Mark Calvey for BizJournal.com writes: There has been no shortage of media coverage on this year's higher tax rates and new taxes, but accountants expect many of their clients to still be surprised when the bill comes due next April.
My take: You can count on it.
And next year will be too late for the wealthy to take steps this year to reduce taxes owed for 2013.
Marcum, the New York accounting firm with a Bay Area office, says it debuted an online tax calculator to help clients avoid nasty surprises next year.
"Most people are aware of the increase in tax rates, but have not focused on how the new rates will impact them in real dollars," said Joseph Perry, partner-in-charge in Marcum's tax and business services practice.
"Many are likely to be very surprised when they receive their 2013 projections, extensions or actual returns and find out how much they owe."
To be certain, Marcum and its rivals have been talking to their clients about the impact of higher taxes for some time. But denial can be a wonderful thing, especially when it comes to the prospect of writing big checks to Uncle Sam.
Even Marcum says its online calculator doesn't take into consideration the 3.8 percent Medicare tax on investment income.
But before those who decidedly fall into the less-than-wealthy dig a tissue out of their pocket for these folks, the latest results in BMO Private Bank's Changing Face of Wealth surveys finds that those with $1 million or more are feeling better off today than they were in September 2008, when the financial markets were slammed with the bankruptcy of Lehman Brothers and government seizure of Fannie Mae and Freddie Mac.
BMO's survey finds that 66 percent of California's affluent say they're better off now than in 2008 and 68 percent expect the economy to improve over the next year. (I'll add a cautionary note, investor confidence can shift on a dime, especially if a shock hits the financial markets.)
Meanwhile, Bloomberg reports that Walmart is cutting orders as unsold merchandise piles up while shoppers keep a tighter grip on their wallets. The nation's top retailers typically don't look at the final months of the year as a time to pull back on inventory.
But for now, sentiment among millionaires might best be described as "What — me worry? The BMO study finds that 80 percent or more of millionaire respondents are spending more on entertainment, travel, club memberships and collections and hobbies than they were five years ago.
"We are seeing increased confidence in the overall California economy, and the momentum is led by high-net-worth individuals and families," said Ron Gong, managing director of CTC Consulting/Harris MyCFO, which is part of BMO Financial Group. "The affluent in our state are feeling more secure about their financial health than they were five years ago and are optimistic about the future.
"The tech sector is leading this recovery, but the current environment of increased investing, spending and job creation is also positive, which reinforces this outlook," Gong said.
Hopefully the good times roll for this crowd well into next April. Because even Walmart shoppers know the consequences of bigger-than-expected tax bills.
"If these tax increases are not properly planned for, and cash flow is insufficient to meet the tax obligation, clients may have to reduce their discretionary spending or draw down invested assets," Marcum's Perry said. "Planning before year-end is imperative. Timely planning can help minimize tax exposure, gain the greatest benefit and avoid that 'surprise, surprise' moment."
But before we assume America's wealthy have little in common with those shopping at Walmart, I received the results of a poll of the nation's millionaires this morning from Natixis Global Asset Management, which manages $783 billion through affiliates such as Active Investment Advisors in Oakland. True, the firm found that millionaires are more optimistic about retiring earlier and living longer than most Americans.
But their key concerns about what could tarnish their golden years is the cost of long-term care not covered by insurance, 42 percent; investments falling sharply in value, 40 percent; and cognitive impairment or dementia, 17 percent.
And what if things go wrong and they run out of money in retirement? The nation's wealthiest investors said they would first turn to their families, 41 percent, then the government, 40 percent, to support them. Just 16 percent of the millionaire respondents said they'd go back to work, which may simply reflect the bleak employment prospects of the over-80 set.
And that's a survey of millionaires. I suspect the government is already at the top of the list when it comes to providing support in retirement for many of Walmart's loyal shoppers.
Meanwhile, this week some in Washington are making the case to avoid default by giving high priority to paying interest to the Chinese government and other holders of U.S. Treasury bonds and worry later about grandma and her Social Security check. The fact that some of Wall Street's top CEOs had to inform the nation's political leadership that such a move would have devastating economic consequences underscores how disconnected Washington is from the rest of us these days.
And yes, the revolution will be tweeted.
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