Posts By :

Noelle Merwin

  • Noelle Merwin
  • No Comments

A Tax Decision Every Married Couple Should Revisit for 2025
A Tax Decision Every Married Couple Should Revisit for 2025 266 266 Noelle Merwin

Married couples have a choice when filing their 2025 federal income tax returns. They can file jointly or separately. What you choose will affect your standard deduction, eligibility for certain tax breaks, tax bracket and, ultimately, your tax liability. Which filing status is better for you depends on your specific situation.

Minimizing tax

In general, you should choose the filing status that results in the lowest tax. Typically, filing jointly will save tax compared to filing separately. This is especially true when the spouses have different income levels. Combining two incomes can bring some of the higher-earning spouse’s income into a lower tax bracket.

Also, some tax breaks aren’t available to separate filers. The child and dependent care credit, adoption expense credit, American Opportunity credit and Lifetime Learning credit are available to married couples only on joint returns. And some of the new tax deductions under 2025’s One Big Beautiful Bill Act (OBBBA) aren’t available to separate filers. These include the qualified tips deduction, the qualified overtime deduction and the senior deduction.

You also may not be able to deduct IRA contributions if you or your spouse were covered by an employer-sponsored retirement plan such as a 401(k) and you file separate returns. And you can’t exclude adoption assistance payments or interest income from Series EE or Series I savings bonds used for higher education expenses if you file separately.

However, there are cases when married couples may save taxes by filing separately. An example is when one spouse has significant medical expenses. Medical expenses are deductible only to the extent they exceed 7.5% of adjusted gross income (AGI). If a medical expense deduction is claimed on a spouse’s separate return, that spouse’s lower separate AGI, as compared to the higher joint AGI, can result in a larger total deduction.

Couples who got married in 2025

If you got married anytime in 2025, for federal tax purposes you’re considered to have been married for all of 2025 and must file either jointly or separately. And married filing separately status isn’t the same as single filing status. So you can’t assume that filing separately for 2025 will produce similar tax results to what you and your spouse each experienced for 2024 filing as singles, even if nothing has changed besides your marital status — especially if you have high incomes.

The income ranges for the lower and middle tax brackets and the standard deductions are the same for single and separate filers. But the top tax rate of 37% kicks in at a much lower income level for separate filers than for single filers. So do the 20% top long-term capital gains rate, the 3.8% net investment income tax and the 0.9% additional Medicare tax. Alternative minimum tax (AMT) risk can also be much higher for separate filers than for singles.

Liability considerations

If you and your spouse file a joint return, each of you is “jointly and severally” liable for the tax on your combined income. And you’re both equally liable for any additional tax the IRS assesses, plus interest and most penalties. That means the IRS can come after either of you to collect the full amount.

Although there are “innocent spouse” provisions in the law that may offer relief, they have limitations. Therefore, even if a joint return results in less tax, some people may still choose to file separately if they want to be responsible only for their own tax. This might occur when a couple is separated.

Many factors

These are only some of the factors to consider when deciding whether to file jointly or separately. Contact a Smolin Representative to discuss the many factors that may affect your particular situation.

  • Noelle Merwin
  • No Comments

TRACING THE MONEY TRAIL: How Hidden Transactions Can Shape a Case
TRACING THE MONEY TRAIL: How Hidden Transactions Can Shape a Case 266 266 Noelle Merwin

Welcome to the first edition of Follow the Money—my new monthly series on the real world of forensic accounting. After years spent sifting through ledgers, bank statements, and the occasional financial garbage bag disguised as bookkeeping, I’ve come to appreciate just how much finding a single transaction or small series of transactions can change the direction of an investigation. This series is designed to share some of my professional real-life lessons: practical techniques, patterns that repeat across industries, and financial behavior that often says more than a witness.

For this opening article, I want to start with an issue that sits at the core of many disputes: Hidden Transactions. These aren’t simple mistakes or sloppy accounting.  I am talking about deliberate, deceptive financial moves designed to hide certain transactions and assets. Finding such evidence can transform a routine disagreement into something far more serious.

When the Transactions Tell a Different Story

Long before any issues surfaced publicly, Crazy Eddie appeared to be a growing and successful retail operation. Stores were expanding, sales were growing, and the company’s financial results seemed to support the growth and strength. What wasn’t visible was that cash was steadily being taken out of the business through sales that were never recorded.

As the company later positioned itself to go public, that earlier activity began to surface in a different form. Money that had previously been pulled out was routed back through foreign accounts and related entities, eventually reentering the company in ways that appeared legitimate on the books.

Viewed in isolation, none of these transactions drew much attention. The issue only became clear once investigators reconstructed the flow of funds and analyzed; where the money originated, how it moved, and why those movements occurred when they did. At that point, the reported financial performance no longer aligned with economic reality. What began as a routine securities review expanded into a far more serious fraud investigation that ultimately brought the entire company down.

That dynamic—where a pattern of seemingly ordinary transactions reshapes the entire understanding of a case—is something I see repeatedly in modern disputes.

What Exactly Are Hidden Transactions?

At its core, hidden transactions are financial activities that are intentionally structured to avoid detection. These might show up as:

  • Payments routed through unrelated entities
  • Invoices that look legitimate but aren’t tied to any actual service or purchase
  • Transfers timed to avoid financial reporting
  • Transactions “buried” in unrelated General Ledger accounts
  • Funds moved through a chain of entities and transactions, so no single step looks suspicious

One case that illustrates that and sticks with me involved a partnership dispute where everything looked perfectly normal—until we noticed a recurring payment labeled “subscription” to a vendor that, as it turned out, didn’t exist. The “vendor” entity had been formed three months earlier and dissolved quietly after the payments stopped. This forensic finding changed the entire direction of the case.

This scenario also illustrates how hidden transactions surface: often not with a dramatic revelation, but with a minor inconsistency, which, when investigated further, doesn’t line up with the story the numbers are supposed to tell.

Why Hidden Transactions Matter in Litigation

When a hidden transaction comes to light, it rarely stays isolated. Proverbially, if you see one cockroach, there are others! In my experience, these initial discoveries lead to:

  1. Reinforcement of allegations of fraud and self-dealing
    In shareholder disputes or partner conflicts, identifying undisclosed or hidden transfers often establishes breaches of fiduciary duty, embezzlement, and other illicit activities.
  2. Revelations of concealed or dissipated assets
    This situation comes up frequently in cases involving marital business interests, dissolving partnerships, or financial distress. Money that “disappears” rarely does so without a trail. As the saying goes…”Follow the money!”
  3. Point to regulatory issues no one initially expected
    Payments structured to appear innocuous may actually lead to price fixing, kickbacks, collusion, tax or monetary compliance violations.

Here is an illustration of a hypothetical scenario that mirrors situations I’ve investigated. A manufacturer suspects overbilling by a long-time supplier. The general ledger doesn’t show anything out of the ordinary. But once we trace the payments further, we find a pattern of rebates funneled back to a few executives through related vendors. Suddenly, the case is no longer about billing errors—it’s a deliberate kickback scheme.

How We Trace What’s Meant to Stay Hidden
Forensic accounting isn’t about having one magical tool. It’s about layering multiple approaches and methods until the picture becomes clear and the truth is revealed. Here is a sampling of the techniques we use:

Data Analytics and Pattern Recognition
Large datasets reveal behaviors people don’t expect anyone to notice: repeated transfers just under reporting thresholds, payments clustered around critical events, or unusual vendor activity.

Document Reconstruction
Pulling together shipping documents, invoices, emails, banking information, internal communications, and tracing transactions through the accounting processes often reveals inconsistencies that aren’t obvious in isolation. A two-line email can sometimes reveal what a hundred-page spreadsheet tries to obscure.

Interviews and Legal Tools
Speaking with employees, reviewing internal messages, or using subpoenas to obtain third-party records often provides the missing link between financial reality and illicit intent.

The investigative process requires systematic analysis and patience. Hidden transactions are built on complexity. Our job is to simplify that complexity until the economic reality is revealed.

What Businesses and Litigators Should Keep in Mind

If you’re involved in litigation—or operating a business where money flows through multiple hands—there are a few lessons worth remembering:

  • Strong, properly designed internal controls are cheaper than the cost of uncovered fraud.
  • Early forensic involvement often prevents wasted time and misdirected discovery.
  • Even the most carefully concealed transactions leave some form of footprint.
  • The objective isn’t just to find the money; it’s to understand the motivations and intentions behind it.

At the end of the day, tracing hidden transactions is less about fancy spreadsheets and more about clarity of what actually took place. When you uncover what a bad actor tried to hide, the rest of the case often begins to unfold and make sense.

AUTHOR BIO:

Charles “CJ” Pulcine, CPA, CFF is a Manager in Smolin’s Forensic and Valuation Services practice, specializing in forensic accounting, fraud investigations, and litigation support. He is a licensed Certified Public Accountant in New Jersey and holds the Certified in Financial Forensics (CFF) credential.

With more than seven years of experience in forensic accounting, financial audits, and fraud investigation, CJ works with businesses and legal counsel on financial fraud investigations, commercial litigation support, matrimonial litigation, business valuation analyses, and shareholder disputes. His work focuses on uncovering hidden transactions, tracing assets, and analyzing financial misconduct.

As a member of Smolin’s forensic team, CJ supports attorneys throughout the litigation lifecycle, including asset tracing, damages analysis, and preparation of financial evidence for mediation, depositions, and trial. He practices out of Smolin’s Red Bank, New Jersey office.

 

 

 

  • Noelle Merwin
  • No Comments

Smolin Relocates Spring Lake Heights Office to Expanded Red Bank Location
Smolin Relocates Spring Lake Heights Office to Expanded Red Bank Location 266 266 Noelle Merwin
Smolin, Lupin & Co., LLC announces the relocation of its Spring Lake Heights office to its newly expanded Red Bank location. This strategic move supports the firm’s continued growth and strengthens its ability to serve clients.

Effective February 1, the Spring Lake Heights team joined the Red Bank office, now located on the third floor at:
331 Newman Springs Road
Suite 130
Red Bank, NJ 07701

This relocation strengthens collaboration, expands resources, and ensures the firm continues to deliver the responsive, high quality service clients rely on. The new, modernized space offers increased capacity and improved efficiencies, enabling Smolin to better support our client needs across the region.

“As our firm grows, it is essential that our teams are positioned to collaborate effectively and have access to the tools and environment necessary to support our clients,” said Paul Fried, CPA, CEO. “This move reflects our long-term commitment to delivering exceptional service and enhancing the client experience.”

Smolin is excited to welcome clients to the new office. Clients with questions regarding the move are encouraged to contact their Smolin advisor directly.

 

  • Noelle Merwin
  • No Comments

New Trump Accounts – What You Need to Know
New Trump Accounts – What You Need to Know 266 266 Noelle Merwin

Included in the One Big Beautiful Bill (OBBB) signed into law July 4, 2025 was the creation of a tax-advantaged savings account for children called “Trump accounts”. A Trump account is treated like an IRA with the following stipulations:

  • Must be created for the exclusive benefit of an individual who has not reached age 18 by the end of the year.
  • Must be designated as a Trump account at the time it is established.
  • No contributions will be accepted before July 4, 2026.
  • No distribution will be allowed before the year in which the beneficiary reaches age 18.
  • Contributions are limited to $5,000 per year, adjusted annually for inflation after 2027.
  • Employers can contribute up to $2,500 annually (adjusted annually for inflation after 2027) to a Trump account of an employee or an employee’s dependents that will be excludible from the employee’s gross income.
  • A one-time payment of $1,000 will be made by the Treasury to a Trump account for a child born during the period January 1, 2025 – December 31, 2028 if an election is made on the parents Form 1040 for the year of birth. This is referred to as a “Pilot Program Contribution”.
  • To open a Trump account for an eligible dependent child, new Form 4547 can be e-filed with Form 1040. Form 4547 can also be paper filed if so desired.

The IRS has announced that once the Treasury Department verifies that a Trump account was opened, the $1,000 of “seed money” for children born in 2025 will hit the accounts sometime after July 4, 2026. Michael and Susan Dell announced in December that they will personally be donating $6.25 billion to fund Trump accounts – $250 for 25 million children under age 11 in lower-income areas with median family income of $150,000 or less. Various large companies including Bank of America, Charles Schwab, Comcast, IBM, JPMorgan Chase and Wells Fargo have announced they will match the $1,000 contribution for the children of their employees.

Additional information can be found at www.trumpaccounts.gov.

  • Noelle Merwin
  • No Comments

Don’t forget to include a residuary clause in your will
Don’t forget to include a residuary clause in your will 266 266 Noelle Merwin

When creating a will, most people focus on the big-ticket items — including who gets the house, the car and specific family heirlooms. But one element that’s often overlooked is the residuary clause. This clause determines what happens to the remainder of your estate — the assets not specifically mentioned in your will. Without one, even a carefully planned estate can end up in legal limbo, causing unnecessary stress, expense and conflict for your loved ones.

Defining a residuary clause

A residuary clause is the part of your will that distributes the “residue” of your estate. This residue includes any assets left after specific bequests, debts, taxes and administrative costs have been paid. It might include forgotten bank accounts, newly acquired property or investments you didn’t specifically name in your will.

For example, if your will leaves your car to your son and your jewelry to your daughter but doesn’t mention your savings account, the funds in that account would fall into your estate’s residue. The residuary clause ensures those funds are distributed according to your wishes — often to a named individual, group of heirs or charitable organization.

Omitting a residuary clause

Failing to include a residuary clause can create serious problems. When assets aren’t covered by specific instructions in a will, they’re considered “intestate property.” This means those assets will be distributed according to state intestacy laws rather than your personal wishes. In some cases, this could result in distant relatives inheriting part of your estate or assets going to individuals you never intended to benefit.

Without a residuary clause, your executor or family members may also need to seek court intervention to determine how to handle the leftover property. This adds time, legal costs and emotional strain to an already difficult process.

Moreover, the absence of a residuary clause can lead to family disputes. When the law, rather than your will, determines who gets what, heirs may disagree over how to interpret your intentions. A simple clause could prevent these misunderstandings and preserve family harmony.

Adding flexibility to your plan

A key advantage of a residuary clause is added flexibility. Life circumstances change — new assets are acquired, accounts are opened or closed, and property values fluctuate.

If your will doesn’t specifically list every asset (and most don’t), a residuary clause acts as a safety net to ensure nothing is left out. It can even account for unexpected windfalls or proceeds from insurance or lawsuits that arise after your passing.

Providing extra peace of mind

Including a residuary clause in your will is one of the simplest ways to make sure your entire estate is handled according to your wishes. It helps avoid gaps in your estate plan, minimizes legal complications and ensures your executor can distribute your assets smoothly. Contact Smolin Representative for additional details. Ask your estate planning attorney to add a residuary clause to your will.

  • Noelle Merwin
  • No Comments

What’s the right inventory accounting method for your business?
What’s the right inventory accounting method for your business? 266 266 Noelle Merwin

Inventory is one of the most significant assets on a balance sheet for many businesses. If your business owns inventory, you have some flexibility in how it’s tracked and expensed under U.S. Generally Accepted Accounting Principles (GAAP). The method you use to report inventory can have a dramatic impact on your bottom line and tax obligations. In addition, it will affect your financial ratios. Let’s review the rules and explore your options.

The basics

Inventory varies depending on a business’s operations. Retailers may have merchandise available for sale. Meanwhile, manufacturers and contractors may have materials, work in progress and finished goods.
Under Accounting Standards Codification Topic 330, you must generally record inventory when it’s received or when control of the inventory transfers to your company. Then, it moves to cost of goods sold when the product ships and control of the inventory transfers to the customer.

4 key methods

While inventory is in your possession, you can apply different accounting methods that will affect its value on your company’s balance sheet. When inventory is sold, your reporting method also impacts the costs of goods sold reported on your income statement. Four common methods for reporting inventory under GAAP are:

1. First-in, first-out (FIFO). Under this method, the first items entered into inventory are the first ones presumed sold. In an inflationary environment, units purchased earlier are generally less expensive than items purchased later. As a result, applying the FIFO method will generally cause a company to report lower expenses for items sold. This method leaves higher-cost items on the balance sheet. In short, this method enhances pretax profits and balance sheet values. However, it can have adverse tax consequences (because you report higher taxable income).

2. Last-in, first-out method (LIFO). Here, the last items entered are the first presumed sold. In an inflationary environment, units purchased later are generally more expensive than items purchased earlier. As a result, applying the LIFO method will generally cause a company to report higher expenses for items sold. This process leaves lower-cost items on the balance sheet. In short, this method may defer tax obligations. However, its effects on pretax profits and balance sheet values may raise a red flag to lenders and investors.

Under the LIFO conformity rule, if you use this method for tax purposes, you must also use it for financial reporting. It’s also important to note that the tax benefits of using this method may diminish if the company reduces its inventory levels. When that happens, the company may start expensing older, less expensive cost layers.

3. Weighted-average cost. Some companies use this method to smooth cost fluctuations associated with LIFO and FIFO. It assigns a weighted-average cost to all units available for sale during a period. This produces a more consistent per-unit cost. It’s common not only for commodities but also for manufacturers, distributors and retailers that handle large volumes of similar or interchangeable products.

4. Specific identification. When a company’s inventory is one of a kind, such as artwork, luxury automobiles or custom homes, it may be appropriate to use the specific identification method. Here, each item is reported at historic cost, and that amount is generally carried on the books until the specific item is sold. However, a write-off may be required if an item’s market value falls below its carrying value. Once inventory has been written down, GAAP prohibits reversal of the adjustment.

Under GAAP, inventory is valued at the lower of 1) cost, or 2) net realizable value or market value, depending on the method you choose.

Choosing a method for your business

Each inventory reporting method has pros and cons. Factors to consider include the type of inventory you carry, cost volatility, and industry accounting conventions. You should also consider the sophistication of your bookkeeping personnel and software.

Also evaluate how each method will affect your financial ratios. Lenders and investors often monitor performance based on profitability, liquidity and asset management ratios. For instance, if you’re comparing LIFO to FIFO, the latter will boost your pretax profits and make your balance sheet appear stronger. However, you’ll lose out on the tax benefits, which could strain your cash flow. The weighted-average cost method might smooth out your profitability. Still, it might not be appropriate for the types of products you sell. The specific identification method may provide the most accurate insight into a company’s profitability. Nevertheless, it’s reserved primarily for easily identifiable inventory.

Whatever inventory accounting method you select must be applied consistently and disclosed in your financial statements. A change in method is treated as a change in accounting principle under GAAP, requiring justification, disclosure and, if material, retrospective application.

We can help

Choosing the optimal inventory accounting method affects more than bookkeeping — it influences tax obligations and cash flow. In addition, it affects stakeholders’ perception of your business. Contact your Smolin representative for help evaluating your options strategically and ensuring your methods are clearly disclosed.

  • Noelle Merwin
  • No Comments

Expense Strategies for 2026: Reduce Taxes and Optimize Deductions
Expense Strategies for 2026: Reduce Taxes and Optimize Deductions 266 266 Noelle Merwin

Now is a good time to review your business’s expenses for deductibility. Accelerating deductible expenses into this year generally will reduce 2025 taxes and might even provide permanent tax savings. Also consider the impact of the One Big Beautiful Bill Act (OBBBA). It makes permanent or revises some Tax Cuts and Jobs Act (TCJA) provisions that reduced or eliminated certain deductions.

“Ordinary and necessary” business expenses

There’s no master list of deductible business expenses in the Internal Revenue Code (IRC). Although some deductions are expressly authorized or excluded, most are governed by the general rule of IRC Section 162, which permits businesses to deduct their “ordinary and necessary” expenses.

An ordinary expense is one that is common and accepted in your industry. A necessary expense is one that is helpful and appropriate for your business. (It doesn’t have to be indispensable.) Even if an expense is ordinary and necessary, it may not be deductible if the IRS considers it lavish or extravagant.

OBBBA and TCJA changes

Here are some types of business expenses whose deductibility is affected by OBBBA or TCJA provisions:

Entertainment. The TCJA eliminated most deductions for entertainment expenses beginning in 2018. However, entertainment expenses for employee parties are still deductible if certain requirements are met. For example, the entire staff must be invited — not just management. The OBBBA didn’t change these rules.

Meals. Both the TCJA and the OBBBA retained the pre-2018 50% deduction for business meals. What about business meals provided in connection with nondeductible entertainment? They’re still 50% deductible, as long as they’re purchased separately from the entertainment or their cost is separately stated on invoices or receipts.

Through 2025, the TCJA also expanded the 50% deduction rule to meals provided via an on-premises cafeteria or otherwise on the employer’s premises for the convenience of the employer. (Previously, such meals were 100% deductible.) The deduction was scheduled to be eliminated after 2025. The OBBBA generally retains this deduction’s 2026 elimination, with some limited exceptions that will qualify for a 100% deduction. But meal expenses generally can be 100% deducted if the meals are sold to employees.

Transportation. Transportation expenses for business travel are still 100% deductible, provided they meet the applicable rules. But the TCJA permanently eliminated most deductions for qualified transportation fringe benefits, such as parking, vanpooling and transit passes. However, those benefits are still tax-free to recipient employees, up to applicable limits. The OBBBA doesn’t change these rules.

Before the TCJA, employees could also exclude from taxable income qualified bicycle commuting reimbursements, and this break was scheduled to return in 2026. However, the OBBBA permanently eliminates it.

Employee business expenses

The TCJA suspended through 2025 employee deductions for unreimbursed employee business expenses — previously treated as miscellaneous itemized deductions. The OBBBA has permanently eliminated this deduction.

Businesses that don’t already have an employee reimbursement plan for these expenses may want to consider implementing one for 2026. As long as the plan meets IRS requirements, reimbursements are deductible by the business and tax-free to employees.

Planning for 2025 and 2026

Understanding exactly what’s deductible and what’s not isn’t easy. We can review your current expenses and help determine whether accelerating expenses into 2025 makes sense for your business. Contact your Smolin representative to discuss year-end tax planning and to start strategizing for 2026.

  • Noelle Merwin
  • No Comments

SALT Relief Ahead: How the 2025 Cap Increase Could Cut Your Taxes
SALT Relief Ahead: How the 2025 Cap Increase Could Cut Your Taxes 266 266 Noelle Merwin

If you pay more than $10,000 in state and local taxes (SALT), a provision of the One Big Beautiful Bill Act (OBBBA) could significantly reduce your 2025 federal income tax liability. However, you need to be aware of income-based limits. You may also need to take steps before year end to maximize your deduction.

Higher deduction limit

Deductible SALT expenses include property taxes (for homes, vehicles and boats) and either income tax or sales tax, but not both. Historically, eligible SALT expenses were generally 100% deductible on federal income tax returns if an individual itemized deductions. This provided substantial tax savings to many taxpayers in locations with higher income or property tax rates (or higher home values). It also benefited those who owned both a primary residence and one or more vacation homes.

Beginning in 2018, the Tax Cuts and Jobs Act (TCJA) limited the deduction to $10,000 ($5,000 for married couples filing separately). This SALT cap was scheduled to expire after 2025.

Rather than letting the $10,000 cap expire or immediately making it permanent, the OBBBA temporarily quadruples the limit. Beginning in 2025, taxpayers can deduct up to $40,000 ($20,000 for married couples filing separately), with 1% increases each subsequent year. Then in 2030, the OBBBA reinstates the $10,000 cap.

The increased SALT cap could lead to major tax savings compared with the $10,000 cap. For example, a single taxpayer in the 35% tax bracket with $40,000 in SALT expenses could save an additional $10,500 in taxes [35% × ($40,000 − $10,000)].

Income-based reduction

While the higher limit is in place, it’s reduced for taxpayers with incomes above a certain level. The allowable deduction drops by 30% of the amount by which modified adjusted gross income (MAGI) exceeds a threshold amount. For 2025, the threshold is $500,000. When MAGI reaches $600,000, the previous $10,000 cap applies. (These amounts are halved for separate filers.) The MAGI threshold will also increase 1% each year through 2029.

Here’s how the earlier example would be different if the taxpayer’s MAGI exceeded the threshold: Let’s say MAGI is $550,000, which is $50,000 over the 2025 threshold. The cap would be reduced by $15,000 (30% × $50,000), leaving a maximum SALT deduction of $25,000 ($40,000 − $15,000). Even reduced, that’s more than twice what would be permitted under the $10,000 cap. The reduced deduction would still save an additional $5,250 in taxes [35% × ($25,000 − $10,000) compared to when the $10,000 cap applied.

Itemizing vs. the standard deduction

The SALT deduction is available only to taxpayers who itemize their deductions. The TCJA nearly doubled the standard deduction. As a result of that change and the $10,000 SALT cap, the number of taxpayers who itemize dropped substantially. And, under the OBBBA, the standard deduction is even higher — for 2025, it’s $15,750 for single and separate filers, $23,625 for head of household filers, and $31,500 for married couples filing jointly.

But the higher SALT cap might make it worthwhile for some taxpayers who’ve been claiming the standard deduction post-TCJA to start itemizing again. Consider, for example, a taxpayer who pays high state income tax. If that amount combined with other itemized deductions (generally, certain medical and dental expenses, home mortgage interest, qualified casualty losses, and charitable contributions) exceeds the applicable standard deduction, the taxpayer will save more tax by itemizing.

Year-end strategies

Here are two strategies that might help you maximize your 2025 SALT deduction:

  1. Reduce your MAGI. If it’s nearing the threshold that would reduce your deduction or already over it, you can take steps to stay out of the danger zone. For example, you can make or increase pretax retirement plan and Health Savings Account contributions. Likewise, you can avoid moves that increase your MAGI, like Roth IRA conversions, nonrequired traditional retirement plan distributions and asset sales that result in large capital gains.
  2. Accelerate property tax deductions. If your SALT expenses are less than $40,000 and your MAGI is below the reduction threshold for 2025, for example, you might prepay your 2026 property tax bill this year. (This assumes the amount has been assessed — you can’t deduct a prepayment based only on your estimate.)

Plan carefully

In your SALT planning, also be aware that SALT expenses aren’t deductible for purposes of the alternative minimum tax (AMT). A large SALT deduction could have the unintended effect of triggering the AMT, particularly after 2025.

Under the right circumstances, the increase to the SALT deduction cap can be a valuable tax saver. But careful planning is essential. Contact your Smolin representative for assistance with maximizing your SALT deduction and other year-end tax planning strategies.

  • Noelle Merwin
  • No Comments

The Financial Triple Play: 3 Reports Every Business Leader Should Watch
The Financial Triple Play: 3 Reports Every Business Leader Should Watch 1200 1200 Noelle Merwin

In baseball, the triple play is a high-impact defensive feat that knocks the competition out of the inning. In business, you have your own version — three key financial statements that can give you a competitive edge by monitoring profitability, liquidity and solvency.

First base: The income statement

The income statement (also known as the profit and loss statement) shows revenue, expenses and earnings over a given period. It’s like an inning-by-inning scoreboard of your operations. While many people focus on the bottom line (profits or losses), it pays to dig into the details.

A common term used when discussing income statements is “gross profit,” or the income earned after subtracting the cost of goods sold from revenue. Cost of goods sold includes the cost of labor, materials and overhead required to produce or acquire a product. Another important term is “net income.” This is the income remaining after all expenses (including taxes) have been paid.

Also, investigate income statement trends. Is revenue growing or declining? Are variable expenses (such as materials costs, direct labor and shipping costs) changing in proportion to revenue? Feeling overwhelmed by fixed selling, general and administrative expenses (such as rent and marketing costs)? Wondering whether some products or service offerings more profitable than others? Evaluating these questions can help you brainstorm ways to boost profitability going forward.

Second base: The balance sheet

The balance sheet (also known as the statement of financial position) provides a snapshot of the company’s financial health. This report tallies assets, liabilities and equity at a specific point in time. It provides insight into liquidity (whether your company has enough short-term assets to cover short-term obligations) and solvency (whether your company has sufficient resources to succeed over the long term).

Under U.S. Generally Accepted Accounting Principles (GAAP), assets are usually reported at the lower of cost or market value. Current assets (such as accounts receivable and inventory) are reasonably expected to be converted to cash within a year, while long-term assets (such as plant and equipment) have longer lives. Similarly, current liabilities (such as accounts payable) come due within a year, while long-term liabilities are payment obligations that extend beyond the current year or operating cycle.

Intangible assets (such as patents, customer lists and goodwill) can provide significant value to a business. But internally developed intangibles aren’t reported on the balance sheet; instead, their costs are expensed as incurred. Intangible assets are only reported when they’ve been acquired externally.

Owners’ equity (or net worth) is the extent to which the book value of assets exceeds liabilities. If liabilities exceed assets, net worth will be negative. However, book value may not necessarily reflect market value. Some companies may provide the details of owners’ equity in a separate statement called the statement of retained earnings. It details sales or repurchases of stock, dividend payments and changes caused by reported profits or losses.

Third base: The statement of cash flows

The cash flow statement shows all the cash flowing in and out of your company. For example, your company may have cash inflows from selling products or services, borrowing money, and selling stock. Outflows may result from paying expenses, investing in capital equipment and repaying debt.

Typically, cash flows are organized on this report under three categories: operating, investing and financing activities. The bottom of the statement shows the net change in cash during the period. Watch your statement of cash flows closely to gauge your business’s liquidity. To remain in business, companies must continually generate cash to pay creditors, vendors and employees — and they must remain nimble to respond to unexpected changes in the marketplace.

What’s your game plan?

Financial reporting is more than an exercise in compliance with accounting rules. Financial statements can be a valuable management tool. However, many business owners focus solely on the income statement without monitoring the other bases. That makes operational errors more likely.

Play smart by keeping your eye on all three financial statements. We can help — not only by keeping score — but also by analyzing your company’s results and devising strategic plays to put you ahead of the competition. To learn more contact your Smolin representative.

 

  • Noelle Merwin
  • No Comments

Age-Based Tax Triggers: What You Need to Know
Age-Based Tax Triggers: What You Need to Know 1200 1200 Noelle Merwin

They say age is just a number — but in the world of tax law, it’s much more than that. As you move through your life, the IRS treats you differently because key tax rules kick in at specific ages. Here are some important age-related tax milestones for you and loved ones to keep in mind as the years fly by.

Ages 0–23: The kiddie tax

The kiddie tax can potentially apply to your child, grandchild or other loved one until age 24. Specifically, a child or young adult’s unearned income (typically from investments) in excess of the annual threshold is taxed at the parent’s higher marginal federal income tax rates instead of the more favorable rates that would otherwise apply to the young person in question. For 2025, the unearned income threshold is $2,700.

Age 30: Coverdell accounts

If you set up a tax-favored Coverdell Education Savings Account (CESA) for a child or grandchild, the account must be liquidated within 30 days after the individual turns 30 years old. To the extent earnings included in a distribution aren’t used for qualified education expenses, the earnings are subject to tax plus a 10% penalty tax. To avoid that, you can roll over the CESA balance into another CESA set up for a younger loved one.

Age 50: Catch-up contributions

If you’re age 50 or older at end of 2025, you can make an additional catch-up contribution of up to $7,500 to your 401(k) plan, 403(b) plan or 457 plan for a total contribution of up to $31,000 ($23,500 regular contribution plus $7,500 catch-up contribution). This assumes that your plan allows catch-up contributions.

If you’re 50 or older at the end of 2025, you can make an additional catch-up contribution of up to $3,500 to your SIMPLE IRA for a total contribution of up to $20,000 ($16,500 regular contribution plus $3,500 catch-up contribution). If your company has 25 or fewer employees, the 2025 maximum catch-up contribution is $3,850.

If you’re 50 or older at the end of 2025, you can make an additional catch-up contribution of up to $1,000 to your traditional IRA or Roth IRA, for a total contribution of up to $8,000 ($7,000 regular contribution plus $1,000 catch-up contribution).

Age 55: Early withdrawal penalty from employer plan

If you permanently leave your job for any reason after reaching age 55, you may be able to receive distributions from your former employer’s tax-favored 401(k) plan or 403(b) plan without being socked with the 10% early distribution penalty tax that generally applies to the taxable portion of distributions received before age 59½. This rule doesn’t apply to IRAs.

Age 59½: Early withdrawal penalty from retirement plans

After age 59½, you can receive distributions from all types of tax-favored retirement plans and accounts (IRAs, 401(k) accounts and pensions) without being hit with the 10% early distribution penalty tax. The penalty generally applies to the taxable portion of distributions received before age 59½.

Ages 60–63: Larger catch-up contributions to some employer plans

If you’re age 60–63 at the end of 2025, you can make a larger catch-up contribution of up to $11,250 to your 401(k) plan, 403(b) plan, or 457 plan. This assumes your plan allows catch-up contributions.

If you’re age 60–63 at the end of 2025, you can make a larger catch-up contribution of up to $5,250 to your SIMPLE IRA.

Age 73: Required minimum withdrawals

After reaching age 73, you generally must begin taking annual required minimum distributions (RMDs) from tax-favored retirement accounts (traditional IRAs, SEP accounts and 401(k)s) and pay the resulting extra income tax. If you fail to withdraw at least the RMD amount for the year, you can be assessed a penalty tax of up to 25% of the shortfall. However, if you’re still working after reaching age 73 and you don’t own over 5% of your employer’s business, you can postpone taking RMDs from the employer’s plan(s) until after you retire.

Watch the calendar

Keep these important tax milestones in mind for yourself and your loved ones. Knowing these rules can mean the difference between a smart tax strategy and a costly oversight. If you have questions or want more detailed information, contact your Smolin representative.

 

Start Typing
in NJ & FL | Smolin Lupin & Co.