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    What the CARES Act Means for RMD’s

    When it comes to required minimum retirement account distributions (RMDs), the government giveth, and now giveth again.

    Earlier in the year, due to congressional approval of the Secure Act created for older Americans, the RMDs from retirement accounts are underwent a bit of a makeover. The updated life expectancy tables, which were proposed by the IRS for 2021, adjusted how you calculate those RMDs and there are two main benefits to consider.

    After 2019 the mandated annual withdrawals from your retirement accounts will begin once you reach  72, as opposed to the former 70 and a half years of age. While that age delay is a small thing, it is still helpful to those wishing to maintain account balances and defer taxes.

    The second benefit of the updated longer life expectancy calculations is that they work to make the minimum amount you have to take a little smaller. While it is true that most account holders take more than required, the IRS estimates that just 20.5% of those age 70 and older are expected to take only the minimum in 2021.  Now the government has come along to bring further financial relief to those minimum minded retirees by waiving all required minimum distributions due in 2020.

    Normally, there is a consequence if you do not take any distributions, or if the distributions are not large enough, but the Coronavirus Aid, Relief and Economic Security (CARES) Act changes this for 2020. By not taking a RMD, you can reduce your 2020 tax bill.

    Anyone with an RMD due in 2020 from a company plan, such as a 401(k), 403(b), IRA, or other defined contribution plan, is eligible.  Unfortunately, if you already took an RMD for 2020, you may be out of luck because there are generally no give backs.

    The Czar Beer team is dedicated to providing timely, accurate information on all aspects of the CARES Act and the current economic crisis that affect our clients. However, as this is all developing quickly we are here to offer support in any way we can. You can email us at info@czarbeer.com or call 212 397 2970 with any questions you may have.

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    Quick Guide: CARES Act Payroll Tax Deferral

    News of the Coronavirus Aid, Relief, and Economic Security (CARES) Act has made headlines every day since its enactment in late March. As of April 16, the Small Business Administration (SBA) announced that the initial amounts appropriated for the Paycheck Protection Program (PPP) and the Economic Injury Disaster Loan (EIDL) (including up to $10,000 emergency grants) for the COVID-19 virus situation have run out, but fear not for businesses concerned about cash flow can find solace in two other CARES Act provisions.

    One provision of the Act allows the employer portion of payroll tax deposits to be utilized if no PPP loan is forgiven. This provision seeks to alleviate the burden on employers struggling to make payroll by allowing the employer’s share of the 6.2% social security tax that would otherwise be due from the date of enactment through December 31, 2020, to be deferred and then paid in two 50% installments by December 31, 2021 and December 31, 2022. For those who are self-employed, you can immediately defer paying 50% of your self-employment tax that would be due from the date of enactment through the end of 2020 until the end of 2021 (25%) and 2022 (25%).

    This means an employer who incurs its 6.2% share of Social Security tax in 2020 may defer payment of that tax until 2021 and 2022.

    The second provision allows an employer to receive an immediate credit against those yet-to-be paid payroll taxes via the sum of the emergency medical leave credit, sick leave credit, and new employee retention credit. This will increase the cash available to businesses in the coming months. It appears these credits may also be refundable, meaning you can get cash back from the IRS for certain payroll taxes already paid.

    The Czar Beer team is dedicated to providing timely, accurate information on all aspects of the CARES Act and the current economic crisis that affect our clients. However, as this is all developing quickly we are here to offer support in any way we can. You can email us at info@czarbeer.com or call 212 397 2970 with any questions you may have.

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    How to Fraud-Proof Your Business

    We all wish we lived in a world where others think like us and have the same morals we do, but we need to forewarn you that there are people out there in the job market who don’t share your vision.  They are the small percentage of job seekers who hide important information about their job history so that you will feel comfortable enough to offer them a position.

    The problem when you encounter these types of situations is that small businesses normally don’t  take the time to prosecute employees they know or think committed fraud. These employees understand this so they tend to ride the high employment wave into jobs that no one else is available to take. With unemployment less than 4% we want to remind you how important it is that fraud prevention be part of your company’s culture, particularly during the hiring process.

    While we all attempt to avoid hiring such types, it is better to be safe than sorry in this high employment environment.  What helps most to protect against this risk is the amount of attention that a business owner devotes to fraud. Dedicating time to fraud prevention sends a powerful message to employees about its importance and empowers honest employees to help sniff out the not so honest ones.

    At Czar Beer we suggest that you structure your work and day-to-day responsibilities with an eye toward fraud prevention so that it can be stopped in its tracks. To do so we recommend several business routines that will help  minimize loss. They will also improve employee performance and security, and positively affect your overall business prosperity.

    We’ll say it again, these business routines will guard against fraud, make things better and allow you to better prosper.  Who’s listening now?

    Simple precautions can save you from future fraud trouble:

    • Research who you hire – Conduct due diligence with thorough interviews, references checks and past employer calls. Don’t skip formal background checks: they’re required to build a trustworthy team.
    • Separate duties – Don’t give any single employee too much authority. Structured separation of duties with financial checks and balances helps you avoid concentrating too much power in one person and gives you and your employees the confidence that business finances are being handled correctly.
    • Educate employees – Set up training sessions to teach employees how they can help prevent fraud with due diligence and adherence to operational guidelines, roles and responsibilities.
    • Prepare your business for fraud strikes – These strikes are most likely created internally.  That’s right, we watch the bank and credit card statements for items incorrectly posted from outsiders and the risk from inside is about two thirds as much.  Research shows that 37% of fraud is initiated by internal sources.

    By expanding precautions, you can add more security:

    • Conduct frequent account reconciliation– Only half of small business owners review bank statements, credit card charges and accounting books. Frequent reconciliation identifies financial red flags early. Online banking services provide transaction, balance and utilization reporting for easier reconciliation.
    • Fraud audits – Regular fraud audits signal your commitment to reduce fraud and keep your business secure. Reduce risk and uncover weaknesses with audits and reviews by your Certified Public Accountant.

    Whether you are a business, individual, or non-profit, the Czar Beer team can outline specific steps you should take to minimize fraud and secure your business’ sustained growth.

    For more information, contact us at info@czarbeer.com or (212) 397-2970.

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    Is “Handyman” Work Traded for Rent Bartering?

    Did you know that “handyman” work traded for rent is bartering? For some co-op and condo unit owners this sounds a lot like the superintendent or resident manager who performs a number of roles and lives on premises, but that is not the case.  In 2018 the tax court once again determined that handyman services in exchange for rent is considered bartering and therefore taxable. In the ruling a handyman traded work for the rent he owed his landlord and was required to pay tax on the value of the work performed that was applied to his rent. So why would it be different for your superintendent or resident manager?

    This is because your superintendent or resident manager falls under the convenience-of-the-employer exclusion. This rule means that an employee may exclude from gross income the value of lodging provided free by an employer if the employer does so for a substantial non-compensatory business reason.   It must occur on the business premises and since New York City requires either an on-site person or one in close proximity to the property this shows  that the housing is for the employer’s rather than the employee’s convenience and the employer must require the employee to accept the housing as a condition of employment. Thus, in order to satisfy local and federal taxation laws, the employee must live in the lodging to be able to perform the duties of their employment.  This allows for your board to provide a wonderful quality of life to your unit owners at a lower cost.

    With over 35 years of experience serving co-ops and condos, the Czar Beer team can outline specific steps you should take to minimize taxes, maximize loan eligibility, and enhance the value of your property.

    For more information, contact us at info@czarbeer.com or (212) 397-2970.

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    The No.1 Tip to Successfully Completing Your IRS Audit

    Many people dread the mere thought of an Internal Revenue Service (IRS) audit.  However, these days, you’re most likely to receive a “desk” audit whereby a missing income item or proper documentation for a deduction is requested. Sometimes this happens because the taxpayer doesn’t receive or misplaces a source of income and they don’t have an alternative source of knowledge about that income, so an adjustment is necessary.  In cases like this, the matter is then easily resolved through a payment by the taxpayer, while the IRS is successful in finding money for the government.

    At Czar Beer, we sometimes work with some clients who reveal that while they have deductions, the record keeping burdens can create a situation where the deduction amount is correct but adequate documentation is not readily available.

    We are not suggesting that everyone should drop everything else that goes on in their lives to invest a huge amount of time into meeting the IRS requirements, but we would like to take this opportunity to remind you that taxpayers are required to maintain adequate documentation for certain deductions on certain forms.   Additionally, be mindful of the fact that several tax court cases came down to negative conclusions not only for the tax due but also for not maintaining adequate records and the court upheld the accuracy-related penalties assessed by the IRS.

    To avoid this you should discuss contemporaneous record requirements with your tax professional to assure that you only spend required time, but still have the documentation needed to meet the IRS’ minimum requirements.

    Whether you are a business, individual, or non-profit, we can outline specific steps that you should take to minimize taxes, maintain appropriate records and successfully defend your deductions if you are audited.

    For more information, contact us at info@czarbeer.com or (212) 397-2970.

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    Why Choosing A Good Accountant Should Be Your Top Priority

    One of the most important decisions that you will make as a small business owner is choosing an accountant and tax advisor. In addition to being important, is can also be one of the most intimidating because this is a relationship that extends beyond just bookkeeping and will provide guidance and advice as your business grows.

    You should acquire an accountant as soon as you start your business in order to set up the proper legal structure. An incorrect legal structure can wind up costing you a lot in taxes and legal fees to correct. If you are buying a franchise or other small business, an accountant’s evaluation of the financial records is absolutely necessary.

     

    Don’t make the mistake of delaying to involve an accountant until tax time. Working with an accountant to set up the proper procedures for record keeping and financial projections can help you to avoid costly tax problems.

    Research and Interview

    Your relationship with your accountant is a relationship that deserves your time and attention. Even solo entrepreneurs will benefit from establishing a solid relationship with an accountant who can aid in setting up the business correctly and assist with questions as you grow.

    As a small business owner, you should interview small accounting firms that can provide you with the personal time and attention that you will need. Beware solo accountants who may not be able to spend time answering many of your questions because of their own workload. Regardless of whomever you choose, you need to make sure that you feel comfortable as you will be dealing with sensitive personal financial information.

    Some strategies that will help you choose an accountant or firm that best suits your needs are:

    Marshall Persky, a SCORE mentor and former chairman advises “…to build a shortlist of accountants that you would consider ‘partnering’ with because that is exactly what you are doing by hiring a business accountant.”

    • Interview in person so you can gauge your level of comfort.
    • See if they have experience with your specific industry. Accounting metrics can vary substantially by industry so you’ll want to hire a firm that has substantial experience in your are. It is also imperative that the accountant or firm has experience handling small businesses.
    • Verify credentials. A CPA (Certified Public Accountant) designation is preferable and they should have access to current tax information. The AICPA (Association of International Certified Public Accountants) maintains a directory of accounting companies that you can choose from or try to get a referral from another local small business that you trust.  The SBA (Small Business Association) suggests inquiring with your local Chamber of Commerce for networking events. Your business bank may also be able to aid you with suggestions.

    In addition to assisting you in legally structuring your business, an accountant can also be very helpful in dealing with your bank’s loan officer and the bank’s requirements for particular financial reports.  When choosing your accountant ensure that they are always available to answer your questions with clear explanations – no technical jargon.  It is imperative that you understand what you are doing financially and why you are doing it.

    Make sure you keep yourself updated.  The accountant should be accessible during the year to guide your financial decisions in growing your business and understanding your cash flow.

    Define Your Needs

    Be honest about how much time you can devote to preparing, updating and maintaining your financial records. Can you maintain your own accounting software? If not, you will need to keep organized records –  and no that doesn’t mean shoeboxes of receipts. See if your accountant can provide some training for you.

    Remember that your main responsibility is to run your business so don’t take on more than you are capable of handling. If necessary, Make a list of requirements that you would want the accountant to handle because records that are not maintained correctly can be costly.

    If you are handling the daily accounting, allow your accountant access to your cloud payroll and accounting services. This will enable the accountant to keep updated and will reduce the costs physical meetings and printing reports.

    Make Sure You Are Covered For Taxes

    Tax season is particularly hectic for both the small business owner and the accountant.

    Avoid the last minute tax crunch. Schedule a meeting with your accountant at the start of the year and supply all the relevant files and documents as early as possible.

    Find out how your accountant handles a government audit. These can be very costly in time, money and stress. In the event you would need one, it is essential that you have a good accountant to assist you.

    Use your accountant to aid in tax planning so you can avoid unexpected tax bills.

    What Are the Costs?

    The costs associated with hiring an accountant or accounting firm are very important to discuss, especially for the small business owner. Very often, you may not be able to afford a retainer structure. Even if that is the case, you will hopefully be able to develop a relationship with the accountant or accounting firm you choose that will allow you to utilize their services strategically as you grow. Efficiency with your record keeping and timely updates will help toward keeping  costs down. The expense is still worth your time as good accounting is needed to run your business effectively and avoid costly financial errors.

    Taking the time to establish a solid business relationship with an accountant who you are comfortable working with will pay off in time and money. Now that you’ve bought into the need for an accountant, stay tuned for more tax tips and tricks as tax season approaches!

    Whether you are a business, individual, or non-profit, we can outline specific steps you should take to minimize taxes, maximize loan eligibility, and enhance the value of your property.

    For more information, contact us at info@czarbeer.com or (212) 397-2970.

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    Don’t Make This Common Tax Credit Mistake

    The Internal Revenue Service (IRS) seems to be using new tools to audit interesting situations whereby a Taxpayer achieves a substantial Tax credit.

    A tax credit can be so much more valuable than a tax deduction as a deduction reduces income and then a tax rate is applied.  Therefore, the marginal savings a deduction provides is only a portion of the amount incurred. Whereas a tax credit can offer a benefit for each dollar amount spent.

    That benefit seems to have received extra attention from the IRS as we see a couple of recent tax court decisions which seemed to have discovered situations that were costing the Government money without providing the intended benefits to the economy:

    • In TC Summ. Op. 2016-81 (Berry) the taxpayer claimed $5,800 of self-employment income from the one-time sale of tools and machinery, however, self-employment income is reserved for those in their own recurring business intended to make a profit. By reporting this capital gain income as another type, Berry, then, “conveniently” qualified him for a nice earned income credit. The court moved the income to Line 21 of Form 1040, removed the self-employment tax (and earned income credit) rightly stated that a one-time sale of tools is not considered an activity entered into for profit “with continuity and regularity.”
    • In the Federal Court of Claims case Foxx v. U., 2017 PTC 46 (Fed. Cl. 2017) a

    $2,500 preparer penalty was assessed because the preparer artificially reported additional income in order to claim a larger earned income credit for a client.

    Rightly so, there are limits to what can be accomplished with Tax planning.

    Whether you are a business, individual, or non-profit, we can outline specific steps you should take to minimize taxes, maximize loan eligibility, and enhance the value of your property.

    For more information, contact us at info@czarbeer.com or (212) 397-2970.

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    How to Earn Your New York State Fuel Oil Credit

    We have all heard the two sides of the fanfare with the Green community as well as all of the new New York City (“NYC”) regulations that accompany the City’s Green initiative.  Mayor Bill de Blasio’s signing into law INT-642A, which raises the minimum biodiesel component of NYC’s heating oil to 5% (B5), went into effect on October 1, 2017.  Expanded use of biofuel in our home heating oil will reduce pollution, upgrade our air quality and improve our public health,” he noted, explaining that the increase from B2 to B5 Bioheat® fuel would have the environmental impact equivalent of removing 45,000 cars from the road.  Thus, the B5 standard makes NYC a national leader in biofuel use for home heating.

    But biodiesel is also cost-effective.  We are seeing that its cost runs the same as conventional heating oil. The City’s biofuel comes predominantly from used cooking grease that has been recycled from our restaurants across the City, and from the waste products of soybean crops.

    We want to remind everyone that New York State encourages the use of Bioheat® fuel and also offers a quite generous tax credit.  Residents who use blends of B6 (6% biodiesel) or higher can claim a direct income tax credit of up to 20 cents for each gallon they buy- one cent for each percentage point of biodiesel in a gallon of their heating fuel.

    Based on our conversations with fuel industry leaders, we understand that there is no price difference between B5 and B6 and the specifications and fuel quality in terms of performance and efficiency are pretty much the same.

    APPLYING FOR THE NYS TAX CREDIT

    To apply for the NYS Clean Heating Credit you will need your delivery receipt. Make sure your delivery receipt says the level of biofuel.  As an example, should the delivery receipt indicate “B20 Biofuel”, you will receive a 20 cent-per-gallon tax credit from New York State. You will need to send your receipt along with a completed NY State Form IT-241.

    Excerpt from the instructions for the New York State Tax Credit form:

    Tax Law section 210-B.25 provides for a tax credit for the  purchase of bioheating fuel used for space heating or hot water  production for residential purposes within New York State. The   credit is equal to one cent for each percent of biodiesel per   gallon of bioheating fuel purchased before January 1, 2020.   The amount of the credit may not exceed 20 cents per gallon.

    Bioheating fuel purchased on or after January 1, 2017, must   contain at least 6% biodiesel per gallon of bioheating fuel to   qualify for the credit.

    Bioheating fuel purchased on or after September 13, 2017, that   is comprised of renewable hydrocarbon diesel blended with  conventional home heating oil, may qualify for the credit.

    The amount of credit allowed cannot reduce the tax due to less   than the fixed dollar minimum tax under Article 9-A. Any amount not used in the current tax year may be refunded or credited as an overpayment to next year’s tax. No interest will be paid on the refund. The credit is not allowed against the metropolitan transportation business tax (MTA surcharge) under Article 9-A.

    Attach documentation showing the date of the purchase, the amount, and the percent of biodiesel in the bioheating fuel purchased by you and claimed on this form. The credit must be claimed for the tax year in which the bio heating fuel is purchased, regardless of when the bioheating fuel is used.

    Definitions
    Bioheating fuel
    is a fuel comprised of biodiesel or renewable  hydrocarbon diesel blended with conventional home heating  oil, which meets the specifications of the American Society for   Testing and Materials (ASTM) designation D396 or D975.

    Biodiesel is a fuel comprised exclusively of mono-alkyl esters of   long chain fatty acids derived from vegetable oils or animal fats,   designated B100, which meets the specifications of the ASTM designation D6751.

    Renewable hydrocarbon diesel is a domestically-produced fuel derived from vegetable oils, animal fats, and other renewable feedstocks that meet the most recent specifications of the ASTM designation D975. Renewable hydrocarbon does not include any fuel from co-processed biomass with a feedstock that is not biomass.

    Feedstock is soybean oil, oil from annual cover crops, algal oil, biogenic waste oils, fats or greases, or non-food grade corn oil, provided that the Commissioner of the New York State Department of Environmental Conservation (DEC) may, by rules and regulations, modify the definition of feedstock based on the vegetable oils, animal fats, or cellulosic biomass listed in the Code of Federal Regulations, Title 40, section 80.1426 (40 CFR 80.1426), table 1.

    Heating oil is petroleum oil refined for the purpose of use as fuel for combustion in a space and/or water heating system that meets thespecifications of the ASTM designation D396 or other  specifications as determined by the Commissioner of the New
    York State DEC.

    Residential purposes mean any use of a structure, or part of a structure, as a place of abode maintained by or for a person, whether or not owned by such person, on other than a temporary or transient basis. This includes multi-family dwelling units such as multi-family homes, apartment buildings, condominiums, and cooperative apartments.

    For purposes of the  clean heating fuel credit, the structure must be located in New York State.

    We must stress that while the City’s current mandated level is B5 or 5%, the minimum level for the NY State credit is B6 or 6%.  The value of the refundable credit is $0.01/gallon for each percentage of biodiesel blended with convention home heating oil, up to 20 center per gallon.

    Whether you are a business, individual, or non-profit, we can outline specific steps you should take to minimize taxes, maximize loan eligibility, and enhance the value of your property.

    For more information, contact us at info@czarbeer.com or (212) 397-2970.

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    The No. 1 Mistake Co-ops and Condos Can Make During Tax Season

    At Czarnowski & Beer, we always have answers when you need them- it’s just a part of the Czarnowski & Beer KARES culture! Whether you are a client, prospective client or an avid reader of our blog, we are here for you! In case you were wondering, KARES is not misspelled, it is an acronym that outlines our firm’s philosophy.  We use our Knowledge, Advisory and Resources to go the Extra mile and provide Services that go above and beyond.

    Summer is ending and you know what that means- tax estimates and tax returns will be due very soon (9/16 for estimates & 10/15 for balance dues on tax returns). While e-filing has made filing tax payments and estimates easier, occasionally something can go wrong, which can then lead to penalties and interest.

    In our experience, the typical reason a Co-op or Condo will miss a tax payment is if they switch their operating bank account in between the time when they submit the signed e-file authorization forms and the scheduled date for electronic withdrawal upon the returns being e-filed by their accountant. Accountants are supposed to confirm bank account information with the Co-op and Condo for this reason. However, if the account information is changed after the accountant has confirmed the account information present on the tax documentation, problems will likely occur (i.e. your return can be completed in July but the payments aren’t scheduled to be withdrawn until they are due on 9/15 & 10/15).  Therefore, just as a reminder, if your building has switched operating bank accounts, immediately notify your accountant so that they will be able to advise you on your best next steps.

    If the firm has not submitted the return or estimates for e-filing, then there is still time for the accountant to change the account number to the correct one. If the return and estimates have already been submitted for e-filing, there are two ways to rectify the situation: 1) notify your accountant and if the bank account is already closed, they will advise you on how to use alternative payment methods, including manual payment; or 2) notify your accountant and leave the bank account open with enough funds to be withdrawn on the scheduled payment date(s).

    Whether you are a business, individual, or non-profit, we can outline specific steps you should take to minimize taxes, maximize loan eligibility, and enhance the value of your property.

    For more information, contact us at info@czarbeer.com or (212) 397-2970.

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    Easy to Miss Tax Deductions, Part 3

    child tax credit

    Along with the loss of certain tax deductions and expansion of the standard deduction in last year’s tax act, it’s a good time to remind everyone with school age children about benefits that are easy to miss.

    The child tax credit, which was bumped up to $2,000 per child, is intended to offset the many expenses of raising children and it is refundable generally up to $1,400.    The maximum amount of adjusted gross income that you can have and still qualify for the credit was increase dramatically as well. Unfortunately, if your son or daughter is over 16 years old, you can’t use this credit to trim your tax bill.

    However, the new tax law added a separate $500 (unfortunately this one is non-refundable) credit for dependents who don’t qualify for the child tax credit. So, your older children can still save you some money at tax time – even if they’re in college. You can also claim the credit for older relatives that you’re caring for at home. The credit will help fill some of the void left by the new tax law’s elimination of personal exemption deductions, but then need to be a your dependent,

    Note, though, that the combined total of both the child credit and the credit for other dependents is phased out if your adjusted gross income is more than $200,000 ($400,000 for married couples filing jointly).

    A credit is so much better than a deduction; it reduces your tax bill dollar for dollar. So missing one is even more painful than missing a deduction that simply reduces the amount of income that’s subject to tax. In the 24% bracket, each dollar of deductions is worth 24 cents; each dollar of credits is worth a whole dollar.

    Let’s turn now to student-loan interest paid by mom and dad.  Generally, you can deduct interest only if you are legally required to repay the debt. But if parents pay back a child’s student loans, the IRS treats the transactions as if the money were given to the child, who then paid the debt. So, as long as the child is no longer claimed as a dependent, he or she can deduct up to $2,500 of student-loan interest paid by mom and dad each year. There is no need to itemize so it’s not affected by the higher standard deduction.

    With the costs of raising our children, each and every tax savings dollar helps.  While, with the paying student loan interest situation, because they are not liable for the debt, mom and dad can’t claim the interest deduction even though they actually foot the bill, there is still a tax benefit.  Hopefully your child will share their tax refund.

    Whether you are a business, individual, or non-profit – we will outline specific steps you can take to minimize taxes, maximize loan eligibility, or enhance the value of your property. With one call or email we will provide you with a professional, complimentary financial Statement evaluation – no obligation. Just visit Czarbeer.com/tax-offer or contact us at info@czarbeer.com, or call (212) 397-2970 and we will be happy to help you and answer your questions.

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    Easy to Miss Tax Deductions, Part 2

    irs tax forms

    This installment involves deductions that are easily overlooked.

    It’s hard to overlook the big charitable gifts that you made during the year, by check or your payroll deduction (if you do that, check your pay stub in December). After all you get letters from the institutions that detail it all.  However, the little things add up too. Remember that you can write off out-of-pocket costs incurred while volunteering for a charity. For example, ingredients for dishes you prepare for a nonprofit organization’s soup kitchen and stamps you buy for a school’s fund-raising mailing count as charitable contributions.  If you drove your car for charity in 2018, remember to deduct 14 cents per mile, plus parking and tolls paid, for your philanthropic journeys. The rate will be 14 cents per mile in 2019 as well.

    Let’s not forget the property we contributed as well. Whether is a drop off of dated style clothes, although with lots of life left, or furniture it was easier to have the charity pick up then arrange for a special trash pick up or your old “Kar” or boat that you gave to the “Kids”, it is all part of the charitable deduction.  Now with a higher percentage of income allowance, lets use our charitable work for something else for ourselves.

    Oh, and a reminder, keep those receipts.  You’ll need an acknowledgement from the charity documenting the support that you provided if your contribution totals more than $250.

    Hey gambling winners, those of you who get Form W-2G, don’t rush and file without looking at what gambling losses you might have also incurred.  So, if you took a trip to Las Vegas but didn’t do so well, you can deduct your gambling losses. This deduction is only available if you itemize, but it is limited. In addition to losses suffered at a casino or racetrack, deductible gambling losses also include the cost of non-winning bingo, lottery and raffle tickets.

    Go back as soon as you feasibly can and build a diary of gambling activity that includes the date and type of wagering, name and location of gambling establishments, names of people with you when you gamble, and amounts that you won or lost.   You can take deductions up to the amount of your gambling winnings, those amounts that you report as taxable income.

    When we find ourselves working to meet the deadline for our personal tax filing, it is easy to miss those things that are not readily available in the file the we keep our tax papers in.  Take the time to sit back and elaborate on all you do, all year long, and not just mention on your return what jumps into your mind during in those short sessions.

    Whether you are a business, individual, or non-profit – we will outline specific steps you can take to minimize taxes, maximize loan eligibility, or enhance the value of your property. With one call or email we will provide you with a professional, complimentary financial Statement evaluation – no obligation. Just visit Czarbeer.com/tax-offer or contact us at info@czarbeer.com, or call (212) 397-2970 and we will be happy to help you and answer your questions.

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    Easy to Miss Tax Deductions

    irs tax forms

    We routinely remind investors about these deductions arising from investments and along with certain basis additions that tend to be missing from the piles of tax information they provide us.  It’s important to take a step back and ensure we maximize benefits to our clients.  We thought sharing them here would be appreciated.

    If you purchased a taxable bond for more than its face value—as you might have to capture a yield higher than current market rates, you get to deduct that premium. That’s only fair, otherwise, the IRS would get to tax that extra interest that the higher yield produces, which you supplemented with your upfront investment.

    You have two choices about how to handle the premium. First, you can amortize it over the life of the bond by taking each year’s share of the premium and subtracting it from the amount of taxable interest from the bond you report on your tax return. Each year, you also reduce your tax basis for the bond by the amount of that year’s amortization.  This is the more time consuming and generally money saving choice.

    The other is that you can ignore the premium until you sell or redeem the bond. At that time, the full premium will be included in your tax basis, so it will reduce the taxable gain or increase the taxable loss dollar for dollar.  But any loss may not be fully deductible so it may be deferred.

    The amortization route may be a pain because it’s up to you to both figure each year’s share and keep track of the declining basis. But it tends to be more valuable because the interest you don’t report will avoid being taxed in your top tax bracket for the year—as high as 40.8%, while the capital gain (assuming you have a gain) you reduce by waiting until you sell or redeem the bond would only be taxed at 0%, 15% or 20%.

    By the way, if you buy a tax-free municipal bond at a premium, you must use the amortization method and reduce your basis each year, however you don’t get to deduct the amount amortized. This is because the interest is nontaxable.  Then the amortized basis is used when you sell, so that premium isn’t deductible then either.

    While reinvested dividends are not a tax deduction, they can ultimately be an important subtraction.  If, like many investors, you have your mutual fund dividends automatically reinvested to buy more shares, remember that each and every new purchase increases your tax basis in that fund. That, in turn, reduces the potential taxable capital gain or increases the loss when you redeem the shares. It is easy to forget to include reinvested dividends in your basis, which results in double taxation of the dividends – once in the year when they were paid out to you and immediately reinvested out of your pocket, and then later as those shares are included in the proceeds of the sale.

    If you might not be sure what your basis is, ask the fund for help. Many funds report to investors the tax basis of shares redeemed during the year since 2012. So it’s the reinvested dividends before that date which are the most likely to have been missed.

    Whether you are a business, individual, or non-profit – we will outline specific steps you can take to minimize taxes, maximize loan eligibility, or enhance the value of your property. With one call or email we will provide you with a professional, complimentary financial Statement evaluation – no obligation. Just visit Czarbeer.com/tax-offer or contact us at info@czarbeer.com, or call (212) 397-2970 and we will be happy to help you and answer your questions.

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    Income Statement Basics

    income statement

    There are several components of a financial statement for a Condominium or a Cooperative.  Through a series of articles, we wish to offer a basic understanding and, where helpful, benchmarks for you to consider versus your specific property.  These articles are in no way intended to provide a comprehensive analysis, rather, more of a resource to provide a basic understanding of the component, and answer certain questions that you may have about specific line items in order to expand the value of the document that you receive from your Board.

    These components include

    • Report letter which details the extent of procedures that were applied, any limitations on those procedures and conclusions reached by the accounting professional.
    • Balance Sheet which presents a snapshot of the financial position of the property
    • Income State which presents the revenues and expenses for the period
    • Cash Flows which presents the sources and uses of cash for the period
    • Notes which presents required and requested disclosures

    Each of the five common exhibits will be presented as separate articles which will also attempt to explain when and where another exhibit may interact or affect the component being showcased.  The articles will have a summary or explanations of the most basic components as well as a discussion of more details for each broad component.   The article on required disclosures that are included as notes to the financial statements, will attempt to offer insight into the most common disclosures for these properties and unfortunately may not include each financial statement note that is included in your property’s annual report.  As certain supplementary information is often included with these financial statements, the most common sections are all showcased together into one article.  We urge you to evaluate all of the articles to fully understand every important aspect of the finances of your property’s financial statements.  We also make ourselves available to attempt to assist with specific questions that you may have that are not covered by the articles by emailing us at info@czarbeer.com.

    The income statement transverses the entire year.  In the most basic terms, its attempting to show how much net profit there is for the year.  However, for these entities a result not close to breakeven is generally not a good thing.   That is, lenders don’t want to see recurring losses and prospective buyers might believe that monthly charges are inadequate to cover costs.  Worse, a net profit can be interpreted by owners saying that they were over charged in their monthly charges as expenses are less than what they were charged.  Always best to see a roughly breakeven as the bottom line, except…..

    Generally Accepted Accounting principles for Coop accounting makes this almost impossible because assessments for capital are considered revenue. However, where the money is spent is not an expense, its an asset for improving the real property owned by the Cooperative.  Thus, capital assessments for cooperatives seem to create a lot of income, which for you as property manager or shareholder is gone, without a deduction for an expense.  Further, a totally unimportant amount to the operation of a cooperative, Depreciation is recorded as an expense. But since the Board didn’t wish to bill shareholders (monthly maintenance) for anything more than what is needed to fund expenses, nothing is budgeted for depreciation.  We can tell you back out this and add that, but the best solution is when the accountant includes a “supplemental schedule” of financial results to the operating budget.  If they haven’t been, our guess is you would more easily review a cooperative financial statement if it was.

    Returning to the income statement, Condominiums can prepare this statement on the fund accounting approach, which is somewhat different from more general Corporation or business accounting, and not allowed for Cooperatives.  This fund style approach, though, does bode well in our presentation here as it breaks up the revenue and expenses into three categories: operating, other and capital or designated fund.  Thus, capital assessments are revenue and capital projects, improvements to common property, owned by the unit owners individually, are the offsetting expenses.  Thus, when an assessment is made to fund a project, these revenues and expense net out on a Condominium Financial Statement.  There are caveats concerning how assessments are reflected as revenue for generally accepted accounting principles.

    Whether you are a business, individual, or non-profit – we will outline specific steps you can take to minimize taxes, maximize loan eligibility, or enhance the value of your property. With one call or email we will provide you with a professional, complimentary financial Statement evaluation – no obligation. Just visit Czarbeer.com/offer or contact us at info@czarbeer.com, or call (212) 397-2970 and we will be happy to help you and answer your questions.

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    The Financial Statement Balance Sheet

    financial statement

    There are several components of a financial statement for a Condominium or a Cooperative.  Through a series of articles, we wish to offer a basic understanding and, where helpful, benchmarks for you to consider versus your specific property.  These articles are in no way intended to provide a comprehensive analysis, rather, more of a resource to provide a basic understanding of the component, and answer certain questions that you may have about specific line items in order to expand the value of the document that you receive from your Board.

    These components include:

    • Report letter which details the extent of procedures that were applied, any limitations on those procedures and conclusions reached by the accounting professional.
    • Balance Sheet which presents a snapshot of the financial position of the property
    • Income State which presents the revenues and expenses for the period
    • Cash Flows which presents the sources and uses of cash for the period
    • Notes which presents required and requested disclosures

    Each of the five common exhibits will be presented as separate articles which will also attempt to explain when and where another exhibit may interact or affect the component being showcased.  The articles will have a summary or explanations of the most basic components as well as a discussion of more details for each broad component.   The article on required disclosures that are included as notes to the financial statements, will attempt to offer insight into the most common disclosures for these properties and unfortunately may not include each financial statement note that is included in your property’s annual report.  As certain supplementary information is often included with these financial statements, the most common sections are all showcased together into one article.  We urge you to evaluate all of the articles to fully understand every important aspect of the finances of your property’s financial statements.  We also make ourselves available to attempt to assist with specific questions that you may have that are not covered by the articles by emailing us at info@czarbeer.com.

    The balance sheet is a snapshot of assets and liabilities at the end of the fiscal year.  In the most basic terms, assets are what we have and liabilities are what we owe.  After presenting the broad component of asset and liability, there is a net difference section referred to as “stockholders’ equity” (for Cooperatives) and “fund” or “members’ equity” (for Condominiums).  Fund accounting is somewhat different from more general Corporation or business accounting, so we will discuss that in a separate article on the fund balance method used for Condominiums (but not allowed for Cooperatives).

    Returning to the broad component of stockholders’ equity, it is the cash and assets contributed to the business plus the net accumulation of profits and losses since inception, less any dividends.  Being the net of what we have and have not (amounts we owe), stockholder’s equity acknowledges the net amount provided to start the business, plus the closing of the net income or loss each year since inception.  It further includes additions of capital that might be made, less any profit distributions made to shareholders. However, it is easiest considered as the total assets offset by liabilities.

    Assets and liabilities are further classified into components which vary depending on their characteristics as well as the amount of time it is expected to take for each to be converted to cash or satisfied. Generally, assets and liabilities which are expected to or can be realized or paid within one year are considered “current”.  Thus, current assets and liabilities are items either available for use “currently” (less than one year) or items needed to be paid back “currently”. Examples of current assets include cash in the bank, accounts receivable, etc., while current liabilities typically include accounts payable (bills not paid), accrued expenses (items where the bill was not received until after the end of the year), and any part of longer term debt (typically mortgages) that is expected to be paid the next year.  Longer term balance sheet components within assets and liabilities are grouped into differing categories for assets versus liabilities.

    First, let us take a look into the orphan component for assets and liabilities, “other”.  Other assets and liabilities tend to be items which may or may not provide benefit or need to be settled for more than a year to come but do have aspects which require that they not be classified as fixed assets and non-long term.  Other assets often include restricted cash, investments in mortgagee (lending institution), stock and funds that the mortgagee requires being set aside and used solely for specific purposes or as security for a loan to be the most common.  Other liabilities tend to be reflections of accounting standards that match revenue and expenses in the same period as well as items that are not expected to be resolved within the next year, but are not long-term financing.

    This category includes assets such as accrued revenues and deferred charges. Accrued revenues being assessments and similar income which has not been billed or collected but is recorded as an asset to properly match it against a related expense or expenditure.  Deferred charges are expenses which are not booked when paid or incurred in order to record the expense in a later (proper) period.

    Liabilities include deferred revenue which represents assessment or other income received but not yet recognized as income in order to match it against specific expenses or expenditures which have not yet been incurred. It may also include upfront commercial lease payments or signing bonuses which, under accounting standards, are recognized as revenue in equal amounts over the term of the lease or agreement. Accordingly, amounts received but not yet recognized as income are reflected in the balance sheet as “other liabilities”.

    Returning to the most common alternative to the current designation (expected to be converted to/from cash within the next year), are longer term assets and liabilities.  These include fixed assets, which are the property itself as well as investments which are expected to last or provide benefit to the property for more than a year.  On the liability side, long-term debt which is financing needed to be repaid over periods longer than a year.  Long-term debt may be offset by an accounting reflection of upfront costs incurred to obtain the financing, referred to as financing costs.  These are expensed over the term of the debt rather than in the period paid and thus are reflected as a reduction of the debt, although they do not reduce the payments, and thus need to be added back to truly understand the full amount of future payments.

    While specific benchmarks for a property are limited, we did want to touch upon aspects of the balance sheet you should look for.

    1. Total assets should exceed total liabilities. It is always best to have more than you owe! However, this may not be true for Cooperatives due to the fact that fixed assets are recorded at costs, generally incurred years and years ago, and then depreciated, or written off over the “accounting life” of the property, while  real estate typically increases in value over time, and available financing is based upon the increased value of that real estate and the cooperative’s ability to fund debt.  Therefore, for Cooperatives, this metric is most applicable for current assets and current liabilities.
    2. Current assets should exceed current liabilities. Cash will need to be utilized if assets don’t get realized into cash as current liabilities need to be repaid.
    3. Other assets and liabilities are not stale. Evaluate each of these and verify whether there is a chance that they will come due and produce cash or be required to be repaid.
    4. Accumulated depreciation shouldn’t exceed accumulate deficit for Cooperatives since, with intended breakeven operating budgets each year, the net amount of accumulated deficit should equal the accumulated depreciation. If it’s more, that means there have been funded net operating deficits. The question is: “Will that behavior be repeated and will you need to fund your share of operating deficits?”.
    5. There should not be net accumulated deficiency of operations by Condominiums since, with intended breakeven operating budgets each year, any deficit should net out over time. If there is a net negative amount of equity, that means there have been funded net operating deficits. The question here is: “Will that behavior be repeated and will you need to fund your share of operating deficits?”.
    6. Stockholders’ equity for Cooperatives should have a net positive accumulation of initial contributions, profits and losses since inception if the operating and capital budgeted items have been fully net breakeven. If there is a net negative amount of equity, that means there have been funded net operating deficits. Finally, the question is: “Will that behavior be repeated and will you need to fund your share of operating deficits?”.

    We wanted to loop back to another pronounced difference between Cooperatives, which have been showcased so far for fixed assets, mortgages as opposed to loans payable, and stockholders’ equity, and Condominiums, which use fund balance accounting.  This section replaces the references to stockholders’ equity above for any owner of a condominium utilizing this resource.   Condominiums utilize an equity section which reflects fund accounting in order to detail the apportionment of funds for specific uses such as operations and capital repairs.  Generally, the former is general revenue and expenses and the latter represents those funds collected for major repairs and replacements less amounts paid toward such major items.  The designation is comparable to the condominium holding funds on behalf of each unit owner to make major repairs, as needed.  However, these funds are not recorded applicable to each unit owner, but the unit owners in total, and no amount is refundable to a unit owner should they wish their funds back.  Thus, the designated fund for major repairs and replacements of a condominium is the net accumulation of initial reserve funds and capital assessments less capital projects since inception for capital budgeted items.  That really reflects what is left or available for capital projects in the future, while the undesignated Fund Equity for Condominiums offers less important financial information of the net accumulation of initial contributions, and profits and losses since inception for operating budgeted items.

    Whether you are a business, individual, or non-profit – we will outline specific steps you can take to minimize taxes, maximize loan eligibility, or enhance the value of your property. With one call or email we will provide you with a professional, complimentary financial Statement evaluation – no obligation. Just visit Czarbeer.com/tax-offer or contact us at info@czarbeer.com, or call (212) 397-2970 and we will be happy to help you and answer your questions.

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    Itemize Your Tax Deduction

    tax-tips-and-credits

    All the talk is that the new Tax Law made such huge changes to itemized deductions that many will simply not look to take many past popular write-offs, and simply use the hugely expanded standard deduction.  But for some, following this strategy blindly may miss expanded deduction opportunities. Let’s take some time to review what still can be itemized.

    Medical expenses are still deductible and limited to the excess over 7.5% of adjusted gross income.  Here is the list that the IRS has in the draft of the instructions for 2018:

    • Prescription medicines or insulin.
    • Acupuncturists, chiropractors, dentists, eye doctors, medical doctors, occupational therapists, osteopathic doctors, physical therapists, podiatrists, psychiatrists, psychoanalysts (medical care only), and psychologists.
    • Medical examinations, X-ray and laboratory services, insulin treatment, and whirlpool baths your doctor ordered.
    • Diagnostic tests, such as a full-body scan, pregnancy test, or blood sugar test kit.
    • Nursing help (including your share of the employment taxes paid). If you paid someone to do both nursing and housework, you can deduct only the cost of the nursing help.
    • Hospital care (including meals and lodging), clinic costs, and lab fees.
    • Qualified long-term care services (see Pub. 502).
    • The supplemental part of Medicare insurance (Medicare B).
    • The premiums you pay for Medi-care Part D insurance.
    • A program to stop smoking and for prescription medicines to alleviate nicotine withdrawal.
    • A weight-loss program as treatment for a specific disease (including obesity) diagnosed by a doctor.
    • Medical treatment at a center for drug or alcohol addiction.
    • Medical aids such as eyeglasses, contact lenses, hearing aids, braces, crutches, wheelchairs, and guide dogs, including the cost of maintaining them.
    • Surgery to improve defective vision, such as laser eye surgery or radial keratotomy.
    • Lodging expenses (but not meals) while away from home to receive medical care provided by a physician in a hospital or a medical care facility related to a hospital, provided there was no significant element of personal pleasure, recreation, or vacation in the travel.
    • Ambulance service and other travel costs to get medical care. If you used your own car, you can claim what you spent for gas and oil to go to and from the place you received the care; or you can claim 18 cents a mile. Add parking and tolls to the amount you claim under either method.
    • Cost of breast pumps and supplies that assist lactation.
    • Medical and dental insurance premiums

     

    So add it all up and remember to reduce by any reimbursements from insurance you received and estimate your adjusted gross income threshold.

    $10,000 of deductions are still $10,000 of deductions! So, for those in high real estate or income tax states, that’s a significant percentage of a standard deduction, a long way toward the determination that standard deduction might not be enough.

    Remember, the rules for deducting interest vary, depending on whether the loan proceeds were used for business, personal, or investment activities. Also, the limits on loans have important milestone dates based on whether the date the debt was taken out either on or before December 15, 2017 or after that date. But if you haven’t refinanced since that date, the rules didn’t change. So consider using your 2017 amount for this determination.

    Generous ones, add all of those letters and notices of the deductible amount that you were sent. Don’t forget your travel to events you volunteered for charity.  Property you contributed is also still deductible.

    One of the lost deductions are casualties which are not part of federally declared disasters.  Only add the qualifying ones.  The infamous other deductions are mostly gone.  Look at the instructions if you have something specific but for these purposes, ignore it.

    Add all of this up and if it is more than $12,000 for a single, or $24,000 for a married couple, you are one of the 30% that the IRS seems to neglect to talk about, when they say most everyone will simply take the standard deduction.

    Let’s work together to make your 2018 return a money-saving masterpiece and work to cut your tax bill to the bone by claiming all of the tax write-offs that you deserve.

    Whether you are a business, individual, or non-profit – we will outline specific steps you can take to minimize taxes, maximize loan eligibility, or enhance the value of your property. With one call or email we will provide you with a professional, complimentary financial Statement evaluation – no obligation. Just visit Czarbeer.com/tax-offer or contact us at info@czarbeer.com, or call (212) 397-2970 and we will be happy to help you and answer your questions.

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    Build Fraud Resistance Into Your Business

    fraud resistance

    We all wish to live think that others think like us and have the same morals we do   You are proud or each and every quality employee within your organization and rightly, you should be. We need to forewarn you that there are bottom dwellers out there in the job market.  They do not share our morals nor believe that they have to work for a living.  They are the 5% of job seekers who hide a checkered past.  Their resume will mostly likely be black and white.  The jobs they list will be the ones that they can afford to let you know about, the missing ones will be the ones you want to know the most about.  And when asked about that gap, be ready for the explanation that you’ll say to yourself no one could make up.  You’ll feel comfortable enough to hire.

    You see small business doesn’t take the time to prosecute employees they know or think committed fraud or defalcation, and these employees know it.  So they tend to swim the high employment tide into jobs that no one else is available to take.  The better ones accumulate enough to hold themselves over to the next instance.  So, with unemployment less than 5% we remind you how important it is that fraud prevention be part of your company’s culture.

    While we all attempt to avoid hiring such types, we think you better be prepared for it in this high employment environment.  What helps most to protect against this risk is the amount of attention that a business owner devotes to fraud. That sends a powerful signal to employees about its importance and prevention.   Then, the honest ones help sniff out the cave dwellers.

    We want to suggest that you structure your work and the carrying out of day-to-day responsibilities with an eye toward fraud prevention so that this can be stopped in its tracks and then fraud is less likely to happen. We are going to suggest several business routines that will help to minimize such loss., They will also improve employee performance and security, and positively affect your overall business prosperity.  We’ll say it again, they will guard against fraud, make things better and allow you to better prosper.  Who’s listening now?

    We want you to take the time and resources to prepare your organization for fraud strikes.  These strikes are most likely to come from inside your organization.  That’s right, we watch the bank and credit card statements for items incorrectly posted from outsiders and the risk from inside is about two-thirds as much.  Surveys have shown that 37% of fraud is initiated by internal sources.

    Simple precautions can save you from future fraud trouble:

    • Research who you hire – Conduct due diligence with thorough interviews, references checks and past employer calls. Don’t skip formal background checks: they’re required to build a trustworthy team.
    • Separate duties – Don’t give any single employee too much authority. Structured separation of duties with financial checks and balances avoids concentrating too much power in one person and gives you and your employees the confidence that business finances are being handled correctly.
    • Educate employees – Set up training sessions to teach employees how they can help prevent fraud with diligence and adherence to operational guidelines, roles and responsibilities.

    By expanding precautions, you can add more security:

    • Conduct frequent reconciliation of accounts – Only half of small business owners review bank statements, credit card charges and accounting books. Frequent reconciliation identifies financial red flags early.
    • Online banking services provide transaction, balance and utilization reporting for easier reconciliation.
    • Fraud audits – Regular fraud audits signal your commitment to reduce fraud and keep your business secure. Reduce risk and uncover weaknesses with audits and reviews by your CPA.

    Whether you are a business, individual, or non-profit – we will outline specific steps you can take to minimize taxes, maximize loan eligibility, or enhance the value of your property. With one call or email we will provide you with a professional, complimentary financial Statement evaluation – no obligation. Just visit Czarbeer.com/offer or contact us at info@czarbeer.com, or call (212) 397-2970 and we will be happy to help you and answer your questions.

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    Improving Your LinkedIn Profile

    linkedin profile

    Many savvy professionals maintain their LinkedIn account for years but tend to leave it dormant in a vain effort to attract job offers or enhance their business, but then only the most dedicated “surfers” tend to find them.  Facebook and Instagram seem to draw more of our attention to supply content.  But even then, as time and life move on, so can our attention to our presentation.  Let’s take a journey into simple and effective ways for you to enhance your profile to its fullest potential.  We are hoping to show you that there is so much more you can do with your LinkedIn profile than you might have realized.

    It just seems that a lot of people create a LinkedIn profile at the beginning of their career and might go in and update it when they get a new job and such, or every now and again.  If that’s you, we are not here to tell you that you’ve been using LinkedIn wrong this whole time, but LinkedIn is so much more than an online resume to get a new job, it is truly a professional platform to showcase your work in your industry and a central place to build your brand.  We see brand building everywhere we turn in media marketing outlets.  Concepts range from giving people what they want, to drawing attention using out of the ordinary antics which then loop home to a large company’s brand.  There are concepts that use common sense and professional presentation to leave YOU as the brand to those who connect to reach you in searches.  Understanding the way LinkedIn uses analytics for searches and relying on their advice as to what works for others can set your brand on fire.  At the very least, considering that there are more than 450 million LinkedIn members worldwide, it’s more important than ever to get away from the stale resume rehash and find ways to make your profile stand out from the crowd. Ready to make your LinkedIn profile come to life?

    Newsflash: your headline is your most prime real estate on the platform, let’s face it, it’s the first thing people see in a search result and when you comment on others’ status updates and posts.  If you only have your job title and name of company, that won’t help differentiate you from the pack, no brand building there.  If you really want to stand out, skip this dull approach and instead play around with your headline to make it more interesting.

    No hiring managers or recruiters’ type in a company name when searching for candidates!   They use keywords like ‘process improvement’ or ‘lead generation,’ along with job titles, to find someone with a set of skills.

    So, when writing your headline, enter your job role (it doesn’t have to be exactly what’s on your business card), plus industry keywords to help you come up in search results, plus a branding statement that reflects how you provide value to an employer.  For instance, change “Category & Channel Manager at Office Depot” to “Award Winning Category & Channel Manager | Multi-Channel Marketing | Invigorates Brands, Sets Retail Strategy for Growth”.

    While the words you use on your profile will certainly have an impact on people, you should also choose a head shot with care.  There is no better way to make a lasting first impression.  Whether you like it or not, people will make a quick judgment on you based on your picture!  You are looking to add a clear, clean, striking head shot. While it doesn’t have to be professionally done, this is one place not to skimp, remember, you need to see your photo as the visual manifestation of your personal brand on LinkedIn.

    LinkedIn offers an option to add a background photo, and career pros say you should take advantage of this often-overlooked feature.   The background image affords you the additional opportunity to make your profile stand out to visitors. This new feature on your personal profile homepage should not be ignored because it is underutilized by most users and affords you an additional opportunity to brand yourself.   Take the time to consider what type of impression you want to make when choosing a background image—just be sure that whatever image you choose isn’t distracting and that you have permission to use it.

    Let’s not regurgitate our resume but instead work it socially.   Try to make it a conversation describing yourself and your accomplishments.  This personal approach moves you away from a profile of a chronology of places worked.  Tell your story, use the space before your work history to tag those search concepts.  People want to hear from you authentically as you tell the story of who you are and what you have accomplished.  Remember, we are more relatable when we write in the first person.  They truly want to know what YOU do and what YOU care about. This helps people see you as more real and approachable

    What’s the point of having a LinkedIn account if nobody can find you? Use the keywords recruiters will be searching for by incorporating such keywords throughout your profile, including in your headline, summary and work experience sections. This can increase the likelihood of coming up in search results and showing up on the first page of results for whatever keywords you choose if you have enough of those keywords in your profile. Recruiters are likely to contact those candidates whose profiles show up first in a keyword search. Drive traffic to your profile by adding those keywords that recruiters will search for, such as, if you are an IT specialist, Palmer suggests using keywords such as “user support,” “issue resolution,” “troubleshooting,” “configuration of laptops and PCs,” “IT conversions” and “installations.”

    LinkedIn allows you to add images, sound bites, video, PDFs and PowerPoint presentations to your profile to add context and color to your words. Instead of simply telling people why you’re great at what you do, consider showing them what you’ve accomplished by adding multimedia to your profile.  These can be a powerful way to reinforce the skills and experience you describe.  But only use good quality images, and don’t flood your profile with masses of content because generally less is more. If you’re adding videos, make them short and snappy. Your audience is unlikely to have the patience for more than a 3-minute video. So, if you do decide to use multimedia, just be sure to keep these concepts in mind.

    Seek out recommendations! These go a long way, so it is important to be sure that your LinkedIn profile contains at least a few glowing reviews from people you have worked with who can vouch for your skills, leadership style, professionalism and character.  These clearly demonstrate your credibility and allows you to stand out among your peers.  Those you work closely with can be asked if they would be willing to write a recommendation for you.  Offer those you work closely with, such as a manager, colleague or group member, to exchange recommendations.  Don’t forget your volunteer experiences, co-curricular activities and projects.  Build on that brand!  Supply recommendations to all of those in your network and see how many come back as returns.

    We are coaching you to avoid creating your profile then just walking away.  Take the time to engage in your community and share content.  It’s vital to realize that static content alone, no matter how well written, isn’t enough to get you noticed, however, engaging regularly with your network will increase your profile views. Take the time and trouble to ‘Like’ other people’s posts, share your status updates and industry information and help connections when you can by sharing resources or job leads. That simple step alone puts you well ahead of the many people who take a ‘set it and forget it’ approach to LinkedIn.

    Expand your presence by joining LinkedIn groups related to your industry to get to know people in your field.   Go further than simply joining groups, try to work at this to engage them on a weekly or monthly basis.  One basic method is to comment on an article a recruiter has published or shared with the group. This is a way to demonstrate thought leadership, display engagement and create a more natural relationship should a recruiter reach out to you.

    It is important to prioritize the information on your page.  You can manipulate the experience section to avoid following the Summary directly.  Consider moving sections up—like Projects, Publications or Volunteer—if the information there will better highlight your expertise and accomplishments.  Work to order the information strategically with the goal to strengthen your career story and personal brand to create an even stronger first impression. To reorder a section of your profile, go to “Edit Profile,” then hover your mouse over the section you want to move. Next, click and drag the vertical arrows in the top-right corner of the section, dropping the section at the place on your page where you’d like it to appear.

    LinkedIn automatically assigns profiles a URL that consists of a series of random numbers and letters. To make your profile more personalized, take advantage of the feature that allows you to create your own URL.   This is one of the easiest things anyone can do, but so many people don’t even think about it. Your LinkedIn profile URL does need to have your first and last name, not a jumble of code, to brand you properly and show that you take your online presence seriously. To change your LinkedIn URL, select “Edit Profile,” then underneath your profile picture, click the “settings” icon next to your current URL. You’ll then be taken to your public profile. On the top right of the page, click the “edit” icon next to your URL, then customize the last part of your URL (after www.linkedin.com/in/) so that it contains your name.   Once you’ve created your personalized URL, consider including it on your resume so that it’s easier for hiring managers to find you on LinkedIn.

    Assure your contact information is entered and current.  This sounds like a no-brainer, but many people make the mistake of leaving out their contact information on their LinkedIn profile. If I can only reach you through LinkedIn and we’re not connected, that limits my ability to reach out and I like people who make it easy to connect. Be sure to include the contact information that you are truly comfortable sharing.

    Ultimately LinkedIn, like all social media, is about starting a conversation, so include profile elements that encourage that.  So, take the time to work toward the goals highlighted here and improve the chance of success in your new ventures!

    Whether you are a business, individual, or non-profit – we will outline specific steps you can take to minimize taxes, maximize loan eligibility, or enhance the value of your property. With one call or email we will provide you with a professional, complimentary financial Statement evaluation – no obligation. Just visit Czarbeer.com/offer or contact us at info@czarbeer.com, or call (212) 397-2970 and we will be happy to help you and answer your questions.

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    Retirement Planning Investment Strategies

    Whats Your Plan for Retirement?

    When interest rates were bare bottom some of us felt that moving funds around to bank accounts earning more wasn’t worth our time.  Now that interest rates have moved up we wanted to loop around to remind everyone that periodic review of the returns on retirement funds is vital to any retirement plan. Money is flowing from bonds due to a perceived rise to higher interest rates, so a rotation seems to be under way.

    For those who seek to have their cash readily available, now is the time to research better return money market accounts than your standard bank or money market account.  If you are dedicated to maintaining your funds under one investment company umbrella, so everything is in one place and on one periodic statement, we suggest you call to inquire about additional options.  Be sure to question availability of funds without penalty and risk of loss of capital if you are staying with these readily available investment fund types.  Query regarding minimum balances and limits/cost of transactions, such as withdrawals.

    Online savings accounts can be a new product for some long-term investors.  What you give up in a brick and mortar bank or brokerage office, you more than make up for with higher yields.  Well-known names such as American Express, Barclays and Goldman Sachs offer these as well as internet-based only investment companies.  Again, for those concerned with availability and not locking up funds, these savings vehicles offer many aspects you are used to and interested in, yet with yields ten times what you are receiving now.  If you are leery, start small by opening an account with a minimal balance and see how the process works and your ability to verify your balances online.

    With rising interest rates a certificate of deposit or CD might not seem like a good option as you take on interest rate risk or become subject to a penalty should you need your funds.  Essentially, you deposit a sum of money for the bank to hold for a fixed term of anywhere from one to five years. You typically can’t access this money before the end of the term without incurring a penalty. But during its time sitting in the bank, your money can gain twice as much interest every year than if you’d put it in a high-interest savings account.  CDs are considerably lower risk than investing in stocks or mutual funds and are ideally suited for shorter-term savings goals. A CD is an accelerated savings account and by using a laddering strategy you can spread out maturities and have the peace of mind that a certain amount of funds will be available periodically.  An example is with $500,000 to invest and having access to $50,000 every six months. You can start the ladder using $50,000 CDs at 6 month intervals, thus one at 6 month maturity, then a year, then a year and one-half, etc.  You will end up with ten $50,000 CDs with varying rates, the longer term higher than the shorter periods.  The trick is to renew each at a five-year maturity in order to get the higher yield. The work is that you have to remind yourself to reset the term every 6 months upon renewal.

    For those concerned about the FDIC insurance levels of $250,000 per bank, many large investment houses will allow you to invest in CDs of different banks all under their account umbrella.  You receive the FDIC insurance on a larger than $250,000 balance and yet maintain the convenience of everything in one place and one periodic statement as well.

    Just to loop you back to an important thought, despite running the risk of losing your money, successfully investing in stocks has proven to work as the best long-term strategy. The best options are growth stocks and income stocks, or mutual funds or exchange-traded funds that pay regular, increasing dividends over time.  It’s coming on ten years of gangbusters returns in the stock market so we remind you that we might be at a time where there will be a pause in stock price appreciation, maybe even a longer term correction so rotating some of your positions to less riskier products discussed above might make sense. Just a reminder, you may need to pay capital gains taxes if you sell positions.

    The flip side of risky investing is not investing at all because you’re afraid of the risk. The result is that you’ll shortchange yourself and make far less money than you need. An above-average rate of return is vital to a long-term retirement investment strategy, but for those approaching retirement (within ten years) pulling some chips from the table and letting the banks hold it for you makes very good sense.

    Whether you are a business, individual, or non-profit – we will outline specific steps you can take to minimize taxes, maximize loan eligibility, or enhance the value of your property. With one call or email we will provide you with a professional, complimentary financial Statement evaluation – no obligation. Just visit Czarbeer.com/offer or contact us at info@czarbeer.com, or call (212) 397-2970 and we will be happy to help you and answer your questions.

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    Retire on Time

    Whats Your Plan for Retirement?

    Let’s face it most everyone makes that first step toward retirement by choosing the age when you WANT to stop working. But unfortunately, that becomes their last step, while it’s only the beginning when it comes to their retirement planning.  We are here to remind you what more is required in order to achieve that dream, that dream of the age you wish to retire.

    This dream is going to require a plan and when it comes to finances, plan is a four-letter word to most people.  If you’re in your 40s or 50s and you haven’t started thinking about how you will actually achieve your retirement and what you’ll do when you stop working, let’s look at the five most common mistakes so you can decide if it’s time to get serious.

    The five major reasons why people are forced to keep working far longer than they expected:

    1.     Underestimating how much money you’ll need

    While it’s hard to guess how much money you need to save to retire comfortably, it’s probably more than you realize. Generally, you’ll want to cover 70% to 90% of your working income with a combination of your savings and Social Security. If that’s more than you thought, it gets worse. The Economic Policy Institute has found that the median retirement savings for Americans between ages 56 and 61 is just $17,000. Further, more than 40% of baby boomers approaching retirement don’t have any savings at all.

    2.     High living expenses

    Many people have difficulty saving for their retirement because their cost of living is too high and they don’t have much left over for retirement savings after paying bills. Some dream of getting by with a smaller amount because they plan on transitioning to a thrifty lifestyle once they retire. Unfortunately, this assumption has two flaws:

    First, not putting money aside now is just postponing the fact that you must put money aside. If you don’t do it now, you’ll have to do more later. That will almost certainly mean having to work past your projected retirement age.

    Second, it’s harder to give up an expensive lifestyle with a big house and nice car than you might imagine. The longer you have it the harder it is to part with. If you reach retirement age and realize you want to keep these luxuries, you’ll have to keep working to save extra for a more comfortable retirement.

    3.     Overspending on housing

    Apartment living is very common in Europe and other parts of the world, but it doesn’t really jibe with the white-picket-fenced American Dream. If you’re living in the United States and you own a house, there’s a good chance it’s bigger and more expensive than you need. A report from the Joint Center for Housing Studies at Harvard found the number of Americans who can’t afford their homes jumped 146% from 2001 to 2017. The problem begins during house shopping, when people fall in love with a house and then start pulling strings to see how they can pay for it. Unfortunately, this results in mortgage and maintenance costs that leave little money for retirement savings or investing.

    4.     Investing too aggressively or not at all

    The search for bigger returns leads many people to invest heavily in stocks, which yield higher returns than savings but are riskier thanks to market volatility.  It’s coming on 10 years of superior market gains.

    5.     Not having a plan

    Many people choose an age that seems best to retire and leave their “retirement plan” at that.

    However, if you don’t create a solid plan for your retirement, you may find yourself a year or two away from it and you won’t be ready. You may not have enough saved or you might not have thought about what you’ll be doing with all your free time!

    Read on to see how you can fix these issues and increase your chances of retiring on time:

    1.     Accelerate your savings

    If you’re behind on your savings, you should still be able to retire on time if you increase how much you’re saving during your last 10 years of work. You can accomplish this without entirely devastating your current plans and lifestyle. How?

    2.    Cut your lifestyle spending

    So, what’s the solution? Simple: begin to gradually decrease your lifestyle spending ahead of time. Look at how much you make a month. Driving the newest car can be expensive, and so are cable TV, premium mobile phone plans, and eating dinner out several times a week. If you begin to cut down on your monthly spending, you’ll have more money left over to put into your saving account, a CD, or another investment that will get you to your savings goal faster.

    3.     Downsize

    If having a bigger house than you need is making it impossible to save for retirement, then consider downsizing in the years before you stop working. This will allow you to put more of your income toward your retirement and increase the chances that you will be able to retire on time. Downsizing earlier will also make your transition to budget-friendly retirement living easier.

    Finally, keep in mind that the city where you choose to retire can make a big difference in the quality of life you can achieve with your savings and Social Security.

    4.     Get higher returns on your money

    Putting your money in a certificate of deposit is a good middle ground that gets you higher returns than regular or high-interest savings accounts while avoiding most of the risk that comes with investing. When you lock your money down for one to five years in a CD, you’re locking into a particular interest rate. The risk is that if interest rates go up, the interest on your money won’t — because you’ve locked in. To reduce this risk, you can consider putting your money in a one-year certificate of deposit that will lock in the interest rate but won’t force you to stick to it for too long if interest rates do go up. The next year you could simply put your money in another one-year CD and reap the benefits of higher interest all over again.

    5.     Create a retirement plan

    A retirement plan should begin with how much money you think you’ll need each month to cover housing, food, and other monthly costs that will ensure a comfortable lifestyle. Cross-check this with your sources of income, including your Social Security, savings, and perhaps part-time work. If there is a gap between needs and how much money you’ll have each month, then you’ll need to fill it by padding out your retirement savings and possibly working a few years longer than you originally planned. It won’t be the end of the world if you have to work a few extra years before you retire, and it’s best to make the most of it. The less time you have until retirement, the more important it is to gain the highest returns possible on your money, including from CDs.

     

    Whether you are a business, individual, or non-profit – we will outline specific steps you can take to minimize taxes, maximize loan eligibility, or enhance the value of your property. With one call or email we will provide you with a professional, complimentary financial Statement evaluation – no obligation. Just visit Czarbeer.com/offer or contact us at info@czarbeer.com, or call (212) 397-2970 and we will be happy to help you and answer your questions.

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    Laughable Tax Positions

    laughable tax position

    One enjoyment we have in following Tax Court cases is getting the chance to chuckle now and again.  We thought that we’d share some of the amusing 2017 Tax Court cases.

    In Ohde v. Comm’r,  T.C. Memo. 2017-137, the Tax Court held that a couple was not entitled to a $145,000 charitable contribution deduction for the alleged donation of more than 20,000 items to Goodwill. The court found the couple’s allegations that they made such contributions implausible. We wonder how many pages the required list of the items was and how much that return must have weighed. That Preparer Practitioner should have been asked to be paid by the pound.

    In  TC Memo 2017-79 (Bulakites) the Tax Court held that an insurance consultant wasn’t entitled to alimony deductions that exceeded the amount in his separation agreement and sustained the IRS’s disallowance of his unsubstantiated deductions for interest and other expenses; the court sustained accuracy-related penalties, rejecting his attempt to blame Turbo Tax for his mistakes.  Interestingly, had he used a Tax Preparing professional he probably wouldn’t have had to pay the accuracy penalty.

    In TC Memo 2017-65 (Penley) the Tax Court held that a couple can’t deduct losses from their real estate activities because the husband wasn’t a real estate professional, finding that the couple didn’t sufficiently substantiate their claim that the husband worked more hours in his real estate activities than in his full-time employment. Penley claimed he worked 10-12 hours every Saturday & Sunday, and 4-6 hours every week day on a rental property, in addition to a regular full-time job in another field.  Even having a hand-written calendar supporting these hours, the court found it not only unreliable, as his total work hours were 13 hours daily according to the calendar every single day for 365 days. We have trouble understanding why the court did not believe him!

    In TC Summ. Op. 2017-2 (SAS) the taxpayer attempted to deduct legal fees related to suing a former employer as “Negative Other Income”. The court determined that the expenses were employment related 2% miscellaneous itemized deductions that should be deducted as itemized deductions, subject to various limitations.

    We hope you enjoyed our review of cases from 2017! Whether you are a business, individual, or non-profit – feel free to reach out to us with any follow-up questions. With one call or email we will provide you with professional, complimentary advice – no obligation. Just contact us at info@czarbeer.com, or call (212) 397-2970 and we will be happy to help you and answer your questions.

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    Bartering Handyman Work for Rent

    handyman-for-barter

    For some, this sounds a lot like the superintendent or resident manager who performs a number of roles and lives on premises. Last year, the Tax court once again determined that bartering the services of a handyman in exchange for rent was taxable. A handyman had traded work for the rent he owed his landlord and was required to pay tax on the value of the work performed that was applied to his rent.  So why would it be different for your superintendent or resident manager?

    This falls under the convenience-of-the-employer exclusion; thus, an employee may exclude from gross income the value of lodging provided free by an employer only if the employer does so for a substantial non-compensatory business reason.  It must occur on the business premises, which works well with the New York City requirements for an on-site person within close proximity to the property. The key is that the housing is for the employers, rather than for the employees’, convenience and the employer must require the employee to accept the housing as a condition of employment. Thus, in order to satisfy local and Federal Taxation laws, the employee must need to “live in the lodging to be able to perform the duties of this employment.”  This allows for your board to provide a wonderful quality of life to the owners.

    Whether you are a business, individual, or non-profit – feel free to reach out to us with any follow-up questions. With one call or email we will provide you with professional, complimentary advice – no obligation. Just contact us at info@czarbeer.com, or call (212) 397-2970 and we will be happy to help you and answer your questions.

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    Like Kind Exchanges and the New Tax Law

    real-estate-sale

    Like Kind Exchange provisions survive in the new tax law, but only for real estate investors.

    One important tax deferral advantage is still available for real estate used in business. This postponement of capital gains tax is one of the best real estate investor vehicles for preserving and building real estate wealth. This provision of the Internal Revenue Code allows property owners to exchange their property for other like-kind property without recognition of capital gains. It makes it possible to transfer the financial gain that is realized from the sale of a property into another property without federal capital gains tax at the time of the sale.

    Saving those taxes can be a vital opportunity to parlay profits for further profits. Simply trading one real property for another real property doesn’t automatically constitute a like-kind exchange. Executing an improper exchange may result in substantial tax liabilities and potential legal action from investors. The provisions to utilize a middleman remain intact. Sad to remind you that a personal residence doesn’t qualify for this tax deferral.

    Whether you are a business, individual, or non-profit – feel free to reach out to us with any follow-up questions. With one call or email we will provide you with professional, complimentary advice – no obligation. Just contact us at info@czarbeer.com, or call (212) 397-2970 and we will be happy to help you and answer your questions.

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    Adequate Documentation for an IRS Audit

    irs audit

    Adequate documentation is key when defending against an IRS audit.

    Many dread the concept of an IRS audit. These days, the most likely type is a “desk” audit, whereby a missing item of income or adequate documentation of a deduction is requested.   Sometimes, the client just doesn’t receive, or misplaces, a source of income and doesn’t necessarily have an alternative source of documentation for that income, thus an adjustment is assessed. The matter is then easily closed, through a payment by the taxpayer. The IRS achieves success in finding money for the government.

    We work with some clients who indicate that they have deductions, but recordkeeping burdens can create a situation where, although the deduction amount is correct, adequate documentation is not readily available.  We are not suggesting that everyone drop everything else that goes on in life to invest the huge amount of time the IRS estimates is required to maintain adequate documentation for certain deductions. However, we need to take this opportunity to remind you that, like every year, several tax court cases came down to negative conclusions not only for the tax due but, without maintaining adequate records, the court upheld the accuracy-related penalties assessed by the IRS. Discuss contemptuous records requirements with your tax professional to assure that you only spend the time necessary and yet have the documentation that meets minimum requirements.

    Whether you are a business, individual, or non-profit – feel free to reach out to us with any follow-up questions. With one call or email we will provide you with professional, complimentary advice – no obligation. Just contact us at info@czarbeer.com, or call (212) 397-2970 and we will be happy to help you and answer your questions.

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    Tax Credit Awareness

    tax-tips-and-credits

    The Internal Revenue Service (IRS) seems to be using new tools to audit interesting situations whereby a taxpayer achieves a substantial tax credit.

    A tax credit can be so much more valuable than a tax deduction, as a deduction reduces income and then a tax rate is applied. Therefore, the marginal savings a deduction provides is only a portion of the amount incurred. Where a tax credit can offer a benefit up to 100% of the value of the amount spent.  That benefit seems to have received focus by the IRS as we see a couple of recent tax court decisions seemingly to have discovered situations which were costing the Government money without providing the intended benefits to the economy.

    In TC Summ. Op. 2016-81 (Berry) the taxpayer claimed $5,800 of self-employment income from the one-time sale of tools and machinery, self-employment income is reserved for those in their own recurring business intended to make a profit.  By reporting this capital gain income as another type of income,  Berry, then, “conveniently” qualified for a nice earned income credit. The court moved the income to Line 21 of Form 1040 (capital gains), removed the self-employment tax (and earned income credit) rightly stating that a one-time sale of tools is not considered an activity entered into for profit “with continuity and regularity.”

    In the Federal Court of Claims case Foxx v. U.S., 2017 PTC 46 (Fed. Cl. 2017) a $2,500 preparer penalty was assessed because the preparer artificially reported additional income in order to claim a larger earned income credit for a client.

    Rightly, there are limits to what can be accomplished with tax planning.

    Whether you are a business, individual, or non-profit – feel free to reach out to us with any follow-up questions. With one call or email we will provide you with professional, complimentary advice – no obligation. Just contact us at info@czarbeer.com, or call (212) 397-2970 and we will be happy to help you and answer your questions.

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    Tax Issues After a Trade-In

    sales tax

    Trading in property, such as a car, used to be more than about the savings of the sale tax.  When it came time to handle the income tax aspects, things were quite easy. The amount paid was used for the depreciation of the new equipment and no time was wasted dealing with the sale of the traded-in item. It was assumed to be sold for its un-depreciated remaining balance with no gain or loss.

    Those hopeful of tax simplification will find more to deal with in 2018, as these transactions are in essence more complicated. So now, when you trade in a piece of equipment for another piece of equipment, both used for business, let’s get on with the busy work.

    The new part is that the trade-in value given for the old equipment is now part of the sales price, therefore depreciation may need to be recaptured (income realized), should that amount be more than the remaining depreciated value.  Recording all this in the accounting system will take some thought and work as most systems simply post the amount paid.

    The full purchase price needs to be determined by “grossing up” or “adding back” the trade in value, that total amount, not what was paid will be used for depreciation of the new asset. The good news is that higher amount qualifies for bonus and Section 179 depreciation, both designed to stimulate the economy by providing Tax benefit upfront to businesses spending on equipment by giving the Tax benefit up-front to the business. All that benefit may or may not provide ultimate net benefit to the business, as Tax planning can be quite intricate.  Consult your tax advisor!

    Whether you are a business, individual, or non-profit – feel free to reach out to us with any follow-up questions. With one call or email we will provide you with professional, complimentary advice – no obligation. Just contact us at info@czarbeer.com, or call (212) 397-2970 and we will be happy to help you and answer your questions.

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    Tax Planning Is Vital This Year to Those Who Make a Living in The Tri-State Area

    tax planning

    The tax law passed late last year included numerous changes that we have written about in our blogs that will have wide impacts across the Country. Specifically, there is a likely jump in the numbers of Americans who’ll owe taxes when they file 2018 returns, so it may be time to re-think your tax planning. Going back to last Christmas, we received the gift of the new tax law and most commentary revolved around whether to prepay real estate taxes before 12/31/17.  We think it is important to loop back around and remind everyone of the tax law’s limitation and/or elimination of many itemized deductions.  If you itemized in the past, this year is a year that you might want to prepare a projection of your tax liability in anticipation of year end.

    We don’t recall ever before that the Government Accountability Office (GAO) issued a report warning that more than 4.5 million taxpayers will likely come up short next April, unless they act now to adjust their withholding amounts.   So, if you are one of those roughly 28 million who are expected to have changes in the amounts you claim, you are at risk.  If you have thousands lying around in the bank to pay those taxes then you don’t need to be concerned, we worry about those who don’t.  In a perfect world, it probably should not be this way, that is that the withholding taxes were adjusted in 2018 for the new tax law and yet the GOA coming out and saying a mistake might have been made.

    There are a few areas that have the most potential to contribute to this aspect.  These are: the new limits on state and local tax deductions (the SALT deductions), a restriction on the amount you can deduct for home mortgage interest and to some extent the elimination of the deduction for job-related expenses.

    The GAO looked most closely at those who itemize deductions and provided more clarity as to who is at risk. They seem to be specifically warning married taxpayers who itemize deductions, with two children under age 17, income exceeding $180,000 from one or more jobs and who have $20,000 or more in non-wage income (dividends, interest or capital gains) as the ones most likely to have to pay additional tax when they file in April.

    The recommendation is to plan now to minimize the check writing later.  One helpful tax planning tool is the IRS’s Withholding Calculator (which is on the IRS website) which can be utilized to do your “checkup” and it should only take a few minutes.  The calculator will ask for your estimated values for your income in 2018, (use 2017 adjusted for any changes that you know of such as raises), your number of dependents, as well as estimated itemized deductions (remember to update for the new Tax law limits) plus the amount of federal tax withheld on your last paycheck.

    If your get results that indicate you’ll owe tax when you file, realize that estimates were used, the limits may work out differently and it’s not over until the Tax return is prepared. If you see a large balance due, the first step is to start putting aside more Tax money now.  You can use your bank or allow Uncle Sam to hold your money by increasing the amount of tax withheld from your pay for the rest of this year by revising your W-4 form. You’ll need to figure the number of additional allowances you need, which can be tough with only months to go. As a rule, when you reduce the number of allowances you claim, your employer will withhold more federal income tax.  The question may be whether changes made now will need to be revised in 2019.

    Get off the list of those who will owe taxes (without money to pay them) by knowing what your tax situation is now.  This is important because having too little money withheld could result in an unexpected tax bill or even a penalty when you file your 2018 return. By making tax planning adjustments now, you’ll still have some time to make any necessary adjustments.

    Whether you are a business, individual, or non-profit – we will outline specific steps you can take to minimize taxes, maximize loan eligibility, or enhance the value of your property. With one call or email we will provide you with a professional, complimentary financial statement evaluation – no obligation. Just visit Czarbeer.com/offer or contact us at info@czarbeer.com, or call (212) 397-2970 and we will be happy to help you and answer your questions.

     

     

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    Planning for the Required Minimum Distribution Date

    social security couple

    If you born June 30, 1958 or before, and have retirement accounts, you deserve to be congratulated. What, you never heard that being 59 or older meant something with your retirement account?  But you probably have heard about the required minimum distribution date whereby in the year you turn 70-1/2 years old, you’d better take something from your retirement accounts otherwise the IRS imposes stiff penalties.

    The congratulations reflect that you can start distributions from your IRA and 401(K) accounts without penalty.  Yes, we understand that you will have to pay tax on them, but we are only going to suggest that you do if you need to pay living expenses.  That means you were able to retire early (be sure you have health insurance covered until Medicare starts) or have had some difficulties with employment.  But, you do need to live and it’s important for you to look at your entire retirement planning picture in order to avoid the most common of social security mistakes retirees make.  That is not planning for when you start social security benefits.

    If you need to, you can take a 20% discount and start at age 62.  There are some changes coming to the age at which benefits start or these milestones occur, so please do your research, since the dates are being extended for some baby boomers and later retires.  If you need the money or are of poor health, start as soon as you are entitled.  But we are here to propose you do the analysis and consider using your IRA and 401(K) accounts for living expenses should you be retired and can wait until age 70 to start taking social security.

    Unfortunately, by following the press and other advisors, many people focus on the required minimum distribution date.  This maximizes money to heirs.  For us, the decision to start Social Security before age 70 and delay withdrawing money from a traditional IRA until age 70-1/2, when required minimum distributions (RMDs) begin, is completely backward.  We have already mentioned that you are giving up a higher Social Security benefit.  Once you reach your full retirement age, your monthly Social Security check gets 8% larger for every year you delay taking benefits through age 70 (technically, it’s 2/3% per month). If you really care, the “crossover point” that you need to live through is 12 years.

    For example, suppose at full retirement age (which is 67 if you were born in 1960 or later) your Social Security check is $2,000 per month (or $24,000 per year). At age 70, that check would be $2,480 per month ($29,760 per year). By waiting until age 70 to start taking benefits, by the time you reach age 83 you would have been paid a total of $386,880, compared with the $384,000 you would have gotten if you had started at age 67, even though you got income for three extra years. The average life expectancy of a 67-year-old is at least 85, and growing, so any year you or your spouse live past age 83 is money in your pocket.

    Taxes will be paid on your tax-deferred accounts no matter what, as they are taxable to you or your heirs, and at some point, it will be fully liquidated to you or to your heirs. Let us take this part out of consideration then.

    As always, it’s not how much money you make that counts, but how much you keep.

    Social Security income is never more than 85% taxable, but it might not be taxable. The taxed amount is determined by an 18-step calculation in the return instructions for Form 1040. Essentially, the process tells you to take half of your Social Security benefit, add that to all your “other income” and then perform a series of calculations to determine how much of your Social Security (between 0% and 85%) is taxable.  In other words, the bigger your Social Security check and the less “other income” you have (for the same total income), the less your adjusted gross income and the less tax you will pay.

    Many advisors like to dazzle with expanded calculations on what is best for you, at C & B we believe that the realization is if you plan to retire before age 70, consider delaying your Social Security until age 70 and living off your retirement accounts from your retirement date until then.

    The value of delaying Social Security until age 70 is far more than just getting “more money per month.” There are tax advantages, surviving spouse advantages, even inheritance advantages when the entire portfolio and estate are considered as a whole. However, there are times and circumstances when this advice is not suitable, and this is the reason for seeking professional financial guidance before implementing decisions about when to start Social Security and when to start withdrawing from your IRA, 401(k), etc.  Please be sure to consult your Tax Advisor for your specific situation.

    Whether you are a business, individual, or non-profit – we will outline specific steps you can take to minimize taxes, maximize loan eligibility, or enhance the value of your property. With one call or email we will provide you with a professional, complimentary financial statement evaluation – no obligation. Just visit Czarbeer.com/offer or contact us at info@czarbeer.com, or call (212) 397-2970 and we will be happy to help you and answer your questions.

     

     

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    Maximizing Social Security

    maximizing social security

    We have all been programed that when we reach age 65, we need to head to the Social Security office and declare ourselves as eligible.  This is vital to accepting the benefits of Medicare as our out-of-pocket (when including health insurance premiums) tend to drop. Even our health insurance premium will tend to drop once we qualify for this valuable program.  The starting dates for certain future retirees have a deferral of retirement commencement ages so please realize that certain milestones mentioned in the article need to be updated for your personal situation.

    However, many of us make the most common error in social security benefits by starting our benefits then as well.  Unless you are in poor health, you can earn a substantial premium on your social security checks by waiting until age 70 to start. We are all too familiar with the low interest rates these days, of several percentage points.  Your monthly check from social security will be substantially higher if you can wait these years. That means that if you had a savings account with an annual social security benefit of $20,000, you will earn and additional $1,600, or 8% each year.  Lots of found money.

    So, bypass the desire to hold onto your IRA or 401(K) and start tapping in at age 65. But that’s the opposite of what most should do, because waiting until 70 to take benefits can pay off in more ways than one.

    Many think they just can’t stand working past age 65 (or 66 or 67).  Assuming you have worked steadily for many years, just a minimal amount of “consulting” is necessary.  Doesn’t your company really need you to consult?  It makes no sense to let all that experience leave at once. The other fear is that they may not live long enough to recapture the lower monthly payments from 65 to 70.  Hate to tell you the basic facts, you are dead when you are dead.  There is no judgement of whether you did it right or wrong, we are afraid of outliving our retirement money more than leaving it to our loved ones. So that extra 8% goes a long way to supporting us until the inevitable.

    In addition, people also see that putting off taking Social Security by funding their living expenses with withdrawals from their IRAs or 401(k)s with disdain, because those accounts are 100% taxable upon receipt and they hate “giving money to Uncle Sam.”  For certain taxpayers, social security is 85% taxable.

    Whether you are a business, individual, or non-profit – we will outline specific steps you can take to minimize taxes, maximize loan eligibility, or enhance the value of your property. With one call or email we will provide you with a professional, complimentary financial statement evaluation – no obligation. Just visit Czarbeer.com/offer or contact us at info@czarbeer.com, or call (212) 397-2970 and we will be happy to help you and answer your questions.

     

     

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