Blog

D'Arcangelo Blog

D'Arcangelo Blog

  • Home
    Home This is where you can find all the blog posts throughout the site.
  • Categories
    Categories Displays a list of categories from this blog.
  • Tags
    Tags Displays a list of tags that have been used in the blog.
  • Login
    Login Login form
Recent blog posts

The Heartbleed Bug: 8 Tips to Protect Yourself Online

Posted on in IRS

The “Heartbleed” bug has sent businesses and individuals into attack mode in order to prevent passwords from being disclosed, personal information from being compromised, and assets from being stolen. The IRS issued the following statement about Heartbleed:

“The IRS continues to accept tax returns as normal. Our systems continue operating and are not affected by this bug, and we are not aware of any security vulnerabilities related to this situation. We continue to monitor the situation and remain in contact with our software partners.”

Tagged in: IRS
Last modified on

On the heels of the financial crisis, banks tightened their lending policies and many companies could not qualify for inexpensive fixed-rate loans. Instead, they took on variable-rate loans. Interest payments that fluctuate based on the U.S. prime rate or London InterBank Offering Rate (LIBOR) index are a viable option, as long as rates continue to hover near historic lows. If market indices rise, borrowers with substantial variable-rate loans could be in for a rude awakening.

Just how low are today’s rates compared to historic levels? To put current interest rates into perspective, consider the U.S. prime rate, which is the basis for many companies’ variable-rate loans. It has been set at 3.25% since 2008, its lowest level since the mid-1950s.

By comparison, its 50-year high was 21.5% in 1980. The median prime rate from 1947 to present is 8.75%. The most common prime rate (or mode) is 7.5% over the same period. If the prime rate jumps to 7.5% over the next few years, many companies will be unprepared to absorb the incremental interest expense.

Last modified on

Supreme Court Ruling Spotlights Severance Pay

Posted on in Finance

On March 25, 2014, the U.S. Supreme Court ruled in favor of the IRS in a case against a now-defunct employer, Quality Stores. At issue was the question of whether severance pay for laid off workers was subject to Social Security and Medicare taxes under the Federal Insurance Contributions Act (FICA). The employer paid the tax when it was due, but later, applied for refunds on behalf of the company as well as the former employees. More than a decade later, the case United States v. Quality Stores, Inc. et al (No. 12-1408) made its way to the nation’s highest court.

Last modified on

Tax day is right around the corner. If your tax bill is higher than you’d like, there may still be an opportunity to lower it. If you qualify, you can make a deductible contribution to a traditional IRA right up until Tuesday, April 15, 2014 and still benefit from the resulting tax savings on your 2013 return.

Small business owners can set up and contribute to a Simplified Employee Pension (SEP) plan up until the due date for their returns, including extensions.

You also have until April 15 to make a contribution to a Roth IRA.

Last modified on

On March 13, President Obama directed the U.S. Department of Labor (DOL) to come up with a way to update overtime pay rules to reflect the “changing nature of the American workplace” and to make them more “in keeping with the intention of the Fair Labor Standards Act.”

The move has the potential to affect millions of employers and workers. Fortunately for employers, the revisions to existing overtime regulations will not occur overnight. It may take many months, and the changes may face legal challenges along the way. The President said he would take input from employers into consideration as new regulations are being developed. What that means is not known at this point.

It is probable that some employees currently ineligible for overtime pay requirements by being treated as falling within the broad “executive, administrative and professional” employee exemption category will ultimately have to be paid more.

Of course, these employees may only have to be paid more if their employers don’t cap their weekly hours at 40. It will also depend on how the regulations are written.

Last modified on

The federal estate tax law currently provides unprecedented flexibility for married couples.

Case in point: If the estate of the first spouse to die doesn’t utilize the full estate tax exemption, the remainder may be used by the surviving spouse’s estate under the “portability” provision of the law. Now the IRS has granted additional time for certain estates to elect to benefit from this option (IRS Revenue Ruling 2014-18).

Recent Estate Tax History

Culminating a decade of incremental increases under the Economic Growth and Tax Relief Reconciliation Act of 2001, the Taxpayer Relief Act of 2010 established a generous $5 million estate tax exemption for transfers to non-spouse beneficiaries, subject to indexing for inflation (for 2014, the inflation-indexed exemption amount is $5.34 million).

Last modified on

Make Your 401(k) Do Its Job

Posted on in Finance

The battle to get most employees to participate in a 401(k) seems to have been won. A recent survey of large and small businesses found over 80% employee participation for 57% of employers. The survey was conducted by WorldatWork and the Employee Benefits Institute.*

When you add the 16% of employers with participation rates between 70% and 79%, you find that nearly three-quarters of employers have about three-quarters of their employees enrolled in the plan. However, averages are only averages, masking outliers on both ends of the spectrum.

Last modified on

How ACA Thresholds Apply to Your Business

Posted on in Healthcare

The Obama Administration's most recent change to the Affordable Care Act (ACA) may have given some employers the wrong impression. With this modification, employers with 50 to 99 employees now have until 2016 to comply with the "Shared Responsibility" provisions of the law. Some employers, especially those who are close to the threshold of 99 employees, may be surprised to learn they are not really off the hook.

What You Need to Consider:

First, recall that the employer size thresholds are based on a calculation which includes part-timers. You need to add up their combined monthly hours and divide by 120 to determine the actual number of full-time equivalents (FTEs) you have. This number must then be added to the number of full-timers, to determine your status.

Last modified on

Estate Planning: Check Your Beneficiary Designations

Posted on in Estate Planning

With today’s relatively generous $5.34 million Federal estate tax exemption, you may think estate planning is only a concern for the rich.  However, you may be wrong!

Regardless of your income or net worth, there is one estate planning move you should probably make right now: check the beneficiary designations for your life insurance policies, bank accounts, brokerage firm accounts, retirement accounts, and other assets.  If you have not yet turned in the proper forms to designate beneficiaries, do it now.  If your forms are out of date, update them.

The consequences of failing to take these simple steps can be serious.  Consider the following real life “horror stories.”

Last modified on

Employers that have 50 to 99 full-time employees or full-time equivalent employees (FTEs) now have a one-year reprieve, until 2016, to comply with the employer “play or pay” mandate. This delay is small, but significant for those affected. It’s part of the 227-page final regulations regarding the employer mandate, which were released by the U.S. Treasury Department on February 10. (You can find the information in section 4980H of the Internal Revenue Code in the “shared responsibility” segment.)

Basics about “Play or Pay”

Under the Affordable Care Act, there is a shared responsibility mandate that imposes a penalty on a “large employer” if it does not offer “minimum essential” health insurance coverage or if one or more of its full-time employees obtains a premium tax credit to help purchase health coverage. The employer mandate applies to for-profit companies, not-for-profit organizations and governmental entities.

If your company falls into the 50 to 99 employee category that was given a reprieve to 2016, the delay may be good news, but your business is still required to take action, as described below.

Last modified on

Scorecard of Key Expired Tax Breaks

Posted on in Tax

Several federal income tax breaks for individuals and businesses expired at the end of 2013. Although we are solidly into 2014, Congress has, so far, failed to extend many of tax savings opportunities that we have become accustomed to. Some observers predict that Congress will not act for months – perhaps even until after the November mid-term elections.

Here is a summary of some noteworthy deductions and credits that will not be available – or will be significantly reduced – in 2014. Many of these federal income tax breaks were available (at varying levels) for several years before expiring on New Year’s Eve.

Last modified on

Tax Season ID Theft Concerns

Posted on in Tax

Tax season is a good time to remind you about the dangers of tax identity theft. IRS impersonation schemes continue to flourish. But the IRS never initiates contact with taxpayers by email or social media to request personal or financial information. The initial contact with taxpayers is always through the U.S. mail. If you receive an email or social media solicitation that appears to come from the IRS, imposters may be trying to steal your identity.

Last modified on

What's New on Your 2013 Form 1040

Posted on in Tax

Last year’s W-2s and 1099s should be arriving soon in your mailbox or inbox. So it is officially time to start thinking about filing your 2013 personal tax return. Here is what you need to know about the key tax law changes that took effect in 2013:

Higher Rates for Upper-Income Individuals

Most individuals will pay the same federal income tax rates for 2013 that they did for 2012 (10, 15, 25, 28, 33, and 35%). The exception is upper-income folks. For these individuals, the American Taxpayer Relief Act (ATRA) raised the maximum federal rate for 2013 to 39.6% (up from 35%). The 39.6% rate affects singles with taxable income above $400,000, married joint-filing couples with income above $450,000 and heads of households with income above $425,000.

Last modified on

Large employers are often in a better position financially to take advantage of elaborate wellness and employee assistance programs. Perhaps your own budget doesn’t allow for such things, but that doesn’t mean you are helpless.

The Centers for Disease Control estimates that 75% of your healthcare costs and loss of employee productivity is due to “lifestyle choices,” which may motivate you to pursue a remedy.

When wellness programs first became popular around twenty years ago, their architects operated under what turned out to be a very naïve assumption: causing employees to live healthier lives (e.g. quitting smoking, eating more nutritious food and getting plenty of exercise) was primarily a matter or education. Tell people what they need to do and the reasons why, and the behavior will change.

Last modified on

2014 New Year's Resolution: Tone Your Finances

Posted on in Finance

The holiday season provides an excuse to eat too much and exercise too little. So by the time New Year’s rolls around, many Americans return to the health club, resolving to stick to an exercise regime.

But our physiques aren’t the only “assets” that could benefit from exercising extra diligence in the New Year. Many people have flabby spending habits. Here are five ways to trim the fat and add discipline to your personal finances in 2014:

Last modified on

The Manufacturing Outlook: Boom or Bust?

Posted on in Finance

It’s often been said that “numbers don’t lie.” For instance, if you simply look at the cold, hard facts, an increase in factory input during the latter part of 2013 would normally be cause for optimism in early 2014. In addition, the buzz created in technology-based industries remains loud, with several high-profile projects gaining traction. The Fed’s announcement about quantitative easing (QE) should provide greater clarity for a recovering economy. The combination of these three factors appears to paint a rosy picture for manufacturing firms at the dawning of the New Year.

Last modified on

529 Plans: State Benefits

Posted on in Finance

Among the most attractive benefits of a 529 college-savings plan are the tax breaks savers receive while building a nest egg to pay for a child's education expenses. 529 plan participants can avoid paying federal taxes on their 529 savings' gains, but many states offer local benefits on the initial 529 contributions, as well.

Morningstar recently tallied the states' benefits to determine which states offered the most generous local tax breaks. By quantifying these benefits, college savers are better able to determine whether their home state's 529 plan is a good choice. Generous tax benefits and fee waivers may offset other shortcomings in a plan, like higher expense ratios or mediocre investments options. Likewise, if a state's tax benefits are little to none, college savers have little reason to stay with their state's plan and may instead seek a better one elsewhere.

Last modified on

529 Plan Participants Deserve Better Disclosure

Posted on in Finance

College savers need to be aware of many details when choosing a 529 plan, yet often the information either isn't provided or takes too much digging to find. A recent Morningstar study of 529 plans' disclosure found that the typical 529 plan website and plan document provide only high-level descriptions of the investment options. Basic information, including the name and tenure of the portfolio managers running the 529 investment options and details about the most recent portfolios, isn't required disclosure for 529 plans.

Last modified on

History of Interest Rates

Posted on in Finance

It is commonly known that interest rates have been at historically low levels for a few years now. But how low are they? The image illustrates the characteristics of interest rates of various maturities. On average, long-term government bonds delivered the highest yield of 5.2%, while intermediate-term government bonds and 30-day Treasury bills provided an average yield of 4.6% and 3.5%, respectively. Current interest rates are positioned relatively close to the all-time lows, especially on the lower end of the maturity curve.

Last modified on

Online Sales Tax: The Future Is Still Uncertain

Posted on in Tax

Cyber Monday 2013 was the biggest online shopping day in U.S. history. It was also the day the U.S. Supreme Court refused to hear a constitutional challenge by Amazon and Overstock to a 2008 New York law that requires out-of-state online retailers to collect sales tax if they use in-state affiliates to direct traffic to their websites.

Several states - including New York, Illinois, Texas, and California - have enacted these so-called "Amazon Laws," prompting a debate on whether it's fair to require out-of-state online retailers to collect sales tax. This debate pits online retailers and consumers against state taxing authorities and traditional brick-and-mortar stores.

Significant dollars are at stake in the online sales tax debate. For example, online sales are expected to grow 15% to $78.7 billion in November and December 2013, according to Forrester Research. Using an average state sales tax rate of about 5.6%, $4.4 billion could be on the table this holiday season alone. Many online retailers are not currently collecting sales tax, but that situation could change in the near future.

Last modified on

The End of the Recession

Posted on in Finance

In September 2010, the National Bureau of Economic Research announced the long-awaited news: an end date for the recession that had begun in December 2007. The NBER determined the official end date as June 2009, quieting down (if not completely silencing) double-dip fears. NBER defines a recession as a significant decline in economic activity spread across the economy, lasting more than a few months, normally visible in real GDP, real income, employment, industrial production, and wholesale-retail sales. Looking back at the performance of the main asset classes during the recession and in the years following the official end date, gold was the best overall performer, and long-term government bonds offered consistent positive returns. Out of the investments with the worst performance during the recession, REITs posted the most impressive return in the four post-recession years.

Last modified on

Do You Have a Job-Less Safety Net?

Posted on in Finance

“What are the chances that I'll lose my job?” Unless you're a retiree, a tenured college professor, or the owner of a business, that question has probably passed through your mind at least a few times over the recent years. Even if you're confident about the security of your current position, it never hurts to put in place a good safety net. Some of the primary steps are outlined below.

Last modified on

Financial First Steps After Having a Baby

Posted on in Finance

The arrival of a baby is an exciting event, but it also brings additional financial challenges and decisions for the whole family. Outlined below are four key financial considerations to help new parents prepare for many of life's unknowns.

Prepare for the Unexpected:Check your individual health insurance policy for specific guidelines on adding coverage for your newborn (most plans give parents 30 days after the birth of the child). Missing this deadline may require waiting until the next annual enrollment period to add your baby to your plan.

Last modified on

IRS Announces Standard Mileage Rates for 2014

Posted on in IRS

The Internal Revenue Service has issued the 2014 optional standard mileage rates used to calculate the deductible costs of operating an automobile for business, charitable, medical or moving purposes.

Beginning on January 1, 2014, the standard mileage rates for the use of a car (also vans, pickups or panel trucks) will be:

  • 56 cents per mile for business miles driven
  • 23.5 cents per mile driven for medical or moving purposes
  • 14 cents per mile driven in service of charitable organizations
Last modified on

Wrap Up Last-Chance Tax Breaks for 2013

Posted on in Tax

The holiday season can be a difficult time to think about taxes. But with a few last-minute maneuvers, you might be able to reduce the amount of money you owe Uncle Sam for 2013. Here are six strategies to consider. Don't delay - once the ball drops on New Year's Eve, these tax breaks will be gone...

Last modified on

The Importance of Staying Invested

Posted on in Finance

Investors who attempt to time the market risk missing periods of positive returns. The image illustrates the value of a $100,000 investment in the stock market from Jan. 2007 to Oct. 2013, which included the global financial crisis and the recovery that followed. The value of the investment dropped to $54,381 by Feb. 2009 (the trough date). If an investor remained invested in the stock market, the ending value would be $143,550. If the same investor exited the market at the bottom to invest in cash for a year and then reinvest in the market, the ending value would be $93,527. An all-cash investment would have yielded only $54,558. The continuous stock-market investment recovered its initial value over the next three years, and provided a higher ending value than the other two strategies. Investors are well advised to stick with a long-term approach to investing.

Last modified on

Under the Internal Revenue Code, some tax breaks seem to be a good deal, but later, you find there are strings attached. The ability to claim Section 179 deductions for qualified real property is a good example. New IRS guidance explains there could be future negative tax consequences when businesses opt to claim current deductions under Section 179 – rather than depreciate real property assets over time.

Background information: The American Taxpayer Relief Act of 2012 (ATRA) made beneficial changes to the Section 179 depreciation deduction rules for tax years beginning in 2012 and 2013. Under these rules, businesses can potentially claim first-year depreciation write-offs for up to $500,000 of eligible asset costs.

Last modified on

Tis the Season for Gift and Estate Planning

Posted on in Estate Planning

Over the years, estate planning has been a little bit like riding a roller coaster. In 1978, the federal estate tax exemption was only $134,000 and the highest estate tax rate was a whopping 70%. Flash forward to 1988 and the estate tax exemption rose to $600,000 and the marginal tax rate fell to 55%. By 2001, the federal estate tax exemption increased to $1 million and in 2010, the federal estate tax was temporarily repealed – but just for one year.

Today, the scene is set for you to take advantage of some tax-friendly estate planning opportunities due to the relatively generous federal gift and estate tax regime.

Last modified on

New Guidelines for Mental Health Benefits

Posted on in Healthcare

According to Congress, mental health benefits and medical health benefits need to be made available on an equal basis. The idea was to prevent employers from being more generous with health benefits for standard medical and surgical services than they were for mental health and addiction services.

This is why Congress passed the Mental Health Parity and Addiction Equity Act of 2008. To measure the equality of the two types of benefits, they added criteria such as co-pays, deductibles, maximum days of treatment or access to high quality, non-local “centers of excellence.”

Last modified on

IRS Adds an Attractive Option to Flexible Spending Accounts

Posted on in IRS

Background: Ever since cafeteria plans, also known as Section 125 plans, became available in 1978, employers have complained about the rigidity of these plans. Specifically, they were troubled by the fact that, when employees did not use all of the funds in their accounts by the end of the year, those funds had to be forfeited. The main concerns have been:

  • The restriction discourages participation, particularly among lower paid workers who could not abide the thought of throwing away hard-earned money if they failed to drain their health flexible spending accounts (FSAs) by the end of the year.
  • To avoid forfeiting their unused funds, employees rushed to incur unnecessary health services at the end of the year.
  • Plan administration could be simplified by easing the restriction.
Last modified on

Understanding Financial Capital and Human Capital

Posted on in Finance

When calculating total wealth, it is important to consider not only financial capital, but human capital as well. Financial capital refers to an individual’s total saved assets, while human capital refers to the individual’s future potential savings from income earned. Looking at financial capital in isolation for retirement planning is incomplete without also considering human capital. Initially, an individual has higher human capital and lower financial capital. Over time, accumulation in savings increases financial capital, while human capital declines as the individual reaches retirement. Certain life events trigger significant changes in financial capital, such as receiving an inheritance, and in human capital, such as going back to school or receiving a promotion at work. Individuals should keep this in mind when planning their financial goals.

Last modified on

Financial Experience and Behaviors Among Women

Posted on in Finance

The 2012-2013 Prudential Research Study “Financial Experience and Behaviors Among Women” surveyed 1,410 women about their financial knowledge, actions, and confidence in attaining their financial goals. In general, women face particular financial challenges because they tend to live longer than men, earn less, and take more breaks from the workplace.

On the positive side, the study shows that women, although severely hit by the slow economic recovery, remain positive about the future. However, women also feel they lack knowledge about financial products, feel less confident about retirement, and don’t see themselves as well-prepared to make financial decisions. For example, the study found that 26% of women surveyed did not understand IRA plans too well, which is worrisome given that IRAs are important tools of a sound retirement-planning strategy. According to the Department of Labor’s “Women and Retirement Savings” publication, only 45% of the 62 million women (age 21 to 64) working in the United States participate in a retirement plan. Here are a few guidelines that women might want to consider to get back on track.

Last modified on

Financial Planning for Women

Posted on in Finance

Financial planning may present different challenges for women as opposed to men for various reasons. Knowing these challenges, when and if they are likely to occur is crucial for women to successfully manage income, expenses, retirement planning, college planning for children, and any other money matters that need attention.

Challenge 1: Women tend to live longer than men. According to 2009 data from the Centers for Disease Control, remaining life expectancy for a 65-year old woman is 20.3 years, as opposed to only 17.6 years for a 65-year-old man. This may mean that not only do women need to accumulate more assets for retirement, but also that they need to manage these assets much more carefully in retirement in order to make them last for a longer period of time. It is, therefore, paramount for women to begin contributing to a retirement account as soon as possible. According to the Department of Labor’s “Women and Retirement Savings” publication, only 45% of the 62 million women (age 21 to 64) working in the United States participate in a retirement plan. This is probably one of the worst financial-planning mistakes you can make. If your workplace offers a 401(k) plan, you should start contributing as soon as you receive your first paycheck, and make sure you’re contributing enough to take advantage of the employer match.

Last modified on

Lighten the Load

Posted on in Finance

Do mutual fund investors prefer to invest in funds offering low expense ratios? The answer is yes. Expense ratios are an important factor in choosing a mutual fund, because they affect returns. It seems that the market is taking matters into its own hands and putting more assets in low-expense funds. As of October 2013, the average expense ratio for domestic funds was 1.14%. Investors pooled about 86% of net assets in funds with expenses lower than the average, leaving only a small portion to higher expense funds.

You would think that a majority of funds available to investors would have fairly low expenses, but 54% of funds have below-average expenses and 46% have expenses equal to or above the average expense. With more funds available and a variety of added investment choices, investors have clearly chosen the low-cost alternative.

Last modified on

Year End Tax Planning Strategies for Small Businesses

Posted on in Tax

It’s not too late; you can still take steps to significantly reduce your 2013 business income tax bill. Here’s a rundown of the best small business year-end tax-saving moves:

1. Buy a Heavy SUV, Pickup or Van

While buying a big SUV, pickup or van for your business may not be seen as politically correct because of the gas the vehicles use, the fact is they are useful if you need to haul people, equipment and materials around. They also have major tax advantages.

Last modified on

Nine Bright Year-End Tax Planning Strategies for Individuals

Posted on in Tax

1. Game the Standard Deduction

If your total annual itemized deductions are usually close to the standard deduction amount, consider the strategy of bunching together expenditures for itemized deduction items every other year. Itemize in those years to deduct more than the standard deduction figure. Then, claim the standard deduction in the intervening years.

Over time, this can save hundreds or even thousands in taxes by increasing your cumulative write-offs. That’s because you’ll bag higher itemized deductions in alternating years and relatively generous standard deductions in the other years. So regardless of what happens with tax rates, you’ll come out ahead.

Last modified on

The Affordable Care Act (ACA) contains a tax incentive for certain small employers to offer their employees a health insurance plan, and pay for at least half the cost. Employers eligible to take advantage of this provision are under the 50-worker “employer mandate” threshold, and thus not compelled by the ACA to “pay or play.”

Tax Credit Basics
For tax years 2010 to 2013, there is a minimum tax credit of 35% of premiums paid by qualified small business employers (25% of premiums for small tax-exempt organizations).

There are changes to the tax credit for 2014. The IRS recently proposed regulations updating and fine-tuning the original Section 45R rules governing the credit, beginning next year. In addition, the tax break will be more valuable to eligible employers starting in 2014.

Last modified on

Farmers and ranchers who previously were forced to sell livestock due to drought, similar to the drought currently affecting much of the nation, have an extended period of time in which to replace the livestock and defer tax on any gains from the forced sales, the IRS announced in guidance.

Under IRS Notice 2013-62, farmers and ranchers who, due to drought, sell more livestock than they normally would may defer tax on the extra gains from those sales. To qualify, the livestock generally must be replaced within a four-year period. The IRS is authorized to extend this period if the drought continues.

Last modified on

Tax Benefits for Private Schools

Posted on in Tax

If you have doubts about the efficacy of the education system in your area, you’re not alone. U.S. Secretary of Education Arne Duncan released the following statement about the PIAAC test results:

“These findings should concern us all. They show our education system hasn’t done enough to help Americans compete – or position our country to lead – in a global economy that demands increasingly higher skills.”

People concerned about the quality of their children or grandchildren’s education might opt for private education starting at the K-12 level. But “going private” can be costly.

There’s no federal tax “voucher” for private school costs (many states offer tax credits to offset private school costs). Some possible federal tax saving opportunities include:

Last modified on

Is America Falling Behind in Workplace Scores?

Posted on in Finance

Americans scored well below the international averages in three skill areas in tests given to adults in 24 countries. The Organization for Economic Cooperation and Development (OECD) released the results of its first survey in early October.

You might be surprised by the results on the Program for the International Assessment of Adult Competencies (PIAAC) exam:

  • Americans ranked 16 out of 23 industrialized countries in literacy (written text)
  • We scored 21 out of 23 in numeracy (numerical and mathematical concepts)
  • In the  “problem solving in technology-rich environments” test, the U.S. ranked 17 out of 19 countries
Last modified on

The U.S. stock market has bounced back, and employer stock options are once again a potentially valuable form of extra compensation for employees who receive them. Employer stock options can come in the form of either incentive stock options (ISOs) or nonqualified stock options (NQSOs). While the latter are not entitled to any special treatment under the federal income and employment tax rules, ISOs are treated favorably for the most part.

However, the big tax downside of ISOs is what happens if the shares you acquire by exercising an ISO plummet in value after you exercise. In this scenario, you can wind up with a significant alternative minimum tax (AMT) liability on gains that have vanished.

Last modified on

Not Just for the Rich and Famous

Posted on in Estate Planning

Less than 1% of those who die in the U.S. will owe federal estate taxes in 2013, according to the Tax Policy Center, a nonprofit organization.

Many people think estate planning is only for the more affluent folks, but everyone with a positive net worth or minor children should think about what will happen when he or she passes away.

More than Taxes

Small, simple estates typically require minimal time and money to square away. Estate plans should include:

Last modified on

Over the years, estate planning has been a little bit like riding a roller coaster. In 1978, the federal estate tax exemption was only $134,000 and the highest estate tax rate was a whopping 70%. Flash forward to 1988 and the estate tax exemption rose to $600,000 and the marginal tax rate fell to 55%. By 2001, the federal estate tax exemption increased to $1 million and in 2010, the federal estate tax was temporarily repealed – but just for one year.

Today, the scene is set for you to take advantage of some tax-friendly estate planning opportunities due to the relatively generous federal gift and estate tax regime.

Last modified on

The Risks of Over Allocated Funds

Posted on in Finance

Exposure to concentrated investments may increase the overall risk of a portfolio. As a rule of thumb, if a fund holds more than 30% of assets in one sector, you may be putting all those eggs in one basket. Take, for example, the dot-com bubble. Investors who loaded up on rapidly growing Internet investments probably lost a considerable amount of money when the bubble burst.

It is also important to consider the extent a fund is vested in its top investments. For example, if 25% of its assets are in the top three holdings, or a fund consists of 40 or fewer holdings, the fund could be a higher risk. Funds with investments concentrated in one country can be a risky proposition as well. A fund manager not only must pick good investments but also runs the risk of a souring economy. Country-specific risks become even more prominent when a fund involves investments in emerging markets. These economies are generally subject to a variety of risks that can drive holdings southbound.

Last modified on

A Brief Overview of ETF Providers

Posted on in Finance

The exchange-traded fund industry has come a long way since the first ETF, SPDR S&P 500, was launched in 1993. U.S. ETFs closed August 2013 with just over $1.49 trillion in total net assets.

An ETF is a passively managed index fund that strives to achieve a return similar to that of a particular market index. There are many factors that contributed to the increase in popularity of ETFs, including trading flexibility, lower expense ratios, tax efficiency with regard to capital gains distributions and, more importantly, potential diversification benefits. By buying a single unit of an ETF, investors can get exposure to all the securities that make up the related index—for example, the S&P 500. Here is a quick look at the three major providers in the industry.

Last modified on

The True Costs of ETFs

Posted on in Finance

Investors often make the mistake of assuming the expense ratio of a fund represents the total expenses incurred when investing in that fund. This isn’t true for mutual funds and it certainly isn’t true for exchange-traded funds (ETFs). There are four main costs to owning an ETF.

The net expense ratio is the percentage of assets used to pay for operating expenses, management fees, administrative fees, and other costs incurred by the ETF, except brokerage costs. Assuming a gain of $500 on a principal investment of $10,000, an expense ratio of 0.09% will incur a cost of $9.45. Investors have to pay the expense ratio regardless of whether the fund realized a gain or a loss.

Last modified on

Five Lessons from the Four-Year Market Rally

Posted on in Finance

Five Lessons from the Four-Year Market Rally

  1. The turning point is not always obvious. In hindsight, it seems like it should have been dead obvious that stocks were cheap four years ago. But, because of their inability to clearly identify market bottoms, investors may be better off sticking with a strategic asset-allocation plan.
  2. Don’t let past performance control your portfolio. To the extent that you can, let your strategic asset-allocation framework be a key driver of where you deploy new cash.
  3. To help maximize participation, make a little room for the risky stuff. Even though higher-quality stocks tend to hold up better during downturns, the opposite tends to be true during recoveries. Investors may want to maintain exposure to both types of companies: high-quality, wide-moat dividend payers and economically sensitive small- and mid-caps.
Last modified on

Saving Is Not Enough

Posted on in Finance

After two financial crises occurring almost back to back during the “lost decade,” investors have every right to be risk-averse, hesitant, angry, or distrustful. The problem with not investing at all, however, is that you may not have sufficient money to achieve your financial goals. An individual saving $100 per month, without investing, would have put away only $52,400 since 1970. By placing that money in five-year fixed-term investments, the investor would have been able to end up with almost five times that amount. And if invested in a diversified portfolio, our investor’s savings would have grown to $835,313. It’s true that any investment involves varying levels of risk. But, as the image illustrates, even if you have low risk tolerance, you can find a suitable investment for your needs that may still be much better than no investment at all.

Last modified on

There are some basic differences when a VA is held inside a qualified account, meaning an IRA (traditional or Roth) or employer plan.

Contract Titling Difference: A non-qualified contract can be held by two owners or a trust, whereas a VA held in a qualified account must have an individual owner who is also named as the annuitant. (Note that on the Lifetime GMWB, joint spousal coverage can be achieved on an individual retirement account.)

Product Differences: Often, a VA contract or benefit held in a qualified account has a different issue age. For example, one lifetime income rider must be purchased by age 77 when held in a qualified account, versus age 80 in a non-qualified account. In a few cases, fees and expenses are different. One variable annuity contract 

Last modified on

Retirement Income Sources

Posted on in Finance

Concerns about shortfalls in traditional retirement income sources like Social Security and pension plans have caused people to expect to rely more heavily on personal savings to fund their retirement. The graph illustrates that while only 45% of current retirees utilize their personal savings for retirement income, 62% of current workers expect to receive retirement income from an employer-sponsored retirement savings plan, while only 41% of those already retired actually receive income from such a source.

It may be a good idea to plan for a diminished reliance on Social Security or a pension plan. Whatever extra funds you save by taking this more conservative view will make retirement all the more enjoyable.

Last modified on

You have probably heard of some of the horror stories. For example, there was the case of an employee who used certain unflattering words to describe her supervisor, including “scumbag,” in a post visible to co-workers. When she was terminated and took her case to the National Labor Relations Board, the company settled and narrowed the scope of its social media policy (NLRB v. American Medical Response).

The NLRB maintained any social media policy that interferes with an employee’s right to free speech among co-workers about wages and working conditions, known as “concerted activities” under the National Labor Relations Act, is unacceptable. The fact it occurred via social media instead of in actual conversation made no difference. Also, this protection exists whether or not employees are represented by labor unions.

Last modified on

Ten Important Facts About Charitable Tax Deductions

Posted on in Tax

As follow up to our last blog post on September 12, here are ten important facts about charitable tax deductions:

  1. Charitable contributions are deductible only if you itemize on your tax return.
  2. To be deductible, charitable contributions must be made to “qualified” organizations. Giving money to an individual is never deductible. To determine if an organization qualifies as a charitable organization, go to the IRS Exempt Organizations Select Check.
  3. To deduct a charitable donation of money, regardless of the amount, you must have a bank record or a written document from the charity showing its name, the date and amount of the contribution. Bank records include cancelled checks, bank or credit union statements, and credit card statements. These statements should show the name of the charity, the date, and the amount paid. Credit card statements should also show the transaction posting date.
Last modified on

Charitable Giving: Which Americans Are Most Generous?

Posted on in Finance

Charitable giving is growing at a healthy pace, a sign that Americans are a little more confident about the economy and their own finances.

Individuals, corporations and foundations donated $316.2 billion to charitable causes in 2012, a 3.5% increase over 2011, according to the annual Giving USA study, which is conducted by the Giving USA Foundation and Indiana University Lilly Family School of Philanthropy.

Last modified on

The Social Security Administration (SSA), as well as the U.S. Defense and Labor Departments, recently updated their same-sex marriage policies to reflect that the Supreme Court overturned part of the Defense of Marriage Act (DOMA) on June 26.

That ruling invalidated DOMA’s definition of marriage for federal benefits purposes as only between a man and a woman (United States vs. Windsor). As a result, same sex spouses whose marriages are recognized at the federal level must change their tax filing status from unmarried to married. That may affect their marginal tax rates, as well as their eligibility under several tax rules and the treatment of certain forms of employee compensation.

Last modified on

IRS Notifications and Rulings that Target Small Businesses

Posted on in IRS

If your business receives a Notification of Possible Income Underreporting from the IRS, you are not alone. The IRS has sent out about 20,000 of these letters, which imply that the taxpayers underreported cash receipts.

Not an Audit

IRS officials say these letters do not constitute an audit. The tax agency is merely asking taxpayers to review the accuracy of their tax returns and, in many cases, provide additional documentation.

Last modified on

Plan Ahead as if You Will Be Audited

Posted on in IRS

While your chances of being audited may be relatively low, planning as if you will hear from the IRS could help you survive a challenge. A recent U.S. Tax Court case illustrates why keeping meticulous records and operating in a business-like fashion can mean the difference between claiming tax deductions and having them disallowed.

Last modified on

Stay on Top of Retirement Tax Angels

Posted on in Tax

Compounding of earnings and starting to save early have a tremendous positive effect on how much you accumulate for retirement. But to make the most of compounding, you also need to be smart about taxes.

If you don’t plan ahead, the federal and state governments could collect a huge portion of your retirement savings. Uncle Sam can take as much as 39.6% (up to 35% in 2012). When you add in state taxes (if applicable), as well as phase-out rules that can reduce or eliminate tax breaks as income rises, you could be looking at an effective marginal tax rate of 49.6% or higher.

Last modified on

Unraveling the Complexities of the Healthcare Law

Posted on in Healthcare

October 1, 2013 is an important date in the implementation of the Affordable Care Act (ACA). That is the date when open enrollment for health insurance coverage through the new “marketplace” begins.

As part of the marketplace, which is scheduled to begin January 1, 2014, individuals and employees of small businesses will have access to coverage through a new competitive private health insurance market. According to the U.S. Department of Labor (DOL), “the Marketplace offers one-stop shopping to find and compare private health insurance options.”

Last modified on

How to Protect Against Tax Identity Theft

Posted on in Tax

Congress recently gave the IRS failing grades for not adequately preventing, identifying and processing identity theft cases involving tax returns. One member of Congress called tax identity theft “an epidemic that is profoundly unacceptable.” Another joked that if bank robber Willie Sutton were alive today, he’d target the IRS.

In the past couple of years, the IRS has announced that it is cracking down on the problem. Yet the number of tax identity theft cases rose to 1.9 million through June 2013, up from 1 million in 2011, according to the Treasury Inspector General for Tax Administration.

Last modified on

Business owners and executives help to shield themselves from personal liability by operating as a corporation or limited liability company. This provides protection from exposure in certain legal disputes. However, as one recent court ruling illustrates, an owner or executives can be held individually responsible for unpaid overtime pay under the federal Fair Labor Standards Act (FLSA).

How employees are classified – as exempt or non-exempt – is not a decision to be taken lightly. Depending on the details of the job, it could mean the difference between workers getting paid for overtime hours or not. If the answer is not clear-cut and if the employees in question suspect they are underpaid, businesses could find themselves embroiled in a lawsuit.

Last modified on

How Much Foreign-Bond Exposure Do You Need?

Posted on in Finance

The European debt crisis took a toll on many world bonds in 2011. The performance of world- and emerging-market bonds may have you wondering how big a role foreign bonds should play in a portfolio, particularly for pre-retirees and retirees. As with most asset-allocation decisions, setting a strategic, long-term allocation to foreign bonds can help you avoid being whipped around by market sentiment. Your decision also depends on where you are in your investing life cycle and on your goals. Younger investors who are in growth mode might look to foreign-currency exposure as a source of diversification. For investors nearing retirement, the bond sleeve of their portfolios may provide stability more than diversification or return-generating potential. A retired investor with a more conservative foreign-bond investment might stake more in such an offering than another retired individual with an investment that's heavy on emerging-market debt. If you have a high weighting in foreign stocks overall, bear in mind that layering on a foreign bond will further subject your portfolio to currency fluctuations.

Last modified on

Benefits of Staying Invested Through Market Volatility

Posted on in Finance

The recent market volatility has investors questioning, “Are stocks still a good investment?” It’s a good question, and one way to address this issue is to look at the recent 2007 – 2009 market crash. Investors who bailed out of the stock market following the significant decline and moved their money to the safety of cash would be quite disappointed to learn that the stock market, in fact, recovered significantly.

Last modified on

Three Popular ETF Questions Answered

Posted on in Finance

Although the exchange-traded funds, commonly known as ETFs, have existed for almost two decades, they’ve only recently caught on with investors. The ETF market has evolved, and investors now have hundreds of ETFs from which to choose. Here are three commonly asked questions to consider when adding ETFs to a portfolio.

Q: What is the difference between the ETF market price and net asset value (NAV), and why do ETFs trade at a premium or discount?

Last modified on

So, You're Ready for Retirement...Or Are You?

Posted on in Finance

In the past, retirement planning used to involve two planning stages: the accumulation of assets, and the distribution of assets. Nowadays, there may be three periods to consider: accumulation, transition, and distribution. “Transition” can be defined as the period between full employment and full retirement when a person is working on a reduced or part-time basis.

Last modified on

In multiple cases this summer, the Equal Employment Opportunity Commission (EEOC) has taken action against employers for allegedly discriminating against disabled individuals.

This follows an increase in the number of disability discrimination charges filed during the previous six years. The EEOC has not given a reason for the increase, but most HR professionals and employment law expert attribute it to factors including the aging population and an expanded disability definition that went into effect in January 2009.

Last modified on

IRS Announces Postponement of FATCA Deadlines

Posted on in IRS

The IRS recently announced that certain withholding and due diligence deadlines under the Foreign Account Tax Compliance Act (FATCA) are postponed for another six months, until June 30, 2014 (IRS Notice 2013-43).

The new law targets non-compliance by U.S. taxpayers through foreign accounts and establishes a global approach to fighting offshore tax evasion. The Treasury Department stated the delay is “due to overwhelming interest from countries around the world” and will provide foreign financial institutions (FFIs) with more time to comply with FATCA.

Last modified on

A new 3.8% Medicare surtax is now imposed on net investment income collected by higher income individuals, estates and trusts. The tax, which the IRS calls the NIIT, is effective for tax years beginning on or after January 1, 2013.

The NIIT can also have an impact on the income, gains and losses from partnerships and S corporations. This article discusses these issues, based on recent guidance from the IRS.

Last modified on

The 2010 healthcare legislation created a new 3.8% Medicare tax on net investment income collected by individuals, estates and trusts. The new tax, which the IRS calls the NIIT, is effective for tax years beginning on or after January 1, 2013. So it’s not officially time to start planning to avoid or minimize the tax for this year. To do that, you need to understand how it works. Helpfully, the IRS issued proposed regulations that provide much-needed details.

Here is the impact of the new tax on:

Last modified on
  • Talk with your children about credit. In the Sallie Mae student survey on college credit card use, one-third of the undergraduates had never, or only rarely, discussed the subject with their parents. Nearly 85% indicated they needed more education on financial management topics.
  • Help your child select an appropriate credit card.Try to convince your child to get a debit card instead of a credit card, so he or she can’t get into too much debt. If your child obtains a credit card, you should help select it. With your child, go through several credit card offers, comparing interest rates, annual fees, grace periods, and penalties.
Last modified on

Arm Your College Student Against Credit Card Debt

Posted on in Finance

Sending a child off to college is associated with a host of parental worries. Fortunately, one of them will be alleviated by the Credit Card Accountability, Responsibility and Disclosure (CARD) Act, which is designed to protect college students from some of the predatory lending practices common on campuses today. The law went into effect in February of 2010.

This is good news for parents of young adults, who have often found themselves in the difficult position of bailing their children out after charging thousands of dollars, or watching them struggle with overwhelming balances.

Last modified on

Chasing Performance

Posted on in Finance

Investors often endure poor timing and planning as many chase past performance. They buy into funds that are performing well and initiate a selling spree following a decline. This becomes evident when evaluating a fund’s total return compared with the investor return. Overall, the investor return translates to the average investor’s experience as measured by the timing decisions of all investors in the fund.

The image below illustrates the investor return relative to the total return for a given fund. Over the short term, both the total and investor returns were positive and relatively similar. Over a 10-year period, however, total return greatly exceeded investor return. Investors who attempted to time the market ran the risk of missing periods of exceptional returns.

Last modified on

New York Income Tax: Appellate Court Upholds MCTMT

Posted on in Tax

A New York appellate court has reversed a lower court's ruling that the metropolitan commuter transportation mobility tax (MCTMT) was unconstitutionally passed by the Legislature without a home rule message. The lower court found that the tax was a special law that did not serve a substantial state interest. However, the appellate court concluded that the law, which provides a funding source for the preservation, operation, and improvement of essential transit and transportation services in the Metropolitan Commuter Transportation District, does serve a substantial state concern. Therefor, the law was not unconstitutionally passed without a home rule message.

Mangano v. Silver, Appellate Division of the Supreme Court of New York, Second Department, Nos. 2012-09463 and 2012-09991, June 26, 2013

Last modified on

Even though it’s all about dollars and cents, the financial industry runs on percentages; dollar signs are few and far between. The use of percentages is an understandable, and helpful, convention when communicating financial information. After all, a headline saying “Company A’s Net Jumps by 16%” is more helpful than one that reads “Company A’s Net Jumps $1.02 Billion.” Providing percentages rather than dollars also allows investors to compare apples to apples: you can readily discern that an investment that has gained 8% during the past 10 years has been a better bet than one that has gained half as much.

Yet dealing in percentages, especially relatively small ones like inflation rates, expense ratios, and long-term annualized returns, can also distract from important information that factors into your financial plan. Those small and innocuous-looking percentage figures, when translated into dollar terms and compounded over many years, can make a huge difference between success and failure.

Last modified on

Update on Affordable Care Act

Posted on in Healthcare

The Affordable Care Act imposes a little-known new fee on certain employers and health insurance companies. The first payments are due on or before July 31, 2013.

The Patient-Centered Outcomes Research Institute (PCORI) fee may take some employers by surprise. While many organizations are focused on the healthcare law’s “employer mandate” which was just delayed until 2015, they may have overlooked the PCORI fee.

Last modified on

Delay in Affordable Care Act Employer Mandate

Posted on in Healthcare

The bombshell July 2 announcement came in the form of a blog post on the U.S. Treasury Department’s website, accompanied by a statement issued from the White House. The employer “shared responsibility” provision is being delayed one year, until 2015. The move was described, essentially, as a consequence of the IRS’ failure to provide employers and health plans with guidance for their reporting obligations under Section 6055 and 6065 of the Affordable Care Act (ACA).

Last modified on

Required Minimum Distribution Tips and Traps

Posted on in Tax

The tax-deferred compounding you get via an IRA or a company retirement plan enables you to grow your savings without having to fork over taxes on your investment earnings year in and year out. However, at some point, required minimum distributions, or RMDs, will take effect. All retirees must begin taking RMDs from their tax-deferred retirement plans by April 1st of the year following the year in which they turn age 70 ½. They must continue to take distributions by December 31st of each year thereafter. Roth IRAs aren’t subject to RMDs. However, you exert more control than you might think over the timing of your RMDs, as well as over which accounts you tap. Here are some tips for getting the most out of your RMDs, as well as some traps to avoid.

Last modified on

Know Your Risks

Posted on in Finance

Risk is the chance that you won’t be able to meet your financial goals or that you’ll have to recalibrate your goals because your investment comes up short. Investors face many forms of risk depending on the kinds of investments they choose.

Market, industry and company risk: General market fluctuations can affect securities trading in that market. Stocks tend to fluctuate more than other asset classes, and may pose more risk over short periods of time. Investors looking to time the market run the risk of jumping into the market during the worst times, and out of the market during the best times. Security values can also decline from negative developments within an industry or company.

Credit and interest-rate risk: Credit risk is the possibility of a bond issuer not being able to make timely payments of principal and interest. The value of a bond may also decrease due to financial difficulties or the declining creditworthiness of the issuer. Interest-rate risk relates to how bonds tend to rise in value when interest rates fall, and to fall in value when interest rates rise. Typically, bonds with longer maturity exhibit greater price volatility.

Last modified on

Evolution of a New Non-GAAP Reporting Option

Posted on in Finance

Landscape

  • Millions of privately held companies throughout the U.S. do not need or are not required to have financial statements prepared in accordance with U.S. GAAP (generally accepted accounting principles).
  • Such companies usually are smaller enterprises, do not plan on a change in ownership soon, do not intend to go public and are not in highly specialized industries.
  • Many owner-managed, for-profit businesses do not have CPAs on staff. They rely on their CPA firms as trusted business advisors.
  • While some small businesses have found the cash or tax basis of accounting acceptable, these bases may be insufficient or inappropriate for other companies or users looking for more robust and relevant financial information.
Last modified on

The AICPA’s new Financial Reporting Framework for Small- and Medium-Sized Entities is designed for America’s small business community. The FRF for SMEs accounting framework delivers financial statements that provide useful, relevant information to owners of private companies and other stakeholders in a simplified, consistent, cost-effective way.

Last modified on

Summer means teenage employment will rise at many workplaces. More working teenagers means an increase in potential risks for employers, including the risk of harassment and other illegal treatment.

If your organization employs teenagers, don’t cut corners when complying with federal and state employee-protection laws just because the employees are young.

The U.S. Department of Labor (DOL), the Equal Employment Opportunity Commission (EEOC) and the Occupational Safety & Health Administration (OSHA) all have websites to actively inform teenagers of their rights:

Last modified on

The first thing you need to know is – do you qualify as a fiduciary? The answer should be clear from your plan document, which spells out plan governance. There is a “named fiduciary,” which may simply be a title, such as a CEO. A plan trustee is a fiduciary, and you probably have a retirement plan committee, the members of which may serve in a fiduciary capacity.

This role is also determined by function. You may be what is known as a “functional” fiduciary if you made key decisions about the basic operation of the plan, like vendor selection. But this doesn’t mean every choice you make on behalf of the plan is considered fiduciary. Some decisions fall under what is called the “business decision exemption,” for example, plan design, or the choice to terminate a plan.

Last modified on

The Importance of Saving for Women

Posted on in Finance

Women face a different set of financial-planning challenges than men because they tend to live longer, earn less, and take more breaks from the work force. Women may also experience more difficulties if they are widowed or divorced. The good news is that women tend to save more. According to Vanguard’s “How America Saves 2012” report, women saved at rates about 5% to 10% higher than those of men across every income group. However, even though their savings rates were higher, women’s balances in savings accounts tended to be lower than those of men because women, on average, had lower incomes. This illustrates the extreme importance that saving (and starting to do so early) has for women. It’s not always easy, but managing debt, controlling expenses, and contributing to a retirement plan can make a world of a difference down the road.

Last modified on

What Is a Bond Ladder

Posted on in Bonds

Laddering a bond portfolio means that you buy bonds with varying maturity dates, for example: one bond maturing in a year, another in three years, and two others maturing five and 10 years from now, respectively. When the bonds mature, the investor can either spend the proceeds, which would necessitate matching the maturity dates of the bonds in the ladder to spending needs (for example, when college tuition comes due each year) or reinvest in another bond that matures at a later date.

Laddering is, above all, a diversification strategy, enabling you to spread your assets across multiple credits with different characteristics, thereby mitigating the risk of sinking a lot of your assets into a single bond that defaults. And if you're reinvesting your proceeds when a bond matures, laddering helps you further diversify across multiple interest-rate environments.

Last modified on

What You Need to Know about Health Savings Accounts

Posted on in Finance

Health Savings Accounts (HSAs) are growing in popularity, and more companies are offering them to their employees. Many people, however, are confused about what these plans are and when it is appropriate to take advantage of them.

What is an HSA? Health Savings Accounts were created by a provision in the Medicare Prescription Drug Improvement and Modernization Act of 2003 and signed into law in December of that year. The purpose of creating the accounts was to provide a way for Americans to prepare for the future medical costs and lower their health insurance premiums by switching to higher-deductible medical plans. Employers can establish plans for employees, and HSAs are also offered by banks, credit unions, insurance companies, and other approved companies.

Last modified on

Understanding Risk Tolerance and Risk Capacity

Posted on in Finance

When determining an appropriate asset allocation mix, it is important to consider not only one’s risk tolerance, but also one’s risk capacity.

An investor’s risk tolerance refers to his or her aversion to risk, while an investor’s risk capacity relates to his or her ability to assume risk. Sometimes, an investor’s risk capacity and risk tolerance do not match up. If an investor’s capacity to take risk is low but the risk tolerance is high, then the portfolio should be reallocated more conservatively to prevent taking unnecessary risk. On the other hand, if an investor’s risk capacity is high but the risk tolerance is low, reallocating the portfolio more aggressively may be necessary to meet future return goals. In either case, speaking with a financial advisor may help to determine if your risk tolerance and risk capacity are in sync.

Last modified on

Healthcare Reforms on Tap

Posted on in Healthcare

The Patient Protection and Affordable Care Act (ACA) will continue having a major impact on the hospital industry. Significantly, it is designed to increase access to healthcare services, improve the quality of services and reduce overall costs. Here are several upcoming changes that should be considered:

Last modified on

9 Key Factors Driving Hospital Valuations

Posted on in Healthcare

There are nuances in providing valuations for virtually every type of business entity ranging from retail outlets to manufacturing operations to personal service firms. But valuations for hospitals and other organizations in the health care field are especially daunting.

Currently, hospitals face some unique challenges, including difficult economic conditions, increased competition and burdensome reporting requirements. In addition, the main provisions in the 2010 healthcare law – the Patient Protection and Affordable Care Act (PPACA) – kick in next year, further complicating matters.

Last modified on

1.      Clear the clutter. As the old saying goes, “looks can be deceiving.” That’s certainly true when it comes to a cluttered home. Potential buyers need an accurate picture of the size of the house. If you’ve cluttered up your home and garage, it will be difficult for prospective buyers to get a real sense of the space. 

Get rid of the extra junk in closets, attics and basements before you put the house on the market. Pare down the stuff on shelves and tables too, and limit the gadgets on kitchen counter tops.

2.      Remove yourself from the equation.While you might be attached to your children’s school photos, trophies and other mementos, the people looking at your house won’t be. Prospective homebuyers may have a harder time seeing themselves living in the house if your personal touches are everywhere. 

Tip: don’t hover when the potential buyers are checking out the house. Buyers will appreciate a simple walk-through with their realtor without your input.

Last modified on

Tax and Other Considerations When Selling Your Home

Posted on in Tax

The prime residential real estate selling season is in full swing – and 2013 looks like it could be a good time to sell, depending on your situation. Mortgage interest rates are down and the National Association of Realtors reports that home sales are up, compared with a year ago.

So, while prospective sellers are making their properties look like model homes in the hopes of raking in a nice profit, this is a good time to review how taxes will factor into the transaction. With the home sale gain exclusion tax break, the profit from selling your principal residence might be free from federal income taxes (and possibly state income taxes, too). The rules are straightforward for most sellers.

Last modified on

Health Savings Account Limits for 2014

Posted on in Healthcare

With Health Savings Accounts (HSAs), individuals and businesses buy less expensive health insurance policies with high deductibles. Contributions to the accounts are made on a pre-tax basis. The money can accumulate year after year tax free, and be withdrawn tax free to pay for a variety of medical expenses such as doctor visits, prescriptions, chiropractic care, and premiums for long-term-care insurance.

Participating employers can also contribute to accounts, on behalf of their employees.

Last modified on

New Changes in Auditors Reports for Nonprofits

Posted on in Auditing

Beginning with the latest wave of auditor reports, managers of nonprofit organizations can expect to see some significant differences from prior year. Reason: The Clarified Auditing Standards became effective for audits of periods ending on or after December 15, 2012.

These new standards feature several significant changes, including new terminology and changes in the form and content of the report, which will be reflected in 2012 reports for calendar-year organizations.

Last modified on

The Bernie Madoff scandal, which was first uncovered in 2008, sent shock waves through the financial services community. The infamous Madoff was accused of swindling investors in a massive Ponzi scheme the likes of which had not been seen before. Prosecutors estimated the size of the fraud to be $64.8 billion. Eventually, he pled guilty to 11 federal crimes, was sentenced to 150 years in prison and ordered to pay restitution of $170 billion.

But Madoff is not the only high-profile con artist accused of bilking investors and business associates out of large sums of money. In one recent investigation, as reported by the FBI and culled from court documents, another criminal was recently brought to justice.

Last modified on

A Few Tips for Reporting Tips

Posted on in Tax

Employees who receive cash tips of $20 or more in a calendar month are required to report the total to their employers. These employees must provide written reports by the tenth of the following month. Employees who receive tips of less than $20 in a calendar month aren't required to report their tips to employers, but are still required to report the amounts as income on their tax returns.

Last modified on

How Safe Is Your Insurance Policy?

Posted on in Finance

So you've finally sat down with your financial advisor and answered important questions, such as do you need life insurance, how big of a policy do you need, and what type makes the most sense for you. One thing you don't want to happen after purchasing your life insurance policy is to find out the company that sold you the policy has run into financial trouble. If your insurer went out of business, not only would you be uninsured, but you would also have to reapply for a new policy at a potentially more expensive rate due to your age and health.

Last modified on

Investing with a Long-Term Focus

Posted on in Finance

It’s easy to follow a long-term investment strategy in good times; the hard part is sticking with it during bad times. What should you do if you are a long-term investor sitting in the midst of a bear market? If you are holding a well-diversified portfolio, the answer is rather straightforward: stay the course.

Volatile markets can cause investors to abandon their long-term goals for risky short-term investment strategies. Volatility can range from a single-day market crash to extended periods of jagged performance. The market has undergone cycles with high and low annual returns from 38% (1995) to -37% (2008) over the past 50 years. It can be tough to stay the course in the face of such fluctuations.

Last modified on

How Can Grandparents Help with College Costs

Posted on in Tax

If your grandchildren are fortunate enough to have you chip in with their college costs, there are a few things you need to be aware of before you start writing checks.

The most straightforward way for a nonparent to help a student pay for college is with a cash gift. Gift tax rules in 2013 allow any individual to give another individual up to $14,000 per year ($28,000 from a couple) without the gift counting against the lifetime estate tax exemption. A problem with this approach is that your contribution will be taken into consideration when the student applies for need-based financial aid. Cash given directly to a student the year before he or she applies may be considered student income, reducing need-based aid by as much as 50% of the amount given. Furthermore, money held in the student’s name is treated as a student asset, reducing aid by another 20%. Cash given to the parents also counts against financial aid, albeit at a much lower rate of up to 5.64%. To potentially avoid any financial aid impact with a cash gift, keep in mind that the Free Application for Federal Student Aid takes into account income from the prior year in determining need-based aid. Hence, consider giving the money when you know the student will not be applying for aid next year.

Last modified on

Making Up for Retirement Shortfalls

Posted on in Finance

Given the backdrop of economic uncertainty and the rise in both life expenctancy and medical costs, prospects look difficult for those facing retirement shortfalls. Fortunately, a financial advisor can show you how pulling these key levers can help your retirement nest egg last.

Last modified on

Social Security for the Self-Employed

Posted on in Tax

If you thought that running a successful business on your own was hard enough already, think again. As a self-employed individual, defined by the IRS as someone who operates a trade, business or profession, (either by yourself or as a partner), you are required to pay self-employment tax as well as income tax. Self-employment tax consists of Social Security and Medicare taxes, similar to those withheld from the pay of most wage earners. Failure to comply with IRS regulations may result in your business operations being jeopardized. The following are a few key facts to keep in mind:

1. The Social Security tax rate for 2013 is 15.3% on self-employment income up to $113,700. Should your net earnings exceed $113,700, you continue to pay only the Medicare portion of the Social Security tax, which is 2.9%. Starting this year, the Medicare tax rate for net earnings in excess of $200,000 ($250,000 for joint filers) is increased to 3.8%.

Last modified on

A Beginner's Guide to Credit Cards

Posted on in Finance

Credit cards are magic little pieces of plastic that allow you to use money without having it, right? Wrong. The reality is that credit cards are magic little pieces of plastic designed to make money for the credit-card companies. Not being aware of your full responsibilities as a credit card holder can bury you deep in debt and significantly limit your access to credit in the future. Therefore, it is crucial for you, the consumer, to be aware of all the little details of credit-card transactions.

A credit card is a valuable convenience, since it means you don’t have to carry cash around anymore. But it definitely does not mean that you can make unlimited purchases and not pay for them, as some people may think. With a credit card, all the purchases you make during a certain period of time are allowed to accumulate, and you receive a bill (statement) for the total amount spent at the end of that time period (usually a month). Once you get the bill, you have a grace period—normally 20 to 25 days—until the due date.

Last modified on

Financial Preparations for a Natural Disaster

Posted on in Finance

As residents of areas affected by Hurricane Sandy found out, a natural disaster can bring out not only emotional hardship, but financial hardship as well. From keeping important documents safe and accessible to having enough cash on hand to get by until things return to normal, being prepared for a disaster is an important part of protecting your home and your family. It could be a natural disaster like a hurricane, tornado, flood, fire, mudslide, or earthquake. Or it could be something on a more limited scale like a power outage. Whatever the crisis, taking the steps below will help you better handle whatever might come your way.

Last modified on