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August 2022 Question and Answer

Question:

How do I change my company’s fiscal year-end?

Answer:

Transferring your business to a fiscal year from a calendar year is a significant step and should be done only if there is a strong business purpose. It will complicate tax compliance because some reporting deadlines will shift while others, like Forms 1099 and W-2, will remain on a calendar year.

Changing your year-end date generally requires approval from the IRS by submitting Form 1128, so you’ll want to get your tax professional involved. However, if you’re looking to change your fiscal year-end strictly for a financial presentation viewpoint, remember you can always present your company financials using any period you like without changing your tax filing requirements.

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Are You Saving Enough For Retirement

Here are the average retirement account balances by ages, according to a Survey of Consumer Finances.* This chart clearly demonstrates that most Americans are not saving nearly enough for retirement. Fortunately, you do not have to be average. Working with your financial professional is your best chance of developing a realistic savings strategy that works for you.

AGE GROUP AND THEIR AVERAGE RETIREMENT SAVINGS

  • Under 35: $13,000
  • 35-44: $60,000
  • 45-54: $100,000
  • 55-64: $134,000
  • 65-74: $164,000
  • 75 and up: $83,000
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Interest Rates and Bonds

A fundamental principle of bond investing is that market interest rates and bond prices generally move in opposite directions. When interest rates rise, the cost of bonds typically decreases and the bond’s yield (how much you’ll earn) usually increases. This is true for government and corporate bonds.

INVERSE RELATIONSHIP

A bond’s coupon rate (e.g., interest rate) is fixed when issued. But when interest rates change, the coupon rate becomes more or less attractive depending on how interest rates move. When a bond’s coupon rate is lower than the prevailing interest rate, investors will likely find it less appealing, and the bond’s price will decrease. For example, if a corporate bond has a coupon rate of 3%, but prevailing interest rates are 4%, an investor will pay the amount that generates more than a 4% yield. So, a $1,000 face value bond might sell for $925.

Remember that time to maturity and the issuer’s credit quality also impact bond rates.

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How To Change A Business Name

Has your business outgrown its name? Or perhaps you’ve purchased a company and want to rebrand its product line. Fortunately, changing your company’s name is straightforward.

SEARCH

After you settle on a new name, complete a business name search with the Secretary of State where you do business. You’ll want to make sure this name is available and that it follows the state’s naming rules. You may also want to verify that the domain name is available, even if you don’t plan to have a website right away. Buying the domain name will ensure another business can’t use it.

NOTIFY

When you confirm the company name is available in your state, you need to file an amendment certificate with your Secretary of State to notify the state of the name change.

You’ll also need to notify the IRS for federal tax purposes, and that might mean applying for a new federal employer identification number. And don’t forget to update any business licenses or permits, bank accounts, and company agreements or bylaws.

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Consider State Taxes Before You Move

Relocating to a different state means state tax changes. Simply because a state has low (or no) income tax doesn’t necessarily mean it’s a low tax state. A state needs funds to survive and while they may not charge income tax, there are other ways to collect taxes.

SALES TAX

Sales tax can vary by type of product or service purchased. And the rate can vary depending on where you make the purchase.

Currently, there are five states without a state sales tax. In the other 45, a state-wide sales tax is collected on taxable goods and services. For example, Florida has a 6% state-wide tax rate, and Colorado’s is 2.9%.

On top of the state sales tax, local counties, cities, or municipalities may collect their own sales tax. If you’re in Miami, you’ll pay an additional 1% sales tax to Miami-Dade County, and in Denver, you’ll pay an extra 4.81% on most retail purchases.

Along with different rates, most states tax items differently. While some basic goods like groceries may be exempt from sales tax, other things like alcohol and sugary beverages may incur excise taxes in addition to the state and local sales taxes.

REAL ESTATE TAX

One of the primary revenue sources for local governments is real estate tax, where the tax is based on the value of the owned property. And if you’ve bought real estate recently, you may notice a hike in property tax. That’s because of the higher prices of housing. Your locality will likely adjust appraisal values and taxes according to the higher value.

OTHER TAXES

Although sales and real estate taxes will be the two most significant taxes to consider, there are a few others to consider. Motor vehicle taxes, those fees you pay to register your car, boat or RV each year, vary from state to state. If you are working in your new locale, be aware that some cities have occupational privilege taxes you’ll pay, in addition to any state income tax. And some states have an estate or inheritance tax — Maryland has both.

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August 2022 Client Line Newsletter

Consider State Taxes Before You Move – simply because a state has low (or no) income tax doesn’t necessarily mean it’s a low tax state.

How to Change a Business Name – changing your company’s name is straightforward.

Interest Rates and Bonds – a fundamental principle of bond investing is that market interest rates and bond prices generally move in opposite directions.

Are You Saving Enough For Retirement – review the charge of average retirement account balances by ages.

August 2022 Question and Answer

August 2022 Client Profile

Higher Education Costs – review average in-state tuition and fees full-time undergraduate students paid during the 2021-2022 school year.

Retirement Plan Audits – if your company’s retirement plan has 100 or more eligible participants at the beginning of the plan year, you’ll need an audit.

The QBI Deduction and Real Estate Investments – the qualified business income deduction offers tax savings to qualified businesses; learn how it applies to real estate investments.

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June 2022 Questions and Answers

Question:

Do my volunteer hours at the local food pantry count as a charitable contribution?

Answer:

Unfortunately, your good deed won’t come with a tax break. Hours spent volunteering for a qualified charity aren’t a tax deduction. But there is some good news. The miles you drive to get to and from the food pantry are tax-deductible. For 2022, you can deduct 14 cents per mile if you itemize deductions. And if you make donations of food or other staple items to the pantry, those costs are deductible too.

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Consider Tipping Servers More

Servers in the U.S. earn below the minimum wage, with the best-paid waiting salary at $28,280. That is why your tip could make the difference between paying the bills on time or incurring a penalty or, worse, having utilities cut off for those who provide service to you.

Source: CreditCards.com

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June 2022 Client Profile

Eliza wants to invest some of her retirement assets in socially responsible companies. But she doesn’t know where to start or how to analyze companies for their social and environmental responsibility.

Environmental, Social, and Governance (ESG) investing is a strategy that examines a company’s sustainability and non-financial social stewardship. The best way to start is to discuss the idea with her financial professional, who can provide personalized guidance and help her to make informed decisions.

Perhaps she should consider what matters most to her. For example, some funds focus on natural resource preservation while others prioritize fair labor practices.

Interested, in digging deeper, Eliza can research companies with high ESG scores and examine corporate reports that follow the Global Reporting Initiative (GRI) framework for reliable information. Although there are no universal ESG standards, the GRI is the most commonly used.

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

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Appealing an Unexpected Medical Bill

If you received a medical bill that you believe was sent to you in error or the amount is wrong, you can file an appeal with your insurance company.

START WITH THE EXPLANATION

Your insurance company should have provided an explanation of benefits that breaks out the cost of the service, how much they paid, and what’s left for you to pay. Compare the amount they paid with your insurance documents to verify they agree.

IN NETWORK

A common error is for doctors or hospitals to send incorrect billing codes to the insurance company, resulting in a denial of a claim or paying for the procedure at lower out-of-network rates. If your provider is in-network, ask them to rebill the insurance company with the correct information.

NO-CHARGE SERVICES

Under the Affordable Care Act, insurance companies must cover all costs of annual physical exams and other preventative care. But if your doctor orders additional tests, your insurer may deem them an unnecessary part of your physical exam. To avoid surprise bills, ask the providers to check with your insurance so you know what is covered.