Year-End Tax Planning

Happy Holidays from Capaldi Reynolds & Pelosi 
Authors: Jennifer Wallace, CPA and Jason A. Mendick

INDIVIDUALS

Tax planning can help you minimize your tax liability in both the current year and future year giving you, rather than the government, the use of your money for investment, business, or personal purposes. Timing the payment of deductible expenses or when income is received can permanently reduce your taxes or defer some of your tax to a future year.

To obtain the maximum benefit, you need to be able to project your tax situation for the current and subsequent years. Based on those results, you can decide what actions are needed before year-end. If you expect your current year tax rate to increase in the subsequent year, then you may want to consider deferring the payment of deductible expenses and accelerating income in the current year. Conversely, you may want to prepay deductible expenses and defer income in the current year if you anticipate a lower tax rate in the following year.

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Business Health Checkup: Pre-tax Net Income

Authors: David Wagstaff and Calvin Longer 

Periodically we will highlight a ratio or benchmark and talk about how you can use these to better understand your business.

The disclaimer: Benchmarks and ratios, blindly applied, can be dangerous. Benchmarks can be useful in understanding areas to investigate, but it’s important to understand what’s being compared and why variances might exist.

Benchmarking Run Amok

Alarmed, a client called me. He had been running some benchmarks and saw his company had over 10 times the number of people in its collections department as other loan collection companies its size. The client was in the process of engaging consultants to help “right” size the department and wanted strategies for how to reduce staff. We conducted a day-long preliminary assessment and found the problem wasn’t with the number of staff but rather the choice of “comparable” companies. The subject company was collecting on $5,000 used auto loans and the comparables were banks that were collecting on $250,000 mortgages (a 50 to 1 ratio). It naturally takes many more staff to collect on $250,000 worth of used auto loans than to collect on a single $250,000 home loan.
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Have you thought about Exit Planning?

Author: Michael J. Reynolds, CPA, CEPA 

If you’re a business owner, one of your most valuable assets is your business.

It is also probably true that you devote a lot of time and thought to managing and growing your company and much less time imagining your company if you are not part of it. Have you ever asked yourself:

  • What will happen to my business if I am no longer able to run it – for example, if I suddenly become too ill to run the business?
  • When am I planning to step down to let the next generation of my family take over my business, and is the next generation ready to do so? Do I have family who are willing to take over the family business and do they have had the proper training and experience to do so?
  • Who would assume the responsibility that I have to my customers and employees if suddenly I were unable to work?

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Charitable Contributions – A Sound Strategy for Tax Reduction

Author: Frank Pelosi, CPA, CVA

One of the strategies to reduce your taxable income is to make a charitable contribution to a qualified organization before the calendar year ends.

DonateCommon examples of qualified organizations include churches, religious organizations, nonprofit educational organizations, nonprofit hospitals and medical research organizations, volunteer fire companies, etc. Some foreign charities also qualify as qualified organizations. To ensure that you are eligible for a charitable contribution deduction, ask your organization if it is a qualified organization OR you can use the online tool
[1] on the IRS website to determine the status of an organization.

In addition to assuring that the contribution is to a qualifying organization, it’s important to maintain proper documentation of your contribution. A valid charitable contribution may be disallowed by the IRS if not adequately substantiated.

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Assessing the Potential Impact of the Supreme Court Ruling on Maryland Tax Law on Individuals

Estimated $200 Million in Refunds Will Be Made Available to Maryland Residents… Will Residents of Your Home State Benefit Next?

Maryland v. WynneMonday, May 18th marked the date of a landmark ruling by the U.S. Supreme Court. In a five-to-four ruling, the Supreme Court ruled (in Comptroller of the Treasury of Maryland v. Wynne et ux.) against the Maryland tax law’s double-taxation treatment of income earned by residents who work out of state. Maryland’s current tax structure is based on a two-tier system, whereby residents are assessed a state tax of up to 5.75% on their income, in addition to a county tax of up to 3.2% depending on the resident’s county of domicile. Residents who earned income from out-of-state sources, and thus paid tax to those foreign jurisdictions, were afforded a credit for taxes paid on the state portion of their income tax assessment, but not for the county portion. Thus the Supreme Court ruled that the failure to allow a credit on all taxes imposed by the state of Maryland was “inherently discriminatory and operates as a tariff”, and is thus unconstitutional under the dormant Commerce Clause, which grants the federal government regulatory authority over the states where instances of double-taxation that might discourage interstate commerce are found.
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The Press of Atlantic City Features Capaldi Reynolds & Pelosi

As published in
The Press of Atlantic City – posted here with permission.
See original article.
Author: Martin DeAngelis

Capaldi Reynolds & Pelosi is a mature institution, an 80-year-old accounting firm whose chairman, Bob Reynolds, has been with the business for 57 years. But the company has been on a growth spurt lately, adding 26 new partners and staff members in 24 months and doubling the size of its Northfield offices to hold all those people.

In October 2012, Capaldi Reynolds had 34 accountants and 44 total employees. By last October, after a series of mergers, the firm was up to 52 accountants and 70 employees, meaning it had grown by close to 60 percent in just two years — and in a region where the business climate has suffered badly in that same time.

Matt Reynolds, one of three managing partners, starts that growing-up-fast story in November 2012, when Capaldi Reynolds merged with Morowitz & Co., of Galloway Township, and added seven people to CRP. Read more

Investing in Bonds & Stocks 101

Stocks & BondsWhen it comes to constructing a portfolio it is generally not a matter of stocks or bonds, it is a matter of both. As a matter of fact, there are two other asset classes, cash and alternative investments that also should also be considered for a well-diversified portfolio. The percentage of each asset type, a.k.a. asset allocation, is the prime determinant of your portfolio’s return and volatility. Asset allocation is based upon the investor’s risk tolerance, which is a function of many factors including age, stability of income, family responsibilities, other resources, personal plans, and propensity for risk. There are also a number of objectives to consider such as the desire for capital preservation, current income, growth, risk aversion, and tax issues. A financial planner can assist you in determining your risk tolerance and developing an appropriate comprehensive plan.
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Make Your Personal Financial Life More Effective (Part 1 of 2)

There are many core principles that each of us regularly follow throughout our lives. These principles help us navigate through the many decisions we make daily.
I have 10 favorite axioms that I follow — and share with my college classes and clients — to make personal financial life more satisfying and effective. Sometimes, many years after the class or meeting, former students and business acquaintances reflect upon the axiom and remark how it positively influenced their lives.

Here are the first five:
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Capaldi Reynolds & Pelosi acquires Lavinsky, Horowitz & Pollard

Capaldi Reynolds & Pelosi, (CRP) is pleased to announce Lavinsky, Horowitz & Pollard (LH&P), CPAs and Business Advisors have agreed to join our team to form the largest locally based accounting, tax, audit and business advisory firms in South Eastern New Jersey.  Jointly the new firm will have 36 CPA’s and along with our sister company CRA Financial Advisors will have over 70 employees.
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