Integrity,
and Discipline
WINTER 2012 Vol. 21 No. 3
IMPORTANT DATES
JANUARY 2012
4th Estimated Tax Payment Due 1/16/2012
N.J. Sales Tax for December Due 1/20/2012
Employers Must Furnish W-2 Statements to Employees. 1099 information
statements must be furnished by banks, brokers, and other payers. 1/31/11
Employers Must File 2011 Federal Unemployment Tax Returns and Pay any Tax Due. 1/31/2012
4th Quarter Federal & N.J. Payroll Tax Due 1/31/2012
FEBRUARY 2012
N.J. Withholding Tax for January Due 2/15/2012
N.J. Sales Tax for January Due 2/20/2012
Payers Must File Information Returns (such as 1099s) with the IRS 2/28/2012
Employers Must Send W-2 Copies to the Social Security Administration 2/29/2012*
*April if filing electronically.
MARCH 2012
Corporation Tax Returns Due 3/15/2012
N.J. Withholding Tax for February Due 3/15/2012
N.J. Sales Tax for February Due 3/20/2012
APRIL 2012
Personal Tax Returns Due 4/16/2012
Partnership Tax Returns Due 4/16/2012
1st Estimated Tax Payment for 2011 Due 4/16/2012
N.J. Sales Tax for March Due 4/20/2012
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1st Quarter Federal & N.J. Payroll Tax Due 4/30/2012
MAY 2012
N.J. Withholding Tax for April Due 5/16/2012
N.J. Sales Tax for April Due 5/20/2012
Save The Date:
Monday October 8th 2012, 9:00 am
Tobia & Hillyer 16th Annual Golf Outing
“The 1040 Open”
Our Website…Your Website: A tool for our clients
Bert and Dora have built their business over the past forty plus years on a philosophy that our clients are our business. Therefore, each decision they make is based purely upon how it will benefit Tobia & Hillyer’s customers. They are constantly and consistently striving to come up with new ideas and make improvements that they feel will be helpful. For instance, they host periodic compli¬mentary seminars on important and pertinent topics, they send out blast email announcements on timely issues, they send regular monthly “Actionable Thinking” objective market updates and of course they produce this newsletter three times a year.
Additionally as added value, several years back Bert and Dora began the process of developing a website as a resource for our clients. Their vision and hope for our website has always been to give our clients a place to go that would be user friendly and that our clients could obtain helpful, up-to-date information and easy to use tools. It was also meant to be a place to read our current newsletter on line, or refer back to archived newsletters. If you haven’t already logged on, I encourage you to take a peek at www.tobiahillyer.com, where you will find such tools as easy to use calculators for mortgages, college and retirement and such resources as direct links to the IRS, State of New Jersey and State of New York websites. You can also find the Salvation Army valuation guide for donated items, a worksheet for real¬tors and a link to directly order your current year tax organizer. There are direct links to look up the value of your automobile and financial and business resource links, as well as other helpful information.
The Tobia & Hillyer website is, and always will be, an ongoing en¬terprise. That is why we cherish and value your input, comments, criticisms and ideas. We want to know what you want to see. If there is a particular website that you love, please let us know so that we may take a look. And believe me, we take your ideas and comments to heart. If you want to see it, we will make sure it is there. In the upcoming months we will be doing some upgrading to our site so I truly look forward to hearing back from all of you. Thank you in advance for helping us to better serve you and I can’t wait to greet you during tax season.
Wishing you, your friends and your families a healthy, happy prosperous New Year from the entire Tobia & Hillyer Team!
Yes, it’s that time of year again when we here at Tobia & Hillyer gear up for tax season and look forward to seeing you in the next couple of months. Please call to set up an appointment for the prepa-ration of your tax returns as early as possible. Your tax return can be prepared as early as January, and you don’t have to pay your balance due until April 15, 2012. If you are entitled to a refund you will receive it within two weeks of filing.Additionally, your referrals are always greatly welcomed and appreciated. We will always make time to take appointments with your friends and relatives. In 2012 we would love to get one new referral from each of our Clients. So please think of who among your friends and family could benefit from our services and ask them to mention your name when they call us. We en¬courage your referrals as they are the highest compliment we can receive and are sincerely and greatly appreciated.
Let Me Introduce Myself…
Dear Clients and Friends: My name is Mike Schwartz and I joined Tobia & Hillyer in Novem¬ber 2011. I was born in Brooklyn, NY. I graduated City University of New York-Queens College earning my bachelor’s degree in account¬ing. I am a Certified Public Accountant. My professional experi¬ence includes managing my father’s CPA firm for over 18 years. The areas of my expertise are accounting, bookkeeping, tax, and audit. I am looking forward to provid¬ing excellent service for all of your tax and accounting needs.There are many business and tax planning alternatives that Bert, Dora, and I can implement to enhance your bottom line. As always, please call us with any questions that you may have.
Answering the Retirement Riddle
The two most important questions individuals who are preparing for retirement should ask themselves are: 1. Will I outlive my money? 2. Will my money outlive me? When you have made possibly the most important decision you will ever have to make, when to retire, you begin a complex balancing act of taking out withdrawals that are substantial enough to allow you to live the lifestyle you have grown accustomed to but are not so great that you run out of money. So how do you determine what the right amount to withdraw is?
If you listen to the “talking heads,” they have recommended a general rule of thumb for a withdrawal rate. Typically they suggest a 4% to 6% withdrawal of your total portfolio per year. Since the 2008 global credit crisis has impacted so many portfolios, these same pundits have now reduced their recommendations to 2% to 3% per year.
The major issue that these folks do not take into account is each cli¬ent’s individual goals, objectives and circumstances. A withdrawal rate of 6% may work perfectly for one individual while the same rate could be devastating to another. This conventional rule of thumb does not factor in how much you should be saving, does not develop an Investment Policy Statement (how your wealth should be invested) and when you can afford to retire. As with all other financial issues our clients face, the only real way to determine the answer to the aforementioned “two most important questions” is through our financial planning process we call “The Legacy Com¬pass.”
So how can an individual determine what withdrawal rate is suffi¬cient to get a general idea of where they need to be. Simply, the ideal withdrawal rate should be a percentage that is less than the annual rate of return of your investments minus taxes and inflation. In a perfect world, this equation would work flawlessly. However, as we already know, and as we have seen in the past few years, market re¬turns are not predictable and using a constant 7% assumed rate of return may not suffice. We know that there are going to be negative years in the market and this is what creates the conundrum of what clients should do in down years. If you want to avoid shrinking the real value of your portfolio in these circumstances, you need to develop a distribution plan that factors in negative years. By ac¬counting for negative years, creating different buckets of wealth to take withdrawals from and having a defined distribution plan, you have the ability to continue to take withdrawals that meet your lifestyle regardless of what is happening in the market.
By implementing a defined distribution plan through your custom¬ized Legacy Compass, even if your investments are losing money in those down years, you will not have to forgo the luxury items, discretionary expenses or holding off on withdrawals when mar¬ket returns are below average. This is vastly contradictory to the consensus of the financial experts of the media and their 4% to 6% strategy. And yes, it can be accomplished.
This concept is not infallible and there are some circumstances where client’s outflows exceed their inflows. Meaning, does your lifestyle exceed what you can afford? Sometimes a simple cash flow adjustment or an alteration to your Investment Policy Statement to favor more aggressive growth investments will help with this problem.
Whatever your individual case may be, it is to your advantage to develop a customized, comprehensive financial plan through our Legacy Compass that takes into account your goals, objectives and circumstances. I hope that everyone has a wonderful Holiday!
Chartered Retirement Plans Specialist
Over the past few months I have been studying for my Chartered Retirement Plans Specialist (CRPS ®) designation. On Friday December 9th 2011, I passed my examination earning my CRPS® designation. The CRPS® by definition is a program specifically targeted at professionals that design, install, and maintain retirement plans for the business community.
Due to the ever-increasing client demand for professionals who are knowledgeable in the administration of retirement plans Tobia & Hillyer felt that this certification would benefit our clients greatly. I’ve learned many of the essentials to insure the current plans are up to date and running efficiently that Tobia & Hillyer Financial Services administers, and to also capture new business in this area.
Financial Statement and Policy Review – Crucial on a Regular Basis
When I meet with new clients I generally ask that they bring with them their financial statements, insurance policies, and annuities so that I may review them. What I have found is that on most occasions the client isn’t even exactly sure of what their policies and annuities contain or how they even work. Very often these things made sense to the client when they first purchased the product, but after that point rarely have they been looked at again, lying idol in a file folder. Over the years I have seen some very unfortunate scenarios that can cost people significant amounts of money and aggravation only because they have not periodically reviewed the products they own to be sure they still make sense. Below are some of the most important items to be reviewed and considered on a periodic basis.
First and foremost one should always be sure that policy or account beneficiaries are those who are intended. Families are constantly changing as you know. Some families grow as new members arrive due to births or marriages. Additionally, some families shrink due to death or divorce. It is during times like these when so much else is weighing upon one’s mind that people forget to change the ben-eficiaries on their accounts. It’s not a good scenario when a family finds out that an ex-spouse is still the beneficiary on a policy.
Another major issue to consider is that there are several different types of life insurance and annuity products with many bells and whistles that can do a lot of good in certain scenarios. One must be sure to know the type of policy that they currently hold, and all that it affords them. What I hate to see happen is for a client to have been paying for a benefit or rider that they didn’t even realize they had, and that could have been improving their financial situ¬ation. For example many life insurance policies have a Waiver of Premium rider that allows one to stop paying the premium if they become disabled. If one is not aware or has forgotten that the rider is on their policy, they run the risk of letting it lapse because they can no longer afford the premium due to the very disability.
Finally, as with any industry, the financial world is constantly changing. Companies come out with new and better products every day. This leads me to yet another advantage of reviewing your financial statements. There is the potential that you are over paying for an outdated product. You should review your policiesat least twice a year to prevent this exact scenario. It has been my experience that rarely have I found an annuity or life insurance policy set up more then ten years ago, is still the best use of a cli¬ent’s money today.
At our own expense, both I and my partner Robert Egan provide an opportunity for you to come in to sit down and review your current situation. This simple step may go a long way in prevent¬ing some of the issues I stated above and could insure that you are maximizing your money to the best of your ability.
Small Business Updates
>Social Security benefits for 2012 Social Secu¬rity taxable wage base will increase to $110,100 in 2012. For 2012 the employee tax rate for Social Security is 4.2%. The employer tax rate for Social Security remains unchanged at 6.2%. This will be in effect for 2 months, and will affect employees future Social Security benefits. In 2012, the Medicare tax rate is 1.45% each for employers and employees, unchanged from 2011. This new law also includes a recapture provision for high income individuals.
The State of New Jersey unemployment benefits 2012 taxable wage base under Unemployment, Disability and Family Leave Insur¬ance will increase to $30,300. The disability rate will decrease to .0200 (from .0500 in 2011) for the employee only for the first and second quarters in 2012. Additionally the Family Leave Insurance will increase to .000800 (from .000600 in 2011) for the employee only for the first and second quarters in 2012.
Due to new state banking rules for 2012 you will now be charged a fee for including a paper copy of your cancelled checks in your bank statement. We recommend, if you own a business, that you request this and continue to receive paper copies. The reason is that it may prove very difficult several years down the road to obtain your electronic back up if you find that you need it for the state or the federal government.
Deferral limits for traditional and safe harbor 401(k) plans. The 2012 limit on employee elective deferrals for tradional and safe harbor 401(k)s is $17,000 for 2012. Catch-up contributions for participants age 50 and over is: $5,500 for 2011 and 2012
Deferral limits for SIMPLE 401(k) plans. The limit on employee elective deferrals to a SIMPLE 401(K) plan is: $11,500 for 2011 and 2012. Catch-up contributions for participants age 50 and over is: $2,500 for 2011 and 2012.
Tax Relief When Disaster Strikes
Hurricanes, tornadoes, earthquakes, wildfires, floods, storms. Few parts of the country escape the risk of natural disaster. If you’re an unlucky victim, you may receive help from insurance and federal disaster aid. But the tax code also offers some relief.
You may be able to take an itemized deduction for part of your loss. In tax terms, it’s a “casualty loss,” and it can also apply to events such as a car crash, a house fire, or theft. Here are the basics: Sudden event. The loss or damage must be due to an unexpected and sudden event. Losses due to slow deterioration over the years, such as rot, rust, or insect damage, don’t qualify. Tax deduction. Your tax deduction won’t equal your total loss. You must subtract any insurance or other reimbursement. Then you must also deduct $100 for each loss and 10% of your adjusted gross income. Basis adjustment. Your loss may also be limited by your adjusted basis in the property. That’s generally what you paid for it, plus or minus any improvements or previous losses. Disaster classification. In a widespread disaster, the area may be classified as a “federally declared disaster area.” If that happens, you have two choices. You can claim your casualty loss against the current year’s taxes. Or you can amend the previous year’s return and claim your loss against that year’s taxes. That usually generates a faster refund, but it may change the amount of your deduction.
If you’re unlucky enough to suffer a casualty loss, please contact us. We’ll help you claim the maximum possible tax benefit.
email: bert@tobiahillyer.com or dora@tobiahillyer.com
Securities offered through First Allied Securities, Inc. • Member: FINRA/SIPC