Archives for April 2014

Tips for Cybersecurity

It seems like everywhere we turn there is a story about cybersecurity. Hackers are trying to undermine the security setup to protect companies from attacks. We know that hackers are more sophisticated and are changing their techniques to stay ahead of the technology developed to keep them out. It is a vicious circle because technology is working to thwart the threat of attack. In this day and age of computers and technology how can companies, large and small, keep ahead of the ever present threat of cyberattacks.

Many times the threats vary in how they come. Some can be highly sophisticated and others are surprisingly simple, but all cyberattacks are targeted to do one thing, gain information and data to use later. There are many tactics that are used in cyberattacks including phishing scams, large data breaches, and viruses. Educating both employees and consumers is one way to help prevent some of the attacks. Everyone needs to be in charge of cybersecurity practices to help prevent future problems.

The following are ways other industries and smaller companies can improve their  cybersecurity:

  • Involve Everyone: This issue is not just and IT issue. Everyone is responsible for maintaining the companies security.
  • Be Constantly Alert: If you do not think it will happen to you, it probably will. You have to believe that you will be attacked and be prepared for what comes.
  • Have a Plan: There needs to be a written plan so if the company is attacked then there are steps and procedures in place to help fix everything. Also, practice to make sure everything work the way you want it to work.
  • Update Regularly: Make sure the products or companies used to protect you company is up-to-date and your defenses are up.
  • Extra Security for Sensitive Information: Build extra security around sensitive data, including personal information, to prevent problems. Help employees to prevent accidental exposure of data.
  • Integrate Information Security with Risk Management: This allows more people to be watching for problems and it can help keep control on problems that arise.

IRA Rollover Guidance

In the past rollovers were allowed on a IRA-to-IRA basis, but the IRS has announced that it will now follow the Tax Court’s decision to limit a taxpayers rollovers to one a year no matter how many IRA the taxpayers has. The rollover will now be ruled on an aggregate basis.

By applying the rule on an aggregate basis, the IRS also announced that the proposed regulations will be withdrawn and a new set of regulations will be issued concerning the change by the tax court. The IRS position will now reflect the changes made by the Tax Court in the Bobrow decision, limiting rollovers.

In Sec. 408(d)(3)(A)(i), the taxpayer is permitted to rollover funds in the taxpayer’s IRA tax-free as long as the amount distributed is paid into an IRA for the taxpayers benefit within 60 days. Sec. 408(d)(3)(B) limits the subject to one-rollover-per-year. In the Bobrow case, the Tax Court held the taxpayer responsible when they made more than one rollover from more than one account in a year. The first was tax deductible and the full amount of the second rollover was taxable.

With the new stance, the IRS has received comments about the rule. IRA trustees now required to change their procedures for making IRA rollovers. Because of these changes, the IRS will not apply the changes to rollovers made before January 1, 2015.

The last thing the IRS specified was that this does not affect the IRA owner’s ability to transfer funds from one IRA trustee to another because this is not considered a rollover. The transfers are not related to a one-a-year limit.


How Not to Ruin Your Taxes

The simplest advice that can be given to start with is: Don’t overdo. Sometimes trying to find more ways to save money will cost more in the end. Tax laws are hard for CPAs to understand and the interpretation can vary from situation to situation. The biggest problems are once you start to understand tax law, then it is changed and you begin all over again. The following is advice on how to avoid ruining your tax return and making the most out of what you have from millionaires to middle class.

  1. Rethink Bypass Trusts: in the 1990s, some people designed bypass trusts to minimize estate taxes when the lifetime exclusion was around $600,000, but with the new ‘portability’ rule making the lifetime exclusion around $5 million, it makes it much easier to pass money to heirs and shielding them from taxes. For the most part, bypass trusts can cause more harm than good, but they can be useful for specific situations.
  2. Keep Tax Planning Simple: The common practice when investing is rebalancing. This practice is having dividends automatically reinvested in taxable accounts. This can have more harm than good. Instead of reinvesting into taxable accounts, in high earning years, maximize tax-deductible retirement, and in low earning years maximize Roth contributions. Prepare for tax planning in November and December to be prepared for the coming year.
  3. Optimize Social Security Timing: By delaying social security benefits, people can take advantage of the increases in income the delay causes. You can add on average $10,000 to your net worth by just delaying taking social security by a few years.

Benefit of Aging Clients

Many people would not think of aging clients as a benefit, but in reality and aging client list can have many benefits. Many times the feeling is that clients that are of retirement age are depleting their assets and will no longer be needing services, but the truth is that many of these clients have been saving for retirement for years and will still have part of their retirement principal after thirty years. Life expectancy is increasing. Clients will be living into their 90s and they will require services for managing their retirement, and planning for when they are gone.

So what makes older clients desirable? Older clients know what they want. They have been spending years figuring out their finances, portfolios, etc. As a CPA, years have been spent building a relationship with the clients and understand the needs that can affect them after retirement. Those relationships can transition in to relationships with a new generation. The next generation will likely retain the services if the parents were treated well.

Sometimes the question comes down to losing assets. In many cases people have saves most of their adult life for retirement. If this is the case, then the assets that they have built will not be depleted easily. In the early stages of retirement, the withdrawals tend to be modest, but even if the client lives into their nineties, very few of them deplete the savings in fact some even compound their wealth if the scenarios are right.

In the end, the odds of a client dying and leaving the assets to a surviving spouse are high. That spouse then will leave the assets to the children, and so on. This is a way to build a client base into the next generation. Patience, persistence, and perspiration make an unbeatable combination for success- Napoleon Hill.