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Category Archives: Year-End Tax Planning

Business Owners Should Consider How Their Companies Are Structured For Tax Purposes

Posted onNovember 12, 2024
CPA Paul Dowen provides expert tax planning advice to his clients.
Courtesy of Whittemore, Dowen, Ricciardelli

By Susan Elise Campbell

Year-end may be a good time to consider restructuring a small business to shield personal assets from potential liabilities. 

The tax code allows for several options, according to Paul Dowen, CPA, and partner at Whittemore, Dowen & Ricciardelli, LLP, certified public accountants serving the North Country and Saratoga County. Dowen said the typical choice today is between a limited liability company (LLC) or a Subchapter S corporation (S corp), although there are other entities. 

Both provide some protection for the owner by limiting personal liability, just as a corporation does. If the company has debt or other financial obligations, owners are not personally responsible for satisfying them.

“In a retail store or restaurant with people coming in and out of the building, you might have product liability,” he said. “Both LLCs and S corps give you some protection.”

“The confusion is that an LLC can be organized as a sole proprietorship, a partnership, a C corp or an S corp,” he said. “If a client tells me their business has been set up by the attorney as an LLC, I know there is some liability protection, but that doesn’t tell me how the company is being taxed.”

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Business Report: Consider Tax-Smart Charitable Gifts

Posted onNovember 12, 2024

By Eric Snell

As we enter the annual season of giving, you might be thinking of charities you wish to support. But you also might be wondering how to gain some tax benefits from your gifts.

It used to be pretty straightforward: You wrote a check to a charity and then deducted the amount of the gift, within limits, from your taxes. But a few years ago, as part of tax law changes, the standard deduction was raised significantly, so fewer people were able to itemize deductions. Consequently, there was less financial incentive to make charitable gifts. 

Of course, this didn’t entirely stop people from making them. And it’s still possible to gain some tax advantages, too. 

Here are a few tax-smart charitable giving strategies:

• Bunch your charitable gifts into one year. If you combine a few years’ worth of charitable gifts in a single year, you could surpass the standard deduction amount and then itemize deductions for that year. In the years following, you could revert to taking the standard deduction. 

• Make qualified charitable distributions. Once you turn 73 (or 75 if you were born in 1960 or later), you must start taking withdrawals from your traditional or inherited IRA. These withdrawals — technically called required minimum distributions, or RMDs — are taxable at your personal income tax rate, so, if the amounts are large enough, they could push you into a higher tax bracket or cause you to pay larger Medicare premiums. 

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Business Report: Smart Tax Moves: Year-End Harvesting

Posted onNovember 22, 2023
Matthew Burnell, financial paraplanner, HK Wealth Management Group.

BY MATTHEW BURNELL

“It’s that time of the year, and I don’t mean just the holiday season, even more exciting it’s time for year end financial and tax planning! The following are some topics that you may want to discuss with your tax accountant or financial advisor.

One year end strategy is “tax loss harvesting”. You or your financial professional may be selling equities in non-retirement accounts throughout the year. If selling at a price higher than the purchase price, you have a capital gain on the sale which is taxed according to your income bracket and the amount of time the security was held. With the goal of reducing tax on capital gains, you can look to offset some of the gains by selling other securities in your portfolio that have a loss.

This should be done strategically considering the investment philosophy of your portfolio. Note, repurchasing the same or substantially identical security that you sold for a loss within thirty days, or the loss may be considered a “wash sale” and disallowed.

Now may also be a time to review your withholding on your salary heading into the new year. If you keep owing a large tax bill in April and would prefer to pay this over the course of the year instead, and if applicable reduce interest and penalties your withholding percentage may not be aligned with your income tax rate. For example, if your effective Federal Tax Rate is 25% and the withholding on your paystub is 15%, there is a 10% gap here and you will likely owe taxes in April if you have not been making estimated payments. You can adjust your withholding on form W4 provided by your employer.

Maxing out your retirement contributions is a way to reduce taxable income as well as save for retirement. If you are using a pre-tax plan such as a 401K or 403(B). The maximum contributions for 2023 to a 401K is $22,500 plus an extra $7,500 if over the age of fifty. For example, a client is over age 50 and earns $120,000. If they contribute $30,000 to a 401K that reduces taxable income (aside from FICA taxes) to $90,000 for the tax year. So, you have deferred taxes on this $30,000 as well as set aside money for retirement that can grow over time.

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Business Report: Year-End Tax Strategies For Business Owners

Posted onNovember 22, 2023
Megan Nelson, CPA at Whittemore, Downe & Ricciardelli, LLP..

By Megan Nelson, CPA

Business owners, whether a sole-proprietorship, partnership, S-Corporation or closely held C Corporation, should take the time before year end to assess their current financial situation.  First and foremost, make sure the books and records are up to date, reconciled and properly categorized so you have an accurate view of your financial picture.  No benefit is derived from tax planning based upon poor records.  Next, take some time to reflect on the past year, anticipate the remainder of the year and project ahead to next year. 

Most business owners are looking to minimize taxes, however avoiding taxes at all cost may not always result in keeping the most cash.  For example, buying something before year end for the sake of getting a deduction does typically result in lower taxes, but it can also result in a negative impact on cash flows, meaning  more dollars are spent than taxes saved and often doesn’t result in the best overall financial situation for the business.  On the other hand, spending money on necessary expenses or equipment that will help the business grow and be more effective/efficient might justify that impact on cash flows.  Or, if profits are up, it may make more sense to pay tax now and keep those after tax dollars to grow your business.

Keep in mind, tax planning shouldn’t be looked at based on a single year.  Consider your tax situation this year, but how might it compare to next year and the year after?  The Tax Cuts and Jobs Act (TCJA) became law in 2017 and lowered income taxes for almost everyone.  Personal income tax rates in effect today are scheduled to sunset at the end of 2025 and increase to what they were in 2017.  Under current law, the beginning of 2026 could find many taxpayers paying 3% to as much as 9% more in federal tax compared to the same income this year.  Maybe saving cash and postponing that equipment purchase is a better financial decision. 

If after looking at your current year income with consideration for few years, you decide it is beneficial to reduce current year income, here are some options to maximize deductions:

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Saratoga Springs Man Is Named President Of Fenimore Asset Management Firm

Posted onNovember 7, 2022
Christian Snyder, J.D., CFA, was appointed president of Fenimore Asset Management.
©2022 Saratoga Photographer.com

Christian Snyder of Saratoga Springs, J.D., CFA, has been appointed president of Fenimore Asset Management, an independent, Capital Region-based investment advisory firm and manager of the FAM Funds family of mutual funds.

He succeeds Debra Pollard who is retiring from Fenimore at the end of 2022 after a tenure of more than 30 years with the company, the last six as president.

Snyder will work closely with Fenimore founder and Executive Chairman Tom Putnam, Chief Executive Officer John Fox, and the management team to guide the 48-year-old firm into the future.

“Fenimore prides itself on attracting and retaining associates who share our strong values, distinctive investment philosophy, and dedication to service excellence. Deb and Christian exemplify these traits,” said Fox.

“Christian has nearly two decades of experience in the financial services industry along with a solid track record of leadership and integrity. We are excited to have him on the team and look forward to working together to further our mission of preserving and growing our investors’ capital over the long term.”

Snyder joins Fenimore after five years as chief operating officer of the Wealth Strategies Group at Goldman Sachs Ayco Personal Financial Management. Prior to that, he served three years as associate counsel and then deputy general counsel for the company. 

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Financial Advisors Urge People Not To Panic Amid The Uncertainty Caused By COVID-19

Posted onNovember 12, 2020November 13, 2020

By Jill Nagy
Get your life in order, think about possible tax changes and, above all, don’t panic. That is the advice of area financial advisors for surviving in the age of COVID-19.
“It’s never been more important to attend to your estate plan,” said Jeff Vahanian of Vahanian & Associates in Saratoga Springs. “We are very aggressive about this. People have had to adjust their behavior in many ways. I hope they refocus on things that matter.”
He urges his clients to have a health care proxy, naming someone to make medical decisions if they are unable to; a living will, to indicate their preferences in connection with medical care; and a power of attorney, appointing someone to make decisions in non-medical matters if they are unable to do so.
“In times like these, they are very critical. Nobody should be without them,” he said.
Vahanian said people with young children to should decide who they want to raise them if they are unable to do so.

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Business Report: When Are Meals, Entertainment Deductible?

Posted onNovember 12, 2020November 13, 2020
Joanna Piscitella is a CPA with Hedley & Co. PPLC.

By Joanna Piscitella, CPA
The Internal Revenue Service has issued final regulations on the business expense deduction for meals and entertainment following changes made by the 2017 Tax Cuts and Jobs Act (TCJA).
The Treasury Department and the IRS did not receive any requests to speak at a public hearing on the proposed regulations but they had received written and electronic comments in response to the proposed regulations.
These written comments were incorporated into the new regulations.
As a reminder, the 2017 TCJA generally eliminated the deduction for any expenses related to activities generally considered entertainment, amusement or recreation. However, taxpayers may still deduct business expenses related to food and beverages if certain requirements are met (Typically limited to 50 percent of the expenditure).

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Business Report: Focus On What You Can Control

Posted onNovember 12, 2020November 13, 2020
Mickey Orta, senior vice president for wealth management at NBT Bank.

BY Mickey Orta
The top two questions that financial professionals have been hearing from customers are: “What’s going to happen to my investments and financial plans depending on the results of the presidential election?” and “When will things get back to normal post-COVID?”
While these questions can’t be answered directly, that doesn’t mean we have to sit tight without taking any action.
It’s probably safe to say that 2020 has not unfolded in a way that any of us could have predicted. The COVID-19 pandemic upended everyone’s plans—financially, and in general—starting in March. A busy and heavily contested election season added to the feeling of heading into the unknown.
Whether you’re looking at financial planning for 2021 from the perspective of a business or as an individual, the pandemic isn’t going away and so uncertainty is likely to continue.
To help reduce some stress, take a look at what is in your control and focus on those elements. Financial planning has many components that are squarely within your control.

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Business Report: Your Lease Amid COVID-19 Pandemic

Posted onNovember 12, 2020November 13, 2020
Lisa Blanchette is an associate with Bond, Schoeneck & King.

BY Jessica M. Blanchette
Commercial tenants: Remember that extensive and wholly uninteresting document entitled “lease agreement” that you scanned, signed, then shoved into a file folder and never thought of again?
Well, it’s making a comeback.
If you are one of the many businesses struggling to pay your rent due to the economic effects of the COVID-19 pandemic, your lease agreement should be one of the first resources to which you turn for guidance.
Like all contracts, commercial leases typically include the standard who, what, where, when, and why provisions of an agreement between a landlord and tenant. But they generally go beyond that as well and many leases, especially long-term ones, also contain lengthy provisions outlining the rights, obligations, and, perhaps most importantly, protections for both landlords and tenants.

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Business Report: Businesses Should Take To The Offensive

Posted onNovember 12, 2020November 13, 2020
John D. Flory III, chief information security officer, Harbor Networks.

By John Flory III
It is time for businesses to play offense against cyber criminals: For the last 200 days the business world has faced unimaginable challenges. These challenges have forced us to stray from our comfort zone, modify our existing tried and true policies as we fought to survive. Going forward we have to anticipate the unexpected and be prepared for anything.
The strength of the American Economy comes from the resilient nature of its’ businesses. Solving for these challenges just makes them stronger.
The speed at which a “work from home” adaptation occurred and the laxing of policies to account for the transition, while closing the doors, has opened an enormous number of windows. While we have been learning how to be “operable”, cyber criminals have been ramping up their capabilities to exploit this new opportunity exposed to them. Where email phishing is still the primary way criminals are stealing from us, their tactics are changing, and we need to take an offensive approach to defending our livelihoods and our homes.

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