This is the time of year that we all think about preparing our Federal and State income tax. As I have done in past years, I sought out a local tax professional. Karl Badey is the newest partner in his CPA firm, and he has offered to share his thoughts and advice on the recent tax changes.
Timothy Becker: Karl, what services does your firm provide to businesses and individuals?
Karl Badey: Montovani, Murray, Nemphos, and Tiernni, LLC www.mmnt-cpa.com is a full service accounting firm. We provide tax preparation, accounting, and auditing. The firm is over 30 years old and we have been in Manchester, here at 160 Chapel Road for 10 years. We have five CPAs and five members of our support staff. The CPAs are all specialists. Phil Nemphos is a specialist in financial statements and auditing. Young No is an expert in non-profits and pension audits. Matt Tierinni specializes in accounting systems and business consulting. Kerry Emerson is an expert in estates and trusts. I specialize in business and personal taxes.
Timothy Becker: What steps did you need to take to become a certified public accountant?
Karl Badey: I graduated from the Westchester Campus of Pace University. I was an accounting major, and I minored in music and economics. In 1992, I accepted a position at AIG in Manhattan. I used the train ride of my commute to study for the CPA exam. I passed it a year later. I got married and moved to Connecticut. I needed more experience before I got licensed. I studied at the University of Hartford and earned a Masters Degree in Tax in 1996, got my CPA license, and started doing public accounting. I joined the firm in 2010 and I became a partner at the beginning of this year.
Timothy Becker: Please share your thoughts about the recent tax law changes?
Karl Badey: Thank God they passed the patch for the alternative minimum tax. The alternate minimum tax was put into place by Congress to make sure that rich people pay a minimum amount of tax. The problem was that it was not indexed for inflation. If the problem was not fixed, a huge number of people would have owed between $6,000 and $9,000 in additional tax. In 2013, the individual rates have increased to 39.6% for single people that earn over $400,000 and couples that earn more than $450,000. The capital gains rate for high income taxpayers has gone up to 20%. Everyone's paycheck went down by 2% due to the reinstatement of the 6.2% Social Security tax from 4.2%. There are more changes coming. It is just a matter of time.
Timothy Becker: It seems to me that the Federal Government is getting very strict. Should taxpayers be concerned about an IRS audit?
Karl Badey: The chances of getting an audit are slim, however the number of audits have increased dramatically. Last year alone I had six of my clients audited. In my first 10 years I only had two. The IRS has hired more auditors and increased the number of audits they perform.
Timothy Becker: Why should an individual or a business owner hire a CPA?
Karl Badey: The tax laws are so complex and the rules and exceptions so complicated, that the average person could make a mistake. The mistake could be in the IRS's favor which is lost money, or the IRS could send you a letter asking that you pay an additional tax. Hire a CPA and have your tax return done correctly and avoid a headache.