CPA Services Blog

Should You Choose a Roth IRA or a Traditional IRA?

Whether retirement is decades away or a few years off, the changes you make to your investment plans can have a significant impact on your post-retirement lifestyle. One big question many investors have is about Roth IRAs and traditional IRAs. Specific state and local regulations can also affect your saving strategy, so choose a New York accountant with a thorough understanding of how state laws intersect with your investment strategy. It’s best to seek the input of a qualified financial adviser before making investment decisions, but this quick guide will give you useful suggestions to discuss with your CPA. Continue reading

What You Need to Know about Social Security Benefits for 2017

For the nearly 90 percent of Americans over the age of 65 who collect some or all of their retirement benefits through Social Security, 2017 could be a year of changes. For those who are planning to retire within the next five years, current changes to Social Security could have a lasting impact on their benefits too. While the best guide to maximizing your benefits and protecting your wealth is a knowledgeable CPA who can personalize your retirement planning, reading up can help you know which questions to ask when talking to your accountant or financial planner.

Social Security Eligibility Changes for 2017

Many of the requirements for eligibility remain the same this year, but some dates have changed. Currently, you must be 62 years old or above to receive retirement benefits, although you may be eligible for other kinds of Social Security benefits if you are younger. Although 62 is the minimum age for eligibility, many people wait to claim until they reach full retirement age, which is dependent on your birth year. Currently, people born between the years of 1943 and 1954 reach full retirement age at 66. Because the threshold for full retirement is being stepped up to age 67, those born in later years may have months added to their eligibility age according to the following schedule:

Birth Year    Full Retirement Age
1955          66 years and 2 months
1956          66 years and 4 months
1957          66 years and 6 months
1958          66 years and 8 months
1959          66 years and 10 months
1960          67 years

Social Security Credits

Eligibility for retirement benefits and payment amounts also depend on the number of Social Security credits you have earned throughout your career. This year, a single credit is equivalent to a net income of $1,300, and you may earn as many as four credits per year. To qualify, in other words, you must have earned at least $5,200 for a minimum of 10 years to be eligible for benefits on your own earned income. These figures refer to 2017 dollars, so income from prior years is converted to present-day values for purposes of calculating eligibility and benefit amounts.

Calculating Social Security Benefits

Working with a financial planner who knows state and local laws is important even when working with federal income, and your New York CPA can go over the specific details of how your benefits are determined. Your lifetime earnings are first indexed for inflation, and then the 35 years during which your earnings were highest are averaged. Dividing the resulting figure by 12 gives you your AIME, or average indexed monthly earnings. This year, the formula for determining benefits grants 90 percent of the first $885 of your AIME, an additional 32 percent of income between $885 and $5,336, and another 15 percent of any amount above this figure. Calculating the effects of early or full retirement will also have an impact on your monthly benefit amount.

Are Social Security Benefits Truly Secure?

Social Security benefits are secured in a trust fund with reserves of nearly $3 trillion, and it is currently taking in more than it pays, leading to an even larger reserve. Although predicting the future is never a precise science, current expectations are that the trust will be depleted in 2034. That does not mean, however, that Social Security payments will end; younger workers will still be paying into the system, and these payments are expected to be enough to cover 75 percent of existing benefits. It is also possible that changes to Social Security income could replenish reserves and maintain current levels of retirement benefits past that point.

Working with a CPA on retirement planning to make the most of 401(k) plans and other programs can also help you meet or exceed your retirement goals.

What Else Is New for 2017?

  • A cost-of-living increase of 0.3 percent is planned for 2017.
  • The maximum taxable earnings from Social Security benefits, including retirement benefits, are now $127,200.
  • The largest current maximum monthly retirement benefit is now $2,687 per month.

Copyright © 2017 CPA Services. All Rights Reserved.

The Biggest Tax Mistakes Businesses Make – And How You Can Avoid Them

The Biggest Tax Mistakes Businesses Make – And How You Can Avoid Them

The Biggest Tax Mistakes Businesses Make – And How You Can Avoid Them

Individual tax returns can become complicated enough, but businesses face even greater challenges. For an organization, a small mistake at tax time could spell significant fines and penalties down the line – costs that could limit your company’s growth for years to come. The good news is that most such mistakes are easily avoidable. Here are some of the most common tax mistakes and how to protect your company from making them.
Continue reading

Take Charge of Your Company’s Year-End Taxes Today

Take Charge of Your Company’s Year-End Taxes Today

Take Charge of Your Company’s Year-End Taxes Today

When it comes to the little things, procrastination has its rewards. Sleeping in an extra few minutes or putting off errands until after your alma mater’s big game can feel good. When talking about your business’ 2017 taxes, though, it’s never too early to start. Every year brings new changes to tax laws, and organizations that prepare to implement next year’s tax strategy early gain a significant chance to make the most of what’s new. With the help of a New York accountant who has already done the necessary homework on local, state, and federal tax law for the coming year, you ensure your company benefits from every deduction and credit you’re owed. Continue reading

Retirement Planning at Any Age

How much do you need to save for retirement? What’s the safest plan for your retirement savings today, and will that change as you get closer to retiring? How can small changes now add up to meaningful retirement income in the future? People are right to ask these and other important questions about retirement. It’s easy to think about retirement savings as a future problem, but the solution happens now. Whether you’re founding a start-up, building a family, or building on a lifetime of career successes, this is the right time to think about your long-term financial security. Your CPA is your most valuable financial planning resource, and here are some points to discuss with your accountant.

Getting Started: Retirement Planning in Your 20s

Do you have a retirement plan?

Do you have a retirement plan?

There’s no such thing as “too early” when it comes to long-range financial planning. People in their 20s today may not be retiring until the 2050s and 2060s, but a small investment now pays significant dividends that far into the future. Depending on your income and your goals, retirement planning can take a back seat to building up savings or gearing up to start a business today, but with help from an experienced accountant, it’s usually possible to find something to set aside for retirement.

Investing in a 401(k) plan, especially if you work with an employer who matches funds, is often an excellent way to shelter current income for tomorrow’s use. This is also the best age at which to invest in a portfolio that’s more volatile in the short term; with more time to cushion you from risk, your chances of seeing greater growth in your retirement savings increases.

Becoming Established: Financial Planning for Your 30s

For many people, the 30s are a decade of personal as well as professional change. Starting a family, launching a business, buying a home, investing in property – these and other major milestones mark this decade. Even with a higher income than you enjoyed in your 20s, you may find saving a greater challenge as changes to insurance, increases in your emergency fund, and mortgage payments rise. Your tax returns also become more complex, particularly if you’re starting a business or setting aside savings for your family.

In Your Prime: Retirement Savings for 40-Somethings

The 40s are prime investment years. You typically earn more than you did earlier in your career and may have established your own business, yet retirement is far enough away that you can still incorporate higher-risk, higher-yield investments in your portfolio. Many people find their financial futures are more readily foreseeable, particularly with guidance from your CPA. Services that help you handle personal and professional tax preparation are increasingly important for wealth protection, ensuring tax compliance while preserving your wealth for other goals, including retirement.

Gearing up for Retirement: Saving in Your 50s

You’re still more than a decade away from early or full Social Security retirement eligibility, but for many people, celebrating a 50th birthday marks the starting point for making concrete retirement plans. Family expenses for child care and education are usually past, and earnings are often higher than ever, which makes your 50s an outstanding time to devote more of your income to retirement savings. Although you’re closer to retirement, you still have a cushion of many years, but it’s still a good time to reassess your portfolio in light of how and when you want to retire. Is it time for you to shift your portfolio toward lower-risk investments? Are you saving for a particular personal or professional goal? Talk with your accountant about choices that are right for you.

Retirement Planning in Your 60s and Beyond

As you move into your 60s, retirement may be just around the corner – but increasingly, it isn’t. For many business owners and entrepreneurs, retirement from one career means launching another. Whether you plan to invest in real estate, write the next great American novel, or blog your travels around the world, your financial advisor can help you realize your post-retirement dreams. Speak with your CPA and learn more about planning your financial future for the years and decades still to come.

Copyright © 2016 CPA Services. All Rights Reserved.

Estate Planning for Everyone

Estate Planning For Everyone

Estate Planning For Everyone

Federal estate tax laws have changed recently, reflecting shifts in how families pass along wealth. The current exemption threshold is indexed for annual inflation, and as of this year, that figure is $5.45 million. This higher threshold means that the great majority – more than 98 percent – of a New York CPA’s clients have estates that are exempt from the national gift and estate tax.

That’s good news, but it doesn’t tell the whole story about estate planning and tax preparation. Even if your estate is below the threshold, estate planning for your family’s future is still an important part of their financial security. Together, you and your accountant can map out a plan for generational wealth that you can leave as a lasting gift to those who are most important to you.

Asset Appreciation

Wealth management and asset protection are meaningful whether your estate is worth $50,000 or $5 million. Appreciated assets that are exempt from estate, gift, and transfer taxes may still be subject to net investment income tax and, depending on their value, capital gains taxes as well. Traditionally, your CPA might have recommended an estate planning strategy that minimized the value of these assets as they changed hands to heirs due to tax requirements.

Today, estate planning takes an entirely different approach, one that often maximizes the value of assets. The American Taxpayer Relief Act, or ATRA, of 2012 dramatically changed the landscape for estate planners and financial advisors. Now, valuation discounts are predicated on the maximum value of assets, so it’s in your and your financial planner’s best interests to apply top value to appreciated assets.

Estate Planning for Life

Charting a course between earning your greatest valuation discounts while minimizing possible capital gains and net investment income expenditures is your CPA’s goal. Asset transfers designed to protect wealth from federal estate taxes that are no longer assessed could even be counterproductive. While estate planning resources and property transfer options are available online for the do-it-yourself financial planner, these applications can’t provide insight into which choices are best for reducing capital gains tax burdens while recognizing the full value of the estate and its assets.

Planning your estate is about more than what you leave behind; it’s also about how well you live today. The knowledge and expertise of a CPA can also reveal other options for your estate planning needs, including setting up your IRA and managing retirement funds so you can enjoy your wealth today while saving wealth for future generations. With your CPA, services such as revocable living trusts and trustee bank accounts could provide solutions for your specific needs rather than a one-size solution that may not fit all lifestyles.

The key to estate planning that works for you now and ensures security for your family in the future is communication with a financial planner who can develop a plan for you. Even without a significant tax burden from federal inheritance taxes, your estate deserves careful planning and management.

Copyright © 2016 CPA Services. All Rights Reserved.

Does Your Business Qualify for Research and Development Tax Credits?

Long Island Certified Public Accountants for Business

Long Island Business Tax Credits

Within the administration’s documentation on plans for the coming 2017 fiscal year are provisions that could spell significant tax relief for many organizations. In an effort to stimulate economic growth and reward businesses for investing in research and development, Congress recently expanded the scope and availability of R&D tax credits. While a qualified CPA will give you specific details on how the new legislation affects your business, here’s an overview to show you where your organization may be able to apply these expanded credits.

What’s Changed with R&D Tax Credits

Research and development investments have historically earned businesses tax breaks, but the latest round of changes has increased availability to a wider range of industries and included more tech-based activities. Here’s what’s new:

  • The R&D credit has been made a permanent fixture in the tax code; previously, it was provisional and needed regular review along with other extenders.
  • The credit’s usefulness has increased as some small businesses can now apply it toward offsetting alternative minimum taxes and FICA tax.
  • The scope of R&D programs has expanded to include investments in technology such as website design and software.


What Qualifies for R&D Tax Credits?

To qualify, activities must meet a four-part standard:

  • The research, development, or experimental activity must seek to create or improve on a business component. Business components, in this case, include products, processes, formulas, and inventions intended for sale or internal use.
  • Businesses must conduct activities designed to reduce uncertainty. Safety testing and reliability/maintainability testing are examples of this standard in action.
  • The R&D process must be systematic. Experimental research only qualifies as research if it follows well-defined and documented procedures.
  • Research also has to relate to science or technology in some way.

While R&D must meet these four standards to qualify for the credit, the tax code also contains exceptions. Your organization’s CPA can review your specific case, but typically, exclusions include reconfiguring existing business components; duplication or reverse-engineering of existing products or processes; market research and sales data collection; software meant solely for internal use; and research that takes place after commercial production begins.

What Types of Businesses Could Qualify for R&D Credits?

Businesses in science and technology sectors clearly have R&D programs that qualify, but they aren’t the only organizations that benefit. Architectural firms, engineering companies, and tech service providers may also have qualifying programs. Manufacturing companies working on new processes or greening their production facilities could qualify for R&D tax credits to cover feasibility research. If your organization is actively engaged in finding more efficient or effective ways to operate, the new R&D tax credits could apply to you.

To learn whether your organization qualifies or to learn about other tax credits that may benefit you, contact your New York CPA. Services such as eligibility reviews from a professional financial consultant ensure you get all the tax breaks and credits your organization is due.

Copyright © 2016 CPA Services. All Rights Reserved.

The New Overtime: What Does It Mean for Your Business?

When the Department of Labor finalized the Fair Labor Standards Act (FLSA), employers with salaried workers had good reason to wonder how it might affect them. According to White House policy analysts, an estimated 4.2 million workers’ salaries could now include overtime pay if they put in more than 40 hours a week on the job. An additional 9 million may also become eligible, depending on their duties and the size of the companies for which they work. With such a significant change set to take effect by December 1, employers are gearing up for the change and talking with their Certified Public Accountants now.

Fair Labor Standards Act

Fair Labor Standards Act

Who Is Eligible for Overtime Pay?

Salaried personnel whose incomes fall below the threshold of $47,476 per year will now be eligible for overtime pay at a minimum of one and a half times their regular wage for any hours worked beyond the first 40 in a week. This rule isn’t entirely new; the previous threshold figure was $23,660, and many employees in management positions were exempt. Currently, about 7 percent of salaried workers are eligible for overtime compensation.

Are Some Salaried Workers Exempt?

To achieve eligibility, employees must not only be paid under $23,600 but also pass the “duties test,” a set of job duties that determine which salaried employees are owed overtime pay. Under current laws governing overtime, many managers and supervisors are exempt, but these exemptions are set to change under the FLSA. Some executives, administrators, and personnel in creative positions and sales will become eligible for overtime. For business owners, classifying personnel accurately will be an essential element of compliance and one you should discuss with your business’ accountant.

What Does the FLSA Mean for Small Businesses and Non-Profits?

According to the Notice of Proposed Rulemaking (NPRM) that the Department of Labor published at the end of last year, regarding the FLSA, businesses grossing more than $500,000 annually are not exempt. This figure includes non-profit organizations, but only applies to “activities performed for a business purpose” and not to charitable activities the organization undertakes.

How Can Businesses Prepare for the FLSA?

– The first step in preparing for the coming changes to compensation is an assessment of current salaried workers’ status and job duties. Job titles alone do not determine eligibility; a review of duties within organizations that have salaried employees currently earning below the threshold and working more than a 40-hour week is essential.

– Talk to your company’s CPA to understand the effects of the new law and plan your strategy for compliance. For some companies, the change may necessitate raises for key employees. For others, hiring more personnel to ensure that workers reduce or eliminate overtime could be the answer. Your financial planner can help you create a roadmap for implementation that puts you where you need to be by the December 1 deadline.

– Work with a New York accountant to determine whether the state’s overtime laws take precedence over the federal regulations. According to the Department of Labor, state laws that uphold a “more protective standard than the provisions of the FLSA” are to be followed first. Exemptions according to job duty, gross income, or industry vary between state and federal regulations, and working with a New York CPA who is aware of these points of variance ensures optimal protection for both employees and employers.

Copyright © 2016 CPA Services. All Rights Reserved.

When to Create a Family Trust

Creating a Family Trust

Creating a Family Trust

Proper wealth management is not just a concern for individuals; it benefits families for generations. With financial advice from a qualified accountant, you’re able to protect the privacy of your assets, provide for your children, and ensure that family members with special needs are cared for by creating a family trust. A trust is a legal entity that lets you control distribution of your financial assets during your life and assure continuity afterward. The first step in setting up a family trust is making an appointment with your Certified Public Accountant. Services also include defining a trustee and beneficiaries for the trust.

Here are some other important facts to know so you can decide if a family trust is right for you.

Why a Trust?

There are many reasons you might choose to set up a trust, but the common denominator in most of them is control. A trust provides continuity of care for minor children or relatives with special needs, ensures responsible spending in adult children, and lets you maintain the privacy of your assets instead of making them a matter of public record. With a trust, there is often no need to go through probate court, which can be time-consuming and expensive.

Although they are often part of sound financial planning for families with significant wealth, trusts can also make sense for other families too. If a family member with special needs has access to government benefits or services, setting up a trust can help maintain those benefits after you are gone. A New York accountant with a thorough understanding of state law as well as federal law can also maintain continuity of care for state services.

Other reasons to set up a trust can include protection of assets from former spouses or creditors, facilitation of charitable donations, inheritance tax management, and easier administration of financial affairs for yourself and your heirs.

Types of Trusts

Trusts typically fall into one of two categories: irrevocable trusts and revocable, or living trusts. An irrevocable trust places some of your wealth outside your estate, sheltering it from inheritance taxes, and cannot readily be amended. As its name suggests, a revocable trust is one that allows the creator of the trust to change the provisions in it. When the creator of the trust is disabled or deceased, this kind of trust reverts to an irrevocable trust.

One specific form of trust merits discussion for families with significant wealth. A generational trust allows you to provide assets to grandchildren directly, and it may be either a living trust or an irrevocable one. This trust lets families avoid double taxation – once when children inherit and again when the wealth passes to the third generation – and can be the cornerstone for building lasting familial wealth.

Do You Need a Family Trust?

Although a trust confers significant benefits, it’s best to talk with a CPA who’s knowledgeable about estate finance and personal wealth management before deciding whether a trust is right for you. Creating a trust does come with associated costs that include attorney’s fees and retitling charges, and although these fees are typically low compared to the value of the trust, they do factor into the decision for some families. Irrevocable trusts are challenging to change once they are put in place, so working with an accountant who understands the process is vital.

Your accountant can guide you through the process of deciding which type of trust might be best for your family and how a trust can fit into your overall wealth management strategy.

Copyright © 2016 CPA Services. All Rights Reserved.

Busting Myths about Household Employment

In many cases, the divide between business and home life is clear-cut, but what happens when the home is also the place of employment as it is for household workers? Families that also become employers have numerous federal and state labor laws and tax requirements to follow – often more than they know. Few families have extensive experience in the area of household employment, which is why a Long Island accountant who knows federal, state, and local tax law thoroughly is a wise investment.

Household Employment

Household Employment

Hearsay from others who have hired household workers isn’t always accurate. Learn about some of the most common myths about hiring workers in the home and use them as starting points for your conversation with your financial advisor or CPA before tax day.

Myth: Families Can Consider Employees as Independent Contractors

According to the IRS, household workers are expressly identified as employees when the household controls the nature of the work. If you govern who works in your home, what they do, when they work, and how the work is performed, you are an employer – which makes your household workers your employees. Classifying household employees correctly is critical to tax compliance. The Department of Labor has also upheld this distinction, noting that economic dependence on employment and the permanence of the work are also factors in how home workers are categorized.

Myth: Salaried Household Workers Do Not Receive Overtime

The Fair Labor Standards Act, or FLSA, requires that all non-exempt workers receive overtime pay for any hours worked over 40 in a standard 7-day week, including household employees. Like employees in an office, they are generally entitled to a minimum of 1.5 times their usual pay rate for overtime hours. These FLSA guidelines become more complex when household workers live within the home. Some live-in caregivers and nannies are exempt workers, while others remain non-exempt; working with an accountant familiar with employment laws can help you make the right decisions here.

Myth: Household Employees Can Appear on the Family Business’ Payroll

Household workers contribute a great deal to a smoothly running home, and that can make a big difference in the workplace indirectly. According to the IRS, however, they are not direct contributors to the company’s success and cannot be placed on a family-owned business’ payroll. They remain employees of the household, not the business. Expenses and dependent-care tax exemptions related to home workers must go on your personal tax return, not your company’s.

Myth: There Is No Rush to Handle Household Employment Taxes

Tax time is invariably busy for your CPA. Services related to household workers take time to sort out, so work with your accountant as soon as possible to ensure that you make all filing deadlines and comply with labor laws. By speaking to your tax professional sooner rather than later, you ensure that your tax process goes smoothly and make tax season easier on your household personnel too.

Myth: Compliance Is Expensive

For some households, the additional layer of complexity that being an employer adds might be daunting enough to reconsider hiring home workers. Your accountant can map out where hiring workers for home employment and complying with federal and state laws can help offset your liability through tax breaks. Setting up a Dependent Care Account saves money for families that have home healthcare needs. Coordinating with your CPA to establish your family’s employer/employee relationship with home workers also lets your household staff get the full complement of benefits to which they are entitled, including Social Security and unemployment insurance.

By blasting the myths surrounding household employment and ensuring compliance on your personal tax return, you and your accountant offer better financial care to the people who help take care of your household.

Copyright © 2016 CPA Services. All Rights Reserved.