CPA Services Blog

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. Continue reading

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. Continue reading

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.

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.

Finding the Ideal Accountant for Your Business

Few decisions are as critical to an organization’s financial health as choosing the right accountant. It’s more than just a matter of qualifications or cost; a Certified Public Accountant  who fits your company’s needs must also be a good fit with your goals. Here’s an overview of what you need to know to find your ideal accountant.

Certified Public Accountants for Business

Certified Public Accountants for Business

What Do You Need in a CPA?

What is the first thing you need your accountant to do? The answer will tell you a great deal about what sort of CPA you should work with. Your immediate challenge might be assembling accurate, complete financial statements after a recent merger or acquisition. You might need a forensic accountant to spot and explain anomalies in records.

Perhaps you need someone to handle routine accounting duties such as payroll and general ledger maintenance. Maybe you want a Long Island accountant with extensive knowledge of state and federal tax laws. Your ideal accountant might play a key advisory role, helping your organization grow. All of these and more are good reasons to seek a CPA with a specific skill set.

In-House or Outside Accounting Firm?

In the beginning, many business owners and entrepreneurs handle their own accounting using readily available bookkeeping software tools. Successful enterprises quickly grow beyond that point, and then executives face their first major accounting decision: Should they hire a CPA in-house, or should the company work with an outside accounting firm?

For growing businesses, the expense of a full-time accountant may be too great, especially if the company needs experience with a wide range of skills. Hiring CPA services from an outside firm is a smart choice that puts expertise in a variety of areas at a business owner’s fingertips. Large, established businesses face a different challenge: They can afford an in-house accountant, but the volume and scope of their financial transactions may require additional help at times. Turning tax preparation over to an outside CPA relieves pressure on the in-house staff.

Outside accountants are able to handle every aspect of a company’s finances, including:

– Tax compliance
Attestation and assurance
– Forensic accounting
– Audit and review
– Budget and forecast preparation
– Analysis and problem-solving

In-house accountants become familiar with a company’s inner workings and are part of the fabric of the organization. They work with outside CPAs during times of flux such as a merger or sale. Businesses often ask inside accountants to manage:

– General ledger
– Accounts payable and receivable
– Payroll
– Treasury and bank reconciliation
– Daily transactions

Qualifications for Your Company’s Accountant

A larger company has more complex financial needs and requires an accountant with a more extensive skill set than a smaller business. When looking for an accountant, consider these qualifications and areas of expertise.

Certification separates accountants from CPAs and CMAs. Accountants may have either an associate’s or a bachelor’s degree and do not need to pass a qualifying exam. A Certified Public Accountant earns a minimum of a four-year degree and must maintain a schedule of ongoing education to retain certification. They must also take and pass a standardized test to meet state certification requirements. Some accountants focus on the needs of businesses and become Certified Management Accountants, or CMAs. Like their CPA counterparts, CMAs graduate from a four-year program and pass an exam to earn certification.

Aside from certification, experience is another key qualification to examine. CPA services for specific industries may be specialized, and accountants who have experience in those industries are particularly valuable. Accountants familiar with wholesale, retail, services, and other specializations help businesses in these sectors succeed.
When working with an accountant from an outside firm, size matters. A sole practitioner may not offer the versatility of a larger firm, whereas the Big Four may cost more than they save a growing business. Ideally, an accounting firm gives clients versatility and Big Four-quality service at a more accessible price. A mid-sized CPA firm that delivers individualized service is a good starting point for most companies.

References and Interview Tips for CPAs

Some of your most promising leads to find the ideal CPA come from colleagues or vendors. Ask associates within your industry about how they fill their accounting needs; they can often point you in the right direction. Professional associations and industry organizations are also useful when starting your search for the right accountant, so ask around at events and meetings.

A CPA is more than a bookkeeper. A business’ accountant deals with sensitive information, so discretion and availability are vital. CPA firms that instill a company-wide
culture of service ensure you and your firm will be treated as priority clients. Look for firms that offer hours that fit your needs and put you in touch with your accountant, not a voice at a call center.

Whether you want routine bookkeeping, knowledgeable tax preparation, or financial guidance through periods of change in your company’s history, the right accountant plays a crucial role in your business’ success.

Copyright © 2016 CPA Services. All Rights Reserved.

Financial Planning for the Single Senior

Financial Planning for a Single Senior

Financial Planning for a Single Senior

More than half the nation is single, according to U.S. Census data assembled by CityLab. Among that number, many are seniors; it’s the fastest growing group of single people in the nation. Financial planning as a single senior is just as important as it is for married people, yet most of the do-it-yourself financial advice you find is aimed at couples. Here are some key tips to consider when working with your Certified Public Accountant to make the most of your senior status whether you are divorced, a widow or widower, or have never married.

Widows and Widowers

For those who have lost a spouse, financial planning often includes attention to Social Security benefits. Upon reaching full retirement age, or FRA, surviving spouses who have not remarried before age 60 may be eligible for 100 percent of their partners’ Social Security benefits. These benefits continue to be recalculated to adjust for inflation and may be a better option to claim than your own benefits, particularly if you choose to claim at FRA instead of waiting until age 70 to earn additional benefits by delaying your claim.

Choosing survivor benefits and deferring your own claim can lead to a more comfortable retirement. The specifics of eligibility, when to claim, and which benefits to take can be complex to navigate on your own, however, so it’s best to speak to a CPA with experience in retirement planning who will help you make the right decisions for your financial future.

Divorced Seniors

Financial planning for divorcees brings its own set of challenges depending on your ex-spouse’s financial status, the length of your marriage, and whether your former spouse is still living. You may be able to claim some spousal benefits based on your ex-spouse’s work history. Typically, these benefits amount to no more than 50 percent of the ex-partner’s qualified benefits, and these claims are limited to marriages that lasted at least ten years. As with survivor benefits, making a claim on an ex-partner’s Social Security could allow you to defer your own claim until later in life when your own payments increase to their maximum at age 70.

Those whose former spouses have died may qualify for a full survivor benefit instead of half the spousal benefit. In most cases, this full benefit requires the marriage to have lasted at least ten years, but the law does make some exceptions, such as having a disabled child in the home. Because retirement benefit rules can become quite complicated when divorce and survivor benefits enter the picture, it’s best to speak to a financial advisor and learn about all your options.

Unattached Seniors

Although retirement planning for never-married people is more straightforward when claiming Social Security benefits, single seniors face their own set of challenges. With a single income, maximizing benefits becomes even more important. If you have a partner who is a part of your life and future but not your Social Security status, your CPA can implement a financial plan that includes the people most important to you.

Copyright © 2016 CPA Services. All Rights Reserved.

Is Your Holiday Gift-Giving Creating a Tax Liability?

With the holidays and the start of a new year approaching, it’s natural to start thinking about who’s on your gift list this season. Gifts and charitable contributions given in 2015 can help make your tax burden lighter, which could be an especially important consideration if your year has been a prosperous one. If you’ve given gift or inheritance this year, you need to know whether these assets are taxable.

‘Tis the season to talk to your CPA to learn how gifts affect your tax status and what gifting and donations before year’s end could mean for your 2016 tax return.

Like an inheritance, a gift can count as taxable income. In 2015, the annual exclusion for gifts received is $14,000. In other words, if you make a gift below that amount, you do not need to report the amount on your income tax forms for the year. In the case of a cash gift, figuring the value is straightforward, but for gifts of property, assessing fair market value for tax purposes is vital. Working through a local Long Island CPA firm ensures you won’t face any surprises in 2016.

How are gifts that are more volatile in value such as property or stock estimated for tax purposes? Timing is critical here because the IRS evaluates the gift based on its fair market value at the time it was given. In other words, if you received shares of stock valued at $5,000 in January 2015 and sell them for $10,000 in December, you are responsible for taxes on the $5,000 profit even though the total value of the gift in 2015 did not exceed the $14,000 individual gift limit.

Let’s look at a popular gift for the holidays that will almost certainly exceed the exemption limit: a new car.

That $14,000 2015 limit is not without exceptions, but these are limited to special cases. Some medical expenses, tuition, and other education expenses may be exempt from taxation even if they exceed the cap. In the case of tuition, the gift must be paid directly to the educational institution. If, for example, you were to pay for a semester of college for a child or grandchild, you would need to do so directly to ensure it remained a tax-exempt gift; if the money goes to the student first, it then becomes taxable once it exceeds the individual cap. Similarly, medical expenses can qualify as gifts too, but only if the giver pays the care provider or insurance company directly.

The IRS tracks annual gift-giving because every person has a lifetime exemption amount past which gifts become taxable. Currently, this lifetime limit is $5.43 million per person. If you’re married, you and your spouse can combine to exclude up to $10.86 million from taxes. Gifts of property, businesses, and other highly valuable assets count toward this lifetime sum so the IRS can ensure that owners pay the appropriate taxes on them.

While the IRS takes no notice of the usual cashmere sweaters and colognes that get exchanged as gifts for the holidays, it does require larger gifts to be noted on tax returns. If you have given generous gifts this year, talk to your Long Island accountant to learn more about your tax responsibilities.

Copyright © 2015 CPA Services. All Rights Reserved.

Should You Itemize Your Deductions?

When preparing your taxes, how do you determine whether to use standard deductions or itemize them? Some tax preparers advise itemized deductions for those who are single and own no property, but general rules may not be applicable to your specific situation. Choosing a Long Island CPA who takes each client’s case on an individual basis is the ideal way to get the full value of your deductions, but before tax time, it’s worth looking at factors that influence this important decision.

Itemized deductions are a sound choice for most people who own a home and have a mortgage. Ownership is not the sole determining factor in deciding whether to optimize, though. This list of qualifying expenses will give you an idea of what to ask your accountant about when you set up a meeting. The items here include both limited and unlimited deductions, each of which is noted.

Medical expenses – This limited deduction is crucial for any family that has incurred medical expenses that were not covered or reimbursed by an insurance provider. If you carry a high deductible on your medical insurance, you may be able to claim a significant amount of your medical costs as a deduction.

Taxes – The IRS only expects you to pay taxes once and does not tax other tax payments. The payments you have made toward real estate taxes, property tax, sales tax, business-related taxes, and state income tax are an unlimited deduction on your tax returns.

Mortgage interest – Depending on the size and scope of your mortgage, you may be able to claim interest paid on it as a deduction. This category also includes interest you may have paid to buy your home as well as any interest on mortgage payments.

Investment interest – As with mortgage interest, the interest you pay to invest in financial investment property may be worth going through the itemized deduction process. Part of the CPA services an accounting firm offers is going through your investment portfolio to assess whether your interest paid on stocks, bonds, and mutual funds falls into this type of limited deduction.

Charitable contributions – For philanthropic business owners and generous donors, using charitable contributions for itemized deductions is especially important. To qualify, donations must go to a not-for-profit organization, a designation that includes donations to public school systems, many political organizations, religious institutions, and traditional charities.

Estate taxes – Payment of taxes assessed on earned income are not taxable again and should be itemized as a deduction.

Gambling losses – For those who have incurred gambling losses, itemizing these expenses as a deduction can ease financial burdens. Because deducting losses is limited based on money earned from gambling winnings, talk to your Long Island CPA before making any tax decisions.

Job-related expenses – If you have been on the hunt for a new position, you may be able to claim costs related to your job search. While these expenses are limited, they can help defray the cost of job-related education, travel, professional dues, uniforms, and training.

Tax preparation – The expense of having a qualified accountant prepare your taxes is itself a tax-deductible cost.

This list is only a partial one, and it’s always advisable to ask your CPA about specific expenses. Working with a Long Island CPA who is available ensures that you get the most up to date advice on tax deductions, investments, and every aspect of your financial planning.

© CPA Services 2015 All Rights Reserved.

Why You Need a 401(k)

Sole proprietors, employees of small businesses, and independent contractors may relish the freedom their careers offer, but the other side of freedom is that these entrepreneurs may face greater challenges with retirement planning. Traditional employers at larger firms sponsor 401(k) retirement savings plans, but a Long Island accountant firm can help you participate in one of the best long-range savings plans available. Whether you are a small business owner who wants to give your employees new options or a successful independent worker looking for ways to save, let your CPA help you find the right retirement package for you.

Pre-Tax Investments

Even for workers who have other retirement options, a 401(k) plan offers a significant benefit when it comes to income tax payments. The amount you contribute to a 401(k) plan is removed from your income before taxes, so you are responsible for taxes on a smaller net income. Self-employment tax obligations are often an independent worker’s greatest financial challenge. By working with your financial advisor and investing part of your income in a 401(k) fund, you make sound future plans while easing current financial responsibilities through tax-deferred contributions. Your accountant can help you determine the impact your savings plan will have on your income with a 401(k) calculator.

Investing Options

Joining a 401(k) plan gives you a wide range of investment options. Stock or bond mutual funds, money-market accounts, and stable-value funds give you an array of choices to fit your investment portfolio. Your CPA service provider will help you choose the right plan for you. Typically, plan participants opt for higher risk and higher yield for long-range financial planning and select more conservative strategies that pay off closer to retirement.

With a financial planner, you aren’t bound to a single strategy and can adapt your plan to meet changing needs. Stock index funds plug you into the larger market and have an excellent risk-to-reward ratio for long-term planning. Target-date retirement funds include a combination of stocks and bonds designed to offer a maximum return on investments at a set time; these plans are a good choice for those who want to combine more aggressive investments early in the plan and move toward more conservative investments as the retirement date approaches.

Tax Deferment Helps Your Retirement Plan Grow

Interest and investments earn capital, but if that wealth is no longer under your control, you are not the one benefiting. With a tax-deferred investment plan such as a 401(k), you keep more of your income and can therefore achieve more with it. Because you and your accountant have control over that money until retirement and can freely shift it within your chosen plan, you and your CPA take full advantage of investment opportunities as they come. Your financial advisor knows what you want your money to do for you, so keep more of it by investing it now and deferring taxes.

For Employers

Larger businesses have offered employer-matching contributions for retirement plans as a perk for some time, but that hasn’t always been an option for smaller firms and partnerships. With your CPA, you can now find a business 401(k) plan that allows you to become more competitive by offering this benefit to your personnel. As with personal 401(k) accounts, a business 401(k) helps employers limit tax expenses and gives plan participants greater control over their own finances. With a vesting schedule that encourages the firm’s best and brightest to remain and help the business grow, a 401(k) becomes a smart business solution that makes firms competitive with their larger counterparts.

To get the most from your 401(k) as an employee, an employer, or an independent contractor, choose a local Long Island CPA firm that understands the full range of retirement possibilities.

© CPA Services 2015 All Rights Reserved.