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Mishmash of Dates to Open a Business Retirement Plan

September 29, 2016

The logic of the tax code is beyond understanding. If you want “proof” just look at the mishmash of deadline dates when the various retirement plans can be opened. Note that in some cases these deadlines do not apply to businesses formed after the deadline dates shown below.

SIMPLE Plan (Savings Incentive Match Plan for Employees) Individual Retirement Account, SIMPLE 401k and Safe Harbor 401k
Deadline to establish plan: October 1 of the fiscal year.
Contribution deadline: Due date including extensions of the tax return for which the deduction is claimed. It is sooner for contributions by participants.

401k including solo 401k and Roth 401k
Deadline: December 31 of the current fiscal year.
Contribution deadline: Due date including extensions of the tax return for which the deduction is claimed. It is sooner for contributions by participants.

SEP (Simplified Employee Pension Plan)
Deadline: Due date including extensions for the tax year for which the deduction will be claimed. With extensions this can be as late as October 15 of the year following the year the deduction is claimed.
Contribution deadline: Due date including extensions of the tax return for which the deduction is claimed.

IRA and Roth IRA
Deadline: Due date (not including extensions) for the tax year for which the deduction will be claimed. This can be as late as April 15 of the year following the tax year.
Contribution deadline: Due date (not including extensions) for the tax year for which the deduction will be claimed.

Keogh (HR-10), money purchase, profit sharing and defined benefit pension plans
Deadline: December 31 of the current fiscal year.
Contribution deadline: Due date including extensions of the tax return for which the deduction is claimed.

As can be seen, there is no consistency and in some cases no logic to the differences in deadlines to establish the plans and to make contributions. However, these plans can provide great tax benefits and defer the income tax due on substantial income if used in the right situations the right way. To benefit you must be informed. I suggest discussing with your accountant or tax preparer how you might benefit from using the retirement plans listed above.

As to the mishmash – it is what it is and we just need to abide by the deadlines. Someday perhaps Congress will get its act together and simplify nonrevenue generating rules such as indicated here.

Brian Lovett, CPA, JD, partner at Withum assisted in the preparation of this listing.

The First Debates

September 27, 2016

Last night, like over 100 million other people I watched the first debate between Hillary Clinton and Donald Trump. I enjoyed it and it met many of my expectations and preconceived notions – good and bad.

There are so many issues to consider. However, there are two points that I have written about previously and want to re-emphasize. One deals with the Supreme Court and the other about the undecided bloc.

Supreme Court
While presidents come and go and wield great power, their selections for the Supreme Court will in some cases last more than a generation after their term or terms are over. Whatever your proclivity, you need to consider the type of person the next president will select for the Supreme Court and if they will lead America into the direction you want. Your vote for the individuals running should look past their personalities and proposals or lack of substance, but their underlying beliefs and how they will be manifested in their Supreme Court nominations. This choice will have a direct and major effect on all of us.

The Middle Bloc
C. Northcote Parkinson, known for his management laws suggested that “in nearly every matter of controversy, we can assume that the people who will decide will be in the middle bloc.” By my way of reckoning there are two pretty equal large blocs that will vote Democratic or Republican regardless of what the candidates do or say or even who they are. It is the smaller undecided and open minded bloc wanting to hear both sides present their proposed solutions before they make their decisions. That is who the candidates need to usually focus on.

One of the problems facing every campaign is disinterest or lack of enthusiasm by the faithful in their candidate and who may decide to stay home on Election Day. Because of this the candidates need to also focus their attention somewhat away from the middle bloc and charge up their base. This diffuses their message and resources making their success more difficult, costly and less predictable.

Regardless of how you feel, voting is a sacred privilege and you should vote at each opportunity. This year the candidates present clear differences and you need to fulfill your responsibility. Vote on Election Day. Vote like your life depends on it and certainly the quality of your life. It does!

Teacher and Student – A Lesson that Might Have Occurred

September 22, 2016

“Ora ascolta…” “Now listen. The lines start out at the edges and converge into the middle. Once they reach the middle, they spread out to the other edges. You can do it from the left and right sides, as well as the top and bottom. Sketch a flat table to cover the middle and place the Lord in the center of the table. Show six or so apostles sitting on either side focused toward Him. To maintain perspective, have the walls start out the full height of the drawing and use an angular motion to show the walls getting smaller toward the back about 1/3 of the width. Do that on both sides. Show the ceiling getting smaller and end up about 1/3 of the back width. Have the back of the ceiling drop about 1/5 of the distance from the top edge. Now you’ve maintained the perspective from a mathematical formula.”

“Si, Maestro.”

The Maestro was Fra Luca de Pacioli, the foremost mathematician of his time who was teaching his artist student and friend the technique of perspective. Today Fra Luca is known primarily as the Father of Accounting having included a section on the mathematics of commercial transactions in his 1494 Summa which was a compilation of all of the mathematical knowledge known at that time. The section gave the accounting world its double entry bookkeeping system with its “debits” and “credits.” Additionally, Pacioli was so accomplished that he published a book in 1509 which contained a geometric alphabet that he designed and which “M” has been adopted by New York’s Metropolitan Museum of Art as their logo.

At the last part of the 15th Century, the art of perspective was relatively new and was based on mathematical principles. The student paid focused attention and kept thanking Pacioli and saying repeatedly “Si, Maestro.” When they were completed, and Pacioli was satisfied with the sketch he replied “buon lavoro, Leonardo.” “Good work, Leonardo.”

The sketch became “The Last Supper.”

Our Most Unpopular President

September 20, 2016

People measure a president’s popularity by polls, and by the number and percentage of votes they received and perhaps by favorability ratings.

One of our previous presidents can be regarded as perhaps our most unpopular president when he took office because he received one of the lowest percentages of the total votes of any president – 39.8%. He was only nominated by his party because he was the least offensive of the four people contending. As soon as it became apparent he would be the next president seven states left the Union. Further, the people he chose for his cabinet hated him and tried to subvert everything he wanted to do. Nothing in the man’s history indicated that he could be successful. He previously lost two elections for Congress and also two for the Senate, he dropped out of grade school, went broke in a business, his sweetheart died untimely, he had an unhappy marriage, a nervous breakdown, was gawky and always brooding, not attractive and had a funny voice. He once gave one of the greatest speeches of all time and the audience was indifferent. In fact except for one election as a Congressman the only other election he won was the Presidency…in 1860. Today Abraham Lincoln is regarded as one of our greatest presidents.

Strong moral convictions, with insightful people management, focused implementation and persistence can change conditions and move minds.

Just because everyone thinks it, doesn’t make it so

September 15, 2016

Some time ago there was an election coming up. The president was not popular and not well liked. So much so that he asked a famous war general to run instead of him (and was turned down) and so much so that many people in his own party did not want to nominate him. A conservative bloc walked out of the convention and selected their own candidate who was listed on the ballot from that party in four states and winning those states. Further a liberal bloc formed their own party and nominated a former vice president as their own candidate and while they did not win any states, they diverted an equal number of votes from the president as did the conservative faction.

Additionally, the other party’s candidate was a popular New York State Governor, and still further none of the major newspapers expected the president to win, so they did not cover his campaign. Also, the president had so little money that he had to put his wife on the government payroll to make ends meet so campaigning was a hardship with a much smaller organization than he needed. Everyone who was anyone thought this election was a slam dunk and the president would be defeated.

Everyone except the president! He thought he was doing a great job and felt it was his duty to run and his responsibility to campaign. What he did was quite simple and probably the last “small time” presidential campaign. He rented a train and went to as many towns as possible, stopping, making a speech from the back of the train and then going to the next town – sometimes making more than a dozen “whistle stops” in a day.

In today’s political-speak his campaign method might be considered a stealth campaign. No one knew what he was doing except the people at the train stops who looked at the plain talking plain looking man but they saw a giant because of this status as President of the United States and possibly because of some of his bold accomplishments. He did not rest on his laurels. He did not have a defeatist demeanor. He was not a whiner or complainer, but had an upbeat attitude and people felt good hearing him speak. He however, had an easy target knocking a “do-nothing” Congress which it seems people always liked to do. He also never mentioned his opponent, not wanting to make him appear formidable.

He did not shirk from getting the job done. He had the inner confidence to know that if he did the work while the others dawdled he would prevail, and he prevailed. On election night the early newspaper headlines incorrectly read that “Dewey Defeated Truman.” Harry Truman was elected to his own term as president having originally succeeded to the Presidency when Franklin Roosevelt died.

How to Start a Charity

September 13, 2016

You have this wonderful idea about how you can help others, and you want to start a public charity to accomplish your goal. Here is how to start.

An exempt charitable organization, also known a 501(c)(3) organization, must operate exclusively for charitable purposes. It must serve a public rather than a private interest, and the activities that it is engaged in must further its exempt purposes. The organization must be created for religious, scientific, literary, educational or other charitable purposes as defined in IRC Section 501(c)(3).

When creating a not-for-profit entity, you must first establish a legal entity under your state’s law. The entity could be a trust, corporation or association. Every state has its own requirements on what is required to create a not-for-profit entity, which may differ from the requirements to create other types of entities. The IRS website provides a listing of contact information, website and phone number, for each state. Here is a link

“Not-for-profit” status is a state concept that may convey benefits such as exemption for state sales, income and/or property taxes. “Tax-exempt” status is a federal tax law concept. Being a not-for-profit at the state level does not automatically make the entity tax-exempt at the federal level.

Once your organization has been created as a not-for-profit entity under your state’s law, you should then apply for federal tax-exempt status in order for donations to your organization to be eligible for tax deductions by the donor. Tax-exempt status will also excuse your organization from paying income taxes on its income from its charitable purpose activities. It will however, be subject to tax on any unrelated business income it may have. Filing for federal tax-exempt status is done by submitting Form 1023 with the IRS. Before filing with the IRS you will need the following documents to submit.

  • Taxpayer identification number (TIN) obtained from the IRS. Here is a link to apply on-line
  • Organizing or enabling documents signed by a principal officer, such as articles of incorporation, articles of organization or declarations of trust.
  • Bylaws if they have been adopted by your organization.

In order for your organization to obtain tax-exempt status from the first day of operation, you need to file Form 1023 within 27 months of the end for the first month it was organized. You can operate as a tax-exempt organization while waiting for IRS approval, but your donors will not have assurance that their contributions to your organization will be deductible until your application is approved. If the application is approved, donors’ contributions made while the application was pending will qualify as charitable deductions. However, if the application is denied the contributions will not be deductible on donors’ income tax return, and the organization will be responsible for filing federal and state income tax returns.

Every state has its own regulations regarding fundraising as well as soliciting donations. These include requiring registration of your organization, special rules when using the services of a paid solicitor or fundraising counsel, gaming activities and financial reporting. You will need to check with each state in which you plan to solicit funds or hold fundraising activities. . Here is a link to the National Association of State Charity Officials. It contains a link to each state’s charities’ website.

Most public charities are required to annually file one of the following forms: Form 990, 990-EZ or 990-N (e-postcard) or if a private foundation, Form 990-PF. Failure to file for three consecutive years will result in automatic loss of your tax-exempt status. Religious organizations are exempt from these filing requirements. If there is unrelated business income Form 990-T must be filed and this includes religious organizations.

The charity will need to provide donors with contemporaneous written acknowledgments for all single contributions of $250 or more otherwise the deduction cannot be claimed. If the donor receives something of value in return for the contribution beyond a de minimis threshold, the organization should describe and give a good faith estimate of the nature and value of the goods or services it provided. If no goods or services were provided, the organization should include statement to that effect in their acknowledgement.

In conclusion, there are many rules and pitfalls involved in creating and running a public charity. This article contains some information to help you get started.

This blog was primarily prepared by Lisa Galinsky, CPA, a not-for-profit organization specialist at WithumSmith+Brown, PC in our Red Bank, NJ office. You can reach her at

Management Alignment Checklists

September 8, 2016

Michael Roppo, our firm’s performance and profitability strategist for automotive and retail businesses told me that reading the checklists in the last two blogs inspired him to also prepare some. He prepared four management alignment and onboarding checklists. Here is one of them:

Daily Checklist
Rid yourself of uncertainty! Increase your productivity, performance and profitability and get the results you deserve! Take these steps every day!

  1. Give clear directions. Get straight to the point quickly and be definitive.
  2. Require accountability. Focus on results, not theory.
  3. Never rationalize sub-standard performance.
  4. Avoid over planning. When a plan is in place, take action!
  5. Embrace change. Search out opportunities to improve your people and organizational results.
  6. Help every member on the team win every day.
  7. Each day the collective actions should help move performance closer to meeting your objectives. If not, then it was not a successful day.

The other checklists are just as insightful and helpful, but they are more client driven and specific to automotive businesses that comprise most of his clients. The above checklist is applicable to any type of organization. If you think you might need assistance, reach out to Mike at He works out of our New Brunswick office.