Cronin, Hanley, Van Zile & Lorenzo

01/25/2024

Small, well-established boutique tax & accounting firm in Kinnelon, New Jersey seeking a part time CPA with 5+ years tax accounting experience with individual, business, estate, and trust returns including preparation, reviewing and compliance.
Self- motivated, results oriented individual with strong work ethics, attention to detail and a team player.
Requires 2-3 days in our office during the tax season. Flexible hours available during other times of the year.
Lacerte, Drake and QuickBooks experience preferred.
Looking to form a long-term position for future tax seasons.

12/15/2022

Last-Minute Year-End Retirement Deductions

The clock continues to tick. Your retirement is one year closer.

You have time before December 31 to take steps that will help you fund the retirement you desire. Here are four things to consider.

1. Establish Your 2022 Retirement Plan

First, a question: do you have your (or your corporation’s) retirement plan in place?

If not, and if you have some cash you can put into a retirement plan, get busy and put that retirement plan in place so you can obtain a tax deduction for 2022.

For most defined contribution plans, such as 401(k) plans, you (the owner-employee) are both an employee and the employer, whether you operate as a corporation or as a proprietorship. And that’s good because you can make both the employer and the employee contributions, allowing you to put a good chunk of money away.

2. Convert to a Roth IRA

Consider converting your 401(k) or traditional IRA to a Roth IRA.

You first need to answer this question: How much tax will you have to pay to convert your existing plan to a Roth IRA? With this answer, you now know how much cash you need on hand to pay the extra taxes caused by the conversion to a Roth IRA.

Here are four reasons you should consider converting your retirement plan to a Roth IRA:

1. You can withdraw the monies you put into your Roth IRA (the contributions) at any time, both tax-free and penalty-free, because you invested previously taxed money into the Roth account.

2. You can withdraw the money you converted from the traditional plan to the Roth IRA at any time, tax-free. (But if you make that conversion withdrawal within five years of the conversion, you pay a 10 percent penalty. Each conversion has its own five-year period.)

3. When you have your money in a Roth IRA, you pay no tax on qualified withdrawals (earnings), which are distributions taken after age 59 1/2, provided you’ve had your Roth IRA open for at least five years.

4. Unlike with the traditional IRA, you don’t have to receive required minimum distributions from a Roth IRA when you reach age 72—or to put this another way, you can keep your Roth IRA intact and earning money until you die.

12/15/2022

Last-Minute Year-End Tax Strategies for Your Stock Portfolio

When you take advantage of the tax code’s offset game, your stock market portfolio can represent a little gold mine of opportunities to reduce your 2022 income taxes.

The tax code contains the basic rules for this game, and once you know the rules, you can apply the correct strategies.

Here’s the basic strategy:
• Avoid the high taxes (up to 40.8 percent) on short-term capital gains and ordinary income.

• Lower the taxes to zero—or if you can’t do that, lower them to 23.8 percent or less by making the profits subject to long-term capital gains.

Think of this: you are paying taxes at a 71.4 percent higher rate when you pay at 40.8 percent rather than the tax-favored 23.8 percent.

To avoid higher rates, here are seven possible tax planning strategies.

Strategy 1

Examine your portfolio for stocks you want to unload and make sales where you offset short-term gains subject to a high tax rate, such as 40.8 percent, with long-term losses (a rate of up to 23.8 percent).

In other words, make the high taxes disappear by offsetting them with low-taxed losses, and pocket the difference.

Strategy 2

Use long-term losses to create the $3,000 deduction allowed against ordinary income.

Again, you are trying to use the 23.8 percent loss to kill a 40.8 percent rate of tax (or a 0 percent loss to kill a 12 percent tax if you are in the 12 percent or lower tax bracket).

Strategy 3

As an individual investor, avoid the wash-sale loss rule.

Under the wash-sale loss rule, if you sell a stock or other security and then purchase substantially identical stock or securities within 30 days before or after the date of sale, you don’t recognize your loss on that sale. Instead, the code makes you add the loss amount to the basis of your new stock.

If you want to use the loss in 2022, you’ll have to sell the stock and sit on your hands for more than 30 days before repurchasing that stock.

Strategy 4

If you have lots of capital losses or capital loss carryovers and the $3,000 allowance is looking extra tiny, sell additional stocks, rental properties, and other assets to create offsetting capital gains.

If you sell stocks to purge the capital losses, you can immediately repurchase the stock after you sell it—there’s no wash-sale “gain” rule.

Strategy 5

Do you give money to your parents to assist them with their retirement or living expenses? How about children (specifically, children not subject to the kiddie tax)?

If so, consider giving appreciated stock to your parents and your non-kiddie-tax children. Why? If the parents or children are in lower tax brackets than you are, you get a bigger bang for your buck by

• gifting them stock,

• having them sell the stock, and then

• having them pay taxes on the stock sale at their lower tax rates.

In the old days, you used this strategy with your college student. Today, this strategy does not work with that student because the kiddie tax now applies to students up to age 24.

But this strategy is a good one, so ask yourself this question: do I give money to my parents or other loved ones to make their lives more comfortable?

If the answer is yes, is your loved one in the 0 percent capital gains tax bracket? The 0 percent capital gains tax bracket applies to a single person with less than $41,675 in taxable income and to a married couple with less than $83,350 in taxable income.

If the parent or other loved one is in the 0 percent capital gains tax bracket, you can add to your bank account by giving this person appreciated stock rather than cash.

Example. You give Aunt Millie shares of stock with a fair market value of $20,000, for which you paid $2,000. Aunt Millie sells the stock and pays zero capital gains taxes. She now has $20,000 in after-tax cash, which should take care of things for a while.

Had you sold the stock, you would have paid taxes of $4,284 in your tax bracket (23.8 percent x $18,000 gain).

Of course, $4,000 of the $20,000 you gifted goes against your $12.06 million estate tax exemption if you are single. But if you’re married and made the gift together, you each have a $16,000 gift-tax exclusion, for a total of $32,000, and you have no gift-tax concerns other than the requirement to file a gift-tax return that shows you split the gift.

Strategy 6

If you are going to donate to a charity, consider appreciated stock rather than cash because a donation of appreciated stock gives you more tax benefit.

It works like this:

• Benefit 1. You deduct the fair market value of the stock as a charitable donation.

• Benefit 2. You don’t pay any of the taxes you would have had to pay if you sold the stock.

Example. You bought a publicly traded stock for $1,000, and it’s now worth $11,000. If you give it to a 501(c)(3) charity, the following happens:

• You get a tax deduction for $11,000.

• You pay no taxes on the $10,000 profit.

Two rules to know:

1. Your deductions for donating appreciated stocks to 501(c)(3) organizations may not exceed 30 percent of your adjusted gross income.
2. If your publicly traded stock donation exceeds the 30 percent, no problem. Tax law allows you to carry forward the excess until used, for up to five years.

Strategy 7

If you could sell a publicly traded stock at a loss, do not give that loss-deduction stock to a 501(c)(3) charity. Why? If you sell the stock, you have a tax loss that you can deduct. If you give the stock to a charity, you get no deduction for the loss—in other words, you can just kiss that tax-reducing loss goodbye.

12/15/2022

Last-Minute Year-End General Business Income Tax Deductions

Here are four business tax deduction strategies you can easily understand and implement before the end of 2022.

1. Prepay Expenses Using the IRS Safe Harbor

IRS regulations contain a safe-harbor rule that allows cash-basis taxpayers to prepay and deduct qualifying expenses up to 12 months in advance without challenge, adjustment, or change by the IRS.

Under this safe harbor, your 2022 prepayments cannot go into 2023. This makes sense because you can prepay only 12 months of qualifying expenses under the safe-harbor rule.

For a cash-basis taxpayer, qualifying expenses include lease payments on business vehicles, rent payments on offices and machinery, and business and malpractice insurance premiums.

Example. You pay $3,000 a month in rent and would like a $36,000 deduction this year. So on Friday, December 30, 2022, you mail a rent check for $36,000 to cover all of your 2023 rent. Your landlord does not receive the payment in the mail until Tuesday, January 3, 2023. Here are the results:

• You deduct $36,000 in 2022 (the year you paid the money).

• The landlord reports taxable income of $36,000 in 2023 (the year he received the money).

You get what you want—the deduction this year.

The landlord gets what he wants—next year’s entire rent in advance, eliminating any collection problems while keeping the rent taxable in the year he expects it to be taxable.

2. Stop Billing Customers, Clients, and Patients

Here is one rock-solid, straightforward strategy to reduce your taxable income for this year: stop billing your customers, clients, and patients until after December 31, 2022. (We assume here that you or your corporation is on a cash basis and operates on the calendar year.)

Customers, clients, and insurance companies generally don’t pay until billed. Not billing customers and clients is a time-tested tax-planning strategy that business owners have used successfully for years.

Example. Jake, a dentist, usually bills his patients and the insurance companies at the end of each week. This year, however, he sends no bills in December. Instead, he gathers up those bills and mails them the first week of January. Presto! He postponed paying taxes on his December 2022 income by moving that income to 2023.

3. Buy Office Equipment

With bonus depreciation now at 100 percent along with increased limits for Section 179 expensing, buy your equipment or machinery and place it in service before December 31 and get a deduction for 100 percent of the cost in 2022.

Qualifying bonus depreciation and Section 179 purchases include new and used personal property such as machinery, equipment, computers, desks, chairs, and other furniture (and certain qualifying vehicles).

4. Use Your Credit Cards

If you are a single-member LLC or sole proprietor filing Schedule C for your business, the day you charge a purchase to your business or personal credit card is the day you deduct the expense. Therefore, as a Schedule C taxpayer, you should consider using your credit card for last-minute purchases of office supplies and other business necessities.

If you operate your business as a corporation, and if the corporation has a credit card in the corporate name, the same rule applies: the date of charge is the date of deduction for the corporation.

But suppose you operate your business as a corporation and are the personal owner of the credit card. In that case, the corporation must reimburse you if you want the corporation to realize the tax deduction, which happens on the reimbursement date. Thus, submit your expense report and have your corporation make its reimbursements to you before midnight on December 31.

12/06/2022

The Silver Lining of Inflation - Update
November 2022

On November 1st, the Treasury Department announced the new rate of the I-Bond. The rate dropped from its previous rate of 9.62% down to 6.89%.

If you were one of the investors that were able to open an account prior to the rate, drop on November 1st, you still get to enjoy the 9.62% rate for six months from the month that you purchased your bond.
The six months after that you will receive the new rate of 6.89%.

Remember you must hold an I-bond for a minimum of one year. But the term of an I-Bond is 5 years. If you close out your I-bond before the 5-year term is up the penalty is three months’ worth of interest.

If you close your I-bond at the end of the first twelve-month period you will receive 9.62% for the first six months, 6.89% for the next three months, and then forfeit the last three months of interest.
On a $10,000 investment that will still provide you with and effective rate of over 6% in interest for the year, still much higher than you will receive in most CD’s.

You can choose to leave your bond open for 15 months. Then the three months of interest that you would forfeit would be at the rate announced by the Treasury Department on May 1st, 2023.
You can also hold your bond for the full five years. Your interest rate will continue to adjust on each six-month anniversary of your bond to the rate in effect at the time.

Please see our article from September (below) for other information on I-Bonds.

The Silver Lining of Inflation
September 2022

With all the bad news about inflation in the press recently, here is a bit of good news:

Through October 2022, you can buy Series I bonds that pay 9.62 percent interest.

And you receive that rate for six months from the time of purchase.

What happens after that? On November 1, 2022, the U.S. Treasury Department sets a new six-month rate equal to the fixed rate (currently zero) plus the Consumer Price Index inflation rate.

The interest you earn for the first six months gets added to the principal, and you earn interest on that interest during the next six months (think compound interest).

Sounds too good to be true. There’s a trick, right? Not really, but the government keeps your money, both your principal and your interest, for at least one year.

Mechanics

It works like this: You are buying a 30-year bond. The interest rate changes every six months.
You can cash out any time after one year, but if you cash out before five years, you have to forfeit three months of interest (no big deal).
So, if you hold the bond for 18 months, you will receive 15 months of interest.

Let’s say inflation stays as it is and you earn 9.62 percent on your Series I bond for the full year. At the end of the year, your bond has a principal balance of $10,985.
If you cash out, you forfeit three months interest. Three-quarters of 9.62% is still a 7.22% rate of return.

You don’t pay taxes on the interest until you cash out. You get the compounding effect tax-free. It’s like a Roth IRA without age limits and penalties.

Key point. You can’t lose the money you invest or the interest you earn, other than the three months’ worth if you cash in before five years.

When you do cash in, you pay federal income taxes on the interest, but you don’t pay state, county, or city income taxes.

It is possible (albeit unlikely for many) to avoid taxes on the interest altogether if you use the monies for qualified higher education expenses.

Okay, So What’s the Downside?

You can’t buy more than $10,000 per year, although if you buy from Treasury Direct and also utilize your tax refund, you can acquire $15,000 of bonds per year.
The I bond purchase limit on a tax return is $5,000—regardless of joint or single filing.

If you’re married, your spouse can buy $10,000, so now you’re up to $25,000 per year.

Now, let’s add in your corporation or corporations. Such entities can purchase up to $10,000 of such bonds per calendar year.

Example. Sam, his spouse, and his two corporations are hot for the 9.62 percent of tax-deferred interest. He has not yet filed his 2022 tax return, which shows a tax refund.
With Sam, his spouse, and his two corporations, Sam can buy $45,000 of I bonds in calendar year 2022.

He can do the same during calendar year 2023.

The major downside to the bonds is that you cannot buy more than the annual limits above. There’s no overall limit, just the annual limits.

Don’t have $10,000? You can open an I Bond for any amount from $25 up to $10,000 if purchased electronically through the Treasury Direct website.

Inflation and Deflation

The Series I bond is based on inflation. So, if inflation drops to zero, cash out that bond. Meanwhile, ride this inflation wave.
And remember, your Series I bond cannot go down in value. If your $10,000 I bond earned $985 in interest, the new principal balance is $10,985 and that principal balance never goes down.
Deflation can’t hurt it.

Opening a treasury account is relatively simple. Simply go to the treasury direct website and follow the instructions on the screen to establish an account and set up an automatic transfer.

If you have questions on how I Bonds can fit into your overall financial, plan, please contact your financial advisor.

Cronin, Hanley, VanZile & Lorenzo
17 Kiel Avenue, Suite 1
Kinnelon. NJ 07405
https://www.chvfirm.com/

O: (973)492-3069
F: (888)492-2065

Send a message to learn more

10/12/2022

3rd Quarter Sales Tax Returns are Due Thursday, October 20th -

10/06/2022

Heather Lorenzo, CPA to Join Cronin, Hanley and Van Zile -

10/01/2022

Cronin, Hanley and Van Zile, LLC to merge with Heather Lorenzo, CPA, CFP® (HLLCPA, LLC) to form Cronin, Hanley, Van Zile & Lorenzo, LLC

Cronin, Hanley & Van Zile, LLC is excited to announce that Heather Lorenzo will be joining Maryann Hanley, Cara Van Zile, and the rest of the CHV team at Cronin, Hanley & Van Zile, LLC, a Tax and Accounting consulting firm. The new name of the firm will be Cronin, Hanley, Van Zile, & Lorenzo, LLC.

Heather currently owns Heather Lorenzo CPA, LLC (HLCPA, LLC), and with 20 plus years of experience in the financial, tax and accounting industry, she is an expert in helping her clients navigate the everchanging tax laws. In addition, she also assists clients with their accounting and tax planning needs. “I have long prided myself to provide the special attention to each of my clients that they have come to expect. I know that Maryann and Cara also provide a superior level of service to their clients, it is what makes me look forward to the new opportunities that being part of a great team can present,” said Heather Lorenzo, Owner of HLCPA, LLC.

Heather’s experience derives from being a Certified Public Accountant (CPA) and Certified Financial Planner (CFP®), over 12 years of experience with a regional public accounting firm where she worked with diverse clientele, and 10 years of being a sole practitioner of HLPCA, LLC. Overall, the businesses she works with ranges from start-ups and side gigs, up to multimillion dollar corporations. Her expertise allowed her to become a professional in various industries such as construction, real-estate, manufacturing, food and hospitality, non-for-profit, and more.

The determination to work with select clientele is one of the factors that drove heather to start her own business. “Part of the reason I left working for a big firm 10 years ago was the corporate push to delegate clients to staff and focus more on business development. I feel that although business development is important, client service is paramount and by exceeding client expectations on service, business development will be organic through client referrals and word of mouth,” said Heather Lorenzo, Owner of HLCPA, LLC. Firm partners, Maryann, and Cara could not agree more!

Sharing similar values and goals, Heather, Maryann, and Cara decided to combine their 10 to 20 plus years of expertise to become one financial firm. “Working with Heather over the past few years, she has proven to be an indispensable asset to our team. Her impressive experience and skillset will help us grow and continue to deliver the best possible service to our clients,” said Maryann Hanley and Cara Van Zile, Owners of Cronin, Hanley & Van Zile, LLC. “We are so excited to see the positive impact she will undoubtedly have and look forward to a long and successful partnership.” “I have been working with Maryann and Cara and the rest of the CHV team for several years and find that the firm’s approach to client service is above what most have come to expect from their accountants. Maryann and Cara are both very experienced and highly skilled professionals that are tops in their field and together, we will make a great team for years to come,” said Heather Lorenzo, Owner of HLCPA, LLC.