By Jason Bramwell
Nearly nine out of ten New Jersey CPAs expect their businesses to grow in 2014, while more than half say their firms are performing better now than at this time last year, according to a recent Capital One Bank survey.
"Eighty-seven percent of respondents anticipate that their businesses will grow in the next year, which reflects the important role that CPAs play for their clients", Bill Gascoigne, senior vice president of Capital One Bank, told AccountingWEB.
The study revealed that slightly more than half (56 percent) of the 107 New Jersey CPAs surveyed rate their firms' financial performance as better now as compared to a year ago. The majority also expressed optimism in New Jersey's resilience, despite the impact of Hurricane Sandy in October 2012. Seventy-five percent of the CPAs surveyed said New Jersey's economy is doing as well or better than the national economy, while 25 percent said it's doing worse.
"I think New Jerseyans have been very resilient recovering from Sandy. If we can continue to stay the course, we'll see an opportunity for an economic rebound", Ralph Albert Thomas, CGMA, CEO and executive director of the New Jersey Society of Certified Public Accountants (NJSCPA), told AccountingWEB.
Because New Jersey business owners continue to face a variety of challenges, it will become increasingly important for them to turn to their CPAs as trusted business advisors to enhance their tax positions, according to Thomas.
"CPAs have their core business – tax and audit – but we're seeing more opportunities coming in, such as additional consultation work, that went to sleep during the economic downturn that we had from 2007 to 2009 and into 2010", he said.
Another reason the outlook for New Jersey CPAs is optimistic is because their clients are facing a tax environment that has become friendlier, according to Thomas.
"Some of the recent changes in tax policy that are being phased in are giving businesses here a little more optimism about the current climate", he said. "Also [Governor Chris Christie and his administration] have said over the past couple of years that they haven't done anything to increase taxes – both from an individual and a business standpoint – so that has been helpful to the businesses here in New Jersey."
Despite the more tax-friendly environment, 79 percent of New Jersey CPAs anticipate their clients will pay more taxes in 2014 than they did in 2013, according to the survey. In addition, increased taxation (46 percent) is expected to have the largest impact on New Jersey CPA firms over the next twelve months, followed by limited access to credit (23 percent).
According to Thomas, CPAs may have ranked increased taxation as the top issue for their firms and their clients in 2014 because of the inactivity in Washington, DC, on such issues as revamping the alternative minimum tax and increasing estate taxes.
"The lack of tax revamping coming out of Washington is going to contribute to that concern", Thomas said. Because the federal government is facing some "huge deficits", it is likely "there will be some potential increases in taxes. I don't think we're going to see any movement with respect to tax reforms – certainly not this year, and I would question whether we'll see anything in 2014", he added.
Thomas is hopeful that a proposed House of Representatives bill that has received bipartisan support, HR 2137, also known as the Hurricane Sandy Tax Relief Act of 2013, will give New Jersey residents and small businesses a shot in the arm.
Under the bill, homeowners within the Sandy disaster area could withdraw from their IRAs or 401(k) retirement plans without incurring the 10 percent tax penalty for premature distribution if the money is repaid over a three-year period. Residents would also be eligible for an exemption from the adjusted gross income limitation for deducting casualty losses resulting from the storm.
"There's a threshold based on adjusted gross income, and then you'd be able to take losses that exceed that threshold", Thomas said.
Provisions for businesses include expensing the cost of disaster recovery and treating losses sustained from Hurricane Sandy as net-operating losses.
"If small business owners can go back and recoup some of the taxes they paid because of these net-operating or casualty losses, it would help to stimulate the recovery", said Thomas. "I think for those business owners who are teeter-tottering on whether they want to give it a go again, the provisions would push them on the side of wanting to reopen their businesses and get back in the game."
AccountingWEB Readers – Join the Discussion:
- Are increased taxation and limited access to credit issues impacting CPA firms in your state? If not, what are the main issues your CPA firm is facing?
- Is your firm's financial performance better now compared to a year ago? If so, what do you attribute this to?
Please share your thoughts in the comments section below.
About the survey:
Capital One Bank conducted a survey of attendees at the NJSCPA Annual Convention & Expo in Atlantic City, New Jersey, on June 12. The survey was developed to gauge sentiment of the local New Jersey economy, taxation landscape, and accounting industry in the coming year. Percentages are based on the responses of 107 CPAs in attendance at the conference.