Lou Moran: REM's rock star (not *that* R.E.M.)

A small portion of Lou's collection.

A small portion of Lou's collection.

At REM, we have our own guitar hero -- and he puts Peter Buck to shame.

Our firm shares its initials with an award-winning rock band. We're not associated with them*, but we do have a rock star of our own in our midst. What do you get when you mix over 15 guitars, 28 years of experience, and a mélange of musical styles, rhythms, and riffs? The answer here is our Director of IT, Lou Moran. It began with a fateful concert in which he saw KISS’s Ace Frehley shoot rockets out of a guitar. Lou was inspired to become a musician, too.

A younger Lou

A younger Lou

Lou's played with many bands over the years. For a time in the mid-90s, he lived the rock star life, opening shows for major rock bands. He’s done studio work for local commercials, and has taken up several other instruments, including bass and drums (anything a band might need). He is no stranger to most genres of music, having played tunes from the Allman Brothers Band to Slayer to experimental jazz. His favorite songs to warm up on are Stevie Ray Vaughan’s "Pride and Joy" (for its complex syncopations), The Beatles' "Norwegian Wood" (challenging use of the pinky) and Metallica’s classic "Enter Sandman" (he says this one is just really fun to play).

Lou noodles in his home studio

Lou noodles in his home studio

These days, Lou plays at local bars, and is happy to perform whatever might come up. He has built up quite a collection of guitars, including several Les Pauls, some of which are currently on loan to friends and family. Otherwise, Lou enjoys “noodling” by the TV (playing guitar along with whatever plays out of the television) or jamming along with his son to Cage the Elephant or The Orwells. So keep your eyes and ears peeled if you go out at night—you might just catch Lou playing something sweet.

* If Michael Stipe, Peter Buck, or Mike Mills is reading this: Hi! Need a new accountant?

Matt Bass gears up for NYC Triathlon

Have you ever biked across an entire state? Matt has.

Matt Bass, a tax manager in REM's New York City office, is a man of many hats. A graduate of Harvard Business School, Matt has taken on various roles, from radio and television producer to the head of his own operation as a business broker. By the time he became an accountant at REM & Co., Matt had garnered over 30 years of experience in the management world.

Business aside, Matt has some impressive hobbies. Many dare to take up running as a way to stay fit, but Matt has taken that not one, but two steps further. Starting in 2010, Matt has participated in several NYC triathlons—that’s 1 km of swimming, 40 km of biking, and finally 10 km of running to put the icing on the cake. In 2012, Matt completed the New York City Triathlon only one day after finishing the first section of his CPA exams. He’s a member of the New York Cycle Club.

This month, Matt plans to finish yet another NYC triathlon, and on July 23, he’ll participate in RAGBRAI, a week-long bike voyage across the state of Iowa—one of his favorites. We’re cheering you on, Matt!


Do you know of anyone at Raich Ende Malter who might be a good candidate for a staff spotlight? Let us know here.

L to R: Angela Stamper, Matt, and Liz Froemke after the 2012 NYC Triathlon.

L to R: Angela Stamper, Matt, and Liz Froemke after the 2012 NYC Triathlon.

NYS Paid Family Leave Act effective January 1, 2018

Beginning January 1, 2018, all private employers will be required to participate in the New York State Paid Family Leave (NYS PFL) benefit law, which is meant to provide paid leave for employees in certain situations. NYS PFL goes beyond what is required under the Family and Medical Leave Act (FMLA) with regard to protections and payments, and thereby imposes new family leave obligations on New York employers.

NYS PFL will provide eligible employees (both full- and part-time) with up to eight weeks (and up to 12 weeks when fully implemented by 2020) of paid family leave annually to care for an infant (or newly-adopted or fostered child – including those born or placed for adoption prior to January 1, 2018), a family member with a serious health condition (including a spouse, domestic partner, child, parent, parent-in-law, grandparent, or grandchild), or to assist with family obligations when a family member is called to active duty. Note: NYS PFL is not available for prenatal conditions or an employee with serious health conditions.

Employers subject to NYS PFL

NYS PFL applies to all private employers with at least one employee in New York State. This includes out-of-state employers that have one or more employees working in New York (e.g., those working remotely). Public employers are generally exempt from NYS PFL.

Employees entitled to NYS PFL     

Full-time employees who have been employed for at least 26 weeks are eligible, while part-time employees (defined as those scheduled to work fewer than 20 hours per week) must work at least 175 days to be eligible. Those requirements apply regardless of the number of hours per week actually worked and regardless of the employer’s size. Note: Both non-U.S. citizens and undocumented employees who otherwise meet eligibility requirements are eligible for NYS PFL. Employees working fewer than 26 weeks or 175 days in a consecutive 52-week period (e.g., short-term or seasonal employees) may file an NYS PFL waiver, in which case the NYS PFL payroll contribution deductions will be waived (as would the employer’s responsibility to provide benefits to that employee).

Funding

NYS PFL will be completely funded through employee payroll deductions.

Details

  • Covered employers are required to carry NYS PFL insurance or comply with the requirements to self-insure by January 1, 2018. We strongly recommend that you contact your NYS Disability Insurance carrier regarding adding an NYS FPL rider to your current disability policy as soon as possible. This policy should be effective by January 1, 2018.
  • The maximum employee contribution for coverage beginning January 1, 2018 will be 0.126% of an employee’s weekly wage up to and not to exceed the statewide average weekly rate, which is currently set at $1,305.92. For employees who earn more than $1,305.92 per week, the NYS PFL deduction will be capped at $1.65 per week ($1,305.92 x 0.126%). The deduction percentages and caps may change annually – the deduction percentage may change on January 1; the cap may change on July 1.
  • NYS PFL insurance coverage is designed to be funded through employee payroll deductions; however, employers may choose to cover the premium payments and not deduct contributions from employees. The number of weeks of leave available to eligible employees under the NYS PFL and the benefits paid will be phased in over several years. The phase-in schedule is:

This is a summary of the PFL. As of today, New York has not finalized the regulations regarding PFL. The final regulations are expected to be placed into effect within the next several weeks. As soon as we have additional information, we will forward it to you.

If you have any questions regarding NYS PFL, please contact your disability insurance company or the New York State website: https://www.ny.gov/programs/new-york-state-paid-family-leave.

REM at the "Future of Long Island CRE" summit

Senior tax manager Patricia Evans, partner Michael Rosengarten, and tax supervisor Evan Piccirillo.

Senior tax manager Patricia Evans, partner Michael Rosengarten, and tax supervisor Evan Piccirillo.

Raich Ende Malter & Co. LLP joined the "Future of Long Island CRE" summit as a corporate sponsor yesterday in Plainview, New York. The summit was hosted by New England Real Estate Journal, and covered topics as diverse as tax laws, environmental regulations, and an overview of current market trends.

Real estate is REM's largest practice area, with 50 dedicated professionals covering commercial and residential real estate properties, management companies, and owners. Learn more about what we're doing in this area here.

REM volunteers are life-savers

IT Manager Fred Brown practices compressions while tax supervisor Joe DeMartinis observes.

HR coordinator Suzanne Schultz takes a turn.

During the week of May 17, staff members in REM’s Broadway, Long Island, and New Jersey offices received life-saving training. Those who volunteered for the three-hour course were trained to perform adult, child, and infant CPR; to properly use an automatic external defibrillator (AED); and to dislodge obstructions in choking victims and perform resuscitation (if necessary) in adults, children, and infants. Volunteers are part of the firm’s First Responder Team and are expected to respond should an emergency situation arise.

Proofreader Alex Barnett clears the area before administering a "shock" with the AED simulator device. Tax senior Dylan Brady stands clear.

“I’m personally very proud that so many of our staff members volunteer to join the First Responder Team,” says Barbara Weisbein, Director of Human Resources. “The program is partner-approved and staff-run. In addition to the life-saving techniques, the team is trained to take command, including crowd-control and post-EMT arrival. We plan and update our response protocols every year, and each member contributes to the discussion. A trained mind delivers a trained response.”

REM has offered the course to its employees since 2009. The firm absorbs the cost of the training and individual certifications (good for two years), as well as providing multiple AED devices and first aid kits in all REM locations.

Managing Partner Ellis Ende calls the training program a win-win. “I have to say, I have the greatest respect for our First Responders. Their level of compassion is amazing. And you can tell they’re doing it out of a sense of social responsibility, because so many of the same staff members stay on the team from cycle to cycle. We have wonderful people here.”

IT Manager Fred Brown is one of the firm’s original First Responders. He originally took the REM course in 2009. “It wasn’t the first CPR course I’d ever taken, but it was definitely more comprehensive than anything I’d learned before. One thing I like is that the material is always updated and expanded. We learn more every time.”

To date, the First Responder Team has never had to put its skills to use. Fred acknowledges that this is a good thing. “Obviously, it’s important information, and we should always be ready to act on it, but I’ve got to say, I’m glad it’s never happened here.”

Mets game day 2017

Take us out to the ball game...

On Tuesday, May 9, REM staff from our NYC, Long Island, and New Jersey offices came together to cheer on the New York Mets as they defeated the San Francisco Giants, 6-1. The event was organized by REM's Social Events Committee. Committee Co-Chairs Michelle Greco and Monica Lala (both from our LI office) thanked the entire committee for pitching in to prepare and coordinate logistics, with special thanks to audit manager Mike Meilak (NYC office), who was instrumental in making arrangements. The custom-printed REM Mets shirts were designed by tax supervisor Kosta Kokkosis (LI).

New law for NYC independent contractors takes effect May 15, 2017

Monday, May 15, 2017, a new law takes effect for businesses using independent contractors in New York City.  The New York City Freelance Isn’t Free Act (“FIFA”) makes it easier for freelance workers and independent contractors to collect payment.  It also imposes hefty penalties for anyone who does not get agreements in writing and pay on time.

 
 

Who FIFA affects

FIFA applies to individuals doing work as independent contractors in New York City.  It includes organizations and individuals with no more than one employee, whether incorporated or not,  that provide services in exchange for compensation.  It does not matter whether the hiring person or organization is located in New York City.  It excludes sales representatives, attorneys and licensed medical professionals.

FIFA applies to services over $800, either in a single contract or in multiple agreements entered during any 120-day period.

Requirements

FIFA requires that all contracts be in writing and contain at least the following information:

  1. Name and mailing address for all parties,
  2. An itemization of the services to be provided,
  3. The rate and method of compensation, and
  4. The date payment is due (either an exact date or how to calculate it).

If there is no specific date for payment, the default is 30 days from the date the contractor completed the work.  Note: this is not 30 days from delivery of the work or delivery of an invoice.  If there are no other express agreements, payment is due 30 days from the time of completion.

In addition, FIFA makes it illegal to retaliate against a freelancer for asserting rights protected under FIFA or to condition payment to the freelancer on acceptance of less than the previously-agreed-upon amount.

Penalties

FIFA provides an administrative complaint process with the NYC Office of Labor Standards (“OLS”) and even allows the freelancer or the City to bring a civil lawsuit.  Failure to enter a qualifying contract automatically entitles the independent contractor to a $250 statutory damages award.  The penalties to businesses for failing to comply with FIFA can also be assessed up to double the amount due to the freelancer for failing to make timely payment, plus attorneys’ fees. For repeated violators, FIFA imposes a $25,000 civil penalty, payable to the City’s general fund.

What you can do to protect your business

In order to be in compliance with FIFA, make sure all service and independent contractor agreements are in writing and contain an accurate description of the freelancer’s duties, when payment is due or how payment will be calculated, and the contact information of everyone involved.  Make sure that your organization makes the payments on time.  If your organization normally takes longer to pay, account for that when agreeing on payment dates for all future agreements.  Also, make sure that you have an updated W-9 for all independent contractors that your organization uses for 1099-MISC purposes.

We cannot stress enough the importance of following the above-referenced procedures to protect your business.

Questions, email Lucille Southard at lsouthard@rem-co.com or call her at (516) 228-9000, extension 3212.

© 2017

UPCOMING SEMINAR: Combating Tenant Fraud in Today's Real Estate Market

April 12, 2017 – Illegal sublets, AirBNB hostings, delinquencies – tenant fraud takes many forms. If a landlord suspects illegal occupation or short-term leasing is taking place, when and how is it advisable to initiate legal action? How can landlords prevent tenant fraud in the first place?

Raich Ende Malter & Co. LLP (REM) is hosting a seminar for landlords, attorneys, accounting professionals, and real estate professionals on tenant fraud, a serious issue for commercial real estate owners in the New York City metropolitan area. In this seminar, you will learn the basics of landlords' rights, the scope of tenant fraud, mitigating risk, and options for gathering evidence when legal steps are necessary. Speakers include attorney Michelle Maratto Itkowitz (owner, Itkowitz PLLC) and Mark Fogel, Chief Investigator for Forensic Private Investigations. Talks will be moderated by Larry Wilk, CPA, Partner-in-Charge of REM’s Real Estate practice.

Breakfast will be provided by REM. Registration is available online at                                   
https://www.rem-co.com/upcoming-events/2017/5/15/tenant-fraud.

Seminar Title:    “Combating Tenant Fraud in Today’s Real Estate Market”

Event Date:        Monday, May 15, 2017

Location:            Conference Center, 175 Broadhollow Road, Melville, New York

Registration:       https://www.rem-co.com/upcoming-events/2017/5/15/tenant-fraud

Price:                   $20 per person

Contact:               Amy Frushour Kelly, Communications Manager
                             akelly@rem-co.com – 516-228-9000 Ext. 3252

About Raich Ende & Malter Co. LLP (rem-co.com)

Raich Ende Malter (REM) is a regional accounting firm of distinction.  Headquartered in New York City, it is consistently ranked by independent industry surveys as one of the top 25 accounting firms in New York, one of the top 20 in the mid-Atlantic region, and one of the top 100 in the country.  REM provides forward-thinking audit, tax, and business advisory services to over a dozen industry sectors.  It serves businesses ranging from multi-generational family-run enterprises to publicly-traded companies, to organizations that serve the public good as not-for-profit organizations. REM has specialized practices in industries that are key to the economic makeup of New York City and its metropolitan region. These include real estate, financial services, manufacturing and distribution, and to those high-net-worth individuals residing in New York who help fuel and drive the local economy.  Through its affiliation with PrimeGlobal, REM maintains an international reach in 90 foreign countries.

How to score a home run with your board meeting minutes

Minutes of your board’s meetings may seem like a mere formality, but they’re much more than that. Board meeting minutes reflect on your board of directors and your organization’s actions. Savvy nonprofits don’t bunt their way through creating these documents — they try to hit them “out of the park.”

Here are some best practices for developing minutes that will document your meetings clearly and accurately.

Covering the basics

Meeting minutes should cover such fundamentals as the date and time, whether it was a special or regular meeting, and the names of directors attending as well as names of directors who didn’t attend. The minutes should record any board actions (such as motions, votes for and against and resolutions). They also should note whether a quorum was reached, whether any board members left and re-entered the meeting — say, in the case of a possible conflict of interest — and whether there were any abstentions from voting or discussions.

Additionally, minutes should include summaries of key points from reports to the board and of alternatives considered for important decisions. For instance, describe how the board evaluated bids for outsourcing IT work or chose a particular venue for a fundraising event. Another important component: The minutes should record action items — that is, follow-up work that will be needed — and who’ll be responsible. Last, all information in the minutes should be presented clearly and succinctly.

There’s no particular requirement about how much detail should be recorded in your minutes. But attorneys often advise their clients to include enough information so that they can be offered as evidence that an action was properly taken and that directors fulfilled their fiduciary duties. When in doubt about the depth of detail to include in your minutes, consult your attorney.

Meeting privately

At times, your board likely will meet “behind closed doors” to discuss particularly sensitive or confidential issues, such as a staff dismissal or key person salaries. Details of these sessions shouldn’t be included in the board meeting minutes, although a notation should be made that the board moved to an executive session; the notation should provide the general topic of the conversation. Also be aware of your state’s Sunshine Laws that may require open meetings and outline exactly what must be documented.

Details of an executive session can be communicated confidentially in some other form. Nonprofit attorneys sometimes advise their clients not to label this communication as “minutes.” 

Generally, your minutes should be ready for inspection by the next board meeting or within 60 days of the date of the original meeting, whichever comes first. IRS Form 990 asks whether there is “contemporaneous,” or timely, documentation of the board and board committee meetings in minutes or written actions.

Understanding multiple uses

If your organization is ever audited by the IRS, your meeting minutes likely are among the first documents the agency will request to see. Keep in mind that any attachments, exhibits and reports can be considered part of the minutes.

Meeting minutes also can serve as evidence in court. For example, if someone alleges that the board made a hasty decision in cutting a program, board meeting minutes can be used to present the data that was considered when making that decision.

Considering readability

Many not-for-profits today strive for transparency. But your board isn’t being open about its transactions if its meeting minutes are so abbreviated that only the keenest insider can understand the full meaning.

The person assigned to take minutes at your organization’s board meetings should produce minutes that are a straightforward and complete report of all actions taken and the basis for any decisions. Simple and unambiguous wording works best.

With that goal in mind, it’s a good idea to have a second person review the meeting minutes. That person (as well as the original writer) should ask, “Would this report make sense if I hadn’t been at the meeting, and had been unfamiliar with the issues addressed? Would I be able to see at a glance the information provided and decisions made?”

Holding up under inspection

Always keep in mind that the minutes of your board’s meetings can be viewed by many sets of eyes. Make sure that they show the real score.

If you have any questions, email Barry Wechsler at bwechsler@rem-co.com or call him at (212) 944-4433, extension 2408.

© 2017

REM ranked in top 100 accounting firms by Accounting Today

Raich Ende Malter & Co. LLP is pleased to announce our ranking among the top 100 accounting firms in America, as calculated by Accounting Today. REM also placed in the top 20 firms in the Mid-Atlantic region (New Jersey, New York, and Pennsylvania). REM has been firmly anchored in the top 100 for the better part of a decade.

Accounting Today ranks firms by revenue, both nationwide and in specific regions. Hundreds of accounting firms participate in this survey annually, providing in-depth financial and operational data for inclusion. The resulting lists provide a benchmark for gauging industry growth and operational trends.

As always, we find our inclusion here to be a source of pride, and we look forward to 2018.

Raich Ende Malter launches unique accounting firm website

New York, NY (March 21, 2017) – Regional accounting and consulting firm Raich Ende Malter & Co. LLP (REM) announced today the launching of its new website (www.rem-co.com).  “The site, while certainly not unique to website designers working in such industries as consumer products, retail, or hospitality, is unique for a full-service accounting firm,” said John Kmetz, Marketing and Business Development Consultant to REM.  “First of all, we wanted our homepage to set the stage. And we wanted that page to have a ‘wow’ factor that highlights only one message, not many, as our competitors do.  We wanted the site to be clean, crisp, and uncluttered—in a word, elegant.” 

Communications Manager Amy Frushour Kelly agrees.  “Accessibility is key.  There’s no point in having a site that’s difficult to use.  Following the lead of the homepage, we’ve featured content that’s to the point, an attractive, even breathtaking design, and most importantly, made it simple to navigate on a laptop or any hand-held device. We also wanted to personalize the site, and did so by featuring The Ende Collection, one of the largest repositories of vintage business machines in the New York metropolitan area.”  The Ende Collection is housed in REM’s Long Island office, and comprises well over 100 antique adding machines, typewriters, and other business machines, many of which are more than a century old.

Ellis Ende, Managing Partner, encouraged and supported the redesign from the start.  “We are not like any other accounting firm, so why should we look like any other firm?  Our partners and staff think straight, talk straight, and are always quick to respond to any client request.  This new website reflects that totally.” 

About Raich Ende & Malter Co. LLP (rem-co.com)

Raich Ende Malter (REM) is a regional accounting firm of distinction.  Headquartered in New York City, it is consistently ranked by independent industry surveys as one of the top 25 accounting firms in New York, one of the top 20 in the mid-Atlantic region, and one of the top 100 in the country.  REM provides forward-thinking audit, tax, and business advisory services to over a dozen industry sectors.  It serves businesses ranging from multi-generational family-run enterprises to publicly-traded companies, to organizations that serve the public good as not-for-profit organizations. REM has specialized practices in industries that are key to the economic makeup of New York City and its metropolitan region. These include real estate, financial services, manufacturing and distribution, and to those high-net-worth individuals residing in New York who help fuel and drive the local economy.  Through its affiliation with PrimeGlobal, REM maintains an international reach in 90 foreign countries.

Discriminatory plans that meet statutory requirements

The IRS issued a warning to plan sponsors whose plan designs satisfy numeric antidiscrimination tests, yet still have the effect of steering a disproportionate amount of benefits to highly compensated employees (HCEs). The IRS’s message: Simply satisfying numeric tests doesn’t guarantee that you’re complying with antidiscrimination regulations.

IRS findings and examples

In a recent announcement, the IRS reported seeing an uptick in plan designs that provide significant benefits to HCEs. Specifically, it noticed plans benefiting a group of non-highly compensated employees (NHCEs) who work few hours and receive little compensation. These plans tend to exclude other NHCEs from plan participation.

The IRS provided some examples of such designs. In one, the plan bases participation eligibility on job classification, and the classification formula covers a small group of low-pay or short-tenure employees. In another, coverage is available to only NHCEs who work on an as-needed basis and earn a meager salary each year.

Another example: Plans that require 1,000 hours to earn a year of service for vesting purposes, but not for allocation purposes. “In these plans,” the IRS explains, “the low paid or short service NHCEs receive an accrual or allocation, but don’t vest because they never complete a year of vesting service.” A variation on that theme is requiring 12 consecutive months of employment to satisfy a vesting requirement, allowing the NHCEs to vest, but only “in the very small plan benefit.”

The IRS also provides an extreme example in which a participant who earns only $200 in annual compensation receives a $200 profit sharing allocation — 100% of compensation. To allow the plan to clear the antidiscrimination test, an HCE earning $200,000 would receive a $50,000 benefit, or 25% of compensation.

IRS warning              

The IRS warns that these plan designs don’t pass muster. The relevant regulations require that all antidiscrimination rules be reasonably interpreted to prevent discrimination in favor of HCEs.

If you have any questions, contact Elaine Fazzari at efazzari@rem-co.com or (973) 267-4200, extension 5124.

© 2017

REM hosts mentoring meet-and-greet

Michelle Greco demonstrates software for Margaret Daniel and Mercedes Sanchez

Michelle Greco demonstrates software for Margaret Daniel and Mercedes Sanchez

Earlier this month, Raich Ende Malter & Co. LLP hosted a meet-and-greet with some of the young women who are being mentored through the Moxxie Mentoring Foundation.

Over the course of the evening, Mercedes Sanchez and Margaret Daniel, both accounting students at SUNY Old Westbury, listened to professional and personal experiences from the perspectives of women in the business world by REM partners Gigi Boudreaux and Christina Labita and matrimonial attorney Andrea B. Friedman. The young women also had the opportunity to tour REM's Long Island office, hosted by tax professionals Monica Lala and Michelle Greco. This was followed by a roundtable discussion over dinner.

Left to right: Michelle Greco, Margaret Daniel, Mercedes Sanchez, Monica Lala, Andrea B. Friedman, Christina Labita, Gigi Boudreaux

Left to right: Michelle Greco, Margaret Daniel, Mercedes Sanchez, Monica Lala, Andrea B. Friedman, Christina Labita, Gigi Boudreaux

Ms. Sanchez, a mother of four, juggles parenting with work and school. Ms. Daniel works a full-time bookkeeping job while studying for her master’s degree. Their roundtable conversation ranged from technical questions about taking CPA exams to concerns about balancing work and family.

"It’s a rewarding experience to be able to share our own personal experiences with these talented young women who have bright futures ahead of them," said Ms. Labita. "Accounting will provide them with many opportunities to explore."

REM is pleased to be able to facilitate these discussions in partnership with Moxxie as part of our continuing outreach to young women in accounting.

New addition to the Ende Collection

A new addition to the Ende Collection has us enthralled. The 1931 Remington Portable 3 is a special machine for many reasons, not the least of which is it keyboard action.

"It's an ingenious feature," says Bryan Kravitz of PhillyTypewriters.com. "Each key has a clockwork gear on it, kinda like a winged corkscrew for wine bottles. This translates the linear motion of the keys directly into rotational motion for the typebars, so they can rotate a full 180 degrees and lie totally flat when not in use." The result is a lighter machine that stands half the height of its peers. "It was the MacBook Air of its day."

What makes this machine truly special is the legend directly under the Remington logo:

FABRIQUEE AUX ETATS UNIS D'AMERIQUE

This American-made French typewriter is the first in the Collection. "It's the only one," says Ellis Ende, Managing Partner of REM and founder of the Collection. "This is a treasure. I didn't even know this model existed."

Click the images below to take a closer look.

6 Classic techniques for protecting your assets

If your professional, business, or other activities expose you to potential financial liability, asset protection should be a key component of your wealth planning efforts. After all, no matter how successful you are at building wealth, if you don’t protect your assets a large portion could be lost to a lawsuit or an unreasonable creditor’s claim.

Good defense

Everyone’s situation is different, but the following are six asset protection techniques that have benefited many higher-net-worth individuals:

  1. Outright gifts. Giving assets to your spouse, children or other family members is one of the simplest and most effective ways to protect those assets from your creditors. The downside is that you’ll lose control over the assets and any economic benefits associated with them.
     
  2. Tenancy by the entirety. If it’s authorized in your state, you and your spouse should hold title to your principal residence or other eligible property as tenants by the entirety (a special type of joint tenancy). This form of ownership insulates assets against your or your spouse’s individual creditors. It doesn’t, however, protect you from joint liabilities.
     
  3. Retirement plans. Qualified retirement plans — such as pension, profit-sharing or 401(k) plans — are surprisingly effective asset protection vehicles. Qualified plans generally are protected against creditors’ claims, both inside and outside bankruptcy. IRAs offer more limited protection. In bankruptcy, they’re exempt from creditors’ claims up to a specified threshold: currently, $1,283,025. (However, this limit doesn’t apply to rollovers from qualified plans to an IRA.) Outside bankruptcy, the level of creditor protection varies from state to state.
     
  4. Irrevocable trusts. By including “spendthrift” provisions in a trust, you can protect the assets against claims by your beneficiaries’creditors. These provisions prohibit beneficiaries from selling or assigning their interests in the trust (either voluntarily or involuntarily). You can also place the trust beyond the reach of yourcreditors, so long as you relinquish any interest in the assets. If, on the other hand, the trust is “self-settled” — that is, if you name yourself as a beneficiary — then the assets generally aren’t protected against your creditors, except as described below.
     
  5. Domestic asset protection trusts (DAPTs). Permitted in several states, these are self-settled, irrevocable spendthrift trusts that provide protection against your creditors even if you’re a discretionary beneficiary. To use a DAPT, you don’t necessarily have to live in a state with a DAPT law. But you’ll need to locate some or all of the trust assets in one of those states and use a local financial institution to administer the trust. The level of creditor protection varies by state. The main disadvantage of DAPTs is uncertainty over whether they’re enforceable in court, particularly when the grantor is a nonresident.

    A potentially less risky option is a “hybrid DAPT,” which is initially established for the benefit of your children or other third parties. Hybrid DAPTs enable your trustee to add you as a discretionary beneficiary later.
     
  6. Offshore trusts. If you want an even higher level of protection, consider offshore trusts, which are similar to DAPTs but are established in foreign countries with favorable asset protection laws. Typically, they’re irrevocable for a specified term, enabling you to retrieve the assets down the road when your risk may be lower. An ideal jurisdiction for an offshore trust is one that doesn’t recognize judgments from U.S. courts and whose laws place various administrative obstacles in the way of U.S. creditors attempting to collect debts there.

    Offshore trusts have a shady reputation as vehicles designed to hide assets or evade taxes. But when used correctly, they offer legitimate protection against unreasonable or excessive claims. If you establish an offshore trust or foreign account, you’ll need to file information returns. 

A legitimate tool

It’s important to note that asset protection planning is meant to protect you against unanticipated future claims. It provides you with legitimate methods of setting aside wealth for your heirs, deterring litigants and providing creditors with an incentive to settle.

Asset protection planning is not a tool for evading taxes or other obligations, hiding assets, or defrauding creditors. Indeed, fraudulent conveyance laws prohibit you from transferring assets with the intent to hinder, delay or defraud existing creditors or foreseeable future creditors. To ensure you don’t step over any lines, always work with reputable financial and legal advisors.

The sooner, the better

These six tips are only a few of the techniques available to protect and preserve wealth. Whichever strategies you choose, it’s critical to implement them as early as possible. If you wait until creditor claims are imminent, it’ll likely be too late.

If you have any questions, contact Roberto Viceconte at rviceconte@rem-co.com or (212) 944-4433, extension 2480.

© 2017

New legislation eliminates IRS penalty on employer reimbursements

Earlier this week, the Senate passed legislation that will eliminate a significant tax penalty on employers who bypass Affordable Care Act rules by reimbursing their employees for the cost of health insurance premiums. Previously, employers found in violation of the rule were subject to fines of up to $100 per day, per employee, maxing out at $36,500 a year.

The new legislation, endorsed by President Obama, will permit business owners to reimburse employees for the cost of individual health insurance premiums or medical visits.

For more in-depth information, please contact your Raich Ende Malter & Co. LLP tax professional.

2016 Post-election tax update

Any change in Presidential Administration brings the possibility, indeed the likelihood, of tax law changes and the election of Donald Trump as the 45th President of the United States is no exception. During the campaign, President-Elect Trump outlined a number of tax proposals for individuals and businesses. This update highlights some of the President-elect’s tax proposals. Keep in mind that a candidate’s proposals can, and often do, change over the course of a campaign and also after taking office. This update is based on general tax proposals made by the President-elect during the campaign and is intended to give a broad-brush snapshot of those proposals.  

At the same time, the end of the year may bring some tax law changes before President Obama leaves office. This update also highlights some of those possible changes with an eye on how late tax legislation could impact your year-end tax planning.

Campaign proposals

During the campaign, President-Elect Trump called for reducing the number of individual income tax rates, lowering the individual income tax rates for most taxpayers, lowering the corporate tax rate, creating new tax incentives, and repealing the Affordable Care Act (“ACA”) (presumably including the ACA’s tax-related provisions). The President-Elect, in his campaign materials, highlighted several goals of tax reform:

  • Tax relief for middle class Americans
  • Simplify the Tax Code
  • Grow the American economy
  • Do not add to the debt or deficit

President-Elect Trump also identified during the campaign a number of tax-related proposals that he intends to pursue during his first 100 days in office:

  • The Middle Class Tax Relief and Simplification Act: According to Trump, the legislation would provide middle class families with two children a 35% tax cut and lower the “business tax rate” from 35% to 15%.
  • Affordable Childcare and Eldercare Act:  A proposal described by Trump during the campaign that would allow individuals to deduct childcare and eldercare from their taxes, incentivize employers to provide on-site childcare, and create tax-free savings accounts for children and elderly dependents.
  • Repeal and Replace Obamacare Act: A proposal made by Trump during the campaign to fully repeal the ACA.
  • American Energy & Infrastructure Act: A proposal described by Trump during the campaign that “leverages public-private partnerships and private investments through tax incentives, to spur $1 trillion in infrastructure investment over 10 years.”

Individual income taxes

The last change to the individual income tax rates was in the American Taxpayer Relief Act of 2012 (“ATRA”), which raised the top individual income tax rate. Under ATRA, the current individual income tax rates are 10, 15, 25, 28, 33, 35, and 39.6%. During the campaign, President-Elect Trump proposed a new rate structure of 12, 25 and 33%:

  • Current rates of 10% and 15% = 12% under new rate structure.
  • Current rates of 25% and 28% = 25% under new rate structure.
  • Current rates of 33%, 35% and 39.6% = 33% under new rate structure.

This rate structure mirrors one proposed by House Republicans earlier this year. During the campaign, President-Elect Trump did not detail the precise income levels within which each bracket percentage would fall, instead generally estimating for joint returns a 12% rate on income up to $75,000; a 25% rate for income between $75,000 and $225,000; and 33% on income more than $225,000 (brackets for single filers will be half those dollar amounts) and “low-income Americans” would have a 0% rate. As further details emerge, our office will keep you posted.

Closely related to the individual income tax rates are the capital gains and dividend tax rates. The current capital gains rate structure, imposed based upon income tax brackets, would presumably be realigned to fit within President-Elect Trump’s proposed percent income tax bracket levels.

AMT and more

President-Elect Trump proposed during the campaign to repeal the alternative minimum tax (“AMT”). The last time that Congress visited the AMT lawmakers voted to retain the tax but to provide for inflation-adjusted exemption amounts.

During the campaign, Trump proposed to repeal the federal estate and gift tax. The unified federal estate and gift tax currently starts for estates valued at $5.49 million for 2017 (essentially double, at $10.98 million, for married individuals). Trump, however, also proposed a “carryover basis” rule for inherited stock and other assets from estates of more than $10 million. This additional proposal has already been criticized by some Republican members of Congress, while some Democrats have raised repeal of the federal estate tax as a nonstarter.  

Other proposals made by President-Elect Trump during the campaign would limit itemized deductions, eliminate the head-of-household filing status and eliminate all personal exemptions. President-Elect Trump also has called for increasing the standard deduction. Under Trump's plan, the standard deduction would increase to $15,000 for single individuals and to $30,000 for married couples filing jointly. In contrast, the 2017 standard deduction amounts under current law are $6,350 and $12,700, respectively, as adjusted for inflation.

Possible new family-oriented tax breaks were discussed by President-Elect Trump during the campaign. These include the creation of dependent care savings accounts, changes to the earned income tax credit, and enhanced deductions for child care and eldercare.

Health care

The Affordable Care Act (“ACA”) created a number of new taxes that impact individuals and businesses. These taxes range from an excise tax on medical devices to taxes on high-dollar health insurance plans. The ACA also created the net investment income (“NII”) tax and the Additional Medicare Tax, both of which generally impact higher income taxpayers. The ACA also made significant changes to the medical expense deduction and other rules that affect individuals. For individuals and employers, the ACA created new mandates to carry or offer insurance, or otherwise pay a penalty.

President-Elect Trump made repeal of the ACA one of the centerpieces of his campaign. During the campaign, the President-elect said he would call a special session of Congress to repeal the ACA. At this time, how such a repeal may move through Congress remains to be seen. Lawmakers could vote to repeal the entire ACA or just parts. Our office will keep you posted of developments as they unfold.

Business tax proposals

On the business front, President-Elect Trump highlighted small businesses, the corporate tax rate, and some international proposals during his campaign. This goes along with simplification, and the reduction, of taxes for small business.

Particularly for small businesses, Trump has proposed a doubling of the Code Sec. 179 small business expensing election to $1 million.  Trump has also proposed the immediate deduction of all new investments in a business, which has also been endorsed by Congressional tax reform/simplification advocates.

The current corporate tax rate is 35%. President-Elect Trump called during the campaign for a reduction in the corporate tax rate to 15%. He also proposed sharing that rate with owners of “pass-through” entities (sole proprietorships, partnerships, and S corporations), but only for profits that are put back into the business.  

Based on campaign materials, a one-time reduced rate would also be available to encourage companies to repatriate earnings of foreign subsidiaries that are held offshore. Many more details about these corporate and international tax proposals are expected.

Year end 2016

More immediately, the calendar is quickly turning to 2017. Congress will meet for a “lame duck” session and is expected to take up tax legislation. Exactly what tax legislation Congress will consider before year end remains to be seen. Every lawmaker has his or her “key” legislation to advance before the year end. They include:

  • Legislation to renew some expiring tax extenders, especially energy extenders.
  • Legislation to fund the federal government, including the IRS, through the end of the 2017 fiscal year.
  • Legislation to enhance retirement savings for individuals.
  • Legislation to help citrus farmers, small businesses and more.

Some of these bills, if passed and signed into law, could impact year-end tax planning. The expiring extenders include the popular higher tuition and fees deduction along with some targeted business incentives.  If these extenders are renewed, or made permanent, our office can assist you in maximizing their potential value in year-end tax planning.

Another facet of year-end tax planning is looking ahead. President-Elect Trump has proposed some significant changes to the Tax Code for individuals and businesses. If these proposals become law, especially any reduction in income tax rates, and are made retroactive to January 1, 2017, your tax planning definitely needs to be reviewed. Our office will work with you to maximize any potential tax savings.

Working with Congress

When the 115th Congress convenes in January 2017, it will find the GOP in control of both the House and Senate, therefore allowing Trump to move forward on his proposals more easily. It remains to be seen, however, what compromises will be necessary between Congress and the Trump Administration to find common ground. In particular, compromise will likely be needed to bring onboard both GOP fiscal conservatives, who will want revenue offsets to pay for tax reduction, and Senate Democrats, who have the filibuster rule to prevent passage of tax bills with fewer than 60 votes.  Beyond considering tax proposals one tax bill at a time, it remains to be seen whether proposals can be packaged within a broader mandate for “tax reform” and “tax simplification.”

The information generally available now about President-Elect Trump’s tax proposals is based largely on statements by him during the campaign and campaign materials. President-Elect Trump will take office January 20, 2017. Between now and then, more details about his tax proposals may be available. Please contact our office if you have any questions.

Congratulations to REM's winning basketball team

REM CHAMPIONS 2016.jpg

Last night, the REM Broadway office’s own basketball team, LIFO the Party, won their league championships. We are very proud and happy that we became league champions in our first year as a team, and we look forward to many more championships.

Thanks to Coach Neal Kilbane for allowing/approving the team’s participation in the league. As AJ DaPonte points out, “Neal was there from warmups of the first game through the championship game’s final whistle!” Thanks also to Erica Collins, Selma Yilmaz, and Elizabeth Froemke, as well as the significant others of some of the team members, who showed their support from the stands during the season.

The league was organized through Zog Sports. Regular season games began in October and were played at Xavier High School on West 16th Street every week on Thursday night, through Thanksgiving week, culminating in a one-day playoffs and championship Thursday, December 1. LIFO also won second place in the regular season standings.

Team roster, in order of approximate percentage of games attended: Daniel Perez; Charles Hunter; Andrew Statsky; Raymond Batista; Arthur J. “A.J.” DaPonte; Alicia McGlynn; Victor “Dutch” Dennis; Ross Lorber; Jackie Ammirato; Amanda Rinaldo; Victor Le; Jennifer Burroughs; Monika Andrzejkiewicz; Paul Ciaramella; Carlos Savinon; Brian Glavotsky; Keith deVisser; Daeil Yu.

C corp vs. S corp: is it time for you to make the switch?

The Protecting Americans from Tax Hikes (PATH) Act of 2015 accomplished more than just extending certain tax breaks. It also made some taxpayer-friendly provisions permanent — including the shortened recognition period for companies that convert from C corporation to S corporation status. This change is causing many manufacturers and distributors to re-evaluate their corporate status.

After weighing the pros and cons, many companies are electing Subchapter S status to gain enhanced flexibility in business decisions and to lower taxes. Here are some important issues to consider before you convert.

Tax considerations

C corporations pay taxes twice. First, they’re charged corporate-level income taxes. Shareholders then pay tax personally on C corporation distributions and dividends. But S corporations are flow-through entities for tax purposes. This means that income, gains and losses flow through to the owners’ personal tax returns. S corporations generally aren’t taxed at the corporate level.

However, double taxation of C corporations may become a major issue when the owners decide to sell assets or transfer equity. Historically, if a company elected Subchapter S status and sold assets or transferred equity any time within a 10-year “recognition period,” it was charged corporate-level tax on any built-in gains that occurred while the company was a C corporation. Any gains that occurred after making the S election passed through the owners’ personal tax returns.

Under the PATH Act, the recognition period has been permanently shortened to five years. If a business sells assets or stock within the recognition period, only the appreciation in value from the date of the S corporation election will be exempt from corporate-level tax.

So it’s important to establish the company’s fair market value at the conversion date and to allocate it to the company’s assets. This enables taxpayers to quantify which portion of the gain should be taxed as C corporation gain and which portion should be taxed as a flow-through gain to shareholders.

Subchapter S qualifications

For businesses contemplating a Subchapter S election, there’s no time like the present to start the clock on the five-year recognition period. But not every business qualifies for this election. It’s available to only domestic corporations that use a calendar fiscal year and offer just one class of stock (though differences in voting rights are permitted). Qualifying businesses also must have no more than 100 shareholders — including individuals, certain trusts and estates but excluding partnerships, corporations, foreign individuals and entities, and ineligible corporations.

Beware, too, that Subchapter S status restricts how the company distributes cash and liquidates assets. All payouts must be made to shareholders on a pro rata basis. If these rules aren’t followed or if the company merges with another entity that doesn’t qualify, the company will lose its Subchapter S status.

Potential pitfall

Although S corporations are required to make pro rata distributions to shareholders, they aren’t required to distribute income to shareholders. So shareholders who lack control over making distributions may find themselves required to pay personal-level taxes on S corporation income, regardless of whether the company distributed any cash to cover those tax liabilities.

The annual tax burden can be substantial for highly profitable S corporations — and even more substantial for high-income taxpayers. As a courtesy, most S corporations pay enough distributions to cover shareholders’ tax obligations. But there’s no guarantee of distributions for shareholders who lack control over the business.

A tough choice

Before electing to S status, your business must obtain the approval of all shareholders. Although there are many benefits to making the switch — especially now that the recognition period to avoid corporate-level capital gains tax has been permanently shortened — it’s not a prudent option for every business. Your legal and tax advisors can help determine the right choice for your circumstances.

If you have any questions, contact Thomas Turrin at tturrin@rem-co.com or (212) 944-4433, extension 2404.

© 2016

REM hike in West Hills Park

On November 2, REM audit partner Glen Malings, an avid outdoorsman and leader of the Long Island Orienteering Club, led several of our Long Island staff members on a three-mile hike through West Hills Park, located not far from our Melville office. It was a beautiful day, and the hikers got to hone their map-reading skills.