Today is April 15th, the date usually thought of as "Tax Day."

In a normal year this would mark the deadline for filing your 2019 tax returns, but 2020 is anything but a normal year. As a result of the coronavirus pandemic and resulting quarantine, the deadline for filing taxes has been extended to July 15th.

The hope is that by mid-summer most ordinary business will be allowed to resume so that individuals and companies will be able to prepare their paperwork, and tax preparation services will be back to their usual operation—or will have made necessary adjustments to do their work safely. With record unemployment and the sudden spike in medical expenses, the delay should also make things easier for people who are struggling to manage their rapidly shifting finances.

It remains to be seen if all these hopes will pan out, but in the meantime there are a number of other factors that deserve to be addressed. In particular, the relationship between stimulus checks currently being rolled out and taxes has become particularly fraught and confusing. Sources have variously claimed that the checks—maxing out at $1,200 per adult, with an additional $500 for dependents—will be counted toward recipients' 2020 taxable income, or that they function as advances on a future tax return, and will thus eat into or eliminate the amount people can expect to receive from the IRS later this year.

Fortunately, both of these assertions are false. However much you receive in your check—or deposited directly into your account—it will not affect your income for tax purposes, nor will it have any impact on the amount you receive in your refund. That said, that extra money may not be as miraculous as many people are hoping. While the first payments are arriving in people's accounts as we speak, others will see those badly-needed funds delayed for up to five months, and many will not receive as much as they should rightly expect.

People whose are set up to receive direct deposits from the IRS or the Social Security Administration will get their payments quickly, but for those of us waiting on a check in the mail, the first round won't arrive until sometime in May. The issue is that the IRS has a physical limit on the number of checks they can print and ship out—with the added delay of Donald Trump's all-important signature—and with so many people scheduled to receive stimulus money, that capacity becomes a serious drag on the process.

The other major issue is with the way the amounts are calculated. Individuals with incomes over $75,000 will receive smaller amounts, while the threshold is set at $112,500 for the head of a household and $150,000 for joint filers. Every $100 of income over the threshold will reduce your check by $5—so an individual with an income of $80,000 should receive $950 ($250 less than someone who earned $75,000), and an individual with an income of $99,000 won't receive any stimulus money at all.

The real problem arises from the fact that the income used for these calculations is based on the most recent tax return you filed. So people who earned a lot more in 2019 than they did in 2018 would benefit if they haven't filed yet (although any refund they're entitled to will obviously be delayed), while people whose income dropped in 2019 will receive more stimulus money if they chose to file early. On top of that mess, some may see their checks go straight to debt collectors.

It will take months before we have real a sense of how much the stimulus money and the delay of tax season have actually helped people, but the least we can do in the meantime is try to reduce the noise and confusion around these issues.

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The Federal Reserve sets the guardrails for the federal funds rate, and through that helps control the money supply for the nation.

When you take out a loan for a car, charge something to your credit card, or get a personal line of credit, there is going to be an interest rate that applies to your loan.

A lot of different factors go into what you will be charged, including your own personal credit score. But even those with flawless credit still see a minimum charge that they can't get around. That all goes back to the Federal Funds Rate.

One thing consumers rarely realize is that all of our banks are lending money to each other every night. Banks are legally required to maintain a certain percentage of their deposits in non-interest-bearing accounts at the Federal Reserve to ensure they have enough money to cover any withdrawals that may unexpectedly come up. However, deposits can fluctuate and it's very common for some banks to exceed the requirement on certain days while some fall short. In cases like this, banks actually lend each other money to ensure they meet the minimum balance. It's a bit hard to imagine these multibillion-dollar financial institutions needing to borrow money to tide them over for a bit, but it happens every single night at the Federal Reserve. It's also a nice deal for those with balances above the reserve balance requirement to earn a bit of money with cash that would normally just be sitting there.

The Federal Reserve The Federal Reserve


The exact interest rate the banks will charge each other is a matter of negotiation between them, but the Federal Open Market Committee (FOMC) (the arm of the Federal Reserve that sets monetary policy) meets eight times a year to set a target rate. They evaluate a multitude of economic indicators including unemployment, inflation, and consumer confidence to decide the best rate to keep the country in business. The weighted average of all interest rates across these interbank loans is the effective federal funds rate.

This rate has a huge impact on the economy overall as well as your personal finances. The federal funds rate is essentially the cheapest money available to a bank and that feeds into all of the other loans they make. Banks will add a slight upcharge to the rate set by the Fed to determine what is the lowest interest that they will announce for their most creditworthy customers, also known as the prime rate. If you have a variable interest rate loan (very common with credit cards and some student loans), it's likely that the interest rate you pay is a set percentage on top of that prime rate that your lender is paying. That's why in times of low interest rates (it was set at 0% during the Great Recession), a lot of borrowers should go for fixed interest rate loans that won't increase. However, if the federal funds rate was relatively high (it went up to 20% in the early 1980's), a variable interest rate loan may be a better decision as you would be charged less interest should the rate drop without the need to refinance.

The federal funds rate also has a major impact on your investment portfolio. The stock market reacts very strongly to any changes in interest rates from the Federal Reserve, as a lower rate makes it cheaper for companies to borrow and reinvest while a higher rate may restrict capital and slow short-term growth. If you have a significant portion of your investments in equities, a small change in the federal funds rate can have a large impact on your net worth.

Getty Images/Maria Stavreva

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