Integrity,
and Discipline
Winter 2011 • Vol. 20, No. 3
IMPORTANT DATES
January 2011
4th Estimated Tax Payment Due 1/17/2011
N.J. Sales Tax for December Due 1/20/2011
4th Quarter Federal & N.J. Payroll Tax Due 1/31/2011
February 2011
N.J. Withholding Tax for January Due 2/15/2011
N.J. Sales Tax for January Due 2/21/2011
March 2011
Corporation Tax Returns Due 3/15/2011
N.J. Withholding Tax for February Due 3/15/2011
N.J. Sales Tax for February Due 3/21/2011
April 2011
Personal Tax Returns Due 4/15/2011
Partnership Tax Returns Due 4/15/2011
1st Estimated Tax Payment for 2011 Due 4/15/2011
N.J. Sales Tax for March Due 4/20/2011
May 2011
1st Quarter Federal & N.J. Payroll Tax Due 5/2/2011
N.J. Withholding Tax for April Due 5/16/2011
N.J. Sales Tax for April Due 5/20/2011
Save The Date:
Monday October 10, 2011: Columbus Day
Tobia & Hillyer 15th Annual Golf Outing
“The 1040 Open”
We at Tobia & Hillyer wish to extend to you, your family and your friends, a healthy, happy, and prosperous New Year.
We look forward to seeing you in the next couple of months, as you come in for the preparation of your tax returns. Please call to set up an appointment 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, 2011. If you are entitled to a refund you will receive it within two weeks of filing.
ADDITIONALLY, APPOINTMENTS ARE ALWAYS AVAILABLE TO YOUR FRIENDS AND RELATIVES. In 2011 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 encourage your referrals as they are the highest compliment we can receive and are sincerely and greatly appreciated.
New Employee at Tobia & Hillyer
Hello everyone. My name is Anthony Berlangieri. I joined Tobia & Hillyer in December 2010 and, like Bert and Dora, I am an Enrolled Agent. I also have Series 7, 63 and 65 FINRA licenses, as well as a New Jersey Life, Health, and Variable Annuity Insurance license. My professional experience includes over 25 years in the areas of Tax, Accounting and Financial Services.
I graduated from Rutgers University earning my bachelor’s degree in Accounting. I also completed the Certified Financial Planning program at Fairleigh Dickinson University and I will be taking the CFP (Certified Financial Planner) examination after the upcoming tax season. I am involved in various professional organizations and I currently serve as the Vice President of the NJ Society of Enrolled Agents. I am looking forward to servicing you and assisting Bert and Dora with meeting the tax and accounting needs of our clients.
We sincerely thank all of our Clients, Associates and Friends, whose generous contributions made the 2010 1040 Open a huge success!
• Allianz Global Investors • Anthony Paterno • C&L Group • Calandra Printing • Caldwell Flowerland • Casa Filippo • Cedar Grove Chiropractic • Cloverleaf Tavern • W.B. Mason • Jackson National • Sobin Financial Group • Susan Holmberg • Crest Consulting, Coaching & Training • Fidelity Investments • Graphic House Advertising, Inc. • I. Miller International • JS Blade Advertising • Lakeland Bank • PAM Enterprises, Inc. • MetLife • Nicastro Gourmet Products, LLC • Pica Realtors • PNC Bank • Residential Home Funding • The Chocolate Path • Transamerica Capital Management • Wells Real Estate Funds
Tobia & Hillyer Adds a New Arm of It’s Business: Tobia & Hillyer Financial Services, LLC
As a result of the trust you have placed in us we have been able to grow into a new office. I am proud to announce the opening of our financial planning and insurance office in Suite C201! Warren Gallagher, Michael Petracca and I look forward to providing a comfortable, professional atmosphere for each and every one of our clients. With that noted, I would like to invite you to our Open House this January!
Tobia & Hillyer Financial Services, LLC
New Office Open House
January 21, 2011, 3:00pm-8:00pm
271 Route 46 West, Suite C201 Fairfield, NJ 07004
To RSVP Please call 973-882-1937
Or email Melissa@tobiahillyerfinancial.com
I hope you can join us in celebrating the opening of our new office. And, we look forward to continuing to help our Clients plan for their financial futures in our new space.
Note To Self – Check Your Beneficiary Designations!
When was the last time you checked the status of your account beneficiaries? Two years ago? Five years ago? Can’t remember? Even if your will and estate conservation strategies are well thought out and in perfect order, assets in accounts such as retirement plans, annuity contracts, and life insurance policies pass to the designated beneficiary on the account documents. As a result, an incorrect or outdated beneficiary designation form could spoil your best intentions. Life-changing events such as divorce, the birth of a child or grandchild, the death of a loved one, or even a job change should always prompt a review of your beneficiary designations. If your beneficiaries were named years ago, it’s easy to forget that they may not be in line with your current situation. Even if your will clearly lists your spouse as your current heir and your wishes seem obvious, an institution must follow the instructions on the designation form. The same situation can occur when account holders neglect to remove former spouses or forget to add children or grandchildren after they are born. If you fail to designate a beneficiary on account designation documents, your heirs may be determined by federal law, state law, or the plan document that governs your retirement accounts, rather than by your own wishes. Keeping a copy of all beneficiary forms in an easy-to-access file may make it more likely that you will remember to make the necessary changes in order to keep them current. It’s also a good idea to keep copies with your will and to have your attorney coordinate them with the rest of your estate plan. Outdated beneficiary forms have the potential to cause needless grief and hardship for surviving loved ones who are your intended heirs. Fortunately, checking your beneficiary designations takes little time and is certainly worth it.
With Congress likely to make major changes to estate planning and other parts of the tax code, I urge you to let us help you make sure all your hard work planning your financial life goes smoothly. Even if you have the right names, do you have the right forms?
Please talk to us about all of your IRAs, Estate Planning and Trusts, Life Insurance, Medical Power of Attorney, and Living Wills. Let us help you MAKE SURE all is correct. If your assets are with us, we can make sure all is correct. If your assets are elsewhere, it’s even more important that we double check!
Social Security
Social Security benefits will NOT increase in 2011. Medicare premiums will remain the same in 2011: $96.40/month for those people who currently have the premiums withheld from their Social Security income. For all others, the monthly premium will be $120.20 in 2011.
Those under full retirement age can earn $14,160 in 2011. For each $2 earned, above $14,160, they lose $1 of benefits. The year in which you reach full retirement age, a modified test applies, if your earnings reach $37,680. Those at full retirement age can earn as much as you want and there will be no reduction in Social Security. Congress removed the earnings limitation for those who are aged 65 through 69 by passing the Freedom to Work Act of 2000.The maximum benefit depends on your age at which you choose to retire. The monthly benefit amount for 2011 ranges from $1,820 for a person retiring at age 62 to $3,119 for a person retiring at age 70. These are based on earnings at the maximum taxable amount for every year after age 21. You can see the maximum amount of taxable earnings for each year at: http://www.socialsecurity.gov/OACT/COLA/cbb.html.
The ceiling for computing the Social Security tax will remain the same as 2010: $106,800 in 2011. Social Security tax has been the fastest increasing tax over the last several years. The maximum Social Security withholding is $6,621.60 in 2011.
The Federal Insurance Contributions Act (FICA) imposes two taxes on employers, employees, and self-employed workers: one for “Old Age, Survivors and Disability and Insurance” (commonly known as “Social Security”), and the other for Hospital Insurance (commonly known as “Medicare Insurance”). The FICA tax rate for employees and employers is 7.65% each - 6.2% for Social Security and 1.45% for Medicare.
For self-employed workers, the FICA tax is 15.3% - 12.4% for Social Security and 2.9% for Medicare.
There is a maximum amount of compensation subject to the Social Security tax, but no maximum for Medicare. The Social Security maximum is adjusted for cost of living and it determined that there was no increase from 2010 to 2011.
Estate & Gift Tax
The Federal Unified Credit was repealed for 2010 only. In 2011 the unified credit will revert back to $1,000,000.00, with a tax rate of 55%, unless Congress changes it prior to the end of the year.
New Jersey imposes filing requirements and tax liabilities for any gross estate over $675,000. Even if the total estate is less than $675,000, and if the beneficiaries are not the decedent’s spouse or children, then there may be a N.J. inheritance tax due.
Miscellaneous Items
- • The Personal Exemption Amount remains the same for 2010, $3,650, and increases to $3,700 in 2011.
- • Standard Deductions: There was an additional standard deduction in 2009 available for people who pay real estate taxes, but were under the threshold for itemized deductions. This provision expired and is not available in 2010.
- • The Standard Deduction for Single Taxpayers will be $5,700 in 2010 and $5,800 in 2011. For those over 65, it will be $7,100 and $7,200 in 2011.
- • The Standard Deduction for Married Taxpayers will be $11,400 in 2010 and $11,600 in 2011. If one spouse is over 65, the amount in 2010 is $12,500 and if both are over 65, it’s $13,600. If one spouse is over 65, the amount in 2011 is $12,750 and if both are over 65, it’s $13,900.
- • Children under 19 or 24 (if full time student) can earn $950 unearned income (dividends & interest) tax free in 2010 and 2011. The next $950 is taxed at 10% ($95.00) and everything over $1,900 is taxed at the parent’s rate. This is no longer a good strategy for the purpose of saving for higher education. A much better strategy is the Coverdell (Educational) IRA and the 529 Plan, especially now that qualified expenses include technology and computer costs. Contact us for more information.
- • The Gift Tax Exemption will have a $13,000 limit for both 2010 and 2011. If a married couple agrees to gift split, the limit increases to $26,000.
- • Standard Business Mileage Rate for 2010, the mileage rate is 50 cents per mile.
- • Charitable Mileage Rate has remained the same 14 cents for 2010.
- • Medical Mileage Rate for 2010 the mileage rate is 19 cents per mile.
- • Your child’s earning (wages) can go tax-free, $5,700 in 2010 and $5,800 in 2011. If you are Self Employed…these wages will, in addition be tax free to them and deductible to you. They will also not be subject to any Social Security taxes. Your child must be under 18. If your child works especially hard you can pay them an additional $15,500 tax-free by putting $5,000 into an IRA and $10,500 into a SIMPLE IRA for 2010. When the time comes for them to go to college they can withdraw from their IRA, penalty free, if they use the money to go to college.
- • Capital Gains The Capital Gains tax rate will increase to 10% for those in the 15% tax bracket and will remain 20% for all other tax brackets.
- • Charitable Contributions Now the IRS requires written verification of ALL monetary contributions to charity. This can be a cancelled check, a receipt, or a letter from the benefiting institution.
- • Coverdell Educational Savings Account For 2010, it remained the same : $2,000. Withdrawals can be made for public, private or religious elementary or high school educational cost. God Bless America. If you haven’t set one up for your child or grandchild contact Tobia & Hillyer, and we will discuss your options with you. A 529 Plan may be best. Either way, we can set it up for you.
Reflections
As another tax season quickly approaches, I have had the opportunity to reflect on the past year and all that it has brought. While one may think that when the bell rings on April 15th that the lights dim, the music stops, the jelly beans are put away and all is quiet…. that couldn’t be farther from the truth. Yes the routine changes, but the work ethic here remains firmly in place, and the goals are the same… We at Tobia & Hillyer continually strive to better service you, our clients. .
And, as many of you know we are here every day to answer your phone calls, address your questions, allay your fears and act on your behalf whenever any situation arises throughout the entire year.
Also as many of you know, Bert and Dora are strong supporters of the surrounding communities and off tax season our whole team gets on board working hard in support of many great causes.
Finally, with our financial and insurance arm of our business expanding into our newly renovated office space within our complex, we have also worked very hard to make our current office here more comfortable for our clients. With a fresh coat of paint, new carpet on the floors, and an upgraded conference room, we are ready to jump into tax season with a vigor.
So, with my first full year with Tobia & Hillyer just behind me, I so look forward to seeing all of your familiar faces which a year ago were brand new to me.
What are Your Options for an Old 401k or 403b that is sitting with an Old Employer?
Every year millions of workers change jobs, and go through many life altering changes in the process. Many times families are dealing with relocating, changing health insurance, and adjusting to a whole new company. Needless to say people are normally swamped with adjusting to the transition. What can and normally does happen is their old retirement account ends up sitting with the old company with no one managing it and nobody updating the account based on new funds and an ever changing economy. Below are options that an individual has after leaving their company.
The Worst Option for someone younger than 59.5 and still working is to cash out that account. According to one study up to 45% of individuals end up taking this option. This is financial suicide when trying to build up assets for retirement.
When one takes a non-qualified distribution from a retirement account they are subject to a 10% penalty along with paying income tax on the distribution. For many individuals this can amount to losing roughly 40% of the cash value to Uncle Sam.A Better Option for an individual is to move the old 401k or 403b into their new retirement plan. Moving the old account into the new plan allows for a tax and penalty free move into the new plan. This option allows you to consolidate your statements and have the ability to speak with someone about your account. If creditor protection is of concern for you this is probably the best avenue you can take, since creditors do not have access to these funds. Some of the drawbacks of employer sponsored retirement plans are the limited number of choices and types of financial products available (normally less than 40 options and only mutual funds). Normally with most employer sponsored plans you do not have access to advisors that are willing to do retirement projections and risk management with you.
Probably the Best Option for most is rolling that asset into an IRA and consolidating all of your old 401k’s and 403b’s to one location. An IRA has almost limitless choices on how you can invest. You can open an IRA with a financial planner, mutual fund company, or other financial institution, giving you access to nearly any type of investment. With access to thousands of investment products a client has a much better opportunity to find the exact product that fits their individual risk tolerance and time horizon. Working with a financial planner allows an individual to not only manage those assets, but protect against all financial risks, insuring one is on their way to a comfortable retirement.
As a Certified Financial Planner my job is to present you with all the options and go over the pros and cons with you so you can make an informed decision. I realize many individuals do not have the luxury of working one-on-one with an advisor provided by your current 401k. If anyone is interested in a complimentary consultation to go over your 401k options please feel free to call Tobia & Hillyer or email me at Michael@tobiahillyerfinancial.com.
Small Business Updates
Small Business Healthcare Credit
Notice to all small employers that effective this tax year they may be eligible for a new tax credit. In general, the credit is available to small employers that pay at least half the cost of single coverage for their employees in 2010. For tax years 2010 to 2013, the maximum credit is 35 percent of premiums paid by eligible small business employers and 25 percent of premiums paid by eligible employers that are tax-exempt organizations. The maximum credit is for small employers with 10 or fewer full-time equivalent (FTE) employees paying annual average wages of $25,000 or less. Because the eligibility rules are based in part on the number of FTEs, not the number of employees, businesses that use part-time help may qualify even if they employ more than 25 individuals. The credit is not available for employers that have 25 FTEs or more or that pay average wages of $50,000 per year or more. Eligible small businesses can claim the credit as part of the general business credit starting with the 2010 income tax return they file in 2011.
New Payroll Deposit Requirements for 2011
Beginning in 2011 the Internal Revenue Service will be discontinuing the availability of form 8019 – deposit coupons. This is part of an initiative to require electronic payments. If your payroll deposit is more than $2,500 per quarter you will be required to use the electronic tax payment system (EFTPS). If your tax payment is $2,500 or less you can pay the tax when you file your quarterly return. If your payroll is over $2,500 and you do not enroll in EFTPS you will be charged a failure to deposit penalty by the Internal Revenue Service. For amounts not properly deposited or timely deposited the penalties are as follows: 2% - Deposits 1 to 5 days late. 5% - Deposits 6 to 15 days late. 10% - Deposits 16 or more days late. Also 10 days after first IRS notice. 10% - Deposits directly made to the IRS, paid with your quarterly return or at an unauthorized financial institution. Also for amounts subject to electronic deposits but not deposited electronically. 15% - Deposits made after the 10 day notice received by the IRS. .
Healthcare Act New Requirements for 1099 Reporting: Code Sec. 6041 (a), as Amended by 2010 Healthcare Act 9006 (b).Due to the reporting requirements for the “2010 Healthcare Act” any entity conducting a trade of business is now required to obtain a form W-9. Forms 1099 are required for anyone you conduct business with in the amount of $600 or more. For anyone who fails to furnish you with this information through a W-9 you must withhold 28% tax and pay it directly to the IRS. This law will go into effect on January 1, 2012; therefore we are suggesting that you obtain any necessary W-9 forms in 2011. If you do not obtain these forms, you may be liable for this tax. Following is a list of what information is needed: owner’s name (if sole proprietor), legal business name, mailing address, and taxpayer identification number. It is best to obtain these forms up front as 1099 forms are required to be issued if payments exceed $600. Following are examples of what is considered reportable payments: advertising, auto repairs, construction, maintenance, landscaping, photography, printing services, professional services, rents, medical and healthcare services. If you have any questions please contact Trish at trish@tobiahillyer.com
New Changes for Tax Year 2010
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Rental Income Reporting requirements: Beginning in 2011, persons who receive rental income payments of $600 or more during the year are required to file information returns with the IRS. There is an exception if there is a temporary rental of your principal residence.
Phase out of personal exemptions and itemized deductions: In 2010, taxpayers with adjusted gross income over certain levels will not see a reduction in the amount deductible. In 2011, these phase-outs will return.
Self-Employed Health Insurance Costs: In 2010 self-employed individuals will be able to reduce their self-employment income by the amount paid for health insurance. Previously, self-employment health insurance premiums were a deduction to arrive at adjusted gross income. This new change allows for a reduction in the self-employment tax. In 2011, the self-employed health insurance will revert to being a deduction at arriving at adjusted gross income.
Changes to Flexible Spending Arrangements: In 2011 the cost of an over-the-counter medicine or drug cannot be reimbursed from flexible spending arrangements or health reimbursement arrangements unless a prescription is obtained. The change does not affect insulin, even if purchased without a prescription, or other health care expenses such as medical devices, eye glasses, contact lenses, co-pays and deductibles.
Health Coverage for Older Children: Health coverage for an employee’s children under 27 years of age is now generally tax-free to the employees. This allows employees to begin making pre-tax contributions to pay for this benefit.
Health Care Tax Credit for Small Employers: For the tax years 2010-2013, there is a maximum credit of 35% of premiums paid by employers with 10 or fewer full-time employees or equivalent, who pay annual wages of $25,000 or less. This credit is phased out for employers with more than 25 full time employees or equivalents or with average wages of more than $50,000.
Benefit for Employers That Hire and Retain Recently Unemployed Individuals: Employers who hire unemployed workers after February 3, 2010 and before January 1, 2011 may qualify for an exemption from the employer’s share of Social Security on wages paid after March 18, 2010. In addition, for each qualified employee retained for at least a year whose wages did not decrease by 20% in the second half of the year, businesses may claim a new hire retention credit up to $1,000 on their tax return. While these benefits are generally targeted to new, not replacement positions, new hires filling existing positions may also qualify if the persons they are replacing left voluntarily or for cause. Family members and other relatives generally do not qualify for this credit.
Qualified Long Term Care Insurance Premiums: In 2011, there will be an increase in the amount of the age-based limitation for long term care premiums. These amounts, together with other unreimbursed medical expenses, must still exceed 7.5% of the taxpayers adjusted gross income to be deductible as an itemized deduction. The following table shows these amounts for both 2010 and 2011, based upon age Attained Age Before Close of Year 2010 2011 40 or Less $330 $340 41 not yet 51 $620 $640 51 not yet 61 $1,230 $1,270 61 not yet 71 $3,290 $3,390 71 or older $4,110 $4,240
NEW NJ CHANGES: For 2010, the tax rates will revert back to the 2008 rates. This means that the top rate of 8.97% will be imposed on taxable income of $500,000. This is a reduction in the 2009 tax rate of 10.25% on taxable income between $500,000 and $1,000,000 and 10.75% on taxable income over $1,000,000. In 2009, there was a change to the Property Tax Rebate Program. Rather than issuing checks, the State will now issue credits to the property tax bills that homeowners received from their municipality. These credits will begin showing up on property tax bills in May, 2011. Renters who were previously eligible for a rebate have now been eliminated from the program.
Client Organizers
A client organizer is available to all of our 2009 tax return Clients. This organizer is very useful in gathering your 2010 income tax data. The organizer consists of a complete breakdown of all of your income and deductions (in outline form) as it appeared on your 2009 tax return. In addition to the dollar amounts from your 2009 tax return, the organizer contains a blank column to insert your 2010 amounts. If you believe the Client organizer will make your life easier, call or email Maureen maureen@tobiahillyer.com and ask her to prepare one for you to pick up or email back to you.
Please Take Note
Some information in this newsletter may become obsolete or change if Congress passes the new tax bill after this newsletter goes to press.
Office Hours
January through April 15, 2011, our office hours are: Monday through Thursday 9 A.M. to 9 P.M. and Friday & Saturday 9 A.M. to 5 P.M. We will continue to accept your returns through the mail, email and fax. However, we would always prefer to see you in person if at all possible.
email: bert@tobiahillyer.com or dora@tobiahillyer.com
Securities offered through First Allied Securities, Inc. • Member: FINRA/SIPC