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Video instructions and help with filling out and completing Irs interest rates 2021-2022

Instructions and Help about Irs interest rates 2021-2022

Now in this video we'll look at the valuation of interest rate swaps so three years ago you entered into a hundred million dollar notional five-year pay fix LIBOR base interest rate swap with a no resets this based on the thirty over 360 take out now the fixed rate in the swap contract and two years ago was three percent now currently the information on LIBOR are as follows we have a tree as maturity from one to entry and then these are the LIBOR for one year two years in three years so you are required to calculate the value of the interest rate swap for the party that's paying the fixed rate so let's get this desiccated situation so two years ago when you enter into this contract okay it was to pay three percent and then you will receive LIBOR okay so we know me receive LIBOR and then you will pay three percent so the light bulb will be based on the floating rate after being reset every year and then of course in your fall you will receive float and pay LIBOR and then same thing for year five okay you will receive level and pay fixed now of course two years have passed so now you're at year two so there's three more years to go so you want to value the swap as of year two so in this case you will have to assume that we are going to close the contract so when you close the contract you have to enter into an offsetting position so it's to offset it we have to go against what we did in the first place so originally we did a pay three percent so now we have to receive fixed all right so how we gonna get the fixed rate as of year two so what we need to do is based on the current rate at year two we will calculate the fixed swap rate as of today based on these Libor rates now based on what is covered in the last video that I did on pricing interest rate swaps so we're going to calculate the present value of these three Libor rates so for the PV of the one-year rate there will be one over one plus two point five percent multiplied by one year so that will be equal to one plus zero point zero two five one and then we invert it so that's zero point nine seven five six I'll store it into number one store one so there's zero point nine seven five six and then for the pv of the two year LIBOR that's one over one plus three point seven percent times two so that will be equals to 1 plus zero point zero three seven times 2 and then we invert it so that's zero point nine three one one so I'll save it under number two so this is zero point.


When interest rates rise, do stocks usually go up or down?
I like this research put out by J.P. Morgan with highlights the relationship between interest rates and the stock market under different conditions.This chart has four quadrants, two of which have basically no data points in them (upper-right and lower-left), and the remaining two are pretty saturated with a reasonable division between the two (as signified by the orange line).So what does this chart say? It shows the correlation between interest rates and the stock market. So, in the upper left quadrant, it shows a clear positive correlation between interest rates and the stock market (i.e. interest rates move up, the stock market moves up). And conversely, in the lower-right quadrant, the relationship has flipped to a negative correlation (i.e. interest rates move up, stock market moves down). {Please note, I do not mean to imply any causality here. I am not suggesting at the moment that rising interest rates in the upper-left quad. cause a rising stock market…just that there is a clear relationship.}What is the orange line (when does this relationship change) and where are we now?The orange line is the 10-year treasury yield at around 5%, so this chart suggests that when the 10-year treasury is below 5% and interest rates are rising, the stock market should also rise, and above 5%, when interest rates are rising, the stock market should decline. Currently, the 10-year treasury rate is at 2.26%, so well below the 5% dividing line.Why would that be (the two relationships)? One theory is that the causality that discussed before is somewhat flexible. When interest rates are high (think mortgages above 9%, increased loan rates on business, high credit card interest, etc.), if those rates increase, that becomes increasingly more burdensome on balance sheets everywhere, so spending decreases and so does economic activity thus reducing company earnings and the stock market. Under this scenario, the increase in interest becomes a “tax.” On the other hand, in lower interest rate environments (like now), if we were to increase our mortgage rate from 3.25% to 3.75%, we are still at very low rates, to the cost of financing is a relatively low cost. The same can be said for business loans, etc., but when interest rates are rising from a low environment, that is usually a signal that the over-all economic conditions are improving. This is a “tell” instead of a “tax.” The improving economic conditions more than offset the additional expense and so the market tends to move up.Where are we going?Of course that is the $64,000 question, but with the Janet Yellen, the Fed Chairman, having raised interest rates twice already this year and signalling more to come in this year and next, one might believe that the 10-year will also move up. However, this is not a certainly since the Fed Funds rate is a set short-term rate and the 10-year treasury is a market driven rate. Here is a chart of the 10-year treasury (which has been in a bit of a decline recently, although it is higher on the year):It is my belief that as the Fed raises the Fed funds rate (the over-night rate at which banks can borrow money), this will cause the velocity of money to actually increase in the market place (which is against finance 101 theory). The reason being that if the spread between the number at which banks can borrow and lend decreases, which is how they make their money (borrow low and lend out higher), they will no longer be able to lend to only pristine credit and make money (the spread will be too low and client base too small). On the margin, the banks will have to start lending out to slightly lower credit clients (we’re not talking sub-prime yet, just not immaculate credit) and charging a greater rate. The default rates should still be very low in an improving economy, and so the velocity of money increases (which could actually cause inflation and increased rates.)
Will the interest rate increase in 2019?
The short answer is yes, the Treasury is removing dollars from the economy, and this in turn will lead to higher interest rates. There are a lot of different factors that make it difficult to predict the amount interest rates will rise, including the speed at which the government sells its stake, the behavior by banks and other financial institutions, and the borrowing trends of homeowners and other non-financial companies, but that’s the direction they will go.During the Great Recession, the financial markets froze up, with financial institutions ceasing to lend money to otherwise well-qualified borrowers. Since almost all businesses use credit extensively to fund their operations, this had the potential to cripple the economy.To counteract this, the Treasury bought huge amounts of bonds to put more dollars out into the market, and it is now reducing those bonds to bring it’s balance sheet back to a normal level. By selling bonds, the Treasury is in effect buying dollars and removing them from the market. With a lower supply of dollars, assuming a constant demand, the price of a dollar will increase, making people pay more in interest to obtain them.The economy in the United States continues to improve, meaning that there are more good investment opportunities competing for scarce dollars, increasing the demand for dollars and also boosting their price. With fewer dollars in circulation, this will drive greater competition for the remaining dollars, causing interest rates to rise.
How can I fill out an IRS form 8379?
Form 8379, the Injured Spouse declaration, is used to ensure that a spouse’s share of a refund from a joint tax return is not used by the IRS as an offset to pay a tax obligation of the other spouse.Before you file this, make sure that you know the difference between this and the Innocent Spouse declaration, Form 8857. You use Form 8379 when your spouse owes money for a legally enforeceable tax debt (such as a student loan which is in default) for which you are not jointly liable. You use Form 8857 when you want to be released from tax liability for an understatement of tax that resulted from actions taken by your spouse of which you had no knowledge, and had no reason to know.As the other answers have specified, you follow the Instructions for Form 8379 (11/2016) on the IRS Web site to actually fill it out.
If the IRS knows how much money we owe, why do we need to fill out returns?
Because the IRS doesn't know how much money you owe. They know approximately what you made, and they know a little bit about some of your deductions, but they don't know whether and to what extent you are entitled to additional deductions or credits, or whether and to what extent you earned money from transactions not reported to the IRS. Even on the transactions that were reported to the IRS, the IRS doesn't always know how much of that income is actually taxable - or at what rate.
How high are interest rates going to go by the end of 2019?
In the US the present hikes are a quarter point. The Federal reserve has indicated that this year there will be two other hikes. At present the inflation is 2.9 per cent, so on the rise making higher interest rates needed to prevent a higher rate of inflation. Taking into account that those hikes can not be very large as the US President has made it clear that he does not like higher interest rates, it is most likely that 2 times a quater point will be added before the end of the year bringing the federal funds rate to 2.25 to 2.50 percent.
Which IRS forms do US expats need to fill out?
That would depend on their personal situation, but should they actually have a full financial life in another country including investments, pensions, mortgages, insurance policies, a small business, multiple bank accounts…The reporting alone can be bankrupting, and that is before you get on to actual taxes that are punitive toward foreign finances owned by a US citizen and god help you if you make mistake because penalties appear designed to bankrupt you.US citizens globally are renouncing citizenship for good reason.This is extracted from a letter sent by the James Bopp law firm to Chairman Mark Meadows of the subcommittee of government operations regarding the difficulty faced by US citizens who try to live else where.“ FATCA is forcing Americans abroad into a set of circumstances where they must renounce their U.S. citizenship to survive.For example, suppose you have a married couple living in Washington DC. One works as a lobbyist for an NGO and has a defined benefits pensions. The other is self employed in a lobby firm, working under an LLC. According to the IRS filing requirements, it would take about 15 hours and $280 to complete their yearly filings. Should they under report income, any penalties would be a percentage of their unreported tax burden. The worst case is a 20% civil fraud penalty.Compare the same couple with one different fact. They moved to Australia because the NGO reassigned the wife to Sydney. The husband, likewise, moves his business overseas. They open a bank account, contribute to the mandatory Australian retirement fund, purchase a house with a mortgage and get a life insurance policy on both of them.These are now their new filing requirements:• Form 8938• Form 3520-A• Form 3520• Form 5471 (to be filed by the husbands new Australian corporation where he is self employed)• Form 720 Excise Tax.• FinCEN Form 114The burden that was 15 hours now goes up to• 57.2 hours for Form 720,• 54.20 hours for Form 3520,• 61.22 Hours for Form 3520-A.• 50 hours efor Form 5471For a total of 226.99 hours (according to the IRS’s own time estimates) not including time to file the FBAR.The penalties for innocent misfiling or non filings for the above foreign reporting forms for the couple are up to $50,000, per year. It is likely that the foreign income exclusion and foreign tax credit will negate any actual tax due to the IRS. So each year, there is a lurking $50,000 penalty for getting something technically wrong on a form, yet there would be no additional tax due to the US treasury.”
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