AICPA HAS NO “FINDINGS” OR “COMMENTS” ON RVB’s GAO AUDIT ENGAGEMENT

AICPA Comment on Peer ReviewThe AICPA randomly selected one of Rynkar, Vail & Barrett, LLC’s GOA Single Audit engagement to peer review. As noted in the correspondence (link below), it is extremely rare for the AICPA to perform a peer review without finding something to report on. However, the third paragraph from the AICPA letter states there were no “findings” or “comments” as a result of review.

The AICPA review supports our firm’s belief that, Rynkar, Vail & Barrett, LLP, conducts a proper, detailed audit in compliance with all professional standards.

Rynkar Vail & Barrett, LLP Year End Tax Planning Letter

Link

DO YEAR-END PLANNING TO CUT YOUR 2014 TAXES

The end of another year is fast approaching, and it’s once again time to take steps to reduce taxes on your personal and business returns. 

THE “AFFORDABLE CARE ACT”: HOW WILL IT AFFECT YOUR 2014 TAXES?

Staggered start dates. Exceptions. Waivers. Are you still trying to determine how the health care laws will affect your 2014 personal and business federal income tax returns?

EIGHT MORE WAYS TO CUT YOUR TAXES

If you’re looking for ways to cut your 2014 tax bill, you might check out the following suggestions to see if any fit your individual situation.

But hurry; there’s not a lot of time left in 2014 to make a difference in the taxes you’ll pay this year.

TAX RECORDKEEPING: TIPS TO MAKE IT EASIER

Are you sometimes overwhelmed and intimidated by the prospect of keeping records for federal tax purposes? Well, you are not alone. Here are some suggestions that should help you determine what to keep and for how long.

 Just click on the link below to read the full articles.

http://www.planningtips.com/Planning_Tips.asp?Co_ID=156614&Tip_ID=4422

 

 

Governor Cuomo’s “Leave to Die State”

New York has always been known as one of the worst states to die in. Estate tax reform is long overdue, and new legislation initially proposed by Governor Cuomo attempts to keep affluent New Yorkers from retiring elsewhere. Unfortunately, the result is a “won the battle, lost the war” scenario in which moderately wealthy taxpayers will be exempt from the tax, while the only change the more affluent will see is an increase in complexity of the law and taxability of certain gifts.

Under the new provisions, the estate tax exemption will increase from $1M to $2,062,500 beginning April 1, 2014. The exemption will continue to increase by roughly $1M per year, until expected to link with the federal exemption in 2019 (projected to be $5.9M). For the middle class currently considering their retirement options, this could be viewed as a victory. The reform will save thousands of families from estate tax, and minimize the need for planning. However, you cannot choose when you die, and $2,062,500 is still a net worth many New Yorkers fall above. But at least you now have an exemption upwards of $2M to soften the blow, right? While the increase to the exemption is a welcome change, it comes with a catch. A “cliff” to be more precise, that kicks in once an estate goes over the exemption, and fully removes any exemption when an estate exceeds the exemption by just 5%. To illustrate, if the value of an estate is $2,165,625 (5% over the $2,062,500 2014 exemption) tax would be levied on the full value of the estate. This small difference in value (approximately $103,000) has big consequences triggering over $112,000 of tax (the same amount of tax as one would incur under the old law). This makes estate planning for an individual teetering around the exemption amount imperative.

One strategy in the past had been to simply gift a portion of your assets to drive the estate below the state filing requirement. The new provisions, in a regressive step, require all gifts made within three years of death be added back to the estate (assuming the decedent was a New York resident at the time the gifts were made). After being commended in 2000 for eliminating the gift tax, New York is facing scrutiny as it now taxes gifts made within three years of death, possibly including gifts of out of state property.

And what has changed for the wealthy residents who need convincing to stay in New York? Nothing. In 2014, an estate worth $5,340,000 (the federal exemption) will incur $431,600 of tax under the new law, exactly as it would under the old law. The top marginal tax rate remains 16% (although it will be revisited next year) and now the add back provision for gifts eliminates a useful strategy to minimize the tax. Where a majority of the country, including a state of great individual wealth in California, and popular destination state, Florida, have no estate or gift tax, it remains difficult for New York to compete under the current legislation. The wealthier residents the reform was originally intended to keep in the state may have just given further assurance they are better off elsewhere, solidifying New York as the “leave to die state”.

Matthew Taus, CPA

Rynkar, Vail, & Barrett LLP

Potential Fiduciary Income Tax Savings Upon Distributions to Beneficiaries

           Fiduciary income tax preparation season is upon us.  Please remember that Rynkar, Vail & Barrett specializes in the preparation of these returns, as well as related fiduciary income tax planning.  Our firm’s expertise and reasonable billing rates make it an ideal source for such services for your trust and estate clients.  Please keep us in mind and do not hesitate to contact us for further information.

      Substantial changes in Federal tax law effective in 2013 have expanded the importance of considering special distributions to trust and estate beneficiaries.  The new higher 39.6% Marginal Tax Rate on ordinary income and the new 20% rate on qualified dividends/capital gains on income over $11,950 for trusts and estates increase the likelihood that beneficiaries’ tax rates will be significantly lower than those entities.  Additionally, the new 3.8% Net Investment Income Tax (NIIT) is effective when taxable income exceeds only $11,950 for trusts and estates whereas a beneficiary may not be subject to the 3.8% tax at all, depending on adjusted gross income level.

         Naturally, making distributions may not be advisable or permitted.  However, if you have any trusts or estates for which you believe that such planning might be advisable, perhaps we can be of assistance in preparing alternative tax projections.  (Please see the enclosed illustration of potential savings.)  As you are aware, distributions during the first 65 days of a year can be treated as distributions made during the previous year, so there is still time to do this planning for the calendar year 2013.

      If you have any questions or comments, please do not hesitate to contact Bob Rynkar, Frank Riviezzo or Melissa Gonzalez.

ILLUSTRATION OF POTENTIAL FIDUCIARY INCOME TAX SAVINGS UPON TRUST OR ESTATE DISTRIBUTIONS TO BENEFICIARIES

      Assume a trust or estate with taxable income of $100,000 consisting of $50,000 interest income and $50,000 qualified dividends/capital gains.  Also, assume a low tax bracket beneficiary or multiple beneficiaries such that ordinary income distributed from the trust or estate would be taxable at the indicated Federal tax rates.  (Note this illustration does not reflect the potential additional effect of state and local taxes and assumes that beneficiary AGI is below the threshold for imposition of the Net Investment Income Tax.)

 Income Retained by Trust or Estate

       Federal Income Tax              $28,100    $28,100    $28,100 

              Net Investment Income Tax           3,300       3,300       3,300

                                                                            $31,400     $31,400     $31,400   

Income Distributed to Beneficiaries

        Tax Rate on Ordinary Income         15%       25%       28%

           Federal Income Tax               $15,000*    $20,000    $21,500

 Federal Tax Savings if Distributed            $16,400    $11,400    $ 9,900 

* Note: It is possible that a beneficiary could be taxed on ordinary income at a rate of 15% and pay little or no tax on qualified dividends/capital gains, which would reduce the $15,000 tax shown in this scenario.

Retirees, don’t forget your IRA distribution

A majority of retirees have not yet taken any part of their required IRA distribution, according to a new study. lf they neglect to do so before Dec. 31, they face a hefty 50% tax penalty on the amount they fail to withdraw.

It’s one of the many complicated, and costly, facts of tax-qualified retirement plans: Generally, once you’re 70 1/2, you must start taking an annual distribution from your IRA or other retirement plan (there are some exceptions).

As of Nov. 1, 54% of the more than half a million people over 70 1/2 who own an IRA at Fidelity Investments and who appear to be required to take a distribution have not yet withdrawn any of that money, according to Fidelity. All told, 65% of those customers have not taken their full distribution.

Just don’t forget to do it: An estimated 255,000 taxpayers failed to take required minimum distributions totaling more than $348 million, according to tax data for 2006 and 2007, cited in a 2010 report by the Treasury Inspector General for Tax Administration, the IRS watchdog agency.

For those who don’t need that money for their income needs, delaying their distribution as long as possible can be a smart tax-planning move, said Rusty Ross, a CPA with Exencial Wealth Advisors.

By waiting until the end of the year, “You might have a better picture of what your tax liability is going to be,” Ross said. Those who have underpaid on their taxes can adjust the amount withheld on their required minimum distribution.

“That can be a good tool,” he said. ”You can use that distribution to change the withholding to the point where you avoid underpayment penalties.”

Others might be planning to transfer their distribution directly to a charity, but intend to make that move in December. IRA owners who are older than 701/2 can choose to give that money-up to $100,000 – directly to the charity of their choice (excluding private foundations or donor-advised funds).

They won’t get a tax deduction for the charitable contribution, but that distribution won’t count as income. and so they’ll avoid income tax on it.

That can make even more sense for high-income taxpayers: Turning their IRA income into a contribution may help these taxpayers avoid higher Medicare taxes, for instance, plus reduce their likelihood of hitting the so-called Pease limitation on itemized deductions, which affects taxpayers with adjusted gross income above $250,000 for single filers and $300,000 for joint filers.

IRA-to-charity transfers “are not considered charitable deductions and, therefore, not subject to the Pease limitations,” according to a report on year-end tax planning by J.P. Morgan Private Bank’s Advice Lab.

Copyright (c) 2013 MarketWatch, Inc. AlI rights reserved.

2013 FUTA Credit Reduction

The United States Department of Labor has released the list of FUTA credit reduction states for 2013.  The standard FUTA rate is 6.0 percent on the first $7,000.00 of wages. Employers in most states will receive a credit of 5.4 percent against the rate resulting in net tax rate of 0.6 percent. States with federal loans outstanding for two consecutive years must make additional payments to FUTA. As a result, these states will have their FUTA credit amount reduced for 2013 filing as a way to recover the funds still owed to pay back these loans.

The following is a summary of all states with a credit reduction and their net FUTA rate:

State

Credit   Reduction Percentage

Net   2013 FUTA Rate

Arkansas

0.9%

1.5%

California

0.9%

1.5%

Connecticut

0.9%

1.5%

Delaware

0.6%

1.2%

Georgia

0.9%

1.5%

Indiana

1.2%

1.8%

Kentucky

0.9%

1.5%

Missouri

0.9%

1.5%

New   York

0.9%

1.5%

North   Carolina

0.9%

1.5%

Ohio

0.9%

1.5%

Rhode   Island

0.9%

1.5%

Virgin   Islands

1.2%

1.8%

Wisconsin

0.9%

1.5%