRAs and Roth IRAs and how you can understand and take advantage of some strategies here.  But before we do so, let’s just go over the basics of these:

Basics of IRAs (Traditional vs Roth)

With these accounts – you can contribute up to $6K per year if you are under 50 and $7K per year if you are over 50.  If you are over certain income thresholds you can’t contribute to a Roth IRA, or also a Traditional IRA (if you have a employer sponsored retirement plan).  If you don’t have an employer sponsored retirement plan, you can freely contribute and deduct Traditional IRA contributions.

Traditional IRAs are funded with pre-tax dollars, and you get a tax deduction each year that gives you up front tax savings.  Ie. If you contribute $6K to this, that is deducting $6K of income from your tax return that year.  The money grows tax-deferred while it is in the account, and when you take it out it is subject to ordinary income tax rates.  At age 59.5 you can take it out without any penalty (if you take it out prior to 59.5 you are subject to a 10% penalty) and at age 72 you are required to start taking Required Minimum Distributions  (RMDs).   When you pass away your heirs also have to take RMD’s subject to their own ordinary income tax rates.  

Roth IRAs are funded with after-tax dollars so there are no up front tax savings, but the savings are on the back end because you pay no tax on any future withdrawal – the growth is all tax-free.  However, you still have to wait until 59.5 to access the growth portion of the money or you will be hit with a 10% penalty, unless you take out for qualified reasons or you take out your basis without penalty.  When you pass away, your heirs will also not be taxed on these accounts. 

One caveat is necessary here – you need earned income to contribute to these accounts.  If you are retired and don’t have earned income, you most likely can’t contribute.  If you are filing Married Filing Jointly on your taxes and only one spouse has an income, that is fine and both of you can still contribute.  However, you can only contribute up to the limit of your income.  Ie.  If you only make $4K of income per year, you can’t contribute $6K to an IRA or Roth IRA.

Traditional 401k and Roth 401k

These are work sponsored plans with the same tax properties as noted above, but have no income limitations!  Also, if you are under 50 you can contribute up to $19,500 in these or up to $26K per year if you are over 50!

Roth conversions

If you want to get more than $6K per year into a Roth, you can move money from an IRA to a Roth – which is called a Roth conversion and you can do any dollar amount.  However, when you do this, you need to pay ordinary income tax on the amount that you do (ie. if you do $20K conversion, you would add $20K to your ordinary income for that year). 

It may make sense to do this if your business has a tough year, or if you are starting a new business and your income may be lower than otherwise it will be, you can do this at a lower tax bracket and try to convert up to the 12% or 22% tax bracket, understanding your tax bracket may be higher in the near future.

It also may make sense to do this for Individuals who retire prior to 72 (ie. Retiring at 62 or 65 or 70) and you are not required to take RMDs yet, have no earned income coming anymore, and you can live off of after tax accounts (savings account, taxable account, etc.) your income may be lower and you can convert to Roths to maximize up to 12 or 22% bracket again, and get money working tax free and not take RMDs from those balances in the future!

Another option may be to do this if there is a pull-back in the market.  (ie. If the market is temporarily down in value, and your IRA value went from $100K to $70K, and you convert it then you are only paying tax on $70K instead of $100K).  

The concept boils back to triggering income today intentionally and paying tax on a lower tax bracket than a higher tax bracket you may be in the future.

One other caveat is necessary to consider here, is that once you convert, it cannot be undone.  So it may make sense to wait until December to do these things so you have all relevant tax and income information understood and realized before doing it.

‘Backdoor’ Roth IRAs

If you don’t want to convert your IRA to a Roth IRA, you can make new contributions to a non-deductible IRA and ultimately convert to a Roth after that.  There is no tax consequence to doing this if you are converting after-tax funds to a Roth IRA (but only if you have no other IRA accounts including Simple IRAs or SEP IRAs which would trigger something called the pro-rata rule!).  This would make a partially taxable conversion when you do this.

Possible changes to Roth IRAs!

However, all of this could change in the coming months with tax reform.  Here are some potential changes coming down the road

1. Backdoor Roth IRAs could be removed

2. If your income is over threshold ($400K for single filers, and $450K for married filing jointly) – Roth conversions could go away

3. If your accounts are over $10M and between $20M that the IRS could require RMDs from Roth IRAs to get them under this threshold

I hope this is helpful to you and you enjoy the fascinating world of Roth IRAs!

On It with Offit - September 2021

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SEP | 2021 TEAMMATE SPOTLIGHT Meet Laura!   Laura Sendldorfer is our Financial Advisor & Insurance Specialist. She loves helping clients achieve peace of mind and financial freedom through money management, investments, and insurance.   Interests Finance - I enjoy the planning process and helping others achieve their goals. Real Estate - I enjoy seeing transformations and bringing houses back to life, although it’s not quite like HGTV. Traveling - to see all this beautiful world has to offer, learning from other cultures, and experiencing their cuisine. Running - after a year of in-person races being canceled, I look forward to running the delayed cherry blossom 5K this weekend, later this month to the Baltimore running festival and the Bay Bridge run on Halloween. Favorite Philanthropy Doctors Without Borders Favorite Offit Advisors Value Clear Goals- I think it’s magic to help clients set visions and clear goals for the future. Favorite Thing About Working with Our Clients Walking through life with our clients and being able to celebrate their success and growth with them. What Gets Me Out of Bed in the Morning A good coffee (I’d call myself a coffee snob), sunshine, family & friends and my endless list of personal goals. Name One Thing You'd Spend More on to Get the Best Quality For most things, I choose quality over quantity. Some examples are: Coffee, food, travel (although I have yet to fly first class), and most definitely running shoes.   Meet with Laura The IRS Dirty Dozen and Related Scams to be Aware Of! Hello Loyal Readership! Today I want to talk to about some tax related topics and go over an interesting publication that occurs each year from the IRS called the Dirty Dozen. This is a list they put out each year of items to be aware and things they are looking at. Here are some of them that are interesting and you should definitely be aware of! 1. Pandemic related scams – As we all know there have been various forms of stimulus payments and relief over the past year and half or so and there have been scammers trying to prey on people’s lack on understanding of these stimulus options. These scammers may be contacting clients about their payments or make sure they get it and are asking for financial information.This will be a common theme in this article but the IRS will never initiate contact with you via phone, text, email, social media. If someone contacts you saying they are with the IRS – delete it or don’t open it. They will only initiate contact via a letter from the IRS in the regular snail mail. 2. Unemployment fraud – along with the pandemic, many people have filed for unemployment benefits and scammers have also tried to prey on this. Scammers will try to obtain your personal information and file an unemployment claim using your data in which they will get the payment for. If you happen to receive a 1099-G form showing income from unemployment benefits – this is a tip off of fraud that someone filed unemployment under your name. If this happens, reach out to state department to get this corrected, and don’t include this income on your actual tax return because it is not real income attributable to you. 3. Unsuspecting victims –With the pandemic, many charities need more support than normal, but people also getting calls from fake charities claiming that they need support and asking for an immediate donation. To ensure that a charity is real, you can ask any charity for their full name of their organization, their tax id number, and locate them on the IRS to site to verify their status. 4. People imitating the IRS – these people or organizations target seniors or people that don’t have English as their first language saying they need to clarify an issue and need your personal information. Again – the IRS will not contact you directly – it is fraudulent. They will only contact you via an official letter in the mail. If you do speak another language other than English, you can use Schedule LEP and you can indicate preferred language, they will send a letter in your native language. 5. Backtax consolidators – Be aware of firms saying they can help with your backtaxes. These firms can charge high up front fees, and don’t guarantee results. If you need assistance with your backtaxes or IRS payments, the IRS can offer payment plans with a relatively moderate interest rate and there aren’t fees to get it setup. 6. Ghost preparers – someone who says they will prepare a tax return for you but won’t put their name on or sign the return is someone to stay away from. This can be someone looking to initiate stimulus payment fraud, or another scam of some sort. 7. Personal information cons – impersonator calls claiming to be from the IRS about a tax lien or messaging you on social with a link to gather information about you. 8. Phishing scams – these may not be targeted at individuals but actual companies trying to get information from companies that may have personally identifiable information on people. Any company needs to be aware and trained of fake links, or emails with malware that may try to extract data from your computer that could compromise people’s data. 9. Abusive arrangements – this is about being aware of tax promoters who are promising very large tax deductions from alternative tax strategies. They could be promoting ideas lie conservation easements (investing in a piece of land that is subsequently donated), foreign country tax treaties with gray area (ie. Malta), claiming benefits you are not entitled to (R&D and green energy) even though you haven’t done them, and the IRS is aware of taxpayers getting involved in these ideas. You are legally required to include how found out about these ideas, and they won’t fly under the radar with the IRS. If it seems like you are saving too much on taxes, ad it is too good to be true, it probably is. So in the end, this article is not meant to scare you, but rather is intended to raise your awareness of some things that could be scams in the tax world! - The last time the S&P had a pullback of 5% or more was October 2020. Since 1929, the S&P has experienced only 12 other streaks of nine months long like this one. Seeking Alpha, August 16, 2021 - Last month, three out of four cargo containers leaving the port of Los Angeles were empty. The Port of Los Angeles head, Gene Seroka said, “Our largest export commodity continues to be air.” The Loadstar, August 23, 2021 - New research shows that U.S. alcohol consumption rose 39% during the pandemic and 323% among mothers with young children. Fox News, August 16, 2021   - Roughly 75% of all foods and beverages in America contain added sugar. According to the American Heart Association, the average adult swallows the equivalent of six bowling balls of the stuff each year. Meanwhile, the average child downs enough added sugar to fill a bathtub. Medium, August 18, 2021 - Americans are on average 7.8 points more confident than Brits that they could beat various animals in a one-on-one fight, including a medium-size dog, a chimpanzee, a kangaroo, and a goose. YouGov, May 21, 2021   - “If A is success in life, then A = X + Y + Z. Work is X, play is Y, and Z is keeping your mouth shut.” Albert Einstein Stocks Advance Further in August as Bonds Pause Highlights    In what has become a bit of a broken record, the S&P 500 Index, NASDAQ Composite, and Dow Jones Industrial Average each posted new all-time highs in August. Small-caps enjoyed gains, but generally lagged large-caps for the month and the Russell 2000 Index has still not surpassed its high from March.   With large-caps and growth continuing their recent strength, market leadership has shifted. Value is still handily outperforming growth in small and mid-caps year to date, but a slight advantage goes to growth for large-caps. Small-caps overall have forfeited leadership to large-caps year to date.   The 10-year U.S. Treasury yield moved modestly higher in August. After drifting down to its lowest level since February early in the month to 1.19%, the yield moved higher closing August at 1.30%. It had ended July at 1.24%. Outside of high yield, most bond sectors were down for the month.   The U.S. economy is recovering solidly, and recent job gains have been the highlight. Inflation numbers remain elevated and garner a lot of attention. The Fed has reiterated its belief that inflation is transitory at this point.   The delta variant continues to spread more widely across the U.S. It is yet to be seen whether this might have an impact on the economic reopening.   We expect ongoing economic improvements and continued above trend growth in the second half of 2021 and into 2022. Volatility, however, could increase in the months ahead with markets near all-time highs and pandemic issues ongoing. Equity Markets   In the large-cap space, growth continued its recent trend of outperformance compared to value in August. Small-caps, which started the year strongly, have lagged in recent months as growth and large-caps have rallied. Outside of a mid-month spike above 21, the VIX Index remained subdued in August. The VIX Index closed July at 18.24 and ended August at 16.48. Despite the trend lower in the VIX Index, we believe investors should be prepared for ongoing periods of volatility over the next several months with stocks near all-time highs and some uncertainly surrounding the Delta variant. Size and style mattered once again in August with the largest-cap growth companies outpacing smaller and more value-oriented companies. Although there will be times when growth rallies, we still believe that the value/growth disparity that reached a peak last year will likely continue to shift in 2021 with value improving on a relative basis. We continue to use our disciplined approach of seeking out what we believe to be high-quality companies with improving business conditions at what we believe are good prices. These types of companies can be found in both the value and growth universe, but the market’s shift to value stocks since the latter part of 2020 has benefited our focus on quality companies. The numbers for August were as follows: The S&P 500 gained 3.04%, the Dow Jones Industrial Average advanced 1.50%, the Russell 3000 improved by 2.85%, the NASDAQ Composite led indices higher rising 4.08%, and the Russell 2000 Index, a measure of small-cap stocks, increased by 2.24%. For the year to date, returns in the same order were as follows: 21.58%, 17.04%, 20.39%, 18.92%, and 15.83%, respectively. We will continue to monitor how trends shift in the coming months and whether the recent gains in large-cap growth stocks develop more footing or whether small and mid-cap stocks, along with value, return to their recent leadership roles. Looking closer at style, the headline Russell 1000 Index gained 2.89% in August. The Russell 1000 Growth Index drove results as it had in the prior two months, up 3.74%, while the Russell 1000 Value Index gained only 1.98%. For the year to date, the returns were 21.08% and 20.32%, respectively. While growth has caught up to value in the large-cap space, value is still easily outpacing growth in the mid and small cap universe. For example, the Russell 2000 Value Index is up 25.43% year-to-date, while the Russell 2000 Growth Index has gained a mere 6.92% during the same timeframe. International markets bounced back in August after a difficult July following China’s ramp up of regulatory restrictions. The MSCI Emerging Markets Index gained 2.62% in August, which accounts for most of the year-to-date gain of 2.84% for this index. The MSCI ACWI ex USA Index, a broad measure of international equities, advanced 1.90%, which contributed to the 9.40% gain for this index so far this year. Following the trend of recent years, U.S. stocks have continued to outperform their international counterparts. Fixed Income After surging higher during the first quarter of 2021, the yield on the 10-year U.S. Treasury dropped over the next four months. That streak ended in August as yields moved higher once again. The yield closed the month of July at 1.24% before ending August at 1.30%. Most bond sectors struggled in the first quarter, particularly the most interest-rate sensitive bonds, but they had enjoyed a period of recovery over the following four months. In August, most bond sectors declined with the notable exception of high-yield bonds, which have been the clear leader in fixed income so far in 2021. Fixed income returns were as follows for August: the Bloomberg Barclays U.S. Aggregate Bond Index slipped -0.19%, the Bloomberg Barclays U.S. Credit Index declined -0.24%, the Bloomberg Barclays U.S. Corporate High Yield Index rose 0.51%, and the Bloomberg Barclays Municipal Index dropped -0.37%. Year to date, those index returns in the same order were as follows: -0.69%, -0.23%, 4.55%, and 1.53%, respectively. Treasury Inflated Protected Securities (TIPS), which had rallied strongly in recent months with increased worries about inflation, gave up some ground in August declining by -0.18%, but its year-to-date gain still stands at 4.26%. Shorter-dated U.S. Treasuries enjoyed gains in August (the 5-year U.S. Treasury Index rose 1.02%), but longer-dated Treasuries declined. The general U.S. Treasury Index fell by -0.17% in August and is down -1.43% year-to-date. We continue to maintain our long-standing position favoring credit versus pure rate exposure in this interest rate environment.   Source: Clark Capital Benchmark Review, August 2021 S&P 500 Index is an unmanaged group of securities considered to be representative of the stock market in general. You cannot directly invest in the index. Dow Jones Industrial Average - The Dow Jones Industrial Average is a popular indicator of the stock market based on the average closing prices of 30 active U.S. stocks representative of the overall economy.  NASDAQ Composite Index measures all NASDAQ domestic and international based common type stocks listed on The NASDAQ Stock Market. Today the NASDAQ Composite includes approximately 5,000 stocks, more than most other stock market indices. Because it is so broad-based, the Composite is one of the most widely followed and quoted major market indices. Russell 2000® Index measures the performance of the 2,000 smallest companies in the Russell 3000 Index, which represents approximately 8% of the total market capitalization of the Russell 3000 Index which includes the 3,000 largest companies in the U.S., based on market capitalization. As of the latest reconstitution, the average market capitalization was approximately $762.8 million; the median market capitalization was approximately $613.5 million. The largest company in the index had an approximate market capitalization of $2.0 billion and a smallest of 218.4 million.  Russell 1000® Growth Index measures the performance of those Russell 1000 companies with higher price-to-book ratios and higher forecasted growth values.  Russell 1000® Value Index measures the performance of those Russell 1000 companies with lower price-to-book ratios and lower forecasted growth values.  Government bonds are guaranteed by the U. S. Government and, if held to maturity, offer a fixed rate of return and fixed principal value. Securities offered through Kestra Investment Services, LLC (Kestra IS), Member FINRA/SIPC. Investment Advisory Services offered through Kestra Advisory Services, LLC (Kestra AS), an affiliate of Kestra IS. Offit Advisors is not affiliated with Kestra IS or Kestra AS. Offit Advisory Services, LLC is a tax firm but neither Kestra IS nor Kestra AS provide legal or tax advice and are not Certified Public Accounting firms.For more information on the Five Star Wealth Manager and the research/selection methodology go to: www.fivestarprofessional.com. Investor Disclosures: https://bit.ly/KF-Disclosures 9030 RED BRANCH ROAD COLUMBIA, MD 21045, US Phone + Fax:  410 600 PLAN (7526) E – Office@OffitAdvisors.com W- www.OffitAdvisors.com   To schedule an appointment with us, click here! The opinions expressed in this commentary are those of the author and may not necessarily reflect those held by Kestra IS or Kestra AS. The material is for informational purposes only. It represents an assessment of the market environment at a specific point in time and is not intended to be a forecast of future events, or a guarantee of future results. It is not guaranteed by Kestra IS or Kestra AS for accuracy, does not purport to be complete and is not intended to be used as a primary basis for investment decisions. It should also not be construed as advice meeting the particular investment needs of any investor. Neither the information presented nor any opinion expressed constitutes a solicitation for the purchase or sale of any security. Want to change how you receive these emails? You can update your preferences or unsubscribe from this list.

The IRS Dirty Dozen, and Related Scams to be Aware Of

Hello Loyal Readership!

Today I want to talk to about some tax related topics and go over an interesting publication that occurs each year from the IRS called the Dirty Dozen. This is a list they put out each year of items to be aware and things they are looking at.

Here are some of them that are interesting and you should definitely be aware of!

1. Pandemic-related scams – As we all know there have been various forms of stimulus payments and relief over the past year and half or so and there have been scammers trying to prey on people’s lack on understanding of these stimulus options. These scammers may be contacting clients about their payments or make sure they get it and are asking for financial information. This will be a common theme in this article but the IRS will never initiate contact with you via phone, text, email, social media. If someone contacts you saying they are with the IRS – delete it or don’t open it. They will only initiate contact via a letter from the IRS in the regular snail mail.

2. Unemployment fraud – along with the pandemic, many people have filed for unemployment benefits and scammers have also tried to prey on this. Scammers will try to obtain your personal information and file an unemployment claim using your data in which they will get the payment for. If you happen to receive a 1099-G form showing income from unemployment benefits – this is a tip-off of fraud that someone filed unemployment under your name. If this happens, reach out to state department to get this corrected, and don’t include this income on your actual tax return because it is not real income attributable to you.

3. Unsuspecting victims –With the pandemic, many charities need more support than normal, but people also getting calls from fake charities claiming that they need support and asking for an immediate donation. To ensure that a charity is real, you can ask any charity for their full name of their organization, their tax id number, and locate them on the IRS to site to verify their status.

4. People imitating the IRS – these people or organizations target seniors or people that don’t have English as their first language saying they need to clarify an issue and need your personal information. Again – the IRS will not contact you directly – it is fraudulent. They will only contact you via an official letter in the mail. If you do speak another language other than English, you can use Schedule LEP and you can indicate preferred language, they will send a letter in your native language.

5. Backtax consolidators – Be aware of firms saying they can help with your backtaxes. These firms can charge high up front fees, and don’t guarantee results. If you need assistance with your backtaxes or IRS payments, the IRS can offer payment plans with a relatively moderate interest rate and there aren’t fees to get it setup.

6. Ghost preparers – someone who says they will prepare a tax return for you but won’t put their name on or sign the return is someone to stay away from. This can be someone looking to initiate stimulus payment fraud, or another scam of some sort.

7. Personal information cons – impersonator calls claiming to be from the IRS about a tax lien or messaging you on social with a link to gather information about you.

8. Phishing scams – these may not be targeted at individuals but actual companies trying to get information from companies that may have personally identifiable information on people. Any company needs to be aware and trained of fake links, or emails with malware that may try to extract data from your computer that could compromise people’s data.

9. Abusive arrangements – this is about being aware of tax promoters who are promising very large tax deductions from alternative tax strategies. They could be promoting ideas lie conservation easements (investing in a piece of land that is subsequently donated), foreign country tax treaties with gray area (ie. Malta), claiming benefits you are not entitled to (R&D and green energy) even though you haven’t done them, and the IRS is aware of taxpayers getting involved in these ideas. You are legally required to include how found out about these ideas, and they won’t fly under the radar with the IRS. If it seems like you are saving too much on taxes, ad it is too good to be true, it probably is.

So in the end, this article is not meant to scare you, but rather is intended to raise your awareness of some things that could be scams in the tax world!

Student Loans - The Biggest Financial Planning Issue That No One Talks About (Copy)

Hello, loyal readership! Today I wanted to talk about a different subject that we haven’t touched upon yet – student loans! Student loans afford many to go to college, or get an advanced degree or Master’s degree in exchange for a great future profession and higher earning potential, but also have drawbacks in that you have to pay these things back over time and often with very high balances!

Planning around them is a big deal and here are some updates to consider within this sector. If you work for a non-profit, or government institution you may be on track for Public Student Loan Forgiveness if you are paying back your loans on an Income-Based Repayment (IBR) plan and you make 120 qualifying monthly payments (10 years) while employed by that institution. This is especially pertinent to the federal government, state government, and doctors working for nonprofit hospitals.

However, recently there has been a major change to this because as of December 2021, FedLoan Servicing will no longer be servicing student loans.  This will impact millions of borrowers but more importantly, those who are pursuing PSLF should be on high alert.  Currently, there is little information as to who will take over the management of these loans but there are things you can do to protect yourself in the meantime.  The following are our recommendations.  

If your loan servicer is NOT FedLoan Servicing: it is unlikely that anything will change with your loans.

If your loan servicer IS currently FedLoan Servicing:

• Download all payment history.  Historically when loans have transferred to other servicers, the loan terms do not change, but the new servicer does not know your history with the previous lender.

• Prior to FedLoans termination (December 14, 2021), note (screenshot) your current balance AND accrued interest balance.  You want to be sure that when your loan is with the new carrier, the outstanding interest is not capitalized (added to the principal balance).

• Be on the lookout soon for communication from a student loan company that they will be your new servicer.  This will tell you when and how you can access your loans.  (signs point to MOHELA becoming your new provider but there is nothing currently stating that)

• Continue making your payments to FedLoan until you hear otherwise

If you work for a 501c(3) or a government institution and are pursuing Public Service Loan Forgiveness (PSLF):

• Do everything stated above

• Download ALL Employment Certification Forms (ECF) that have been previously submitted

• Note your current income-based payment plan and your re-certification date

• Send in a new ECF by November 1 to get the most up-to-date certification possible

• When you receive communication from your new servicer, if they do not initially indicate it, reach out to them quickly to ensure that they will be processing certifications and applications for PSLF customers

• DOCUMENT EVERYTHING.  Unfortunately, student loan servicers notoriously make mistakes and transitions haven’t run smoothly.

One last thing to note, there has been a temporary pause on required student loan payments due to COVID-19 that was just extended to January 31, 2022 for the final time.  One can either not make payments or pay them down if they so choose. The loan industry expects things to be difficult and busy when millions of borrowers begin making payments again and figuring out how to get back on track.  To add the challenge of transferring millions of loans to another company only adds more stress to the chaos.  Anyone who is paying down their student loans should try to pay these down as much as possible during this time frame to capitalize on the 0% interest period! 

We hope this helps in the changing landscape of student loan advisory!

On It with Offit - August 2021

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The Offit Family  Welcomes Baby #2! Our family is growing! My wife and I are delighted to announce the birth of our second child, a beautiful boy named Nathan Brooks Offit. Nathan was born healthy and happy late last month at Howard County Hospital on July 23rd at 2:26 AM, and just as with Reed, Amanda was and is truly incredible. A would-be homebuyer in Bethesda, MD, pledged to name her first-born child after the seller in a written offer. She lost. Morning Brew, July 29, 2021 Fifty-two percent of Wharton’s incoming MBA class is female, the first time a Top 7 business school has admitted more women than men. The Wall Street Journal, July 28, 2021 Apple’s profits from the past three months ($21.7 billion) was nearly double the combined annual profits of the five largest U.S. airlines in pre-pandemic 2019. New York Times, July 29, 2021 In the United States last year, renewables became the second-most prevalent energy source, second only to natural gas. Accounting for 21% of all electricity generation, renewables topped both nuclear and coal for the first time. Morning Brew, July 28, 2021 While sitting on the porch with her husband, a woman was sipping on a glass of wine, and she says, “I love you so much, I don’t know how I could ever live without you.” Her husband asks, “Is that you talking or the wine talking?” She replied, “It’s me…talking to the wine.” Changes in the Student Loan Landscape by Jamie Callighan | Wealth Management & Student Loan Specialist at Offit Advisors   You may have recently heard that there are more changes coming to the student loan industry.  As of December 2021, FedLoan Servicing will no longer be servicing student loans.  This will impact millions of borrowers but more importantly, those who are pursing PSLF should be on high alert.  Currently, there is little information as to who will take over the management of these loans but there are things you can do to protect yourself in the meantime.  The following are our recommendations and we will send out updates as we receive them.     If your loan servicer is NOT FedLoan Servicing: it is unlikely that anything will change with your loans.   If your loan servicer IS currently FedLoan Servicing: download all payment history.  Historically when loans have transferred to other servicers, the loan terms do not change, but the new servicer does not know your history with the previous lender. Prior to FedLoans termination (December 14, 2021), note (screenshot) your current balance AND accrued interest balance.  You want to be sure that when your loan is with the new carrier, the outstanding interest is not capitalized (added to the principal balance). Be on the lookout soon for communication from a student loan company that they will be your new servicer.  This will tell you when and how you can access your loans.  (signs point to MOHELA becoming your new provider but there is nothing currently stating that) continue making your payments to FedLoan until you hear otherwise If you work for a 501c(3) or a government institution and are pursuing Public Service Loan Forgiveness (PSLF): do everything stated above download ALL Employment Certification Forms (ECF) that have been previously submitted note your current income-based payment plan and your re-certification date send in a new ECF by November 1 to get the most up to date certification possible when you receive communication from your new servicer, if they do not initially indicate it, reach out to them quickly to ensure that they will be processing certifications and applications for PSLF customers DOCUMENT EVERYTHING.  Unfortunately, student loan servicers notoriously make mistakes and transitions haven't run smoothly. One last thing to note, the temporary pause on student loan payments is set to expire on September 30th.  Advocates have been pushing to extend this pause further once again.  The loan industry expects things to be difficult and busy when millions of borrowers begin making payments again and figuring out how to get back on track.  To add the challenge of transferring millions of loans to another company only adds more stress to the chaos.  It is possible another extension will be made.  Hope for the best, prepare for the worst, but do not panic!   We will send out updates as we learn them but do not hesitate to reach out or schedule an appointment if you have additional questions.     U.S. Large-Caps and Bonds Gain to Kick Off the Second Half of 2021 Highlights The S&P 500 Index, NASDAQ Composite, and Dow Jones Industrial Average each posted new all-time highs in July. Small-caps fell for the month and growth continued its recent trend of outperformance compared to value.   With small-caps moving lower for the month, the year-to-date leadership has shifted to large-cap companies. Value still maintains a lead over growth year to date, but that lead has narrowed. International stocks also struggled in July.   The 10-year U.S. Treasury yield continued its recent slide lower in July. After closing June at 1.45%, it ended July at 1.24%. Most bond sectors continued their recovery in July after a rough first quarter.   The U.S. economy is still solidly recovering, but some economic data points showed moderating growth. The initial estimate of Q2 GDP was released and it disappointed at a 6.5% annualized rate compared to expectations of 8.4%.   The Delta variant continues to spread more widely in the U.S. and globally. It is yet to be seen whether this might have an impact on the economic reopening.   We expect ongoing economic improvements and continued above trend growth in the second half of 2021. However, volatility could increase in the months ahead with markets near all-time highs and pandemic issues ongoing. Equity Markets Growth continued its recent trend of outperformance compared to value in July. However, even more dramatic was the dominance of large-cap stocks compared to small-caps for the month. While most major U.S. equity indices enjoyed solid gains in July, small-caps fell rather sharply and relinquished their year-to-date leadership role. After hitting a 52-week intra-day low near the end of June at 14.1, the VIX Index generally trended higher in July. It spiked above 25 at one point during the month (although it did not close at that level) and by the end of July, the VIX Index stood at 18.24. Despite volatility picking up during the month, stocks were generally higher. We believe investors should be prepared for ongoing periods of volatility over the next several months with stocks near all-time highs and after such a strong first half of 2021. Style mattered once again in July, but market capitalization was a more significant driver of returns during the month. Although there will be times when growth rallies, we still believe that the value/growth disparity that reached a peak last year will likely continue to shift in 2021 with value improving on a relative basis.  The numbers for July were as follows: The S&P 500 gained 2.38%, the Dow Jones Industrial Average advanced 1.34%, the Russell 3000 improved by 1.69%, the NASDAQ Composite rose 1.19%, and the Russell 2000 Index, a measure of small-cap stocks, declined by -3.61%. This drop in the Russell 2000 Index in July now causes it to lag the large-cap indices so far this year. Year-to-date returns in the same order were as follows: 17.99%, 15.31%, 17.06%, 14.26%, and 13.29%, respectively. We will continue to monitor how trends shift in the coming months and whether the recent gains in large-cap growth stocks develop more footing, or whether small and mid-cap stocks, along with value, return to their recent leadership roles. Looking closer at style, the headline Russell 1000 Index gained 2.08% in July. The Russell 1000 Growth Index drove results as it had in June, up 3.30%, while the Russell 1000 Value Index gained only 0.80%. Year-to-date returns were 16.71% and 17.98%, respectively. Value is still outperforming growth so far in 2021, but that gap narrowed with the returns from last two months. The small-cap universe was down in July regardless of style, with both growth and value declining. International markets struggled in July, and particularly within emerging markets. Asian markets were hard hit during the month as China ramped up regulatory restrictions. The MSCI Emerging Markets Index dropped -6.73% in July, wiping out most of its gains for the year, and the MSCI ACWI ex USA Index, a broad measure of international equities, fell -1.65%. For the year to date, those two indices now show gains of 0.22% and 7.36%, respectively. Following the trend of recent years, U.S. stocks have continued to outperform their international counterparts. Fixed Income After surging higher during the first quarter, the yield on the 10-year U.S. Treasury has declined over the last four months. The yield closed the month of June at 1.45% and it slipped lower in July to end the month at 1.24%. Most bond sectors struggled in the first quarter, particularly the most interest-rate sensitive bonds, but they have been recovering from that point as yields have dropped. High yield bonds have been the winner in fixed income so far this year, but Treasury Inflation-Protected Securities (TIPS) have surged of late, which has made them among the best pockets of the bond market. The ongoing and massive support from the Federal Reserve is keeping a lid on interest rates (particularly on the front end of the yield curve), but we did anticipate some steepening of the yield curve would occur in 2021. That steepening has happened, but as is typical, these moves are not just made in a steady manner. The yield curve has flattened somewhat in recent months with longer-term yields declining. Fixed income returns for July were as follows: the Bloomberg Barclays U.S. Aggregate Bond Index gained 1.12%, the Bloomberg Barclays U.S. Credit Index advanced 1.30%, the Bloomberg Barclays U.S. Corporate High Yield Index rose 0.38% and the Bloomberg Barclays Municipal Index gained 0.83%. For the year to date, those index returns in the same order were as follows: -0.50%, 0.01%, 4.01%, and 1.90%, respectively. U.S. Treasuries enjoyed gains across the board as interest rates dropped with longer dated U.S. Treasuries showing the best results in July (the 30-year index was up +4.11% for the month), but it is still down -5.51% year to date. As inflation concerns and expectations have increased in recent months, TIPS have had solid results. Over the last three months, the Bloomberg Barclays U.S. Treasury TIPs Index has gained 4.54%, which puts its year-to-date gain at 4.44%. We continue to maintain our long-standing position favoring credit versus pure rate exposure in this interest rate environment.   S&P 500 Index is an unmanaged group of securities considered to be representative of the stock market in general. You cannot directly invest in the index. Dow Jones Industrial Average - The Dow Jones Industrial Average is a popular indicator of the stock market based on the average closing prices of 30 active U.S. stocks representative of the overall economy.  NASDAQ Composite Index measures all NASDAQ domestic and international based common type stocks listed on The NASDAQ Stock Market. Today the NASDAQ Composite includes approximately 5,000 stocks, more than most other stock market indices. Because it is so broad-based, the Composite is one of the most widely followed and quoted major market indices. Russell 2000® Index measures the performance of the 2,000 smallest companies in the Russell 3000 Index, which represents approximately 8% of the total market capitalization of the Russell 3000 Index which includes the 3,000 largest companies in the U.S., based on market capitalization. As of the latest reconstitution, the average market capitalization was approximately $762.8 million; the median market capitalization was approximately $613.5 million. The largest company in the index had an approximate market capitalization of $2.0 billion and a smallest of 218.4 million.  Russell 1000® Growth Index measures the performance of those Russell 1000 companies with higher price-to-book ratios and higher forecasted growth values.  Russell 1000® Value Index measures the performance of those Russell 1000 companies with lower price-to-book ratios and lower forecasted growth values.  Government bonds are guaranteed by the U. S. Government and, if held to maturity, offer a fixed rate of return and fixed principal value. Securities offered through Kestra Investment Services, LLC (Kestra IS), Member FINRA/SIPC. Investment Advisory Services offered through Kestra Advisory Services, LLC (Kestra AS), an affiliate of Kestra IS. Offit Advisors is not affiliated with Kestra IS or Kestra AS. Offit Advisory Services, LLC is a tax firm but neither Kestra IS nor Kestra AS provide legal or tax advice and are not Certified Public Accounting firms.For more information on the Five Star Wealth Manager and the research/selection methodology go to: www.fivestarprofessional.com. Investor Disclosures: https://bit.ly/KF-Disclosures Offit Advisors 9030 Red Branch Road Suite 130 Columbia, MD  21045 Phone + Text:  410 600 7526 (PLAN) Fax: 410 826 7639 E – BOffit@OffitAdvisors.com W- www.OffitAdvisors.com   To schedule an appointment with us, click here! The opinions expressed in this commentary are those of the author and may not necessarily reflect those held by Kestra IS or Kestra AS. The material is for informational purposes only. It represents an assessment of the market environment at a specific point in time and is not intended to be a forecast of future events, or a guarantee of future results. It is not guaranteed by Kestra IS or Kestra AS for accuracy, does not purport to be complete and is not intended to be used as a primary basis for investment decisions. It should also not be construed as advice meeting the particular investment needs of any investor. Neither the information presented nor any opinion expressed constitutes a solicitation for the purchase or sale of any security. Want to change how you receive these emails? You can update your preferences or unsubscribe from this list.