ACCOUNTING
Is Your Business Prepared for New Federal and State Tax Policies ?
Compiled by Miles Z . Epstein Editor , COMMERCE
State and federal policies that are unfriendly to businesses are the top concern of the 440 certified public accountants surveyed by the New Jersey Society of CPAs ( NJCPA ) in May . More than 50 percent of the respondents who service clients said they have advised an individual or business client to leave the state due to the high cost of living and doing business . The survey , sponsored by Provident Bank , was conducted to gauge CPAs ’ outlook on the national and New Jersey economies . With the same goal in mind , COMMERCE asked New Jersey tax experts :
“ How are you advising your business clients to prepare for changes or new tax policies at the state and federal levels ?”
Citrin Cooperman By Erin Avnet , CPA , Partner
We continue to have active conversations with our clients about the proposed tax law changes across federal and state levels . With pending tax legislation , we cannot predict what will happen and our tax advisors are staying on top of the updates and actively meeting with our clients to discuss how to minimize their tax obligations and be prepared for all the potential changes . At the state level , passthrough entity tax has been the hot topic . At the federal level , the back-and-forth tax rate changes make it difficult to plan . With the proposed corporate tax hike and open questions regarding changes to the current 20 percent pass-through deduction , small business owners aren ’ t sure if their current business structure is the right one . With the newly proposed retroactive capital-gains tax increase , businesses in transition and owners looking to sell will need advanced tax planning . As with all tax planning , we weigh the pros and cons , based on client-specific fact patterns , to see what makes sense for them . At a minimum , once the tax policy picture becomes clearer , early year-end planning is essential .
CohnReznick LLP By Neil Gerard , Tax Practice Leader , NJ
Change is a constant when it comes to taxation . On the federal front , Biden ’ s recent proposals have yet to be formalized into a concrete bill , but the corporate income tax rate and the capital gains rate are worth watching . On the state level , the COVID‐19 pandemic has certainly increased volatility in a number of ways , not the least of which is the acceleration and entrenchment of teleworking and the adoption of a more-remote workforce . Going forward , both large and small businesses alike will be affected , and the resulting state tax consequences could potentially be significant within the tri-state area and beyond . When a company crosses a state line , it may be acquiring “ nexus ” in a new jurisdiction and may therefore be acquiring new tax compliance and filing obligations along the way . This could include payroll tax , income tax , sales tax , property tax , and / or excise tax , and that list goes on . As technology enables workforces to disperse , and as business culture continues to embrace the telework model , employers will need to be thoughtful in
“ On the federal front , Biden ’ s recent proposals have yet to be formalized into a concrete bill , but the corporate income tax rate and the capital gains rate are worth watching .”
understanding the potential multistate tax burdens that follow . We are advising clients to take stock now in order to be better prepared .
Goldstein Lieberman & Company LLC By Phillip E . Goldstein , CPA , CEO
President Biden ’ s tax proposal includes a number of tax rate increases for businesses and individuals . We would advise clients to accelerate income , where possible , and to defer expenses — for example , elect out of an installment sale or forgoing bonus depreciation , thereby spreading the expense to the future when taxes may be higher . For the real estate industry , the budget has a proposal to repeal the deferral of gain on IRC Sec 1031 exchanges on high earners . Finally , increased funding for the IRS will result in
“ CPAs are on the front lines of economic recovery steps in the state ,” says Ralph Albert Thomas , CPA ( DC ), CGMA , CEO and executive director at NJCPA .
more audit activity . The recently passed New York State ( NYS ) budget also increased individual and corporate rates , suggesting the same tax strategies be applied . NYS also passed a passthrough entity tax as a work around the SALT cap . However , there still is a need for guidance on how it will be implemented . Early indications are that this is designed to avoid some of the issues that have emerged from the New Jersey version of this legislation — the BAIT . This is an election year for New Jersey , therefore , Governor Murphy ’ s budget has no tax increases ( yet ) but does not roll back any of the tax increases enacted last year .
Klatzkin By John Blake , CPA , MBA , Partner , Chair , Tax Committee
A lot of small businesses are beginning their recovery from the COVID‐19 pandemic . Under the currently proposed tax law changes , many companies could face higher federal tax rates in the future . We have been advising some of our small business clients to accelerate income if possible . The proposed federal tax changes are looking to increase tax rates for individuals and C-Corporations . Having clients accelerate income would mean paying tax at a lower rate in an ideal world . At the same time , we have to advise our clients that if their taxable income goes over $ 1M , they will be
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