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Hal Zemel, CPA, J.D., LL.M.

Hal Zemel, CPA, J.D., LL.M.
Hal Zemel, a Tax Principal at Berdon LLP, has more than 20 years in public accounting and advises businesses in the real estate, service, and manufacturing sectors.
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TAX TALK: Changing Jobs? Consider Your Options for Your Old Retirement Plan

Posted by Hal Zemel, CPA, J.D., LL.M. on Oct 17, 2016 7:00:00 AM

Changing jobs can be both exciting and stressful. The last thing on your mind is what to do with your 401(k) or other employer-sponsored retirement plan. You will likely have a few options to continue building tax-deferred savings.  First and foremost, don’t take a lump-sum distribution from your old employer’s retirement plan. It generally will be taxable and, if you’re under age 59½, subject to a 10% early-withdrawal penalty.

Here are three tax-smart alternatives:

  1. Stay put. Many employer plans allow you to keep your plan, even after your separation from service. If you are satisfied with your investment choices and the fees are not too high, you may want to leave your money in your old plan. However, if you’ll be participating in your new employer’s plan or you already have an IRA, keeping track of multiple plans can make managing your retirement assets more difficult.
  2. Roll over to your new employer’s plan. If your new employer’s plan offers better investment options and/or lower fees, you may want to roll over your plan assets to your new employer’s plan. This may be beneficial if it leaves you with only one retirement plan to keep track of.
  3. Roll over to an IRA. If you are not satisfied with either of the plans offered by your old or new employer, you may want to roll over your plan assets to an individual retirement account (IRA). If you participate in your new employer’s plan, this will require keeping track of two plans. But it may be the best alternative because IRAs offer nearly unlimited investment choices and often lower fees.
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Topics: TAX TALK

TAX TALK: Get More Bang for the Buck by Donating Appreciated Stock Instead of Cash

Posted by Hal Zemel, CPA, J.D., LL.M. on Oct 10, 2016 12:50:00 PM

When planning your charitable giving, you should consider donating long-term appreciated stock instead of cash. Donating stock provides two advantages over cash donations.

Additional Tax Savings

Appreciated publicly traded stock you’ve held for more than one year is long-term capital gains property. If you donate it to a qualified charity, you can enjoy two benefits:

  1. You can claim a charitable deduction equal to the stock’s fair market value (not the amount that you paid for it), and
  2. You can avoid the capital gains tax you’d pay if you sold the stock.

This will be especially beneficial to taxpayers facing the 3.8% net investment income tax (NIIT) and the top 20% long-term capital gains rate this year.

For example, if you donate $10,000 of stock that you paid $3,000 for, your ordinary-income tax rate is 39.6% and your long-term capital gains rate is 20%. If you sold the stock, you’d pay $1,400 in tax on the $7,000 gain. If you were also subject to the 3.8% NIIT, you’d pay another $266 in NIIT.

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Topics: TAX TALK

TAX TALK: Saving for College? Prepaid Tuition Plan v. College Savings Plan? — Part 2

Posted by Hal Zemel, CPA, J.D., LL.M. on Oct 4, 2016 11:00:00 AM

Last week’s blog looked at the use of Section 529 plans, specifically prepaid tuition plans, to  provide a tax-advantaged way to help pay for college expenses. There are two types of plans – prepaid tuition plans and savings plans. This post will address savings plans.

Savings plans

This type of 529 plan allows you to put money away into an individual investment account and defer income tax on the earnings in the account. Money you contribute is invested in one or more specific investment portfolios. Each portfolio consists of a mix of investments (typically mutual funds) that are chosen and managed exclusively by the plan's designated money manager. You generally pick your investment portfolio at the time you open an account, or else one is automatically chosen for you. Your investment return is not guaranteed.

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Topics: TAX TALK

TAX TALK: Saving for College? Prepaid Tuition Plan v. College Savings Plan?

Posted by Hal Zemel, CPA, J.D., LL.M. on Sep 26, 2016 11:00:00 AM

Section 529 plans provide a tax-advantaged way to help pay for college expenses. Here are just a few of the benefits:

  • Although contributions are not deductible for federal purposes, plan assets can grow tax-deferred or tax free if used for qualified education expenses.
  • Some states offer tax incentives for contributing in the form of deductions or credits.
  • The plans usually offer high contribution limits, and there are no income limits for contributing.
  • You can change the beneficiary or rollover the funds to another qualified plan for the same beneficiary or a different beneficiary without income tax consequences.
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Topics: TAX TALK

TAX TALK: Business Expense Deductions Require Documentation

Posted by Hal Zemel, CPA, J.D., LL.M. on Sep 19, 2016 12:50:00 PM

The IRS generally requires you to substantiate your business deductions. If the IRS audits your tax return, they can examine your books and records to determine if you claimed the correct deductions. If you have incomplete or missing records, your business may lose out on valuable deductions. Here are two recent U.S. Tax Court cases that help illustrate the rules for documenting deductions.

Case 1: Insufficient records

In the first case, the court found that a taxpayer with a consulting business provided no specific facts and no documentation to substantiate more than $52,000 in advertising expenses and $12,000 in travel expenses for the two years in question. His only allegation concerning the advertising expenses were that they related to “horses purchased for business use and the losses”; he attached documents purporting to establish the horses' pedigree.

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Topics: TAX TALK

TAX TALK:  Are You an Investor or a Trader?

Posted by Hal Zemel, CPA, J.D., LL.M. on Sep 12, 2016 1:43:26 PM

Do you invest in securities for your own account? If yes, do you know whether you are an investor or a trader? Is there a difference?


As a general rule, the IRS will classify most of you as investors. The IRS will treat the income from the sale of your investments as capital gains and losses. The long term capital gains (held more than one year) will be taxed at preferential capital gains rates. For those of you with net capital losses, the losses are limited to a $3,000 ($1,500 if married filing separately) per year deduction once any capital gains have been offset.

There are also many limitations on your investment expenses. Your investment expenses are deducted as itemized deductions (subject to the many limitations for high income earners). Also, your margin interest is deductible only to the extent of your net investment income. Other investment expenses are treated as miscellaneous itemized deductions, and therefore, may be limited by the 2% adjusted gross income threshold. In addition, your miscellaneous itemized deductions will not provide you with any alternative minimum tax benefit.

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Topics: TAX TALK

TAX TALK: Does the IRS Tax Frequent Flyer Miles?

Posted by Hal Zemel, CPA, J.D., LL.M. on Sep 6, 2016 11:00:00 AM

Did you redeem frequent flyer miles to treat the family to a fun summer vacation or to take your spouse on a romantic getaway? You might assume that you do not owe any tax. You are probably right; however there are instances when your miles could be taxable.

General Rule — Tax Free
Generally, the IRS treats miles awarded by airlines for flying with them as nontaxable rebates. Similarly, the IRS treats miles and other rewards for using a credit or debit card as a purchase price reduction and not as taxable income.

The IRS partially addressed the issue in Announcement 2002-18, where it said “Consistent with prior practice, the IRS will not assert that any taxpayer has understated his federal tax liability by reason of the receipt or personal use of frequent flyer miles or other in-kind promotional benefits attributable to the taxpayer’s business or official travel.”

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Topics: TAX TALK

TAX TALK: Bunch Miscellaneous Itemized Deductions to Maximize Tax Benefit

Posted by Hal Zemel, CPA, J.D., LL.M. on Aug 29, 2016 11:00:00 AM

You will only receive a tax benefit from your miscellaneous itemized deductions to the extent that they exceed, in aggregate, 2% of your adjusted gross income (AGI). You may have found over the years that while you may have had otherwise deductible expenses, you received no tax benefit for the expenses because you did not have enough to exceed the floor. By bunching these expenses into a single year you may be able to exceed this “floor,” and therefore, receive a tax benefit for the expenses. So now is a good time to add up your potential deductions to date to see if bunching is a smart strategy for you this year.

Should you bunch into 2016 or defer into 2017?
If your miscellaneous itemized deductions are getting close to — or they already exceed — the 2% floor, consider incurring and paying additional expenses by Dec. 31, such as:

  • Deductible investment expenses, including advisory fees, custodial fees and publications;
  • Professional fees, such as tax planning and preparation, accounting, and certain legal fees; and
  • Unreimbursed employee business expenses, including vehicle costs, travel, and allowable meals and entertainment.
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Topics: TAX TALK

TAX TALK: Combining Business and Vacation Travel: What Can You Deduct?

Posted by Hal Zemel, CPA, J.D., LL.M. on Aug 22, 2016 1:00:00 PM

Mixing business and pleasure? If you go on a business trip within the United States and tack on some vacation days, you can deduct some of your expenses.

Here’s a quick list as to what you can deduct:

  • Transportation costs to and from the location of your business activity. But business must come first: If vacation is the primary reason for your travel, then generally no transportation expenses are deductible.
  • Costs for rail travel or the use of your personal car.
  • Other out-of-pocket expenses, such as lodging, hotel tips, meals (subject to the 50% disallowance rule), seminar and convention fees, and cab fare.
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Topics: TAX TALK

TAX TALK: Simple Gifting Strategies for Income and Estate Taxes Purposes

Posted by Hal Zemel, CPA, J.D., LL.M. on Aug 15, 2016 8:59:23 AM

If you have a large estate that is in excess of the 2016 lifetime gift and estate tax exemption of $5.45 million (twice that for married couples with proper estate planning strategies in place), you should consider making gifts during your lifetime to reduce your taxable estate. You can make annual exclusions gifts of up to $14,000 per person ($28,000 if you are married) without using any of your lifetime exemption.

Even if your estate would not be subject to tax today, it’s possible that the estate tax exemption could be reduced in the future or your wealth could increase significantly, and estate taxes could become a concern. Also, gifting assets to low income taxpayers may have income tax benefits (assuming the kiddie-tax does not apply).

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Topics: TAX TALK

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