So what’s a SEP?

November 10, 2017     

A Simplified Employee Pension (SEP) is a practical retirement plan which can be used by small businesses and sole proprietors.  The plans are easier to establish than qualified plans and have practically no filing requirements.  The SEP uses an IRA account as the vehicle for the contributions; the plans do not have complicated trust accounting for the plan sponsor.

 

The SEP is not a qualified plan, is has unique rules that are different than qualified plans.  For example, SEP’s have more liberal participation requirements than qualified plans, have a later initial starting date and have different contribution, distribution and vesting rules.

 

Why a Simplified Employee Pension?  (SEP)

  • Can contribute up to 25% of compensation or a maximum of $54,000 – whichever is less – No catch-up – No Elective Deferrals
  • Contribution is tax deductible as a business expense for the company
  • Completely flexible annual contribution amounts – Co. is not required to contribute every year
  • Minimal administration – do not file any IRS documents (tell your accountant about the amount of your contribution)
  • Do not have to employ an actuary
  • Follows the IRA rules for loans, distributions, penalties…(no loans)

 

Steps for Business to establish a SEP

  • Company sets up a master account at Schwab ( no extra legal documents for the company – Schwab provides the  documentation)
  • Employer informs Employee’s that SEP has been initiated
  • Employees receive information – disclose that the return is not predictable
  • User friendly access for employees – All is on-line with Schwab
  • Schenley will meet with individuals alone to discuss risk tolerances, goals…
  • Company could contribute a Dollar amount or a % of salary

 

Participation Restrictions if the Employer chooses to exclude:

  • Sponsor must provide to all employees (including part time)
  • 21 years of age
  • Worked as an employee 3 of the last 5 years
  • Received at least $550 during the year.

 

Who is excluded?

  • Covered by a Union agreement if their retirement benefits were bargained for by union and their employer
  • Non-Resident Aliens who have no U.S. source of earned income from employer

 

When to establish?

  • Established and Funded the date of the Federal Tax return filing or extension

 

Who can establish a SEP and by what date?

          Who                                        Latest Date

          Sole Proprietorship                  4/15/16 or 10/16(Extension date)

          Partnership  or LLC                  4/15/16 or 10/16

          Corporation                             3/15/16 or 9/16

          S – Corporation                        3/15/16 or 9/16

 

Steps for establishing a SEP-IRA with your Employees:

  • Execute a Written Agreement to provide benefits to all eligible employees
  • Give employees certain information about the SEP & Agreement
  • Set up a SEP-IRA for each employee
  • Employees can roll the IRA into a ROTH IRA – must pay tax 1st

 

written by: ||elizabeth genter, schenley president||

Ten Tax Lowering Tips

November 8, 2017     

Some will save you time & money when preparing your taxes returns. Other strategies will help you avoid costly penalties and interest on your Federal & State taxes. 

These tips will help you lower your blood pressure while keeping more money in your pocket!

 

1.) Contribute to your Individual Retirement Accounts – IRA’s

If you haven’t contributed to your retirement account for 2017 

Do so before the April 17, 2018 deadline

  • You can put away $5,500 if you are below 50 Yrs. old
  • You can put away $6,500 if you are +50 yrs. Old

 

2.) Maximize your pension contribution

  • Pension contributions are in pre-taxed dollars.
  • All pension assets grow tax- deferred

 

3.) Organize your records for Tax time

  • W-2’s and 1099’s, last year’s tax return, list of charitable contributions 
  • Use tax organizing software – it will help you to print out useful reports with a click

 

4.) Did you know you can use your RMD for gifts?

  • Your required minimum distribution can be given to your church, for gifts to a school or arts organization and you don’t pay the ordinary income tax on those funds.

 

5.) Itemize your tax deductions

  • Worth the trouble – you can save Thousands in deductions
  • Deduct mortgage interest
  • Charitable deductions
  • Miscellaneous deductions – Tax preparation, Investment Advisory fees, job hunting expenses & home office

 

6.) Use the Home Office Deduction

  • The eligibility rules have loosened up for the home office deductions

 

7.) Why not start a 529 account for college education

  • You can contribute up to $14,000 a person as a parent or grandparent

 

8.) File and Pay your taxes on time

  • If you can’t finish your return – you must pay your taxes by 4/17/2018
  • You can file for a 6 Mo. Extension – 10/15/ 2018

 

9.) File Electronically

  • IRS processes these faster than a paper return
  • You will receive your refund typically within 21 days!

 

10.) Decide 

  • You may need help with your investments and your return!

 

 

Written by: ||elizabeth genter, schenley president||

IRA Contributions Can Benefit You at Tax Time

November 8, 2017     

The 2017 tax season is almost here. Like everyone else, you want to take advantage and receive the highest amount of deductions possible, getting the best refund back! But, where to start? One great way to take advantage of tax season is contributing to your IRA account. You can make contributions throughout the year into your IRA or you can make a single lump sum contribution before the tax deadline on 04/17/2018 (for the 2017 tax year). So, how do you know how much you can contribute?

For the 2017 tax year, you can contribute up to $5,500.00 to your IRA if you are under the age of 50 years old. Once you turn 50, you can contribute $6,500.00 to your IRA yearly without taking an excess contribution penalty for the year. This rule allows those who are closer to retirement to “catch up” and add more to their IRA. Once you reach 70 ½ years of age, you cannot make contributions to your IRA anymore, although if you have a Roth IRA, you can still contribute. After making the smart choice to contribute to your IRA yearly, before filing your taxes; you may be wondering what tax deductions you may receive.

There are two scenarios that can apply to you and your household. The first scenario is employer provided retirement plans. If your employer provides you with a retirement plan at work- that is fantastic! This does not mean you shouldn’t have your own IRA account independently from work as well. You can potentially take advantage of tax deductions each year from your personal IRA. Any contributions made to an employer sponsored retirement for the year are not tax deductible. If you or your spouse, if you are married, have an employer sponsored retirement plan, then your Modified Adjusted Gross Income (MAGI) will determine how much of deduction amount you can claim for your IRA, if any. Your accountant will have the limitations on income for the year that will still allow you to claim a deduction on your IRA contributions. The second scenario is if neither you or your spouse’s employer, if you are married, offer a company sponsored retirement, you may take a full deduction on your taxes for any contributions made that year. Again, you should speak with your accountant for the exact income limitations for each scenario.

 

If you do not have an IRA account, you should consider opening one today.

Not only are there potential tax deductions that you can benefit from yearly,

you will also benefit from compounding interest and planning for your future!

 

Written by: ||cassandra hartman, office manager||

Donate your RMD Tax-free to Charity

November 8, 2017     

 

For nearly a decade the rules allowing for a tax free Qualified Charitable Distribution (QCD) from an IRA to a charity has been an on-again off-again part of the infamous Tax Extenders that would lapse and be reinstated every other year.

The Protecting Americans From Tax Hikes (PATH) Act was passed in 2015, finally making the QCD rules permanent, thus making it easier to engage in proactive charitable giving strategies.

What is an RMD?  A Required Minimum Distribution – a distribution an owner of an IRA is required to take by April 1st, a year after one is 70 ½.  Gifting your RMD to charity helps to minimize the tax bite.

However, obtaining the tax benefits for effecting a QCD from your IRA to a charity requires meeting a few specific requirements, such as being 70 1/2 or older, the maximum gift per year is $100,000 and you may only gift to public charities.

In addition, the most important requirement is that the check must be made payable directly to the charitable entity, not to the owner of the IRA.

 

Tax Benefits of gifting your IRA to a charity:

You will NOT pay Ordinary Income Tax on the IRA Distribution

The RMD is NOT counted as Gross Adjusted Income

The distribution qualifies as a Qualified Charitable Distribution

 

How to make the RMD to a Charity:  Very Easy

You must be 70 ½ at the time of the distribution

Submit a distribution form from the custodian of your IRA, for example: we work with Schwab – their form is simplified – you decide on the amount of the gift and the address of the organization

The custodian, such as Schwab will send a check DIRECTLY to the Charity

You should call the Charity to alert them to the gift, so the charity will then know who the gift is from, a letter of acknowledgement of your gift should be sent for your tax records.

 

Donating your RMD is a win – win for you and the charity – you will receive a nice tax break, reduce your adjusted gross income and the charity receives a great gift!!

 

 

Written by: ||elizabeth genter, schenley president||

 

Real Estate REIT’s

October 24, 2017     

 

     Many dream to own real estate, whether it be a property for rental income, a second home, store front, a hotel, shopping mall, or office building complex. But, having collateral and upfront funds to invest, develop, and manage is not an easy task. Adding liquid Real Estate or REIT’s to your investment portfolio allows you to own part of a shopping mall, hotels, commercial office space, or even apartment rental complexes while diversifying your investment portfolio! So, what is an REIT and how do you choose one to invest in?

     REIT stands for Real Estate Investment Trust. An REIT is a type of investment comparable to a mutual fund. Small and large investors can now own a small part of a real estate venture and even technically collect rental income! There are two types of REIT’s: Equity REIT’s and Mortgage REIT’s. Equity REIT’s generate income by collection of rent, and from sales of properties that are owned long term. Mortgage REIT’s invest in mortgage securities from commercial and/or residential properties. REIT’s usually pay out as taxable income generated by the property to shareholder’s in the funds dividends. The shareholder pays taxes on those quarterly dividends they receive. Owning shares in a REIT can be rewarding! A REIT usually pays an attractive amount in income every quarter. An investor can buy and sell REIT’s daily, making them a very liquid investment.

Some well knows REIT’s are Public Storage (PSA), which is a company that has self-storage facilities all over the United States. Another well-known REIT that has properties in our local area is Simon Property Group (SPG). Two familiar properties are Ross Park Mall and Grove City Outlets. 

     Do you have Real Estate REIT’s in your current investment portfolio? If not, speaking with an investment advisor would be the first step!Schenley Capital believes diversification is a key principal for your investment portfolio.We would like to assist in reviewing your current portfolio to select a customized mix of investments for you.We offer a free portfolio review. Contact us to schedule your personal portfolio review!

 

Written by: ||cassandra hartman, office manager||

Small Cap

October 24, 2017     

Small-cap stand for “Small market capitalization”. Market Capitalization is the estimation of a company’s value or size through multiplying the number of shares outstanding times the share price of the stock. An example of this would be to look at Consol Energy- a Small-cap company. Consol Energy has 230 Million shares of stock priced at $16.95 as of market opening on October 3rd. This puts them at a market valuation of 3.8 Billion dollars. Small cap stocks are shares of a company with a market capitalization value range of about $300 million to $2 billion.

Small cap companies are not necessarily “small”, they are established companies but dwarfed in comparison to larger companies like Coca-Cola and Facebook. So why own small-cap stocks? Small-cap stocks offer more opportunity for growth as they increase their product or service and are growing their market share. Small caps do offer high growth potential although they can be susceptible to market swings. This can be an advantage when the market is up, but a disadvantage when the market is down because they are more susceptible to the negative changes in the market as well as the positive, so more risk is involved.

Many small cap companies create components for larger companies, such as computer parts or automobile parts. Guidewire Software (GWRE) is one example that provides property and casualty software insurance to industries. Another example is Inogen (INGN) which is a medical technology company which develops and manufactures portable oxygen concentrators that provide oxygen therapy to patients suffering from chronic respiratory conditions. Other examples of Small-cap companies are Sonic(SONC), Federated Investors(FII), Chipotle(CMG), and Papa John’s(PZZA).

 

Written by: ||lauren pearce, associate||

Large Cap

October 24, 2017     

Large Cap stands for “Large market capitalization”. Market Capitalization is the estimation of a company’s value or size through multiplying the number of shares outstanding times the share price of the stock. An example of this can be demonstrated through looking at Walt Disney. Walt Disney has 1.544 Billion shares and the share price is $100.05 as of market opening on Oct. 3, this puts their valuation at 154.50 Billion dollars. Large cap stocks are simply a share of a large company with a market capitalization value of around 10 billion or above. Walt Disney would be considered a large-cap company and is part of the 30 companies which make up the Dow Jones Industrial Average. Other examples of Large-cap companies include Apple(AAPL), CVS Pharmacy(CVS), Amazon(AMZN), and Coca-Cola(KO). The advantage of owning large cap in your portfolio is that they are typically more stable and they offer dividends, which pay you a portion of your money back when the company earns a net profit. The disadvantage of large cap companies is that the return on investment is not as high as a smaller growth company because the growth is steady and the companies are well established.

 

Written by: ||lauren pearce, associate||

Asset Class

October 13, 2017     

An asset class is a categorization of assets by their similar financial characteristics, behaviors in the market, and laws and regulations to which they are subject. The main asset classes are stocks, or equities; bonds, or fixed income; and cash equivalents, or money market instruments. Different asset classes are used to vary portfolio investments because each class is expected to reflect different percentages and rates of return on your money. Large US Companies, like Coca-Cola (KO), are mature consumer product companies which usually have a more stable stock price. Small US companies are typically more volatile to market changes, which means their stock price will increase or decrease more quickly than a large company’s stock price. Other examples of asset classes would include: Emerging Markets, Large European companies, Real Estate, and different types of bonds.

 

Written by: ||lauren pearce, associate||

 

 

What is Diversification?

October 6, 2017     

You’ve probably heard the phrase: “Don’t put all of your eggs in one basket” and maybe you wonder what that concept really means for your finances. Diversification is splitting your investments into different “baskets” in order to reduce the risk of losing all your “eggs” or money, if one basket falls or performs poorly. An asset allocation strategy is a key element to developing an investment plan. The asset allocation represents decisions about what percentages of a portfolio to allocate to various categories such as stocks, bonds, and cash. Whether you are a more aggressive or conservative investor, all well balance portfolios will hold an appropriate amount of stocks and bonds in mutual funds. A diverse portfolio includes multiple investments to reduce the adverse effects of a quick downturn in the market and to participate in the reward of an upside market movement.

A practical example of a diversified portfolio may have 60% in stocks and 40% in bonds,

or 70% in stocks and 30% in bonds.

Do you hold a large amount of a stock that was given as a gift to you from a family member?  Do you know how diversified your portfolio is? Do you know what percentage of equity and fixed income you currently hold?

At Schenley we create an overall strategy and pick specific investments which would have the right balance for your goals. We would be happy to review your investments and see if your asset allocation is diversified in a way that meets your needs. 

 

 

Written by: ||lauren pearce, associate||

Cyber Security and Non-Profits

October 3, 2017     

 

     Cyber security is a very sensitive subject these days. Many are aware that a data breach can happen, but many still think “It will never happen to us.” or “Our non-profit is too small, security breaches only happen to larger organizations”.  Small, medium, or large; every non- profit should take proper measures to make sure their donor data is secure from a cyber breach.

   Three questions every nonprofit should ask themselves:

-Do we process donations or event registrations with payment on our website?

-Do we save and store personal information of our employees, volunteers and donors? (personal information being- employee records, social security numbers, driver’s licenses, addresses, bank account numbers for direct deposit for employees, and donation payment information, such as card numbers, checking account numbers, and even investment account numbers from stock gifts.)

-Do we collect and store information about our donors, subscribers to newsletters, and patrons/ event attendees?

If you answered YES to any of these questions, you are at risk for a data breach! So, what can your organization do and what are the next steps to make sure your non-profit is more secure?

     First, assess your risks and review the places that could result in a data breach, then implement a data security plan. When collecting and storing data…where is it stored… the cloud or customized data entry system for your organization that is saved in house? How do we collect the info we store? And finally, who oversees managing the collected data for donors, event attendees, and even employees? Is sensitive information only available to a limited amount of organization members? Training all employees and volunteers to collect and dispose of information correctly and carefully will help aid in preventing a data breach.

     Many nonprofits employ help to maintain their company from outside sources like bookkeeping, IT, payroll, and even data backup and storage. Some organizations collect and process donations thru a third-party source, which may not be as secure and can be breached. Not only is protecting in house data important, making sure all third-parties have a very strong data security plan in place as well, will protect your non-profit from a third-party data breach.

How does your organization prevent data breaches?

Tips for secure passwords:

-Changing passwords for all software which contains donor, event attendee, and employee data

-Make passwords the longest length allowed (example 8 characters, 12, characters, 16 characters)

-Change any password with an employee’s name, the word “admin”, or any other basic information

-Use upper and lower-case letters, numbers, and symbols to make your password complicated

-Add a password authenticator encryption device like a 6-digit code generator (These authenticators are very easy to use. You can even download an app for one on your smart phone!)

Tips for Website Security:

-All nonprofits accepting donations or event attendance payments through your website-choose a secure company to accept, process, and transfer funds to your account

-Change your website back office password with a lengthy password with letters, numbers, and symbols

-Add encryption to your website back office password (This authentication device will help prevent any hackers from taking over your website, redirecting donations and payments to another account, and hurting your sites credibility)

     You can protect your non-profit from a cyber security breach by assessing risks, training all employees and volunteers on how to securely handle data, and making sure all third-parties securely handle your data. These measures will help your organization prepare and will help prevent a cyber security attack in the future. While unforeseen instances may occur, being prepared for them by having a security plan and even investing in cyber liability insurance may help your non-profit to be protected from an unforeseen event! A few upcoming Schenley blogs will be on the topic of Liability Insurance, what is it, and how much coverage would your non-profit need to be protected? Don’t forget, Schenley can review your organizations investment portfolio and insurance! Call us for your organizations personal review today!

 

Written by: ||cassandra hartman, office manager||