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Gift Return Policies

Attention shoppers: Several companies have updated their return policies. According to a goTRG survey* of 500 U.S. retailers, 72% of retailers cite returns as a moderate-to-severe problem. As a result, 60% of retailers are tightening their policies, with free returns no longer the standard for 2023 holiday shopping.

HOW MUCH TIGHTER?

While shoppers say free returns are important, 66% of businesses surveyed charge something for at least some returns — up from 60% last holiday season. For 67% of companies, the fees charged are additional shipping or restocking fees. Some businesses note restocking costs so high that about 25% have turned to zero-sum refunds. Retailers are also shortening return windows to cut returns and offering incentives to shoppers who return items bought online to brick-and-mortar stores.

*Cost of Retail Returns, goTRG.com, 2023

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Do You Know What Your Asset Allocation Is?

The financial markets have had their moments in 2023. And if you haven’t checked your portfolio and retirement plan asset allocations in a while, you could be in for a jolt. Your allocations may be out of line with your current investment goals, timeline and tolerance for risk, but you can fix the problem by rebalancing asset classes.

TO REBALANCE OR NOT?

Let’s say you set or rebalanced your allocation at the beginning of 2023. If your investment time frame and risk tolerance are basically the same currently, you have it easy. Compare your current asset allocation to the allocation you set in January.

Generally, if one or more of the asset categories varies by more than 5%, you should consider rebalancing the weight in each asset class to better match your investment strategy.

KNOW YOURSELF

If your investment goals or risk tolerance have changed significantly, you’ll probably want to develop a new allocation strategy. The objective is to invest aggressively enough to meet your timeline and goals, but not make you nervous.

CONSULT PROFESSIONALS

Work with your financial professional to evaluate the need to rebalance your portfolio at least annually. Your tax advisor can check for tax repercussions before you make any moves.

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Be Aware of This Estate-Planning Change

When property, like the family home or other appreciated assets, passes at your death, do you want to saddle your beneficiaries with capital gains tax? You may do just that if you pass your home through an irrevocable trust.

BACKGROUND

Generally, the appreciation in assets sold or disposed of during your lifetime is subject to capital gains tax. There’s an exception for property passing at your death to your beneficiaries. They’ll generally receive the property at a “stepped-up” value equal to the current fair market value. Thus, capital gains tax is eliminated on appreciation realized during your lifetime. In the past, appreciated property in irrevocable trusts generally has received this favorable treatment.

Recently, though, the IRS has questioned this treatment for property passed to beneficiaries through an irrevocable trust. The IRS’s grounds are that once property is placed in an irrevocable trust, the person who placed it there no longer owns it. Nor does ownership shift to the trust beneficiaries. And in most cases, the property isn’t included in a person’s estate for estate tax purposes.

WHAT’S DIFFERENT NOW?

A 2023 IRS Revenue Ruling* clarifies that property in an irrevocable trust that is not includable in your taxable estate at death will no longer receive a stepped-up basis. While the ruling may sound like a death knell for certain estate-planning strategies, it doesn’t have to be. An irrevocable trust can be constructed to include assets in your taxable estate, allowing your beneficiaries to receive a stepped-up basis.

BOTTOM LINE

Most families don’t have estates large enough to be subject to estate taxes, even with the inclusion of the family home’s value. So, chances are that you can still pass your home to your heirs without estate- and capital-gain tax liability.

Estate and capital-gains taxation and planning with trusts are complex processes, so work with your legal, tax and financial professionals to ensure the documents are drafted properly.

*IRS Revenue Ruling 2023-2

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Where to Find Small-Business Grants

To help you boost your business resources — or start a new business — in 2024, you may want to consider a small-business grant instead of a loan. Why? You don’t have to pay back a grant. However, your business will most likely have to include any grant amounts in taxable income.

GET STARTED

Consult your tax and financial advisors, then do some research. Following are some places to look.

FEDERAL AGENCIES

Grants.gov is a comprehensive database of government small-business grants administered by various federal agencies, such as the Departments of Education and Veterans Affairs.

Small Business Innovation Research and Small Business Technology Transfer programs connect small businesses with federal grants and contracts from 11 agencies.

The USDA Rural Business Development Grant program provides financing to strengthen and grow small businesses in rural communities.

The SBA’s Program for Micro entrepreneurs or PRIME Investors offers grants to microenterprise development organizations.

STATE AND REGIONAL RESOURCES

The U.S. Department of Commerce helps businesses find financing (including state or regional grants), secure locations, and recruit employees.

Small Business Development Centers (SBDCs) provide support for small businesses and aspiring entrepreneurs. They’re often associated with local universities or a state’s economic development agency.

Minority Business Development Agency Centers (MBDA) is a national network of business centers dedicated to growing and promoting minority-owned small businesses. These centers help business owners access capital, secure contracts, and compete in emerging markets.

The SBA’s State Trade Expansion Program funds state governments to implement small businesses STEP grants to cover costs to start or expand into international markets.

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November 2023 Client Line Newsletter

Where to Find Small-Business Grants – to help boost your business resources or start a new business in 2024, you may want to consider a small-business grant instead of a loan.

Be Aware of This Estate-Planning Change – when property, like the family home or other appreciated assets, passes at your death, do you want to saddle your beneficiaries with capital gains tax.

Do You Know What Your Asset Allocation Is – if you haven’t checked your portfolio and retirement plan asset allocations in a while, you could be in for a jolt.

Gift Return Policies – several companies have updated their return policies.

November 2023 Client Profile

November 2023 Question and Answer

New at the SBA – earlier this year the Small Business Association made changes to its programs that will widen access to government-backed small business loans.

Top Holiday Shopping Categories – do you know where the majority of your holiday dollars go.

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A Look at Social Media Advertising Statistics

The social media advertising market is set to rise to $207.1 billion in 2023, with an estimated 4.53% annual growth expected to take the market to $247.3 billion by 2027. And, while social media usage typically has skewed toward the younger demographic, it is spreading to better mirror the overall population, opening untapped opportunities for all types of businesses.

Sources: Instagram, Real Touch Points, Pew Research and SCORE.org

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October 2023 Question and Answer

QUESTION:

We plan to revive employee bonuses at our pre-Covid levels this year. A business owner friend said we can deduct the bonuses for 2023 tax purposes but not actually pay them until 2024. Is this true?

ANSWER:

Possibly. Your friend may be thinking of the “2-1/2 month rule.” Under it, an employer may deduct bonuses earned during a tax year if they pay the bonuses within 2-1/2 months after the end of that year.

But only accrual-basis taxpayers can benefit. Even if you are an accrual-basis taxpayer, you can’t deduct the 2023 bonuses in 2024 unless you fix your obligation to pay in writing before year’s end.

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Beware the Wash Sale Rule

It sounds simple. Sell securities, such as stocks, bonds, ETFs, or mutual funds, in which you have a tax loss for 2023, claim the loss, and repurchase the assets.

Simple, except for the IRS’s pesky wash sale rule. The rule specifies that if you buy or acquire a substantially similar security within 30 days before or after you sell it, you cannot deduct any loss on the sale.

CLAIM YOUR LOSSES

But you have a couple of strategies to use to follow the rules and claim your investment loss. Hold off buying the same or a very similar investment during the 61-day period starting the date of your original purchase and ending 30 days after your sale. If you can’t wait, reinvest in a security that isn’t substantially similar to the one you sold.

Consult your tax and financial professionals before using any investment sale or purchase as a tax strategy.

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October 2023 Client Profile

Connie and her son own Specialty Pet Food and Supplies, a manufacturing business with about 150 employees. She wants to increase the business’s 401(k) plan participation. Connie has read that auto-enrollment can successfully boost participation but wonders if the cost of auto-enrollment is worth the increased participation they may get.

She’s not alone. A Center for Retirement Research study* shows that cost is the most common reason small businesses setting up 401(k) plans don’t go with auto-enrollment.

But Connie may find this isn’t necessarily true in the long run. A professional advisor may be able to show Connie plans that have auto-enrollment and escalation built into their systems and offer legally compliant and effective employee communications as part of their standard services package.

Also, with increasing contribution levels, automatic savings can accelerate asset accumulations and lower plan fees. Auto-enrollment is highly effective but can be more costly.

*Center for Retirement Reasearch at Boston College, 2023

Client Profile is based on a hypothetical situation. The solutions discussed may or may not be appropriate for you.

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Is It Time for That Talk?

It may be a toss-up as to who dreads a family talk about your finances and the future more. You or your heirs. Regardless, if you haven’t had that talk or it’s been a while, there’s no time like the present to discuss expectations — yours and theirs — concerning your estate. They could be quite different.

At your meeting, you’ll want to share the contents and locations of your will, insurance policies, any trusts you’ve set up, your retirement plan accounts and beneficiary distributions, and a business succession plan, if appropriate, along with other estate documents.

That may be the easy part. You also need to let them in on your assets in bank, investment, and other financial accounts — something people often have difficulty doing.

If you haven’t already named a financial power of attorney and executed a healthcare proxy, a family meeting is a good time to do so or to share your choices if you have.

SHARE YOUR WISHES

It’s not just about the money, which is why many advisors encourage in-person meetings to avoid later hard feelings. That way, emotional needs can be addressed, as well as estate and financial information. Make sure everyone understands how you plan to distribute business and personal assets and why. Explain what you value.

If you’d like to see inheritances used for college expenses or a down payment on a home, you may want to set up a trust to distribute funds for those purposes and explain why.

If you want personal property to go to particular people, explain your reasons and list those bequests in your will. You may help avoid family squabbles later.

Be clear about your healthcare proxy and what life-extending measures you do and don’t want, and why you’ve chosen your proxy. It’s a difficult task not everyone can handle but needs to accept.

Finally, assure heirs that your professional advisors will be there to help.