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Tokyo Olympics in Limbo

In recent weeks, there has been a standoff between the International Olympic Committee (IOC) and the Japanese public as to whether the Tokyo Games should be held. After being postponed for a year due to COVID, the summer Olympic Games of 2020 are rescheduled to begin on July 23, 2021 in and around Tokyo, Japan. However, the Japanese citizens have protested the hosting of the Olympics, citing concern for public health and safety. Just 5 percent of the Japanese population is currently vaccinated. There have been recent COVID outbreaks in Tokyo, accounting for a fourth wave of cases in a country that has mostly avoided the large-scale infections suffered by other nations. In all, there have been approximately 716,000 infections and 12,000 deaths from the virus in Japan. These numbers could see a dramatic increase if the country ultimately decides to permit the Olympics and/or open up attendance to crowded sports arenas.

For now, it appears like the games will be held without the crowds of spectators. The Japanese government has banned international travelers from entering Japan to attend the games, and is considering a similar ban on domestic viewers. Nobody disagrees with the ban on international spectators.  The U.S. State Department has recommended that Americans not travel to Japan at all for the foreseeable future, due to the possibility of catching one of the COVID variants during their stay.

However, there remains a sharp debate between who has the ultimate authority to cancel the Olympics, should the threat of COVID remain high. IOC member, Dick Pound told a publication that the event would take place, even if Prime Minister Yoshihide Suga asked that it be cancelled. The comments were a blatant disregard to the 80% of Japanese citizens, politicians, medical workers and corporate leaders who do not want the Olympics to move forward. The IOC has a financial stake in the Games happening, as 73% of its revenues come from the sale of broadcast rights, which would disappear if the Olympics didn’t happen. Japan, however, has lost a majority its revenue prospects from hosting, as tourism revenue from hosting has dissipated given international spectators will be disallowed.

As we’ve seen over the last year, COVID rates and risks can change in a matter of weeks.  We all wish Japan and its citizens good health and strength in the weeks to come. COVID has reminded us that we are all one nation of humans.

 

https://www.wsj.com/articles/who-could-cancel-the-tokyo-olympics-11623111896
Bob Veres Media, Insider Information

The commentary on this website reflects the personal opinions, viewpoints and analyses of Kondo Wealth Advisors, Inc. employees providing such comments, and should not be regarded as a description of advisory services provided by Kondo Wealth Advisors, Inc. or performance returns of any Kondo Wealth Advisors, Inc.  Investments client. The views reflected in the commentary are subject to change at any time without notice. Nothing on this website constitutes investment advice, performance data or any recommendation that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person. Any mention of a particular security and related performance data is not a recommendation to buy or sell that security. Kondo Wealth Advisors, Inc. manages its clients’ accounts using a variety of investment techniques and strategies, which are not necessarily discussed in the commentary. Investments in securities involve the risk of loss. Past performance is no guarantee of future results.

 

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Unbalanced COVID Recovery

Although there have been some vaccine setbacks, overall, vaccine distribution in the United States has been a success. As of the end of April, approximately 56% of the adult population or 146 million people have received at least one dose of the COVID-19 vaccine. Furthermore, 40% or 105 million American adults have been fully vaccinated, according to the CDC.[i]  As children age 12-15 become eligible to receive the Pfizer COVID vaccine, further hopes for herd immunity and reopening of the American economy come closer to becoming a reality. For the economy, that translates into higher GDP as people venture out of their homes and spend more on discretionary items. For the stock market, that optimism translates into higher share prices. However, the COVID recovery has not been equal globally.

As of late, the U.S. and Europe could not have more divergent economic fortunes as both global powers work to recover from the 2020 COVID pandemic. Real Gross Domestic Product (GDP), or the total value of all goods and services produced within the country, grew in the U.S. by an annualized rate of 6.4% in the first quarter of 2021. That is in addition to the 4.3% growth rate in the last quarter of 2020. Relatively speaking, that is the second fastest pace of growth America has seen since the second quarter in 2003.[ii]

The Bureau of Economic Analysis noted the rise in real GDP reflects the increased spending by American’s, who may have felt confident to spend money for the first time in a year after battling the economic uncertainty of COVID. Spending was primarily concentrated in motor vehicles, food & beverages, technology and federal government spending related to COVID.  Additionally, the personal savings rates of American’s was at $4.12 trillion as of March 2021, compared to $2.25 trillion in the fourth quarter of 2020. [iii]  The last time savings rates were that high was during World War II. Many anticipate that as the pandemic eases, cash on the sidelines may be infused into the economy, further supporting U.S. economic growth the remainder of 2021.[iv]

By contrast, the euro zone’s GDP declined by 0.6% in the first quarter of 2021, as the region battled a third wave of COVID infections and many countries employed new lock-downs. This marks the second consecutive quarter of contractions for the region, meaning the euro zone is technically in a recession. Germany, Italy and Spain each had a decline in activity, with France as the outlier with better than expected growth of 0.4% in the first quarter. However, outlook for Europe is generally positive starting in mid-2021. The vaccination campaign has accelerated significantly since the start of the year and the region is expected to reach pre-COVID GDP growth rates, similar in fashion to the U.S. Additionally, countries in the region are beginning to receive EU Covid support funds which should stimulate the euro zone economy. The European Commission asked its member nations to spend at least 37% of the stimulus on climate policies and 20% on digital upgrades. [v]

While it may be counterintuitive, now may be an excellent time to re-examine overweight domestic investment portfolios that have peaked as the S&P 500 reached record highs. Some of your domestic gains can be locked in and reallocated to buy international equity investments while they are still priced relatively low. A well-diversified investment portfolio should include both large and small U.S. investments as well as large and small international investments. Generally speaking the U.S. and international asset classes tend to be inversely correlated, meaning they have a contrary relationship.  Typically when the U.S. is doing well, the international asset class tends to have flatter performance. Conversely when the U.S. is not doing well, that tends to be when international investments shine. While the U.S. had great growth in the last year, it is expected that the growth rate in 2022 will not be as robust as the COVID stock market recovery that started in March 2020. When the U.S. growth flattens, investment growth opportunities may be best realized in international investments. Diversification allows you to spread out your risk, like the opposite of putting all your eggs in one basket.  Therefore, in a properly diversified investment, you can have balanced exposure to major asset classes that allow you to capture growth domestically or internationally without the stress of timing the market, or buying and selling at the perfect time.

On top of typical market rotations, the U.S. also has variables in the near-future that could significantly affect upcoming growth. For one, the trade agreement with China, stalled in 2019 due to COVID, is slowly resuming.  The agreement between the U.S. and China could have significant impact on inventory levels, supply chain management, and cost of inputs which would affect businesses who import goods. Further, President Biden has proposed approximately $4 trillion dollars of spending, outlined in two plans: the Infrastructure and Clean Energy plan, and the American Families plan. While the plans are still in beginning stages, the proposal to increase taxes on American corporations could have an effect on corporate share prices, the cost of goods and services to Americans, and future inflation.

One of the best tools to combat stock market volatility and utilize economic rotations to realize profits is a diversified investment portfolio that employs rebalancing, a strategy that locks in gains in high performing asset classes and invests the gains into underpriced market sectors at a bargain. Many investors have performed well by luck in the last six months. However, it may make sense to get a second opinion on how to position yourself for the uncertainties of the market ahead. Don’t take two steps forward and one step back. Reach out to your Certified Financial Planner™ timely to prepare for whatever lies ahead.

 

 

The commentary on this website reflects the personal opinions, viewpoints and analyses of Kondo Wealth Advisors, Inc. employees providing such comments, and should not be regarded as a description of advisory services provided by Kondo Wealth Advisors, Inc. or performance returns of any Kondo Wealth Advisors, Inc.  Investments client. The views reflected in the commentary are subject to change at any time without notice. Nothing on this website constitutes investment advice, performance data or any recommendation that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person. Any mention of a particular security and related performance data is not a recommendation to buy or sell that security. Kondo Wealth Advisors, Inc. manages its clients’ accounts using a variety of investment techniques and strategies, which are not necessarily discussed in the commentary. Investments in securities involve the risk of loss. Past performance is no guarantee of future results.


[i] https://covid.cdc.gov/covid-data-tracker/#vaccinations

[ii] https://www.cnbc.com/2021/04/29/us-gdp-rose-6point4percent-in-the-first-quarter-vs-6point5percent-increase-expected.html

[iii] https://www.bea.gov/news/2021/gross-domestic-product-first-quarter-2021-advance-estimate

[iv] https://www.wsj.com/articles/americans-of-all-stripes-are-flush-with-cash-11614359700

[v] https://www.cnbc.com/2021/04/30/euro-zone-gdp-q1-2021-amid-new-covid-lockdowns.html

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6 Things to Know Before Filing Your 2020 Taxes

 

Filing your income taxes can be a stressful event, especially in a year where the tax rules seemed to change week to week.  Here are a few things you may want to know before filing your 2020 taxes.

Tax Deadline Extended

For this year only, the individual federal income tax return filing deadline of April 15th has been extended to May 17th. The IRS made this change in mid-March to allow individuals to dissect and understand the new COVID-19 stimulus bill and tax benefits announced in the American Rescue Plan. However, it is important to note that this extension applies to individual filers and not to corporations or small businesses. Businesses are still accountable to the usual April 15th deadline.  Further, anyone who pays estimated taxes, including small businesses, must still pay quarterly estimated payments by April 15th. Additionally, tax payers living in Texas, Oklahoma and Louisiana, the states affected by severe weather earlier this year, were granted an IRS extension to June 15th.

It is important to note that individual states set their own tax deadlines and may or may not comply with the federal IRS extension.  The California Franchise Tax Board (FTB) extended the deadline for individual taxpayers to May 17th, in coordination with the Federal standard, but tax deadlines vary from state to state.

IRA Contributions Extended

Many people uncertain about their financial position waited to make contributions to retirement savings accounts in 2020. Given the noted federal tax filing extension, eligible persons also have until May 17th to make Traditional IRA, Roth IRA, SEP IRA, Health Savings Account (HSA), Archer Medical Savings Account (MSA) and Coverdell Education Savings Account (ESA) contributions. However, many banks are inundated with customer transactions related to the tax filing deadlines, and therefore processing is taking longer than usual. If you want to make a savings contribution for the 2020 year, there’s still time, but act now to ensure your deposit is recorded!

Recovery Rebate Credit

Between 2020-2021, there were three rounds of stimulus checks sent out to Americans in distress. Each round had income qualifications that were measured based on your 2019 income tax filling. However, for many, their 2019 income tax filing presented higher income than what they received in 2020 due to volatility in employment related to COVID.  When filing your 2020 tax return, tax filers can apply for the stimulus checks they qualified for, but didn’t receive (or didn’t get as much as they were entitled to receive) in the form of a tax credit called the Recovery Rebate Credit. The rebate will reduce the taxes you owe, and can even be credited back to the taxpayer in the form of a refund. There is a Recovery Rebate Worksheet that can be completed by your CPA when preparing your tax return and the calculation will flow through to line 30 on your 1040 federal tax filing.

As a reminder, the stimulus payments are not taxable as income. Therefore, the payments are not included in taxable income when determining if you are eligible for the benefits program. 

Unemployment Benefits

To assist those affected by COVID-19, the American Rescue Plan added a provision in March 2021 to allow the first $10,200 of unemployment benefits for individuals ($10,200 each, for joint tax filers) to be excluded from taxation if total household income was below $150,000 during the 2020 tax year. It is important to note that although the tax exemption is $10,200 per person, the household income threshold of $150,000 applies whether the tax filer is single or joint.  If you already filed your tax return and paid taxes on the first $10,200 unemployment income received, it may make sense to ask your CPA if you should amend your previously filed tax return.

Medical Expense Deductions

Medical bills can be daunting and many incurred higher medical expenses in 2020. If your medical expenses were higher than your 2020 standard deduction ($12,400 for Single, $24,800 for Married Filing Jointly) you may deduct them if the expenses exceeded 7.5% of your adjusted gross income (AGI).  The medical expense threshold was supposed to return to 10% of AGI, but due to COVID, has been pegged permanently at 7.5%, per the Consolidated Appropriations Act in December 2019. You can include the cost of nursing home care, if such costs were sustained for medical service needs. For a full list of the many eligible medical expenses, visit https://www.irs.gov/taxtopics/tc502.

Charitable Deductions

Many non-profit organizations were hit hard financially in 2020. To assist in raising donations, the government incentivized individuals to make donations by allowing those who take the standard deduction to deduct up to $300 in cash donations as an above the line dollar-for-dollar reduction of taxable income. In 2021, the benefit was increased to $600 for Married Filing Jointly tax payers. Additionally, for tax filers who itemize, in 2020 & 2021, you can deduct up to 100% of your AGI with cash donations (normally limited to 60% of AGI), allowing for a large write-off under the CARES Act. While many will not gift up to 100% of AGI, or will chose to gift highly appreciated assets instead, like stock, any charitable gifts will surely go a long way towards helping organizations in need, especially small and local organizations.

The tax code has changed, and continues to change rapidly. If you could benefit from a consultation on how the new laws may affect you, reach out to your CPA or Certified Financial Planner™ timely.

The opinions expressed above are solely those of Kondo Wealth Advisors, Inc., (626-449-7783 This email address is being protected from spambots. You need JavaScript enabled to view it. ) a Registered Investment Advisor in the state of California. Neither Kondo Wealth Advisors, Inc. nor its representatives provide legal, tax or accounting advice.

Sources:
www.irs.gov
www.aarp.org
https://www.cnn.com/2021/02/10/success/2020-taxes-information-feseries/index.html

This commentary on this website reflects the personal opinions, viewpoints and analyses of the Kondo Wealth Advisors, Inc.  employees providing such comments, and should not be regarded as a description of advisory services provided by Kondo Wealth Advisors, Inc.  or performance returns of any Kondo Wealth Advisors, Inc.  Investments client. The views reflected in the commentary are subject to change at any time without notice. Nothing on this website constitutes investment advice, performance data or any recommendation that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person. Any mention of a particular security and related performance data is not a recommendation to buy or sell that security. Kondo Wealth Advisors, Inc. manages its clients’ accounts using a variety of investment techniques and strategies, which are not necessarily discussed in the commentary. Investments in securities involve the risk of loss. Past performance is no guarantee of future results.

 

 

 

 

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Tax Filing Deadline Extended to May 17, 2021

Hello,

Please see this timely announcement:

https://www.irs.gov/newsroom/tax-day-for-individuals-extended-to-may-17-treasury-irs-extend-filing-and-payment-deadline

On March 17th, 2021, the IRS announced that the federal income tax filing due date for individuals for the 2020 tax year will be automatically extended from April 15, 2021, to May 17, 2021. The IRS will be providing formal guidance in the coming days.

Individual taxpayers can also postpone federal income tax payments for the 2020 tax year due on April 15, 2021, to May 17, 2021, without penalties and interest, regardless of the amount owed. This postponement applies to individual taxpayers, including those who pay self-employment tax. Individual taxpayers do not need to file any forms or call the IRS to qualify for this automatic federal tax filing and payment relief. Taxpayers who need additional time to file beyond the May 17th  deadline can request a filing extension until October 15, 2021 by filing Form 4868 through their tax professional, tax software, or using the Free File link on IRS.gov.

This relief does not apply to the 1st quarterly estimated tax payments for tax year 2021, that are still due on April 15, 2021.

State Tax Returns

The May 17, 2021 extension only applies to individual federal income returns due April 15, 2021. State filing and payment deadlines vary and are not always the same as the federal filing deadline. The IRS urges taxpayers to check with their state tax agencies for those details.

California will also extend the state tax filing and payment deadline for individuals to May 17th, 2021, similar to the federal tax filing and payment deadline extension. The California extension does not apply to estimated tax payments due on April 15, 2021.

Please consult your CPA for further guidance if appropriate.

Warmly,

Akemi Dalvi

This commentary on this website reflects the personal opinions, viewpoints and analyses of the Kondo Wealth Advisors, Inc.  employees providing such comments, and should not be regarded as a description of advisory services provided by Kondo Wealth Advisors, Inc.  or performance returns of any Kondo Wealth Advisors, Inc.  Investments client. The views reflected in the commentary are subject to change at any time without notice. Nothing on this website constitutes investment advice, performance data or any recommendation that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person. Any mention of a particular security and related performance data is not a recommendation to buy or sell that security. Kondo Wealth Advisors, Inc. manages its clients’ accounts using a variety of investment techniques and strategies, which are not necessarily discussed in the commentary. Investments in securities involve the risk of loss. Past performance is no guarantee of future results.

 

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American Rescue Plan Highlights

The $1.9 trillion American Rescue Plan Act (ARPA) or coronavirus relief bill was passed this week, delivering aid to needy Americans still recovering from the health and economic effects of the pandemic. This recent bill is in addition to the $2 trillion Coronavirus Aid, Relief, and Economic Security (CARES) Act of 2020 and the $900 billion stimulus included within the Consolidated Appropriations Act of 2021, passed in December 2020.

Highlights of the new ARPA bill include the following:

Stimulus Checks

The American Rescue Plan offers the third round of Economic Income Payments or stimulus checks to qualifying Americans. Individuals earning less than $75,000 and couples earning less than $150,000 may qualify for direct payments of up to $1,400 per qualified persons, including dependents claimed on their tax return.[i]

The income thresholds will be based on the last filed tax return.  Many realized the brunt of financial hardship in 2020, but have not yet filed their 2020 tax returns. Further, income from the 2019 tax return may have been higher, making tax filers ineligible for the most recent stimulus check.

Therefore, those who are eligible based on their 2020 income but did not automatically receive a stimulus check may claim the stimulus as a Recovery Rebate Credit. The application for the credit is built directly into the IRS tax Form 1040 when filing your 2020 tax return. If a person does not normally file a tax return and therefore did not get a stimulus payment they were otherwise qualified to receive, they will need to file a tax return for the 2020 year to generate the Economic Impact Payment.[ii]

Unemployment Benefits

The $900 billion COVID-19 relief package passed in December 2020 provided enhanced unemployment benefits that were set to expire on March 14th. To assist affected Americans, the federal government has extended unemployment benefits through September, and added an additional bonus payment of $300 per week on top of the state unemployment benefits. Previously, the federal unemployment bonus payment was $400 per week. The American Rescue Plan decreases the weekly bonus amount but extends the benefit payment period, allowing affected individuals more time to find alternative employment.

Additionally, a provision was added to allow the first $10,200 of unemployment benefits for individuals ($10,200 each, for joint tax filers) to be excluded from taxation if total household income was below $150,000 during the 2020 tax year. It is important to note that although the tax exemption is $10,200 per person, the household income threshold of $150,000 remains whether the tax filer is single or joint. 

The act also provides a 100% subsidy of COBRA health insurance premiums so unemployed workers can remain on their employer healthcare plans through September 2021.[iii]

State & Local Governments

States have experienced an extremely difficult financial year. Expenses related to unemployment benefits and medical care have astronomically increased. At the same time, revenues from income taxes, sales taxes and property taxes have dramatically decreased, putting states in a financial deficit. The American Rescue Plan provides state, local, and tribal governments with $350 billion in stimulus funding. Approximately 18% of state expenditures are earmarked for public education costs, followed closely by public assistance programs for unemployment benefits and food assistance.[iv]

Mortgage/Rent Moratoriums

The current federal eviction and foreclosure moratoriums which end March 31, 2020 will not be extended under ARPA. However, California and Los Angeles County have each independently enacted a temporary eviction moratorium that extends through June 30, 2021. This could be further extended by the Los Angeles County Board of Supervisors thereafter.[v]

Child Tax Credit

The American Rescue Plan increases the Child Tax Credit to $3,000 per child age 6 to 17, and $3,600 for each child under age 6 for a single tax filer earning less than $112,500 or a joint filer earning $150,000 or less in annual income. Unlike prior years where the credit is applied at the time of tax filing, the Act will provide the credit on a monthly basis via direct deposit. The purpose is to help families paying for child related costs in real time.

Small Businesses

The Paycheck Protection Program (PPP) will be allocated an additional $7.25 billion in funds to support small businesses with qualified expenses such as payroll, rent and utilities. The deadline to apply remains March 31, 2021. The American Rescue Plan also earmarks $25 billion in grants for restaurants and businesses hardest hit by the pandemic.

COVID-19

Approximately $50 billion in the Act is allocated for COVID-19 testing and contact tracing to aid in the fight against COVID mutations. An additional $16 billion is allotted for COVID-19 vaccine distribution and $19 billion is allocated to fund the public health workforce needed to fight COVID.

Although we have a long road to recovery, COVID vaccines appear to be the turning point towards recovery and a new “normal”. In response to COVID-19, the government has presented numerous legislative changes. If you could benefit from a consultation on how the new laws may affect you, reach out to your CPA or Certified Financial Planner™ timely.

This commentary on this website reflects the personal opinions, viewpoints and analyses of the Kondo Wealth Advisors, Inc.  employees providing such comments, and should not be regarded as a description of advisory services provided by Kondo Wealth Advisors, Inc.  or performance returns of any Kondo Wealth Advisors, Inc.  Investments client. The views reflected in the commentary are subject to change at any time without notice. Nothing on this website constitutes investment advice, performance data or any recommendation that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person. Any mention of a particular security and related performance data is not a recommendation to buy or sell that security. Kondo Wealth Advisors, Inc. manages its clients’ accounts using a variety of investment techniques and strategies, which are not necessarily discussed in the commentary. Investments in securities involve the risk of loss. Past performance is no guarantee of future results.

 


[i] https://www.npr.org/sections/coronavirus-live-updates/2021/03/09/974841565/heres-whats-in-the-american-rescue-plan-as-it-heads-toward-final-passage

[ii] https://www.irs.gov/coronavirus/get-my-payment

[iii] U.S. Congress. "H.R. 1319: American Rescue Plan Act of 2021." Accessed March 10, 2021

[iv] https://www.americanprogress.org/issues/education-postsecondary/reports/2021/03/10/496936/american-rescue-plan-help-prevent-state-public-higher-education-cuts/

[v] https://dcba.lacounty.gov/noevictions/#:~:text=The%20Los%20Angeles%20County%20Temporary,tenants%2C%20including%20mobilehome%20space%20renters.

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EDUCATIONAL WORKSHOPS

2021 SCHEDULE 

 

Biden’s Plan & Your Taxes

   -Effect on Estate Planning

   -Reducing Taxes

Saturday, September 11th, 2021

09:00 am – 10:00 am

Zoom Webinar

(Zoom link to be emailed upon registration. Contact info@kondowealthadvisors.com for more information.)

 

 

 

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