NEW YORK, NY--(Marketwire - January 11, 2011) - Even though it's been two years since the financial crisis, "New Reality" remains the operative idea as 2011 begins. A "smart move," according to partners at the accounting firm Marks Paneth & Shron, is to recognize that you'll need more money than you ever thought -- and, at the same time, that you should expect less of the future.
"The sure thing about the future is that over-stretched, financially precarious government -- at federal, state and local levels -- will translate to higher overall taxes, reduced benefits from Social Security and Medicare and lower returns, not to mention greater risk, from what seemed like safe investments," according to Alan J. Dlugash, CPA, Tax Partner, at Marks Paneth & Shron.
"What to do about it in 2011? Start making plans to put more money away and invest more; think about postponing retirement; and work hard to ensure the next generation has a realistic grasp of economics and money. This isn't new advice, but the rationale for it is stronger than it's ever been. One more thing: Encourage accountants, other professionals and elected officials to discourage new rules that make doing business more difficult and expensive."
According to Mr. Dlugash...
- Even if income tax rates freeze or go down, the government will get more money from you. While working to keep income tax rates down to help stimulate the economy, the government needs every penny it can get. That means that there will be new limitations on deductions -- and that the "venue" for tax increases will change. For instance, look forward to new higher state and local income taxes; higher state and local use taxes; as well as a reduction of the tax benefit relating to items such as mortgage interest, charitable contributions and other miscellaneous deductions. The paradox: lower tax rates will be accompanied by a greater total tax bill.
- Social Security reform is inevitable, and it will mean less for you. "Some good advice might be to not put Social Security in the mix when planning for retirement," said Mr. Dlugash. A smart perspective is to assume cost-of-living increases in Social Security will melt away and that the age to qualify for benefits will go up.
- The burden on doing business in the U.S. will intensify. If one owns or operates a business, it's going to get harder to make more money. New regulations from a money-hungry government will lead to new requirements like 1099 filings for each of a company's payees to paying more taxes even if the revenue is garnered outside the US.
- The smart money will be especially careful about what kind of municipal and state debt is in a portfolio. "The biggest crises for 2011 are state and local fiscal crises. The financial difficulty there is understated. Expect some bankruptcies," said Mr. Dlugash. In other words, what many believed were "safe" fixed-income investments are potential time-bombs. Know the true creditworthiness of each and every government whose bonds you own or are considering.
- At the same time, interest rates are likely to remain low. Therefore, expect even less income from lower-risk fixed income investments.
"You'll need more money in the bank and invested. Life will get more expensive all around -- in terms of doing business, taxes and retirement living costs. And generating an income will be harder. The smart money 'gets' this," said Mr. Dlugash.
To arrange an interview or request a bylined article by Mr. Dlugash, please contact Itay Engelman of Sommerfield Communications at 212.255.8386 or itay@sommerfield.com.
About Marks Paneth & Shron
Marks Paneth & Shron LLP is an accounting firm with nearly 475 people, of whom 64 are partners and principals. The firm provides businesses with a full range of auditing, accounting, tax, bankruptcy and restructuring services as well as litigation and corporate financial advisory services to domestic and international clients. The firm also specializes in providing tax advisory and consulting for high-net-worth individuals and their families, as well as a wide range of services for international, real estate, media, entertainment, nonprofit, professional and financial services and energy clients.
The firm's subsidiary, Tailored Technologies, LLC, provides information technology consulting services. In addition, its membership in JHI, the leading international association for independent business advisers, financial consulting and accounting firms, facilitates service delivery to clients throughout the United States and around the world.
Marks Paneth & Shron LLP, whose origins date back to 1907, ranks among the 35th largest firms in the nation and is the 13th largest in the New York area. In addition, readers of the New York Law Journal rank MP&S as one of the area's top forensic accounting firms.
Its headquarters are in Manhattan. Additional offices are in Westchester, Long Island and the Cayman Islands. For more information, please visit www.markspaneth.com.
Contact Information:
Media Contact:
Itay Engelman
Sommerfield Communications
212-255-8386
itay@sommerfield.com