One of the positive aspects of sustained high-interest rates is higher yields on bonds, particularly high-quality municipal bonds. It is possible that 2024 will present a different scenario as the Federal Reserve begins a schedule of monetary easing by reducing interest rates over time. The potential for this strategy, combined with a slowdown in inflation and economic growth – and exacerbated by the potential volatility of a U.S. presidential election – offers a hazy but ultimately positive outlook for municipal bonds.
For now, investors with a long-term outlook (up to 10 years) can take advantage of current high-interest rates before they begin declining. A key recommendation is to focus on the credit quality of muni bond issuers, which is more likely to face adjustments due to lower reserves and unreliable revenue streams during an economic slowdown.
The following are some municipal bond market considerations for long-term investors.
While absolute rates are expected to decrease in 2024, muni bonds should continue to offer high yields and strong credit quality.
Speaking of credit quality, despite the larger universe of corporate bonds, there are more AAA- and AA-rated munis than corporate bonds. For example, there are only 13 unique issuers of AAA-rated bonds within the Bloomberg U.S. Corporate Bond Index. Of these 13, two comprise the majority of outstanding AAA corporate bonds. This means an investor is better able to diversify assets across a mix of high-quality muni bonds or a municipal bond fund.
Remember that munis are generally exempt from federal and state income taxes (when the investor lives in the issuing state) and might therefore provide a higher tax-equivalent yield when compared to yields of other long-term bonds.
In order for municipal bond income to be comparable to the after-tax yield of corporate bonds, the investor should be subject to a 45 percent or higher total cumulative tax rate. This is referred to as the “break-even” rate wherein municipal bonds will likely yield more after-tax income.
Longer-term, AAA-rated municipal bonds (up to 10 years) are expected to offer greater value compared to shorter-term munis.
Credit conditions are expected to continue their upward trend in 2024. As a general rule, municipal bonds are highly rated, but the average credit rating has increased even more since the pandemic. For example, the percentage of AAA- or AA-rated bonds in the Bloomberg U.S. Municipal Bond Index increased from 67 percent (pre-pandemic) to 71.4 percent as of November 2023.
Some of the most popular provisions of the 2017 Tax Cuts and Jobs Act are scheduled to expire in 2025. Demand for muni bonds might soar this year as taxpayers seek more tax-advantaged benefits given the potential loss of itemized deductions and a reduced standard deduction. Look for this sunsetting tax legislation to be a hot issue as this year’s election season gets up and running.
Given the higher yields available for the past 15 years, municipal bond returns are projected to be favorable in the near term. However, be wary of issuers that lack strong reserves and whose revenue streams are linked to economic activity.
Perhaps most importantly, investors should consider their objectives when investing in municipal bonds. If you are already in or nearing retirement, take into account your current tax bracket, the type of account you plan to invest in (taxable or tax-advantaged), credit quality, and time to maturity to effectively assess the value of municipal bond income in your portfolio.
Alan F Burke CPA
Municipal Bond Outlook for 2024
February 1, 2024 · Blog, Financial Planning
⏱ 3 min read
One of the positive aspects of sustained high-interest rates is higher yields on bonds, particularly high-quality municipal bonds. It is possible that 2024 will present a different scenario as the Federal Reserve begins a schedule of monetary easing by reducing interest rates over time. The potential for this strategy, combined with a slowdown in inflation and economic growth – and exacerbated by the potential volatility of a U.S. presidential election – offers a hazy but ultimately positive outlook for municipal bonds.
For now, investors with a long-term outlook (up to 10 years) can take advantage of current high-interest rates before they begin declining. A key recommendation is to focus on the credit quality of muni bond issuers, which is more likely to face adjustments due to lower reserves and unreliable revenue streams during an economic slowdown.
The following are some municipal bond market considerations for long-term investors.
While absolute rates are expected to decrease in 2024, muni bonds should continue to offer high yields and strong credit quality.
Speaking of credit quality, despite the larger universe of corporate bonds, there are more AAA- and AA-rated munis than corporate bonds. For example, there are only 13 unique issuers of AAA-rated bonds within the Bloomberg U.S. Corporate Bond Index. Of these 13, two comprise the majority of outstanding AAA corporate bonds. This means an investor is better able to diversify assets across a mix of high-quality muni bonds or a municipal bond fund.
Remember that munis are generally exempt from federal and state income taxes (when the investor lives in the issuing state) and might therefore provide a higher tax-equivalent yield when compared to yields of other long-term bonds.
In order for municipal bond income to be comparable to the after-tax yield of corporate bonds, the investor should be subject to a 45 percent or higher total cumulative tax rate. This is referred to as the “break-even” rate wherein municipal bonds will likely yield more after-tax income.
Longer-term, AAA-rated municipal bonds (up to 10 years) are expected to offer greater value compared to shorter-term munis.
Credit conditions are expected to continue their upward trend in 2024. As a general rule, municipal bonds are highly rated, but the average credit rating has increased even more since the pandemic. For example, the percentage of AAA- or AA-rated bonds in the Bloomberg U.S. Municipal Bond Index increased from 67 percent (pre-pandemic) to 71.4 percent as of November 2023.
Some of the most popular provisions of the 2017 Tax Cuts and Jobs Act are scheduled to expire in 2025. Demand for muni bonds might soar this year as taxpayers seek more tax-advantaged benefits given the potential loss of itemized deductions and a reduced standard deduction. Look for this sunsetting tax legislation to be a hot issue as this year’s election season gets up and running.
Given the higher yields available for the past 15 years, municipal bond returns are projected to be favorable in the near term. However, be wary of issuers that lack strong reserves and whose revenue streams are linked to economic activity.
Perhaps most importantly, investors should consider their objectives when investing in municipal bonds. If you are already in or nearing retirement, take into account your current tax bracket, the type of account you plan to invest in (taxable or tax-advantaged), credit quality, and time to maturity to effectively assess the value of municipal bond income in your portfolio.
Disclaimer
These articles provide general information on tax, accounting, and financial topics for small businesses and individuals. They are educational in nature and are not specific legal, accounting, financial, tax, or other professional advice, and should not be relied upon as such. This content was prepared by Service2Client and may have been reviewed or edited by the website owner for accuracy and compliance. Look for a trust mark below for verification details. No representation is made that any approach described will achieve a particular result, and no regulatory or professional body has reviewed or endorsed this content. Because each situation is different, readers should consult a qualified professional about their specific circumstances before acting. Images accompanying these articles are protected by copyright and may not be copied or reused.
Why on earth, you may ask yourself, would I care about being a good client to my tax prep professional? I mean, you are a paying client, and aside from treating them with the same decency and respect that you would show any other random person, who cares – right? Wrong!
What’s in it for me?
Honestly, it’s simply in your own best interest to be a good client. Maintaining a positive relationship with your tax professional can benefit you in numerous ways. Your tax preparer bills you in one of three ways: a flat fee (guaranteed); hourly; or a hybrid with a basic flat fee that they’ll only add to if out-of-scope issues/problems come up. Let’s look at each approach in more detail.
First, a scenario where you have a guaranteed flat fee no matter what. In this case, it’s pretty obvious to see that one of a tax preparer’s main incentives is to perform the work correctly and up to professional standards, but as fast as possible; less time equals more money. Here, being a good client means that you give your tax professional more room to be thoughtful about your tax return and even perform some planning/optimizing for the current year or next year. If you can help them prepare your return efficiently, there’s room to spare in providing you with value-added advice.
Second, when you engage a tax pro on a strictly hourly basis, saving them time on the administrative side of the return prep will equate to direct savings in your pocket. When you pay by the hour, you are paying regardless of whether they are calculating or reviewing your return, providing advice, planning, or chasing you down for missing info, open items, questions, etc.
Third, we have the scenario where you have a flat fixed fee unless you add services out of scope or things really go sideways. Here, while most tax preparers will eat a little bit of time, if you cause delays in the preparation process due to incomplete or unorganized information or you are late to respond to questions, there is a good chance you’ll get billed for that time as it wasn’t planned for and was unnecessary.
Finally, making your tax professional’s life easy will simply make you more likable as a client. And we all know that we treat people we like better.
How do I become a great client?
So, at this point, you are asking, how do I become my tax professional’s favorite client? There are a few main areas to consider if you want to establish a good working relationship and make life easier for everyone.
Be Organized – The more organized you can be in gathering and submitting your underlying tax documents (W-2, 1099s, etc.) and other necessary information, the better. Many tax preparers will send a tax organizer to help you fill out and organize what you send over. Following this is the best way, but any method that is clear, logical, and complete is best.
Submit All Your Information at Once – While it’s not always possible, don’t submit your information until you have everything. Sending over documents piecemeal is a surefire way to cause confusion and delays and makes the process rife for errors. In fact, many CPAs won’t even start a return until they have everything. Again, this isn’t always possible because sometimes a K-1, for example, is not yet available – but that should be an exception to the rule.
Be Responsive – To the degree that you can be responsive to follow-up questions from your tax preparer or their staff. This will ensure your return keeps moving, saving time (and therefore billable hours) that stopping and starting creates.
Conclusion
Following these tips will not only help you develop a great relationship with your tax preparer for years to come, but it also will ensure the most accurate and efficient preparation of your return possible.
Alan F Burke CPA
How to be Your Tax Pro’s Favorite Client this Tax Season
February 1, 2024 · Blog, Tax and Financial News
⏱ 4 min read
Why on earth, you may ask yourself, would I care about being a good client to my tax prep professional? I mean, you are a paying client, and aside from treating them with the same decency and respect that you would show any other random person, who cares – right? Wrong!
What’s in it for me?
Honestly, it’s simply in your own best interest to be a good client. Maintaining a positive relationship with your tax professional can benefit you in numerous ways. Your tax preparer bills you in one of three ways: a flat fee (guaranteed); hourly; or a hybrid with a basic flat fee that they’ll only add to if out-of-scope issues/problems come up. Let’s look at each approach in more detail.
First, a scenario where you have a guaranteed flat fee no matter what. In this case, it’s pretty obvious to see that one of a tax preparer’s main incentives is to perform the work correctly and up to professional standards, but as fast as possible; less time equals more money. Here, being a good client means that you give your tax professional more room to be thoughtful about your tax return and even perform some planning/optimizing for the current year or next year. If you can help them prepare your return efficiently, there’s room to spare in providing you with value-added advice.
Second, when you engage a tax pro on a strictly hourly basis, saving them time on the administrative side of the return prep will equate to direct savings in your pocket. When you pay by the hour, you are paying regardless of whether they are calculating or reviewing your return, providing advice, planning, or chasing you down for missing info, open items, questions, etc.
Third, we have the scenario where you have a flat fixed fee unless you add services out of scope or things really go sideways. Here, while most tax preparers will eat a little bit of time, if you cause delays in the preparation process due to incomplete or unorganized information or you are late to respond to questions, there is a good chance you’ll get billed for that time as it wasn’t planned for and was unnecessary.
Finally, making your tax professional’s life easy will simply make you more likable as a client. And we all know that we treat people we like better.
How do I become a great client?
So, at this point, you are asking, how do I become my tax professional’s favorite client? There are a few main areas to consider if you want to establish a good working relationship and make life easier for everyone.
Be Organized – The more organized you can be in gathering and submitting your underlying tax documents (W-2, 1099s, etc.) and other necessary information, the better. Many tax preparers will send a tax organizer to help you fill out and organize what you send over. Following this is the best way, but any method that is clear, logical, and complete is best.
Submit All Your Information at Once – While it’s not always possible, don’t submit your information until you have everything. Sending over documents piecemeal is a surefire way to cause confusion and delays and makes the process rife for errors. In fact, many CPAs won’t even start a return until they have everything. Again, this isn’t always possible because sometimes a K-1, for example, is not yet available – but that should be an exception to the rule.
Be Responsive – To the degree that you can be responsive to follow-up questions from your tax preparer or their staff. This will ensure your return keeps moving, saving time (and therefore billable hours) that stopping and starting creates.
Conclusion
Following these tips will not only help you develop a great relationship with your tax preparer for years to come, but it also will ensure the most accurate and efficient preparation of your return possible.
Disclaimer
These articles provide general information on tax, accounting, and financial topics for small businesses and individuals. They are educational in nature and are not specific legal, accounting, financial, tax, or other professional advice, and should not be relied upon as such. This content was prepared by Service2Client and may have been reviewed or edited by the website owner for accuracy and compliance. Look for a trust mark below for verification details. No representation is made that any approach described will achieve a particular result, and no regulatory or professional body has reviewed or endorsed this content. Because each situation is different, readers should consult a qualified professional about their specific circumstances before acting. Images accompanying these articles are protected by copyright and may not be copied or reused.
Email marketing remains the most powerful and effective tool, especially for its high ROI, reach, and engagement. It plays a significant role in business growth. However, more stringent measures are necessary due to evolving threats, hence the recent email deliverability requirements.
Starting this February, major email providers Gmail and Yahoo are implementing stricter email deliverability rules to combat spam and protect user inboxes. This announcement was made by both Google and Yahoo on Oct. 3, 2023, indicating a united effort to enhance email security.
Initially intended for bulk senders (marketers, businesses, and individuals) sending more than 5,000 emails a day, it also applies to senders who send regular emails to their subscribers and meet criteria as per the updated Google Email Sender Guidelines.
Although it may sound strict, there is nothing to worry about. By understanding the rules and adopting best practices, you can ensure your messages land safely in your subscribers’ inboxes.
Key Rules to Remember
Domain Authentication is Paramount – Implement security protocols, including Domain Keys Identified Mail (DKIM), Sender Policy Framework (SPF), and Domain-based Message Authentication, Reporting and Conformance (DMARC) to verify your sending domain and prevent spoofing. DKIM digitally signs emails for verification. SPF confirms that sending domain authorization prevents spammers from impersonating and sending messages from your domain, while DMARC specifies the handling of unauthenticated emails. Basically, these protocols confirm your sending domain as legitimate and not from a malicious email spammer or phisher. Although these protocols have been previously considered best practices, many senders have unknowingly or knowingly bypassed them. Some have ignored them, considering them challenging to deploy. Hence, the step to enforce them as mandatory requirements.
One-Click Unsubscribe is Mandatory – Make it easy for subscribers to opt out with a clear and accessible unsubscribe link in every email. The unsubscribe requests must be honored within 2 days. You can add an unsubscribe button to the header, whereby recipients can unsubscribe easily instead of marking an email as spam. This will ensure email deliverability is not harmed. Allowing easy unsubscribe also offers the benefit of having an email list of quality subscribers.
Maintain a Low Spam Complaint Rate – Keep your spam complaints below 0.3 percent (ideally, this should be below 0.1 percent) to avoid landing in the spam folder or getting blacklisted. Failing to comply with the spam complaint threshold could put the sending domain under review, restricting your email reach.
Beyond the Rules: Deliverability Best Practices
Clean and Permission-Based Email Lists – Send only to subscribers who have opted-in, and keep your list clean by removing inactive users and bounced addresses.
Personalization and Segmentation – Tailor your emails to individual preferences and segment your list based on demographics, interests, or engagement levels.
Mobile-Friendly Design – Ensure your emails are optimized for mobile devices, as most users check their email on smartphones.
Subject Line Optimization – Craft compelling and relevant subject lines that invite users to open your emails.
Craft High-Quality and Engaging Content – Provide relevant and valuable information to maintain audience interest and avoid being marked as spam.
Avoid Spammy Tactics – Avoid excessive images, ALL CAPS text, and misleading content.
Engagement and Reputation – Encourage engagement by asking questions, including social media links, and providing valuable content. Positive user interactions improve the sender’s reputation.
Consequences of Ignoring the Rules
Failing to adhere to the new rules can have severe consequences, including:
Emails Landing in Spam Folders – Your messages may never reach your intended audience.
Domain or IP Blacklisting – Repeated violations can lead to your domain or IP address being blocked by email providers.
Decreased Sender Reputation – This can negatively impact your future deliverability rates, affecting domain reputation and overall business performance.
Adapting to the New Landscape
Although these requirements may seem overwhelming, they represent an opportunity to improve your email marketing practices and build stronger relationships with your subscribers. By prioritizing sender authentication, clear communication, and valuable content, you can ensure your emails reach the right inboxes and achieve your marketing goals.
Remember, staying informed about email deliverability best practices and adapting to evolving regulations is crucial for successful email marketing in today’s landscape.
Alan F Burke CPA
New Email Deliverability Rules: Reaching Gmail and Yahoo Subscribers in 2024
February 1, 2024 · Blog, What's New in Technology
⏱ 4 min read
Email marketing remains the most powerful and effective tool, especially for its high ROI, reach, and engagement. It plays a significant role in business growth. However, more stringent measures are necessary due to evolving threats, hence the recent email deliverability requirements.
Starting this February, major email providers Gmail and Yahoo are implementing stricter email deliverability rules to combat spam and protect user inboxes. This announcement was made by both Google and Yahoo on Oct. 3, 2023, indicating a united effort to enhance email security.
Initially intended for bulk senders (marketers, businesses, and individuals) sending more than 5,000 emails a day, it also applies to senders who send regular emails to their subscribers and meet criteria as per the updated Google Email Sender Guidelines.
Although it may sound strict, there is nothing to worry about. By understanding the rules and adopting best practices, you can ensure your messages land safely in your subscribers’ inboxes.
Key Rules to Remember
Domain Authentication is Paramount – Implement security protocols, including Domain Keys Identified Mail (DKIM), Sender Policy Framework (SPF), and Domain-based Message Authentication, Reporting and Conformance (DMARC) to verify your sending domain and prevent spoofing. DKIM digitally signs emails for verification. SPF confirms that sending domain authorization prevents spammers from impersonating and sending messages from your domain, while DMARC specifies the handling of unauthenticated emails. Basically, these protocols confirm your sending domain as legitimate and not from a malicious email spammer or phisher. Although these protocols have been previously considered best practices, many senders have unknowingly or knowingly bypassed them. Some have ignored them, considering them challenging to deploy. Hence, the step to enforce them as mandatory requirements.
One-Click Unsubscribe is Mandatory – Make it easy for subscribers to opt out with a clear and accessible unsubscribe link in every email. The unsubscribe requests must be honored within 2 days. You can add an unsubscribe button to the header, whereby recipients can unsubscribe easily instead of marking an email as spam. This will ensure email deliverability is not harmed. Allowing easy unsubscribe also offers the benefit of having an email list of quality subscribers.
Maintain a Low Spam Complaint Rate – Keep your spam complaints below 0.3 percent (ideally, this should be below 0.1 percent) to avoid landing in the spam folder or getting blacklisted. Failing to comply with the spam complaint threshold could put the sending domain under review, restricting your email reach.
Beyond the Rules: Deliverability Best Practices
Clean and Permission-Based Email Lists – Send only to subscribers who have opted-in, and keep your list clean by removing inactive users and bounced addresses.
Personalization and Segmentation – Tailor your emails to individual preferences and segment your list based on demographics, interests, or engagement levels.
Mobile-Friendly Design – Ensure your emails are optimized for mobile devices, as most users check their email on smartphones.
Subject Line Optimization – Craft compelling and relevant subject lines that invite users to open your emails.
Craft High-Quality and Engaging Content – Provide relevant and valuable information to maintain audience interest and avoid being marked as spam.
Avoid Spammy Tactics – Avoid excessive images, ALL CAPS text, and misleading content.
Engagement and Reputation – Encourage engagement by asking questions, including social media links, and providing valuable content. Positive user interactions improve the sender’s reputation.
Consequences of Ignoring the Rules
Failing to adhere to the new rules can have severe consequences, including:
Emails Landing in Spam Folders – Your messages may never reach your intended audience.
Domain or IP Blacklisting – Repeated violations can lead to your domain or IP address being blocked by email providers.
Decreased Sender Reputation – This can negatively impact your future deliverability rates, affecting domain reputation and overall business performance.
Adapting to the New Landscape
Although these requirements may seem overwhelming, they represent an opportunity to improve your email marketing practices and build stronger relationships with your subscribers. By prioritizing sender authentication, clear communication, and valuable content, you can ensure your emails reach the right inboxes and achieve your marketing goals.
Remember, staying informed about email deliverability best practices and adapting to evolving regulations is crucial for successful email marketing in today’s landscape.
Disclaimer
These articles provide general information on tax, accounting, and financial topics for small businesses and individuals. They are educational in nature and are not specific legal, accounting, financial, tax, or other professional advice, and should not be relied upon as such. This content was prepared by Service2Client and may have been reviewed or edited by the website owner for accuracy and compliance. Look for a trust mark below for verification details. No representation is made that any approach described will achieve a particular result, and no regulatory or professional body has reviewed or endorsed this content. Because each situation is different, readers should consult a qualified professional about their specific circumstances before acting. Images accompanying these articles are protected by copyright and may not be copied or reused.
One of the positive aspects of sustained high-interest rates is higher yields on bonds, particularly high-quality municipal bonds. It is possible that 2024 will present a different scenario as the Federal Reserve begins a schedule of monetary easing by reducing interest rates over time. The potential for this strategy, combined with a slowdown in inflation and economic growth – and exacerbated by the potential volatility of a U.S. presidential election – offers a hazy but ultimately positive outlook for municipal bonds.
Why on earth, you may ask yourself, would I care about being a good client to my tax prep professional? I mean, you are a paying client, and aside from treating them with the same decency and respect that you would show any other random person, who cares – right? Wrong!
Email marketing remains the most powerful and effective tool, especially for its high ROI, reach, and engagement. It plays a significant role in business growth. However, more stringent measures are necessary due to evolving threats, hence the recent email deliverability requirements.