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Dec 12 2017
What You Need to Know About Year-End Charitable Giving in 2017

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Charitable giving can be a powerful tax-saving strategy: Donations to qualified charities are generally fully deductible, and you have complete control over when and how much you give. Here are some important considerations to keep in mind this year to ensure you receive the tax benefits you desire.

Delivery date

To be deductible on your 2017 return, a charitable donation must be made by Dec. 31, 2017. According to the IRS, a donation generally is “made” at the time of its “unconditional delivery.” But what does this mean? Is it the date you, for example, write a check or make an online gift via your credit card? Or is it the date the charity actually receives the funds — or perhaps the date of the charity’s acknowledgment of your gift?

The delivery date depends in part on what you donate and how you donate it. Here are a few examples for common donations:

Check. The date you mail it.

Credit card. The date you make the charge.

Pay-by-phone account. The date the financial institution pays the amount.

Stock certificate. The date you mail the properly endorsed stock certificate to the charity.

Qualified charity status

To be deductible, a donation also must be made to a “qualified charity” — one that’s eligible to receive tax-deductible contributions.

The IRS’s online search tool, Exempt Organizations (EO) Select Check, can help you more easily find out whether an organization is eligible to receive tax-deductible charitable contributions. You can access EO Select Check at http://apps.irs.gov/app/eos. Information about organizations eligible to receive deductible contributions is updated monthly.

Potential impact of tax reform

The charitable donation deduction isn’t among the deductions that have been proposed for elimination or reduction under tax reform. In fact, income-based limits on how much can be deducted in a particular year might be expanded, which will benefit higher-income taxpayers who make substantial charitable gifts.

However, for many taxpayers, accelerating into this year donations that they might normally give next year may make sense for a couple of tax-reform-related reasons:

  1. If your tax rate goes down for 2018, then 2017 donations will save you more tax because deductions are more powerful when rates are higher.
  2. If the standard deduction is raised significantly and many itemized deductions are eliminated or reduced, then it may not make sense for you to itemize deductions in 2018, in which case you wouldn’t benefit from charitable donation deduction next year.

Many additional rules apply to the charitable donation deduction, so please contact us if you have questions about the deductibility of a gift you’ve made or are considering making — or the potential impact of tax reform on your charitable giving plans.

© 2017

Last Updated by Admin on 2017-12-12 04:22:19 PM

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Nov 01 2017
Retirement Savings Opportunity for the Self-Employed

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Did you know that if you’re self-employed you may be able to set up a retirement plan that allows you to contribute much more than you can contribute to an IRA or even an employer-sponsored 401(k)? There’s still time to set up such a plan for 2017, and it generally isn’t hard to do. So whether you’re a “full-time” independent contractor or you’re employed but earn some self-employment income on the side, consider setting up one of the following types of retirement plans this year.

Profit-sharing plan

This is a defined contribution plan that allows discretionary employer contributions and flexibility in plan design. (As a self-employed person, you’re both the employer and the employee.) You can make deductible 2017 contributions as late as the due date of your 2017 tax return, including extensions — provided your plan exists on Dec. 31, 2017.

For 2017, the maximum contribution is 25% of your net earnings from self-employment, up to a $54,000 contribution. If you include a 401(k) arrangement in the plan, you might be able to contribute a higher percentage of your income. If you include such an arrangement and are age 50 or older, you may be able to contribute as much as $60,000.

Simplified Employee Pension (SEP)

This is a defined contribution plan that provides benefits similar to those of a profit-sharing plan. But you can establish a SEP in 2018 and still make deductible 2017 contributions as late as the due date of your 2017 income tax return, including extensions. In addition, a SEP is easy to administer.

For 2017, the maximum SEP contribution is 25% of your net earnings from self-employment, up to a $54,000 contribution.

Defined benefit plan

This plan sets a future pension benefit and then actuarially calculates the contributions needed to attain that benefit. The maximum annual benefit for 2017 is generally $215,000 or 100% of average earned income for the highest three consecutive years, if less.

Because it’s actuarially driven, the contribution needed to attain the projected future annual benefit may exceed the maximum contributions allowed by other plans, depending on your age and the desired benefit. You can make deductible 2017 defined benefit plan contributions until your return due date, provided your plan exists on Dec. 31, 2017.

More to think about

Additional rules and limits apply to these plans, and other types of plans are available. Also, keep in mind that things get more complicated — and more expensive — if you have employees. Why? Generally, they must be allowed to participate in the plan, provided they meet the qualification requirements. To learn more about retirement plans for the self-employed, contact us.

© 2017

Last Updated by Admin on 2017-11-01 12:06:20 AM

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Aug 08 2017
Own a Vacation Home? Adjusting Rental vs. Personal Use Might Save Taxes

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Now that we’ve hit midsummer, if you own a vacation home that you both rent out and use personally, it’s a good time to review the potential tax consequences:

If you rent it out for less than 15 days: You don’t have to report the income. But expenses associated with the rental (such as advertising and cleaning) won’t be deductible.

If you rent it out for 15 days or more: You must report the income. But what expenses you can deduct depends on how the home is classified for tax purposes, based on the amount of personal vs. rental use:

  • Rental property. If you (or your immediate family) use the home for 14 days or less, or under 10% of the days you rent out the property, whichever is greater, the IRS will classify the home as a rental property. You can deduct rental expenses, including losses, subject to the real estate activity rules. You can’t deduct any interest that’s attributable to your personal use of the home, but you can take the personal portion of property tax as an itemized deduction.
  • Nonrental property. If you (or your immediate family) use the home for more than 14 days or 10% of the days you rent out the property, whichever is greater, the IRS will classify the home as a personal residence, but you will still have to report the rental income. You can deduct rental expenses only to the extent of your rental income. Any excess can be carried forward to offset rental income in future years. You also can take an itemized deduction for the personal portion of both mortgage interest and property tax.

Look at the use of your vacation home year-to-date to project how it will be classified for tax purposes. Adjusting the number of days you rent it out and/or use it personally between now and year end might allow the home to be classified in a more beneficial way.

For assistance, please contact us. We’d be pleased to help.

© 2017

Last Updated by Admin on 2017-08-08 03:09:24 PM

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July 11 2017
Claim a Federal Tax Deduction for Moving Costs

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Summer is a popular time to move, whether it’s so the kids don’t have to change schools mid-school-year, to avoid having to move in bad weather or simply because it can be an easier time to sell a home. Unfortunately, moving can be expensive. The good news is that you might be eligible for a federal tax deduction for your moving costs.

Pass the tests

The first requirement is that the move be work-related. You don’t have to be an employee; the self-employed can also be eligible for the moving expense deduction.

The second is a distance test. The new main job location must be at least 50 miles farther from your former home than your former main job location was from that home. So a work-related move from city to suburb or from town to neighboring town probably won’t qualify, even if not moving would increase your commute significantly.

Finally, there’s a time test. You must work full time at the new job location for at least 39 weeks during the first year. If you’re self-employed, you must meet that test plus work full time for at least 78 weeks during the first 24 months at the new job location. (Certain limited exceptions apply.)

What’s deductible

So which expenses can be written off? Generally, you can deduct transportation and lodging expenses for yourself and household members while moving.

In addition, you can likely deduct the cost of packing and transporting your household goods and other personal property. And you may be able to deduct the expense of storing and insuring these items while in transit. Costs related to connecting or disconnecting utilities are usually deductible, too.

But don’t expect to write off everything. Meal costs during move-related travel aren’t deductible. Nor is any part of the purchase price of a new home or expenses incurred selling your old one. And, if your employer later reimburses you for any of the moving costs you’ve deducted, you may have to include the reimbursement as income on your tax return.

Questions about whether your moving expenses are deductible? Or what you can deduct? Contact us.

© 2017

Last Updated by Admin on 2017-07-11 03:17:45 PM

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July 05 2017
Summer is a Good Time To Start Your 2017 Tax Planning and Organize Your Tax Records

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You may be tempted to forget all about taxes during summertime, when “the livin’ is easy,” as the Gershwin song goes. But if you start your tax planning now, you may avoid an unpleasant tax surprise when you file next year. Summer is also a good time to set up a storage system for your tax records. Here are some tips:

Take action when life changes occur. Some life events (such as marriage, divorce, or the birth of a child) can change the amount of tax you owe. When they happen, you may need to change the amount of tax withheld from your pay. To do that, file a new Form W-4 with your employer. If you make estimated payments, those may need to be changed as well.

Keep records accessible but safe. Put your 2016 tax return and supporting records together in a place where you can easily find them if you need them, such as if you’re ever audited by the IRS. You also may need a copy of your tax return if you apply for a home loan or financial aid. Although accessibility is important, so is safety.

A good storage medium for hard copies of important personal documents like tax returns is a fire-, water- and impact-resistant security cabinet or safe. You may want to maintain a duplicate set of records in another location, such as a bank safety deposit box. You can also store copies of records electronically. Simply scan your documents and save them to an external storage device (which you can keep in your home safe or bank safety deposit box). If opting for a cloud-based backup system, choose your provider carefully to ensure its security measures are as stringent as possible.

Stay organized. Make tax time easier by putting records you’ll need when you file in the same place during the year. That way you won’t have to search for misplaced records next February or March. Some examples include substantiation of charitable donations, receipts from work-related travel not reimbursed by your employer, and documentation of medical expenses not reimbursable by insurance or paid through a tax-advantaged account.

For more information on summertime tax planning or organizing your tax-related information, contact us.

© 2017

Last Updated by Admin on 2017-07-05 03:25:12 PM

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June 28 2017
Turning Next Year's Tax Refund Into Cash In Your Pocket Now

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Each year, millions of taxpayers claim an income tax refund. To be sure, receiving a payment from the IRS for a few thousand dollars can be a pleasant influx of cash. But it means you were essentially giving the government an interest-free loan for close to a year, which isn’t the best use of your money.

Fortunately, there is a way to begin collecting your 2017 refund now: You can review the amounts you’re having withheld and/or what estimated tax payments you’re making, and adjust them to keep more money in your pocket during the year.

Reasons to modify amounts

It’s particularly important to check your withholding and/or estimated tax payments if:

  • You received an especially large 2016 refund,
  • You’ve gotten married or divorced or added a dependent,
  • You’ve purchased a home,
  • You’ve started or lost a job, or
  • Your investment income has changed significantly.

Even if you haven’t encountered any major life changes during the past year, changes in the tax law may affect withholding levels, making it worthwhile to double-check your withholding or estimated tax payments.

Making a change

You can modify your withholding at any time during the year, or even several times within a year. To do so, you simply submit a new Form W-4 to your employer. Changes typically will go into effect several weeks after the new Form W-4 is submitted. For estimated tax payments, you can make adjustments each time quarterly payments are due.

While reducing withholdings or estimated tax payments will, indeed, put more money in your pocket now, you also need to be careful that you don’t reduce them too much. If you don’t pay enough tax during the year, you could end up owing interest and penalties when you file your return, even if you pay your outstanding tax liability by the April 2018 deadline.

If you’d like help determining what your withholding or estimated tax payments should be for the rest of the year, please contact us.

© 2017

Last Updated by Admin on 2017-06-28 01:39:24 PM

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June 20 2017
2017 Q3 Tax Calendar: Key Deadlines for Businesses and Other Employers

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Here are some of the key tax-related deadlines affecting businesses and other employers during the second quarter of 2017. Keep in mind that this list isn’t all-inclusive, so there may be additional deadlines that apply to you. Contact us to ensure you’re meeting all applicable deadlines and to learn more about the filing requirements.

July 31

•             Report income tax withholding and FICA taxes for second quarter 2017 (Form 941), and pay any tax due. (See exception below.)

•             File a 2016 calendar-year retirement plan report (Form 5500 or Form 5500-EZ) or request an extension.

August 10

•             Report income tax withholding and FICA taxes for second quarter 2017 (Form 941), if you deposited on time and in full all of the associated taxes due.

September 15

•             If a calendar-year C corporation, pay the third installment of 2017 estimated income taxes.

•             If a calendar-year S corporation or partnership that filed an automatic six-month extension:

o             File a 2016 income tax return (Form 1120S, Form 1065 or Form 1065-B) and pay any tax, interest and penalties due.

o             Make contributions for 2016 to certain employer-sponsored retirement plans.

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Last Updated by Admin on 2017-06-20 04:09:37 PM

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June 13 2017
Real Estate Investor vs. Professional: Why It Matters

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Income and losses from investment real estate or rental property are passive by definition — unless you’re a real estate professional. Why does this matter? Passive income may be subject to the 3.8% net investment income tax (NIIT), and passive losses generally are deductible only against passive income, with the excess being carried forward.

Of course the NIIT is part of the Affordable Care Act (ACA) and might be eliminated under ACA repeal and replace legislation or tax reform legislation. But if/when such legislation will be passed and signed into law is uncertain. Even if the NIIT is eliminated, the passive loss issue will still be an important one for many taxpayers investing in real estate.

“Professional” requirements

To qualify as a real estate professional, you must annually perform:

  • More than 50% of your personal services in real property trades or businesses in which you materially participate, and
  • More than 750 hours of service in these businesses.

Each year stands on its own, and there are other nuances. (Special rules for spouses may help you meet the 750-hour test.)

Tax strategies

If you’re concerned you’ll fail either test and be subject to the 3.8% NIIT or stuck with passive losses, consider doing one of the following:

Increasing your involvement in the real estate activity. If you can pass the real estate professional tests, the activity no longer will be subject to passive activity rules.

Looking at other activities. If you have passive losses from your real estate investment, consider investing in another income-producing trade or business that will be passive to you. That way, you’ll have passive income that can absorb some or all of your passive losses.

Disposing of the activity. This generally allows you to deduct all passive losses — including any loss on disposition (subject to basis and capital loss limitations). But, again, the rules are complex.

Also be aware that the IRS frequently challenges claims of real estate professional status — and is often successful. One situation where the IRS commonly prevails is when the taxpayer didn’t keep adequate records of time spent on real estate activities.

If you’re not sure whether you qualify as a real estate professional, please contact us. We can help you make this determination and guide you on how to properly document your hours.

© 2017

Last Updated by Admin on 2017-06-13 03:25:10 PM

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June 08 2017
Business Owners: When It Comes To IRS Audits, Be Prepared

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If you recently filed your 2016 income tax return (rather than filing for an extension) you may now be wondering whether it’s likely that your business could be audited by the IRS based on your filing. Here’s what every business owner should know about the process.

Catching the IRS’s eye

Many business audits occur randomly, but a variety of tax-return-related items are likely to raise red flags with the IRS and may lead to an audit. Here are a few examples:

  • Significant inconsistencies between previous years’ filings and your most current filing,
  • Gross profit margin or expenses markedly different from those of other businesses in your industry, and
  • Miscalculated or unusually high deductions.

An owner-employee salary that’s inordinately higher or lower than those in similar companies in his or her location can also catch the IRS’s eye, especially if the business is structured as a corporation.

Response measures

If you’re selected for an audit, you’ll be notified by letter. Generally, the IRS won’t make initial contact by phone. But if there’s no response to the letter, the agency may follow up with a call.

The good news is that many audits simply request that you mail in documentation to support certain deductions you’ve taken. Others may ask you to take receipts and other documents to a local IRS office. Only the most severe version, the field audit, requires meeting with one or more IRS auditors.

More good news: In no instance will the agency demand an immediate response. You’ll be informed of the discrepancies in question and given time to prepare. To do so, you’ll need to collect and organize all relevant income and expense records. If any records are missing, you’ll have to reconstruct the information as accurately as possible based on other documentation.

If the IRS selects you for an audit, our firm can help you:

  • Understand what the IRS is disputing (it’s not always crystal clear),
  • Gather the specific documents and information needed, and
  • Respond to the auditor’s inquiries in the most expedient and effective manner.

Don’t let an IRS audit ruin your year — be it this year, next year or whenever that letter shows up in the mail. By taking a meticulous, proactive approach to how you track, document and file your company’s tax-related information, you’ll make an audit much less painful and even decrease the chances that one happens in the first place.

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Last Updated by Admin on 2017-06-08 05:27:34 PM

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June 05 2017
Operating Across State Lines Present Tax Risks - Or Possibly Rewards

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It’s a smaller business world after all. With the ease and popularity of e-commerce, as well as the incredible efficiency of many supply chains, companies of all sorts are finding it easier than ever to widen their markets. Doing so has become so much more feasible that many businesses quickly find themselves crossing state lines.

But therein lies a risk: Operating in another state means possibly being subject to taxation in that state. The resulting liability can, in some cases, inhibit profitability. But sometimes it can produce tax savings.

Do you have “nexus”?

Essentially, “nexus” means a business presence in a given state that’s substantial enough to trigger that state’s tax rules and obligations.

Precisely what activates nexus in a given state depends on that state’s chosen criteria. Triggers can vary but common criteria include:

  • -Employing workers in the state,
  • -Owning (or, in some cases even leasing) property there,
  • -Marketing your products or services in the state,
  • -Maintaining a substantial amount of inventory there, and
  • -Using a local telephone number.

Then again, one generally can’t say that nexus has a “hair trigger.” A minimal amount of business activity in a given state probably won’t create tax liability there. For example, an HVAC company that makes a few tech calls a year across state lines probably wouldn’t be taxed in that state. Or let’s say you ask a salesperson to travel to another state to establish relationships or gauge interest. As long as he or she doesn’t close any sales, and you have no other activity in the state, you likely won’t have nexus.

Strategic moves

If your company already operates in another state and you’re unsure of your tax liabilities there — or if you’re thinking about starting up operations in another state — consider conducting a nexus study. This is a systematic approach to identifying the out-of-state taxes to which your business activities may expose you.

Keep in mind that the results of a nexus study may not be negative. You might find that your company’s overall tax liability is lower in a neighboring state. In such cases, it may be advantageous to create nexus in that state (if you don’t already have it) by, say, setting up a small office there. If all goes well, you may be able to allocate some income to that state and lower your tax bill.

The complexity of state tax laws offers both risk and opportunity. Contact us for help ensuring your business comes out on the winning end of a move across state lines.

© 2017

Last Updated by Admin on 2017-06-05 02:44:13 PM

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Apr 18 2017
Individual tax calendar: Key deadlines for the remainder of 2017

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While April 15 (April 18 this year) is the main tax deadline on most individual taxpayers’ minds, there are others through the rest of the year that are important to be aware of. To help you make sure you don’t miss any important 2017 deadlines, here’s a look at when some key tax-related forms, payments and other actions are due. Keep in mind that this list isn’t all-inclusive, so there may be additional deadlines that apply to you.

Please review the calendar and let us know if you have any questions about the deadlines or would like assistance in meeting them.

June 15

  • File a 2016 individual income tax return (Form 1040) or file for a four-month extension (Form 4868), and pay any tax and interest due, if you live outside the United States.
  • Pay the second installment of 2017 estimated taxes, if not paying income tax through withholding (Form 1040-ES).

September 15

  • Pay the third installment of 2017 estimated taxes, if not paying income tax through withholding (Form 1040-ES).

October 2

  • If you’re the trustee of a trust or the executor of an estate, file an income tax return for the 2016 calendar year (Form 1041) and pay any tax, interest and penalties due, if an automatic five-and-a-half month extension was filed.

October 16

  • File a 2016 income tax return (Form 1040, Form 1040A or Form 1040EZ) and pay any tax, interest and penalties due, if an automatic six-month extension was filed (or if an automatic four-month extension was filed by a taxpayer living outside the United States).
  • Make contributions for 2016 to certain retirement plans or establish a SEP for 2016, if an automatic six-month extension was filed.
  • File a 2016 gift tax return (Form 709) and pay any tax, interest and penalties due, if an automatic six-month extension was filed.

December 31

  • Make 2017 contributions to certain employer-sponsored retirement plans.
  • Make 2017 annual exclusion gifts (up to $14,000 per recipient).
  • Incur various expenses that potentially can be claimed as itemized deductions on your 2017 tax return. Examples include charitable donations, medical expenses, property tax payments and expenses eligible for the miscellaneous itemized deduction.

© 2017

Last Updated by Admin on 2017-04-18 03:18:50 PM

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Apr 11 2017
Saving Tax With Home Related Deductions and Exclusion

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Currently, home ownership comes with many tax-saving opportunities. Consider both deductions and exclusions when you’re filing your 2016 return and tax planning for 2017:

Property tax deduction. Property tax is generally fully deductible — unless you’re subject to the alternative minimum tax (AMT).

Mortgage interest deduction. You generally can deduct interest on up to a combined total of $1 million of mortgage debt incurred to purchase, build or improve your principal residence and a second residence. Points paid related to your principal residence also may be deductible.

Home equity debt interest deduction. Interest on home equity debt used for any purpose (debt limit of $100,000) may be deductible. But keep in mind that, if home equity debt isn’t used for home improvements, the interest isn’t deductible for AMT purposes.

Mortgage insurance premium deduction. This break expired December 31, 2016, but Congress might extend it.

Home office deduction. If your home office use meets certain tests, you generally can deduct a portion of your mortgage interest, property taxes, insurance, utilities and certain other expenses, and the depreciation allocable to the space. Or you may be able to use a simplified method for claiming the deduction.

Rental income exclusion. If you rent out all or a portion of your principal residence or second home for less than 15 days, you don’t have to report the income. But expenses directly associated with the rental, such as advertising and cleaning, won’t be deductible.

Home sale gain exclusion. When you sell your principal residence, you can exclude up to $250,000 ($500,000 for married couples filing jointly) of gain if you meet certain tests. Be aware that gain allocable to a period of “nonqualified” use generally isn’t excludable.

Debt forgiveness exclusion. This break for homeowners who received debt forgiveness in a foreclosure, short sale or mortgage workout for a principal residence expired December 31, 2016, but Congress might extend it.

The debt forgiveness exclusion and mortgage insurance premium deduction aren’t the only home-related breaks that might not be available in the future. There have been proposals to eliminate other breaks, such as the property tax deduction, as part of tax reform.

Whether such changes will be signed into law and, if so, when they’d go into effect is uncertain. Also keep in mind that additional rules and limits apply to these breaks. So contact us for information on the latest tax reform developments or which home-related breaks you’re eligible to claim.

© 2017

Last Updated by Admin on 2017-04-11 02:33:59 PM

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Mar 14 2017
Do You Need To File A Gift Tax Return By April 18?

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Last year you may have made significant gifts to your children, grandchildren or other heirs as part of your estate planning strategy. Or perhaps you just wanted to provide loved ones with some helpful financial support. Regardless of the reason for making a gift, it’s important to know under what circumstances you’re required to file a gift tax return.

Some transfers require a return even if you don’t owe tax. And sometimes it’s desirable to file a return even if it isn’t required.

 

When filing is required

Generally, you’ll need to file a gift tax return for 2016 if, during the tax year, you made gifts:

  • That exceeded the $14,000-per-recipient gift tax annual exclusion (other than to your U.S. citizen spouse),
  • That exceeded the $148,000 annual exclusion for gifts to a noncitizen spouse,
  • That you wish to split with your spouse to take advantage of your combined $28,000 annual exclusions,
  • To a Section 529 college savings plan for your child, grandchild or other loved one and wish to accelerate up to five years’ worth of annual exclusions ($70,000) into 2016,
  • Of future interests — such as remainder interests in a trust — regardless of the amount, or
  • Of jointly held or community property.

When filing isn’t required

No return is required if your gifts for the year consist solely of annual exclusion gifts, present interest gifts to a U.S. citizen spouse, qualifying educational or medical expenses paid directly to a school or health care provider, and political or charitable contributions.

If you transferred hard-to-value property, such as artwork or interests in a family-owned business, consider filing a gift tax return even if you’re not required to. Adequate disclosure of the transfer in a return triggers the statute of limitations, generally preventing the IRS from challenging your valuation more than three years after you file.

Meeting the deadline

The gift tax return deadline is the same as the income tax filing deadline. For 2016 returns, it’s April 18, 2017 (or October 16 if you file for an extension). If you owe gift tax, the payment deadline is also April 18, regardless of whether you file for an extension.

Have questions about gift tax and the filing requirements? Contact us to learn more.

© 2017

Last Updated by Admin on 2017-03-14 01:00:18 PM

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Mar 01 2017
Tangible Property Safe Harbors Help Maximize Deductions

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If last year your business made repairs to tangible property, such as buildings, machinery, equipment or vehicles, you may be eligible for a valuable deduction on your 2016 income tax return. But you must make sure they were truly “repairs,” and not actually “improvements.”

Why? Costs incurred to improve tangible property must be depreciated over a period of years. But costs incurred on incidental repairs and maintenance can be expensed and immediately deducted.

What’s an “improvement”?

In general, a cost that results in an improvement to a building structure or any of its building systems (for example, the plumbing or electrical system) or to other tangible property must be capitalized. An improvement occurs if there was a betterment, restoration or adaptation of the unit of property.

Under the “betterment test,” you generally must capitalize amounts paid for work that is reasonably expected to materially increase the productivity, efficiency, strength, quality or output of a unit of property or that is a material addition to a unit of property.

Under the “restoration test,” you generally must capitalize amounts paid to replace a part (or combination of parts) that is a major component or a significant portion of the physical structure of a unit of property.

Under the “adaptation test,” you generally must capitalize amounts paid to adapt a unit of property to a new or different use — one that isn’t consistent with your ordinary use of the unit of property at the time you originally placed it in service.

2 safe harbors

Distinguishing between repairs and improvements can be difficult, but a couple of IRS safe harbors can help:

1. Routine maintenance safe harbor. Recurring activities dedicated to keeping property in efficient operating condition can be expensed. These are activities that your business reasonably expects to perform more than once during the property’s “class life,” as defined by the IRS.

Amounts incurred for activities outside the safe harbor don’t necessarily have to be capitalized, though. These amounts are subject to analysis under the general rules for improvements.

2. Small business safe harbor. For buildings that initially cost $1 million or less, qualified small businesses may elect to deduct the lesser of $10,000 or 2% of the unadjusted basis of the property for repairs, maintenance, improvements and similar activities each year. A qualified small business is generally one with gross receipts of $10 million or less.

There is also a de minimis safe harbor as well as an exemption for materials and supplies up to a certain threshold. Contact us for details on these safe harbors and exemptions and other ways to maximize your tangible property deductions.

© 2017

Last Updated by Admin on 2017-03-01 01:34:27 PM

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Feb 21 2017
Deduct All Of the Mileage You're Entitled To - But Not More

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Rather than keeping track of the actual cost of operating a vehicle, employees and self-employed taxpayers can use a standard mileage rate to compute their deduction related to using a vehicle for business. But you might also be able to deduct miles driven for other purposes, including medical, moving and charitable purposes.

What are the deduction rates?

The rates vary depending on the purpose and the year:

Business: 54 cents (2016), 53.5 cents (2017)

Medical: 19 cents (2016), 17 cents (2017)

Moving: 19 cents (2016), 17 cents (2017)

Charitable: 14 cents (2016 and 2017)

The business standard mileage rate is considerably higher than the medical, moving and charitable rates because the business rate contains a depreciation component. No depreciation is allowed for the medical, moving or charitable use of a vehicle.

In addition to deductions based on the standard mileage rate, you may deduct related parking fees and tolls.

What other limits apply?

The rules surrounding the various mileage deductions are complex. Some are subject to floors and some require you to meet specific tests in order to qualify.

For example, miles driven for health-care-related purposes are deductible as part of the medical expense deduction. But medical expenses generally are deductible only to the extent they exceed 10% of your adjusted gross income. (For 2016, the deduction threshold is 7.5% for qualifying seniors.)

And while miles driven related to moving can be deductible, the move must be work-related. In addition, among other requirements, the distance from your old residence to the new job must be at least 50 miles more than the distance from your old residence to your old job.

Other considerations

There are also substantiation requirements, which include tracking miles driven. And, in some cases, you might be better off deducting actual expenses rather than using the mileage rates.

So contact us to help ensure you deduct all the mileage you’re entitled to on your 2016 tax return — but not more. You don’t want to risk back taxes and penalties later.

And if you drove potentially eligible miles in 2016 but can’t deduct them because you didn’t track them, start tracking your miles now so you can potentially take advantage of the deduction when you file your 2017 return next year.

© 2017

Last Updated by Admin on 2017-02-21 04:31:57 PM

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Jan 17 2017
Deduction For State and Local Sales Tax Benefits Some, But Not All, Taxpayers

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The break allowing taxpayers to take an itemized deduction for state and local sales taxes in lieu of state and local income taxes was made “permanent” a little over a year ago. This break can be valuable to those residing in states with no or low income taxes or who purchase major items, such as a car or boat.

Your 2016 tax return

How do you determine whether you can save more by deducting sales tax on your 2016 return? Compare your potential deduction for state and local income tax to your potential deduction for state and local sales tax.

Don’t worry — you don’t have to have receipts documenting all of the sales tax you actually paid during the year to take full advantage of the deduction. Your deduction can be determined by using an IRS sales tax calculator that will base the deduction on your income and the sales tax rates in your locale plus the tax you actually paid on certain major purchases (for which you will need substantiation).

2017 and beyond

If you’re considering making a large purchase in 2017, you shouldn’t necessarily count on the sales tax deduction being available on your 2017 return. When the PATH Act made the break “permanent” in late 2015, that just meant that there’s no scheduled expiration date for it. Congress could pass legislation to eliminate the break (or reduce its benefit) at any time.

Recent Republican proposals have included elimination of many itemized deductions, and the new President has proposed putting a cap on itemized deductions. Which proposals will make it into tax legislation in 2017 and when various provisions will be signed into law and go into effect is still uncertain.

Questions about the sales tax deduction or other breaks that might help you save taxes on your 2016 tax return? Or about the impact of possible tax law changes on your 2017 tax planning? Contact us — we can help you maximize your 2016 savings and effectively plan for 2017.

© 2017

Last Updated by Admin on 2017-01-17 07:03:10 PM

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Jan 03 2017
2017 Q1 Tax Calendar: Key Deadlines for Businesses and Other Employers

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2017 Q1 tax calendar:
Key deadlines for businesses and other employers

Here are some of the key tax-related deadlines affecting businesses and other employers during the first quarter of 2017. Keep in mind that this list isn’t all-inclusive, so there may be additional deadlines that apply to you. Contact us to ensure you’re meeting all applicable deadlines and to learn more about the filing requirements.

January 31

  • File 2016 Forms W-2, “Wage and Tax Statement,” with the Social Security Administration and provide copies to your employees.
  • File 2016 Forms 1099-MISC, “Miscellaneous Income,” reporting nonemployee compensation payments in Box 7 with the IRS, and provide copies to recipients.
  • File Form 941, “Employer’s Quarterly Federal Tax Return,” to report Medicare, Social Security and income taxes withheld in the fourth quarter of 2016. If your tax liability is less than $2,500, you can pay it in full with a timely filed return. If you deposited the tax for the quarter in full and on time, you have until February 10 to file the return. Employers that have an estimated annual employment tax liability of $1,000 or less may be eligible to file Form 944,“Employer’s Annual Federal Tax Return.”
  • File Form 940, “Employer’s Annual Federal Unemployment (FUTA) Tax Return,” for 2016. If your undeposited tax is $500 or less, you can either pay it with your return or deposit it. If it’s more than $500, you must deposit it. However, if you deposited the tax for the year in full and on time, you have until February 10 to file the return.
  • File Form 945, “Annual Return of Withheld Federal Income Tax,” for 2016 to report income tax withheld on all nonpayroll items, including backup withholding and withholding on accounts such as pensions, annuities and IRAs. If your tax liability is less than $2,500, you can pay it in full with a timely filed return. If you deposited the tax for the year in full and on time, you have until February 10 to file the return.

February 28

File 2016 Forms 1099-MISC with the IRS and provide copies to recipients. (Note that Forms 1099-MISC reporting nonemployee compensation in Box 7 must be filed by January 31, beginning with 2016 forms filed in 2017.)

March 15

If a calendar-year partnership or S corporation, file or extend your 2016 tax return. If the return isn’t extended, this is also the last day to make 2016 contributions to pension and profit-sharing plans.

© 2016

Last Updated by Admin on 2017-01-03 10:25:30 PM

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Dec 27 2016
Year-End Tax Strategies For Accrual-Basis Taxpayers

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Record and recognize

The key to saving tax as an accrual-basis taxpayer is to properly record and recognize expenses that were incurred this year but won’t be paid until 2017. This will enable you to deduct those expenses on your 2016 federal tax return. Common examples of such expenses include:

  • Commissions, salaries and wages,
  • Payroll taxes,
  • Advertising,
  • Interest,
  • Utilities,
  • Insurance, and
  • Property taxes.

You can also accelerate deductions into 2016 without actually paying for the expenses in 2016 by charging them on a credit card. (This works for cash-basis taxpayers, too.) Accelerating deductible expenses into 2016 may be especially beneficial if tax rates go down for 2017.

Look at prepaid expenses

Also review all prepaid expense accounts and write off any items that have been used up before the end of the year. If you prepay insurance for a period of time beginning in 2016, you can expense the entire amount this year rather than spreading it between 2016 and 2017, as long as a proper method election is made. This is treated as a tax expense and thus won’t affect your internal financials.

Miscellaneous tax tips

Here are a few more year-end tax tips to consider:

  • Review your outstanding receivables and write off any receivables you can establish as uncollectible.
  • Pay interest on all shareholder loans to or from the company.
  • Update your corporate record book to record decisions and be better prepared for an audit.

Consult us for more details on how these and other year-end tax strategies may apply to your business.

© 2016

Last Updated by Admin on 2016-12-27 06:07:03 PM

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Dec 22 2016
There Is Still Time To Benefit On Your 2016 Tax Bill By Buying Business Assets

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In order to take advantage of two important depreciation tax breaks for business assets, you must place the assets in service by the end of the tax year. So you still have time to act for 2016.

Section 179 deduction

The Sec. 179 deduction is valuable because it allows businesses to deduct as depreciation up to 100% of the cost of qualifying assets in year 1 instead of depreciating the cost over a number of years. Sec. 179 can be used for fixed assets, such as equipment, software and leasehold improvements. Beginning in 2016, air conditioning and heating units were added to the list.

The maximum Sec. 179 deduction for 2016 is $500,000. The deduction begins to phase out dollar-for-dollar for 2016 when total asset acquisitions for the tax year exceed $200,010,000.

Real property improvements used to be ineligible. However, an exception that began in 2010 was made permanent for tax years beginning in 2016. Under the exception, you can claim a Sec. 179 deduction of up to $500,000 for certain qualified real property improvement costs.

Note: You can use Sec. 179 to buy an eligible heavy SUV for business use, but the rules are different from buying other assets. Heavy SUVs are subject to a $25,000 deduction limitation.

First-year bonus depreciation

For qualified new assets (including software) that your business places in service in 2016, you can claim 50% first-year bonus depreciation. (Used assets don’t qualify.) This break is available when buying computer systems, software, machinery, equipment, and office furniture.

Additionally, 50% bonus depreciation can be claimed for qualified improvement property, which means any eligible improvement to the interior of a nonresidential building if the improvement is made after the date the building was first placed in service. However, certain improvements aren’t eligible, such as enlarging a building and installing an elevator or escalator.

Contemplate what your business needs now

If you’ve been thinking about buying business assets, consider doing it before year end. This article explains only some of the rules involved with the Sec. 179 and bonus depreciation tax breaks. Contact us for ideas on how you can maximize your depreciation deductions.

© 2016

Last Updated by Admin on 2016-12-22 07:16:02 PM

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Dec 20 2016
Why Making Annual Exclusion Gifts Before Year End Can Still Be A Good Idea

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A tried-and-true estate planning strategy is to make tax-free gifts to loved ones during life, because it reduces potential estate tax at death. There are many ways to make tax-free gifts, but one of the simplest is to take advantage of the annual gift tax exclusion with direct gifts. Even in a potentially changing estate tax environment, making annual exclusion gifts before year end can still be a good idea.

What is the annual exclusion?

The 2016 gift tax annual exclusion allows you to give up to $14,000 per recipient tax-free without using up any of your $5.45 million lifetime gift tax exemption. If you and your spouse “split” the gift, you can give $28,000 per recipient. The gifts are also generally excluded from the generation-skipping transfer tax, which typically applies to transfers to grandchildren and others more than one generation below you.

The gifted assets are removed from your taxable estate, which can be especially advantageous if you expect them to appreciate. That’s because the future appreciation can also avoid gift and estate taxes.

Making gifts in 2016

The exclusion is scheduled to remain at $14,000 ($28,000 for split gifts) in 2017. But that’s not a reason to skip making annual exclusion gifts this year. You need to use your 2016 exclusion by Dec. 31 or you’ll lose it.

The exclusion doesn’t carry from one year to the next. For example, if you don’t make an annual exclusion gift to your daughter this year, you can’t add $14,000 to your 2017 exclusion to make a $28,000 tax-free gift to her next year.

While the President-elect and Republicans in Congress have indicated that they want to repeal the estate tax, it’s uncertain exactly what tax law changes will be passed, since the Republicans don’t have a filibuster-proof majority in the Senate. Plus, in some states there’s a state-level estate tax. So if you have a large estate, making 2016 annual exclusion gifts is generally still well worth considering.

We can help you determine how to make the most of your 2016 gift tax annual exclusion.

© 2016

Last Updated by Admin on 2016-12-20 07:28:49 PM

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Dec 13 2016
Ensure Your Year-End Donations Will Be Deductible On Your 2016 Return

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Donations to qualified charities are generally fully deductible, and they may be the easiest deductible expense to time to your tax advantage. After all, you control exactly when and how much you give. To ensure your donations will be deductible on your 2016 return, you must make them by year end to qualified charities.

When’s the delivery date?

To be deductible on your 2016 return, a charitable donation must be made by Dec. 31, 2016. According to the IRS, a donation generally is “made” at the time of its “unconditional delivery.” But what does this mean? Is it the date you, for example, write a check or make an online gift via your credit card? Or is it the date the charity actually receives the funds — or perhaps the date of the charity’s acknowledgment of your gift?

The delivery date depends in part on what you donate and how you donate it. Here are a few examples for common donations:

Check. The date you mail it.

Credit card. The date you make the charge.

Pay-by-phone account. The date the financial institution pays the amount.

Stock certificate. The date you mail the properly endorsed stock certificate to the charity.

Is the organization “qualified”?

To be deductible, a donation also must be made to a “qualified charity” — one that’s eligible to receive tax-deductible contributions.

The IRS’s online search tool, Exempt Organizations (EO) Select Check, can help you more easily find out whether an organization is eligible to receive tax-deductible charitable contributions. You can access EO Select Check at http://apps.irs.gov/app/eos. Information about organizations eligible to receive deductible contributions is updated monthly.

Many additional rules apply to the charitable donation deduction, so please contact us if you have questions about the deductibility of a gift you’ve made or are considering making. But act soon — you don’t have much time left to make donations that will reduce your 2016 tax bill.

© 2016

Last Updated by Admin on 2016-12-13 04:40:42 PM

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Dec 06 2016
Can You Pay Bonuses in 2017 but Deduct Them This Year?

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You may be aware of the rule that allows businesses to deduct bonuses employees have earned during a tax year if the bonuses are paid within 2½ months after the end of that year (by March 15 for a calendar-year company). But this favorable tax treatment isn’t always available.

For one thing, only accrual-basis taxpayers can take advantage of the 2½ month rule — cash-basis taxpayers must deduct bonuses in the year they’re paid, regardless of when they’re earned. Even for accrual-basis taxpayers, however, the 2½ month rule isn’t automatic. The bonuses can be deducted in the year they’re earned only if the employer’s bonus liability is fixed by the end of the year.

As an important reminder many small business are cash basis, make sure you check with your CPA.

The all-events test

For accrual-basis taxpayers, the IRS determines when a liability (such as a bonus) has been incurred — and, therefore, is deductible — by applying the “all-events test.” Under this test, a liability is deductible when:

  1. All events have occurred that establish the taxpayer’s liability,
  2. The amount of the liability can be determined with reasonable accuracy, and
  3. Economic performance has occurred.

Generally, the third requirement isn’t an issue; it’s satisfied when an employee performs the services required to earn a bonus. But the first two requirements can delay your tax deduction until the year of payment, depending on how your bonus plan is designed.

For example, many bonus plans require an employee to remain in the company’s employ on the payment date as a condition of receiving the bonus. Even if the amount of the bonus is fixed at the end of the tax year, and employees who leave the company before the payment date forfeit their bonuses, the all-events test isn’t satisfied until the payment date. Fortunately, it’s possible to accelerate deductions with a carefully designed bonus pool arrangement.

How a bonus pool works

In a 2011 ruling, the IRS said that employers may deduct bonuses in the year they’re earned — even if there’s a risk of forfeiture — as long as any forfeited bonuses are reallocated among the remaining employees in the bonus pool rather than retained by the employer. Under such a plan, an employer satisfies the all-events test because the aggregate bonus amount is fixed at the end of the year, even though amounts allocated to specific employees aren’t determined until the payment date.

Additional rules and limits apply to this strategy. To learn whether your current bonus plan allows you to take 2016 deductions for bonuses paid in early 2017, contact us. If you don’t qualify this year, we can also help you design a bonus plan for 2017 that will allow you to accelerate deductions next year.

© 2016

Last Updated by Admin on 2016-12-06 05:15:54 PM

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Oct 26 2016
Is a charitable IRA rollover right for you?

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If you’re charitably inclined, age 70½ or older and have a significant balance in an IRA, a charitable IRA rollover — formally called a “qualified charitable distribution” — permits you to annually make up to $100,000 in tax-free IRA distributions to qualified charities. Charitable IRA rollovers also offer estate planning benefits, and tax legislation in late 2015 made the break permanent.

What are the benefits?

Traditional IRAs can be costly inheritances because the beneficiaries will owe income taxes on the distributions they receive. If you instead donate your traditional IRA assets to charity and bequeath Roth IRAs or investments held in taxable accounts to your loved ones, income taxes will take a smaller bite out of their inheritances.

There are other benefits as well: First, your charitable rollover can be used to satisfy your required minimum distribution for the year. In addition, it provides a tax advantage if you otherwise would be unable to deduct an equivalent charitable donation because, for example, you don’t itemize or you’ve already exceeded adjusted gross income limitations on charitable deductions for the year.

What are the requirements?

To qualify for a charitable IRA rollover, in addition to meeting the age requirement, you must:

  • Transfer the funds directly from the IRA to an eligible charity, and
  • Document the rollover with the same type of written acknowledgment from the charity that you would need to support a charitable deduction on your income tax return.

The distribution to charity must be one that would be fully deductible (without regard to percentage-of-income limitations) if you made the donation yourself. In other words, you can’t receive something of value in return. In addition, you must make the distribution by December 31, 2016, to include it on your 2016 tax return. Before taking action, contact us to ensure you meet all the requirements for a charitable IRA rollover.

© 2016

 

Last Updated by Admin on 2016-10-26 12:42:59 AM

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Sept 29 2016
Get 2 Tax Benefits From 1 Donation: Give Appreciated Stock Instead of Cash

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If you’re charitably inclined, making donations is probably one of your key year-end tax planning strategies. But if you typically give cash, you may want to consider another option that provides not just one but two tax benefits: Donating long-term appreciated stock.

More tax savings

Appreciated publicly traded stock you’ve held more than one year is long-term capital gains property. If you donate it to a qualified charity, you can enjoy two benefits: 1) You can claim a charitable deduction equal to the stock’s fair market value, and 2) you can avoid the capital gains tax you’d pay if you sold the stock. This will be especially beneficial to taxpayers facing the 3.8% net investment income tax (NIIT) or the top 20% long-term capital gains rate this year.

Let’s say you donate $10,000 of stock that you paid $3,000 for, your ordinary-income tax rate is 39.6% and your long-term capital gains rate is 20%. If you sold the stock, you’d pay $1,400 in tax on the $7,000 gain. If you were also subject to the 3.8% NIIT, you’d pay another $266 in NIIT.

By instead donating the stock to charity, you save $5,626 in federal tax ($1,666 in capital gains tax and NIIT plus $3,960 from the $10,000 income tax deduction). If you donated $10,000 in cash, your federal tax savings would be only $3,960.

Tread carefully

Beware that donations of long-term capital gains property are subject to tighter deduction limits — 30% of your adjusted gross income for gifts to public charities, 20% for gifts to nonoperating private foundations (compared to 50% and 30%, respectively, for cash donations).

And don’t donate stock that’s worth less than your basis. Instead, sell the stock so you can deduct the loss and then donate the cash proceeds to charity.

If you own appreciated stock that you’d like to sell, but you’re concerned about the tax hit, donating it to charity might be right for you. For more details on this and other strategies to achieve your charitable giving and tax-saving goals, contact us.

© 2016

Last Updated by Admin on 2016-09-29 04:20:31 PM

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Sept 01 2016
Putting Your Home on the Market? Understand the Tax Consequences of a Sale!

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With good rates and great potential you may be one of the many homeowners who are getting ready to put their home on the market.  But it’s important to think not only about the potential profit (or loss) from a sale, but also about the tax consequences.

Gains

If you’re selling your principal residence, you can exclude up to $250,000 ($500,000 for joint filers) of gain — as long as you meet certain tests. Gain that qualifies for exclusion also is excluded from the 3.8% net investment income tax.

To support an accurate tax basis, be sure to maintain thorough records, including information on your original cost and subsequent improvements, reduced by any casualty losses and depreciation claimed based on business use. Keep in mind that gain that’s allocable to a period of “nonqualified” use generally isn’t excludable.

Losses

A loss on the sale of your principal residence generally isn’t deductible. But if part of your home is rented out or used exclusively for your business, the loss attributable to that portion may be deductible.

Second homes

If you’re selling a second home, be aware that it won’t be eligible for the gain exclusion. But if it qualifies as a rental property, it can be considered a business asset, and you may be able to defer tax on any gains through an installment sale or a Section 1031 exchange. Or you may be able to deduct a loss.

Learn more

If you’re considering putting your home on the market, please contact us to learn more about the potential tax consequences of a sale.

© 2016

Last Updated by Admin on 2016-09-01 04:24:27 PM

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July 12 2016
529 Plans: Saving for College is Also Good for Your Estate Plan

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A 529 plan is a tax-advantaged and flexible education-savings tool. In addition to generous contribution limits and tax-free withdrawals for college expenses, these plans provide unique estate planning benefits for parents and grandparents.

On the plus side . . .

First, even though you can change beneficiaries or get your money back, 529 plan contributions are considered “completed gifts” for federal gift and generation-skipping transfer (GST) tax purposes. As such, they’re eligible for the annual exclusion, which allows you to make gifts of up to $14,000 per year to any number of recipients, without triggering gift or GST taxes and without using any of your lifetime exemption amounts.

Even better, 529 plans allow you to “bunch” five years’ worth of annual exclusions into a single year. Once you’ve taken advantage of this option, however, you won’t be able to make additional annual exclusion gifts to the beneficiaries until year six. And if you die during this period, a portion of your contributions will be included in your taxable estate.

On the minus side . . .

529 plans accept only cash contributions. Also, their administrative fees may be higher than those of other investment vehicles. And, unlike many such vehicles, your investment choices are usually limited to the plan’s pre-established portfolios.

If withdrawals aren’t used for the beneficiary’s qualified education expenses, the earnings portion is subject to federal income taxes (at the recipient’s tax rate) plus a 10% penalty and, in some cases, state income taxes.

An attractive savings vehicle

529 plans offer a powerful combination of income tax savings and estate planning benefits. If college expenses are in your family’s future, contact us for additional information.

© 2016

Last Updated by Admin on 2016-07-12 03:14:32 PM

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June 29 2016
Unexpected Retirement Plan Disqualifications Can Trigger Serious Tax Problems

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It’s not unusual for the IRS to conduct audits of qualified employee benefit plans, including 401(k)s. Plan sponsors are expected to stay in compliance with numerous, frequently changing federal laws and regulations.

For example, have you identified all employees eligible for your 401(k) plan and given them the opportunity to make deferral elections? Are employee contributions limited to the amounts allowed under tax law for the calendar year? Does your 401(k) plan pass nondiscrimination tests? Traditional 401(k) plans must be regularly tested to ensure that the contributions don’t discriminate in favor of highly compensated employees.

If the IRS uncovers compliance errors and the plan sponsor doesn’t fix them, the plan could be disqualified.

What happens if qualified status is lost?

Tax law and administrative details that may seem trivial or irrelevant may actually be critical to maintaining a plan’s qualified status. If a plan loses its tax-exempt status, each participant is taxed on the value of his or her vested benefits as of the disqualification date. That can result in large (and completely unexpected) tax liabilities for participants.

In addition, contributions and earnings that occur after the disqualification date aren’t tax-free. They must be included in participants’ taxable incomes. The employer’s tax deductions for plan contributions are also at risk. There are also penalties and fees that can be devastating to a business.

Finally, withdrawals made after the disqualification date cannot be rolled over into other tax-favored retirement plans or accounts (such as IRAs).

Voluntary corrections

The good news is that 401(k) plan errors can often be voluntarily corrected. We can help determine if changes should be made to your company’s qualified plan to achieve and maintain compliance. Contact us for more information.

© 2016

Last Updated by Admin on 2016-06-29 08:06:20 PM

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June 28 2016
The Tax Dangers of Providing for Employees in Your Estate Plan

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If you’re an employer, you may think of your employees as family. But if you plan to provide for employees in your estate plan, watch out for unintended tax consequences.

IRS rules

Generally, money or other property received by gift or inheritance is excluded from the recipient’s income for federal tax purposes. But there’s an exception for gifts or bequests to employees: Under Internal Revenue Code Section 102(c), the exclusion doesn’t apply to “any amount transferred by or for an employer to, or for the benefit of, an employee.”

Certain gifts to employees aren’t taxable, including “de minimis” fringe benefits, employee achievement awards and qualified disaster relief payments. Otherwise, the IRS generally views transfers to employees as “supplemental wages” subject to income and payroll taxes.

A solution

Despite Sec. 102(c), it may be possible to make a gift to an employee that avoids income taxes. According to the U.S. Supreme Court, such a gift must be made under a “detached and disinterested generosity” or “out of affection, respect, admiration, charity or like impulses.”

In contrast, if a gift is intended to reward an employee for past performance or serve as an incentive for future performance, it’s considered compensation and is subject to income and payroll taxes. Unfortunately, the intent behind a gift can be difficult to prove.

Keep in mind that treating a gift or bequest as compensation isn’t necessarily a bad thing. In some cases, the income and payroll taxes may be less severe than the gift, estate and generation-skipping transfer taxes that otherwise would apply. And you can always “gross up” the transferred amount to ensure that the recipient has enough cash to pay the income and payroll taxes.

If you’re considering including employees in your estate plan, contact us for more information.

© 2016

Last Updated by Admin on 2016-06-28 01:23:17 PM

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June 14 2016
Why It's Time To Start Tax Planning for 2016

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Now that we are almost midway through the year and two months past the tax filing deadline for 2015, it may be tempting to set aside any thought of taxes until year end is approaching. But don’t succumb. For maximum tax savings, now is the time to start tax planning for 2016.

More opportunities

A tremendous number of variables affect your overall tax liability for the year. Starting to look at these variables early in the year can give you more opportunities to reduce your 2016 tax bill.

For example, the timing of income and deductible expenses can affect both the rate you pay and when you pay. By regularly reviewing your year-to-date income, expenses and potential tax, you may be able to time income and expenses in a way that reduces, or at least defers, your tax liability.

In other words, tax planning shouldn’t be just a year-end activity.

More certainty

In recent years, planning early has been a challenge because there were a lot of expired tax breaks where it was uncertain whether they’d be extended for the year. But the Protecting Americans from Tax Hikes Act of 2015 (PATH Act) extended a wide variety of tax breaks through 2016, or, in some cases, later. It also made many breaks permanent.

For example, the PATH Act made permanent the deduction for state and local sales taxes in lieu of state and local income taxes and tax-free IRA distributions to charities for account holders age 70½ or older. So you don’t have to wait and see whether these breaks will be available for the year like you did in 2014 and 2015.

Getting started

To get started on your 2016 tax planning, contact us. We can discuss what strategies you should be implementing now and throughout the year to minimize your tax liability.

© 2016

Last Updated by Admin on 2016-06-14 03:27:53 PM

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May 17 2016
4 Tools For Addressing Incapacity In Your Estate Plan

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Estate planning is often associated with death. But it’s just as important for your plan to address incapacity associated with illness, injury, advanced age or other circumstances.

Unless you specify how financial and health care decisions will be made in the event you become incapacitated, there’s no guarantee that your wishes will be carried out. Plus, without a plan, your loved ones may be saddled with the difficult task of seeking a court-appointed guardian.

Tools for addressing incapacity in your estate plan include:

1. A revocable living trust. You transfer your assets to the trust, retaining control over your financial affairs by serving as trustee. In the event you become incapacitated, your chosen representative takes over as trustee.

2. A durable power of attorney. This document authorizes your representative to manage your financial affairs and control your assets, subject to limitations you establish.

3. A health care power of attorney. Also referred to as a “durable medical power of attorney” or “health care proxy,” this document appoints a representative to make medical decisions for you in the event you can’t make them yourself.

4. A living will. Permitted in most states, a living will communicates your preferences for life-sustaining medical intervention — such as artificial nutrition or hydration — under specified, life-threatening circumstances.

Concerned that your estate plan doesn’t cover all scenarios regarding incapacity? Contact us.

© 2016

Last Updated by Admin on 2016-05-17 05:34:21 AM

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May 11 2016
What 2015 Tax Records Can You Toss Once You've Filed Your Return?

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The short answer is: none. You need to hold on to all of your 2015 tax records for now. But this is a great time to take a look at your records for previous tax years and determine what you can purge.

The 3-year rule

At minimum, keep tax records for as long as the IRS has the ability to audit your return or assess additional taxes, which generally is three years after you file your return. This means you likely can shred and toss most records related to tax returns for 2012 and earlier years.

What to keep longer

You’ll need to hang on to certain records beyond the statute of limitations:

  • Keep tax returns themselves forever, so you can prove to the IRS that you actually filed. (There’s no statute of limitations for an audit if you didn’t file a return.)
  • For W-2 forms, consider holding them until you begin receiving Social Security benefits. Why? In case a question arises regarding your work record or earnings for a particular year.
  • For records related to real estate or investments, keep documents as long as you own the asset, plus three years after you sell it and report the sale on your tax return.

Just a starting point

This is only a sampling of retention guidelines for tax-related documents. If you have questions about other documents, please contact us.

© 2016

Last Updated by Admin on 2016-05-11 11:08:08 AM

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May 10 2016
Entrepreneurs: What Can You Deduct and When?

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Starting a new business is an exciting time. But before you even open the doors, you generally have to spend a lot of money. You may have to train workers and pay for rent, utilities, marketing and more.

Entrepreneurs are often unaware that many expenses incurred by start-ups can’t be deducted right away.

How expenses are handled on your tax return

When planning a new enterprise, remember these key points:

  • Start-up costs include those incurred or paid while creating an active trade or business — or investigating the creation or acquisition of one. Organizational costs include the costs of creating a corporation or partnership.
  • Under the federal tax code, taxpayers can elect to deduct up to $5,000 of business start-up and $5,000 of organizational costs. The $5,000 deduction is reduced dollar-for-dollar by the amount by which your total start-up or organizational costs exceed $50,000. Any remaining costs must be amortized over 180 months on a straight-line basis.
  • No deductions or amortization write-offs are allowed until the year when “active conduct” of your new business commences. That usually means the year when the enterprise has all the pieces in place to begin earning revenue. To determine if a taxpayer meets this test, the IRS and courts will generally ask: Did the taxpayer undertake the activity intending to earn a profit? Was the taxpayer regularly and actively involved? Has the activity actually begun?

An important decision

Time may be of the essence if you have start-up expenses that you’d like to deduct this year. You need to decide whether to take the elections described above. Recordkeeping is important. Contact us about your business start-up plans. We can help with the tax and other aspects of your new venture.

© 2016

Last Updated by Admin on 2016-05-10 08:42:27 AM

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May 09 2016
4 Facts About The Section 199 Tax Deduction

Posted in general

The Section 199 deduction is often overlooked by business owners, perhaps because they’re not sure what it is. You may see it referred to as “the domestic production deduction,” or the “domestic production activities deduction” or “the manufacturers’ deduction.” Here are four more facts about this potentially valuable tax break:

1. It’s a weighty percentage

The deduction is worth as much as 9% of the lesser of qualified production activities income or taxable income. But it’s limited to 50% of W-2 wages paid by the taxpayer that are allocable to domestic production gross receipts.

2. It’s not only for manufacturers

Despite being sometimes called “the manufacturers’ deduction,” many other types of companies can claim the Sec. 199 deduction. Businesses engaged in activities such as construction, engineering, architecture, computer software production and agricultural processing also may be eligible.

3. It has its limits

The deduction isn’t allowed in determining net self-employment earnings and generally can’t reduce net income below zero. It can, however, be used against the alternative minimum tax.

4. It involves math

There’s no denying that calculating the deduction, which involves determining what costs are allocable to domestic production gross receipts, can get complicated. On the bright side, very small businesses can simplify the calculations by using the Small Business Simplified Overall Method. There’s also a Simplified Deduction Method for businesses whose assets are no more than $10 million, or whose average gross receipts don’t exceed $100 million.

Take action

No matter what you call it, the Sec. 199 deduction may be a way for your company to get some tax relief. Please call us for help determining whether your production activities qualify and, if so, how to calculate and claim this tax break on your 2015 return.

© 2016

Last Updated by Admin on 2016-05-09 05:49:37 AM

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Apr 20 2016
Tips For Deducting Losses From A Disaster, Fire Or Theft

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If you suffer damage to your home or personal property, you may be able to deduct these “casualty” losses on your federal income tax return. A casualty is a sudden, unexpected or unusual event, such as a natural disaster (hurricane, tornado, flood, earthquake, etc.), fire, accident, theft or vandalism. A casualty loss doesn’t include losses from normal wear and tear or progressive deterioration from age or termite damage.

Here are some things you should know about deducting casualty losses:

When to deduct. Generally, you must deduct a casualty loss in the year it occurred. However, if you have a loss from a federally declared disaster area, you may have the option to deduct the loss on an amended return for the immediately preceding tax year.

Amount of loss. Your loss is generally the lesser of 1) your adjusted basis in the property before the casualty (typically, the amount you paid for it), or 2) the decrease in fair market value of the property as a result of the casualty. This amount must be reduced by any insurance or other reimbursement you received or expect to receive. (If the property was insured, you must have filed a timely claim for reimbursement of your loss.)

$100 rule. After you’ve figured your casualty loss on personal-use property, you must reduce that loss by $100. This reduction applies to each casualty loss event during the year. It doesn’t matter how many pieces of property are involved in an event.

10% rule. You must reduce the total of all your casualty or theft losses on personal-use property for the year by 10% of your adjusted gross income (AGI). In other words, you can deduct these losses only to the extent they exceed 10% of your AGI.

Have questions about deducting casualty losses? Contact us!

© 2016

Last Updated by Admin on 2016-04-20 09:38:40 AM

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Apr 11 2016
Achieve Greater Charitable Giving Flexibility With A Nonqualified CRT

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As the federal gift and estate tax exemption continues to climb, the number of people subject to estate taxes is shrinking. For those with charitable giving goals, this may increase interest in charitable remainder trusts (CRTs). A lifetime CRT, for example, allows you to accelerate charitable gifts you’d otherwise make at death and enjoy substantial income tax benefits in the process. If taxes are less of a concern, a nonqualified CRT provides greater flexibility to provide for your family while leaving something for charity.

Qualified vs. nonqualified CRTs

Even though a qualified CRT’s exempt status enables it to provide significant tax benefits, those benefits can come at the cost of flexibility. Payouts are limited to a fixed amount or percentage, regardless of hardship or need, and the charity’s remainder interest generally must be at least 10% of the trust’s initial value.

Nonqualified CRTs offer little in the way of income, gift and estate tax advantages, but they need not comply with the requirements for a qualified CRT. That means they can distribute any amount of income and principal to your beneficiaries, in the trustee’s discretion.

Right for you?

Typically, nonqualified CRTs are established at death to take advantage of the stepped-up basis rules — the value of the initial contribution is stepped up to its fair market value, erasing any appreciation that might trigger capital gains taxes. It’s advisable to distribute at least all of the trust’s current income to avoid a steep income tax bill. Currently, trusts are subject to income taxes at the highest rate (39.6%), as well as the 3.8% net investment income tax, to the extent their income exceeds $12,400.

If you’re charitably inclined and gift and estate tax liability isn’t an issue, a nonqualified CRT may be right for you. Contact us with any questions regarding your charitable giving goals.

© 2016

Last Updated by Admin on 2016-04-11 08:27:41 AM

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Apr 08 2016
Who’s helping you with your succession plan?

Posted in general

Every business owner needs to spend some time planning how to either sell the company or pass it along to the next generation. Yet no one should try to create a succession plan alone. One idea to consider: Form a succession planning advisory board.

Multifaceted benefits

Such a board can serve as a voice of reason among the often cacophonous tumult of a business transition. Moreover, it can help you assess the strengths and weaknesses of potential successors unrelated to your personal concerns or biases. And, when you make your pick, the board can help in your successor’s assimilation.

Board members’ varied perspectives usually provide a more objective and collaborative approach to analyzing succession problems and developing fresh solutions. They can further assist by mediating organizational disputes, giving feedback on your heir apparent’s progress and reassuring business stakeholders.

Ground rules

It’s generally a good idea to start small, with a group of three to five potential advisors from outside your family and business. Once you’ve identified an adequate number of candidates, spend some time with each to gauge their interest and commitment.

Ask each member to commit to a specified term of service, so that you both can regularly reassess participation. In addition, ask members to sign nondisclosure agreements, as you’ll likely be sharing confidential information about your company. Clearly spell out the duties and responsibilities you want advisors to fulfill, too.

A new beginning

Creating a succession plan may seem like the beginning of the end to your role in a company that you’ve no doubt spent much time and energy building. But it doesn’t have to be.

Succession planning advisory boards often evolve into lasting business advisory boards that go on to help guide companies for many years. And you, as a former owner, would certainly have a seat at the table.

Most valuable asset

Many business owners rightfully consider their companies as the most valuable assets they own. As such, your company deserves a detailed succession plan so it stays in good hands. Please contact us for help establishing and maintaining that plan.

© 2016

Last Updated by Admin on 2016-04-08 08:48:02 AM

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Apr 05 2016
3 Income Tax Smart Gifting Strategies

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If your 2015 tax liability is higher than you’d hoped and you’re ready to transfer some assets to your loved ones, now may be the time to get started. Giving away assets will, of course, help reduce the size of your taxable estate. But with income-tax-smart gifting strategies, it also can reduce your income tax liability — and perhaps your family’s tax liability overall:

1. Gift appreciated or dividend-producing assets to loved ones eligible for the 0% rate. The 0% rate applies to both long-term gain and qualified dividends that would be taxed at 10% or 15% based on the taxpayer’s ordinary-income rate.

2. Gift appreciated or dividend-producing assets to loved ones in lower tax brackets. Even if no one in your family is eligible for the 0% rate, transferring assets to loved ones in a lower income tax bracket than you can still save taxes overall for your family. This strategy can be even more powerful if you’d be subject to the 3.8% net investment income tax on dividends from the assets or if you sold the assets.

3. Don’t gift assets that have declined in value. Instead, sell the assets so you can take the tax loss. Then gift the sale proceeds.

If you’re considering making gifts to someone who’ll be under age 24 on December 31, make sure he or she won’t be subject to the “kiddie tax.” And if your estate is large enough that gift and estate taxes are a concern, you need to think about those taxes, too. To learn more about tax-smart gifting, contact us.

© 2016

Last Updated by Admin on 2016-04-05 05:33:12 AM

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Mar 31 2016
A Critical Decision: Naming the Guardian of Your Minor Children

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If you have minor children, perhaps the most important element of your estate plan doesn’t involve your assets. Rather, it involves who will be your children’s guardian.

Questions to consider

When evaluating potential guardians, ask these questions:

  • Do they want to serve as guardians?
  • Does your estate plan provide sufficient resources so that caring for your children won’t cause an economic hardship?
  • Do they share your values and parenting philosophy?
  • If they’re married, is the marriage stable?
  • If they have children, do your children get along with them?
  • How old are they in relation to the children? A grandparent may not be the best choice to care for an infant or toddler, for example.

If you prefer, you can name separate guardians for your child and his or her assets.

Keep in mind that a court’s obligation is to do what’s in the best interest of your children. The court isn’t bound by your guardian appointment but will generally honor your choice unless there’s a compelling reason not to.

Appoint a backup guardian

Choosing a backup guardian is a step that shouldn’t be overlooked. Why? If your first choice dies or is unable or unwilling to serve for some other reason, a court will appoint a guardian. In addition to naming a backup guardian, your estate plan should list anyone you wish to prevent from raising your children.

Ensuring a good fit

Taking the time to name a guardian or guardians now will give you the peace of mind that your children will be cared for as you wish if you die while they’re still minors. Consult with us to ensure you choose the right guardian for your situation.

© 2016

Last Updated by Admin on 2016-03-31 12:18:38 PM

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Mar 30 2016
Yes, A Benefits Plan Audit Could Happen To You

Posted in general

Many business owners worry about an income tax audit. But, if you sponsor an employee benefits plan, the IRS could audit it as well. Here are some common questions that plan administrators and sponsors might ask about plan audits.

Where’s the bull’s-eye?

The IRS targets plans in one of four ways:

  1. As part of a special IRS initiative focusing on a specific issue,
  2. On a tip-off,
  3. After discovering questionable or unusual items on a plan’s return, or
  4. By random selection.

The agency says audits aren’t merely a game of “gotcha.” The purpose is to develop corrective strategies and help plan sponsors execute these strategies.

How can you prepare?

Before a plan audit, the IRS usually requests a list of documents to review. An examiner then visits your office or facilities to conduct the audit.

Like a tax audit, a plan audit is best dealt with in consultation with a benefits expert. Make sure to authorize this person to act on your behalf in writing, using the required IRS form (Form 2848, “Power of Attorney and Declaration of Representative”), and that he or she is licensed to practice before the IRS.

What are auditors looking for?

The IRS typically examines a wide variety of plan operational areas. For starters, it will likely look into whether all eligible employees are properly participating, and whether the plan is properly crediting service and vesting in the plan.

Naturally, contributions and distributions are often investigated closely, too. And the agency may examine whether the plan document and trust meet current tax law, as well as whether you’ve timely and accurately filed federal returns and reports.

Who can help?

If you receive a notice of an IRS plan audit, please give us a call. We can work with your benefits advisor to gather the necessary documents and help you navigate the process.

© 2016

Last Updated by Admin on 2016-03-30 06:03:36 AM

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Mar 29 2016
Make A 2015 Contribution To An IRA Before Time Runs Out

Posted in general

Tax-advantaged retirement plans allow your money to grow tax-deferred — or, in the case of Roth accounts, tax-free. But annual contributions are limited by tax law, and any unused limit can’t be carried forward to make larger contributions in future years. So it’s a good idea to use up as much of your annual limits as possible. Have you maxed out your 2015 limits?

April 18 deadline

While it’s too late to add to your 2015 401(k) contributions, there’s still time to make 2015 IRA contributions. The deadline is April 18, 2016. The limit for total contributions to all IRAs generally is $5,500 ($6,500 if you were age 50 or older on December 31, 2015).

A traditional IRA contribution also might provide some savings on your 2015 tax bill. If you and your spouse don’t participate in an employer-sponsored plan such as a 401(k) — or you do but your income doesn’t exceed certain limits — your traditional IRA contribution is fully deductible on your 2015 tax return.

Evaluate your options

If you don’t qualify for a deductible traditional IRA contribution, see if you qualify to make a Roth IRA contribution. If you exceed the applicable income-based limits, a nondeductible traditional IRA contribution may even make sense. Neither of these options will reduce your 2015 tax liability, but they still provide valuable opportunities for tax-deferred or tax-free growth.

We can help you determine which type of contributions you’re eligible for and what makes sense for you.

© 2016

Last Updated by Admin on 2016-03-29 05:55:49 AM

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Mar 28 2016
What's Your Charitable Donation Deduction?

Posted in general

When it comes to deducting charitable gifts, all donations are not created equal. As you file your 2015 return and plan your charitable giving for 2016, it’s important to keep in mind the available deduction:

Cash. This includes not just actual cash but gifts made by check, credit card or payroll deduction. You may deduct 100%.

Ordinary-income property. Examples include stocks and bonds held one year or less, inventory, and property subject to depreciation recapture. You generally may deduct only the lesser of fair market value or your tax basis.

Long-term capital gains property. You may deduct the current fair market value of appreciated stocks and bonds held more than one year.

Tangible personal property. Your deduction depends on the situation:

  • If the property isn’t related to the charity’s tax-exempt function (such as an antique donated for a charity auction), your deduction is limited to your basis.
  • If the property is related to the charity’s tax-exempt function (such as an antique donated to a museum for its collection), you can deduct the fair market value.

Vehicle. Unless it’s being used by the charity, you generally may deduct only the amount the charity receives when it sells the vehicle.

Use of property. Examples include use of a vacation home and a loan of artwork. Generally, you receive no deduction because it isn’t considered a completed gift.

Services. You may deduct only your out-of-pocket expenses, not the fair market value of your services. You can deduct 14 cents per charitable mile driven.

Finally, be aware that your annual charitable donation deductions may be reduced if they exceed certain income-based limits. If you receive some benefit from the charity, your deduction must be reduced by the benefit’s value. Various substantiation requirements also apply. If you have questions about how much you can deduct, let us know.

© 2016

Last Updated by Admin on 2016-03-28 06:44:31 AM

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Mar 25 2016
Do You Need To File A Gift Tax Return?

Posted in general

It’s tax-filing season, and the April 18 deadline to file a 2015 gift tax return is fast approaching. But do you need to file a return? The rules surrounding gift tax returns can be confusing, so let’s review some general guidelines.

A federal gift tax return (Form 709) is required if you:

  • Made gifts of present interests — such as an outright gift of cash, marketable securities, real estate or payment of expenses other than qualifying educational or medical expenses (see below) — if the total of all gifts to any one person exceeded the $14,000 annual exclusion amount,
  • Made split gifts with your spouse,
  • Made gifts of present interests to a noncitizen spouse who otherwise would qualify for the marital deduction, if the total exceeded the $147,000 annual exclusion amount,
  • Made gifts of future interests — such as certain gifts in trust and certain unmarketable securities — in any amount, or
  • Contributed to a 529 plan and elected to accelerate future annual exclusion amounts (up to five years’ worth) into the current year.

No gift tax return is required if you:

  • Paid qualifying educational or medical expenses on behalf of someone else directly to an educational institution or health care provider,
  • Made gifts of present interests that fell within the annual exclusion amount,
  • Made outright gifts to a spouse who’s a U.S. citizen, in any amount, including gifts to marital trusts that meet certain requirements, or
  • Made charitable gifts and aren’t otherwise required to file Form 709 — if a return is otherwise required, charitable gifts should also be reported.

In some cases it’s advisable to file Form 709 to report nongifts. For example, suppose you sold assets to a family member or a trust. Filing a return triggers the statute of limitations and prevents the IRS from claiming, more than three years after you file the return, that the assets were undervalued (and, therefore, partially taxable).

If you made gifts last year and are unsure whether you need to file a gift tax return, we can help you make that determination.

© 2016

Last Updated by Admin on 2016-03-25 10:49:17 AM

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Mar 23 2016
How To Max Out Education-Related Tax Breaks

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If there was a college student in your family last year, you may be eligible for some valuable tax breaks on your 2015 return. To max out your education-related breaks, you need to see which ones you’re eligible for and then claim the one(s) that will provide the greatest benefit. In most cases you can take only one break per student, and, for some breaks, only one per tax return.

Credits vs. deductions

Tax credits can be especially valuable because they reduce taxes dollar-for-dollar; deductions reduce only the amount of income that’s taxed. A couple of credits are available for higher education expenses:

  1. The American Opportunity credit — up to $2,500 per year per student for qualifying expenses for the first four years of postsecondary education.
  2. The Lifetime Learning credit — up to $2,000 per tax return for postsecondary education expenses, even beyond the first four years.

But income-based phaseouts apply to these credits.

If you’re eligible for the American Opportunity credit, it will likely provide the most tax savings. If you’re not, the Lifetime Learning credit isn’t necessarily the best alternative.

Despite the dollar-for-dollar tax savings credits offer, you might be better off deducting up to $4,000 of qualified higher education tuition and fees. Because it’s an above-the-line deduction, it reduces your adjusted gross income, which could provide additional tax benefits. But income-based limits also apply to the tuition and fees deduction.

How much can your family save?

Keep in mind that, if you don’t qualify for breaks for your child’s higher education expenses because your income is too high, your child might. Many additional rules and limits apply to the credits and deduction, however. To learn which breaks your family might be eligible for on your 2015 tax returns — and which will provide the greatest tax savings — please contact us.

© 2016

Last Updated by Admin on 2016-03-23 07:48:44 AM

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Mar 22 2016
Think Twice Before Naming A Minor As A Beneficiary

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A common estate planning mistake is to designate a minor as beneficiary — or contingent beneficiary — of a life insurance policy or retirement plan. Insurance companies and financial institutions won’t pay large sums of money directly to a minor. Instead, they’ll require costly court proceedings to appoint a guardian to manage the child’s inheritance.

Unintended results?

There’s no guarantee the guardian appointed by the court will be the person you’d choose. Let’s suppose that you’re divorced and appoint your minor children from that marriage as beneficiaries. If you die while the children are still minors, a guardian for the assets will be required. The court will likely appoint their living parent — your ex-spouse — which may be inconsistent with your wishes.

There’s another problem with naming a minor as a beneficiary: The funds will have to be turned over to the child after he or she reaches the age of majority (18 or 21, depending on state law). Generally, that isn’t the ideal age for a child to gain unrestricted access to large sums of money.

Name a trust as beneficiary

A better strategy is to designate one or more trusts as beneficiaries of the policy or plan. This approach provides several advantages: Not only does it avoid the need for guardianship proceedings but it also gives you the opportunity to select the trustee who’ll be responsible for managing the assets. And it allows you to determine when the child will receive the funds and under what circumstances.

Beneficiary designations shouldn’t be taken lightly. We’d be pleased to help you choose the proper beneficiary based on your situation.

© 2016

Last Updated by Admin on 2016-03-22 08:05:21 AM

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Mar 21 2016
Is It Time To Get Accountable With Your Employees' Expenses?

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Many companies start out, and get pretty far down the road, using the “per diem” approach when reimbursing employees for lodging, meals and incidental expenses. Doing so involves the use of either IRS tables or a simplified high-low method to reimburse workers up to specified limits.

The per diem approach is relatively simple and doesn’t involve too much record keeping. But it also puts businesses at risk if they exceed the per diem limits, exposing them to IRS penalties and employees to higher tax liability. For this reason, companies often reach a point where they create an “accountable plan” for handling employee expense reimbursements.

Reaping the tax advantages

An accountable plan is a formal arrangement to advance, reimburse or provide allowances for business expenses. The primary advantage is that your business can deduct expenses (subject to a 50% limit for meals and entertainment), and employees can usually exclude 100% of advances or reimbursements from their incomes. Workers whose jobs involve frequent travel may realize significant tax savings.

Qualifying for eligibility

To qualify as “accountable” under IRS rules, your plan must meet the following criteria:

  • It must pay expenses that would otherwise be deductible by the employee.
  • Payments must be for “ordinary and necessary” business expenses such as airfare and lodging charges.
  • Employees must substantiate these expenses — including amounts, times and places — ideally at least monthly.
  • Employees must return any advances or allowances they can’t substantiate within a reasonable time, typically 120 days.

If you fail to meet these conditions, the IRS will treat your plan as nonaccountable, transforming all reimbursements into wages taxable to the employee, subject to income and employment taxes — though potentially deductible by the employee.

Getting some help

Accountable plans take time to establish and require meticulous record keeping. Let us help. We’d be happy to assist you in setting up your accountable plan and regularly reviewing its compliance with IRS rules.

© 2016

Last Updated by Admin on 2016-03-21 07:33:39 AM

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Feb 23 2016
Deduct Home Office Expenses - If You're Eligible

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Today it’s becoming more common to work from home. But just because you have a home office space doesn’t mean you can deduct expenses associated with it.

Eligibility requirements

If you’re an employee, your use of your home office must be for your employer’s convenience, not just your own. If you’re self-employed, generally your home office must be your principal place of business, though there are exceptions.

Whether you’re an employee or self-employed, the space must be used regularly (not just occasionally) and exclusively for business purposes. If, for example, your home office is also a guest bedroom or your children do their homework there, you can’t deduct the expenses associated with that space.

A valuable break

If you are eligible, the home office deduction can be a valuable tax break. You may be able to deduct a portion of your mortgage interest, property taxes, insurance, utilities and certain other expenses, as well as the depreciation allocable to the office space.

Or you can take the simpler “safe harbor” deduction in lieu of calculating, allocating and substantiating actual expenses. The safe harbor deduction is capped at $1,500 per year, based on $5 per square foot up to a maximum of 300 square feet.

More considerations

For employees, home office expenses are a miscellaneous itemized deduction. This means you’ll enjoy a tax benefit only if these expenses plus your other miscellaneous itemized expenses exceed 2% of your adjusted gross income (AGI).

If, however, you’re self-employed, you can deduct eligible home office expenses against your self-employment income.

Finally, be aware that we’ve covered only a few of the rules and limits here. If you think you may be eligible for the home office deduction, contact us for more information.

© 2016

Last Updated by Admin on 2016-02-23 06:17:07 AM

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Feb 15 2016
File Early to Avoid Tax Identity Theft

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If you’re like many Americans, you may not start thinking about filing your tax return until the April 15 deadline (this year, April 18) is just a few weeks — or perhaps even just a few days — away. 

How filing early helps

In this increasingly common scam, thieves use victims’ personal information to file fraudulent tax returns electronically and claim bogus refunds. When the real taxpayers file, they’re notified that they’re attempting to file duplicate returns.

Tax identity theft can cause major headaches to straighten out and significantly delay legitimate refunds. But if you file first, it will be the thief who’s filing the duplicate return, not you.

Another key date

Of course you need to have your W-2s and 1099s to file. So another key date to be aware of is February 1 — the deadline for employers to issue 2015 W-2s to employees and, generally, for businesses to issue 1099s to recipients of any 2015 interest, dividend or reportable miscellaneous income payments.

An added bonus

Let us know if you have questions about tax identity theft or would like help filing your 2015 return early. An added bonus of filing early, if you’ll be getting a refund, is enjoying that refund sooner.

© 2016

Last Updated by Admin on 2016-02-15 06:54:28 AM

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Feb 02 2016
Extension Means Businesses Can Take Bonus Depreciation on Their 2015 Returns - But Should They?

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Bonus depreciation allows businesses to recover the costs of depreciable property more quickly by claiming additional first-year depreciation for qualified assets. The Protecting Americans from Tax Hikes Act of 2015 (the PATH Act) extended 50% bonus depreciation through 2017.

The break had expired December 31, 2014, for most assets. So the PATH Act may give you a tax-saving opportunity for 2015 you wouldn’t otherwise have had. Many businesses will benefit from claiming this break on their 2015 returns. But you might save more tax in the long run if you forgo it.

What assets are eligible

For 2015, new tangible property with a recovery period of 20 years or less (such as office furniture and equipment) qualifies for bonus depreciation. So does off-the-shelf computer software, water utility property and qualified leasehold-improvement property.

Acquiring the property in 2015 isn’t enough, however. You must also have placed the property in service in 2015.

Should you or shouldn’t you?

If you’re eligible for bonus depreciation and you expect to be in the same or a lower tax bracket in future years, taking bonus depreciation (to the extent you’ve exhausted any Section 179 expensing available to you) is likely a good tax strategy. It will defer tax, which generally is beneficial.

But if your business is growing and you expect to be in a higher tax bracket in the near future, you may be better off forgoing bonus depreciation. Why? Even though you’ll pay more tax for 2015, you’ll preserve larger depreciation deductions on the property for future years, when they may be more powerful — deductions save more tax when you’re in a higher bracket.

We can help

If you’re unsure whether you should take bonus depreciation on your 2015 return — or you have questions about other depreciation-related breaks, such as Sec. 179 expensing — contact us.

© 2016

Last Updated by Admin on 2016-02-02 10:56:21 AM

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Jan 27 2016
Follow IRS Rules to Avoid Losing Some of Your 2015 Charitable Donations Deductions

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Sharing your estate with charity by making donations during your life not only benefits your favorite organizations and reduces your taxable estate, but also can reduce your income tax bill. However, if you don’t meet IRS substantiation requirements for a donation, the IRS could deny the corresponding deduction you’re claiming. To comply, generally you must obtain a “contemporaneous” written acknowledgment from the charity stating the amount of the donation, whether you received any goods or services in consideration for the donation, and the value of any such goods or services.

If you haven’t yet received substantiation for all of your 2015 donations, you may still have time to obtain it: “Contemporaneous” means the earlier of 1) the date you file your tax return, or 2) the extended due date of your return. So as long as you haven’t filed your 2015 return, you can contact the charity and request a written acknowledgment — you’ll just need to wait to file your return until you receive it. (But don’t miss your filing deadline; consider filing for an extension if needed.)

Whether making charitable gifts during your life or charitable bequests at death, following IRS rules is critical. Be aware that certain types of donations are subject to additional substantiation requirements. To learn what requirements apply to your donations, please contact us.

© 2016

Last Updated by Admin on 2016-01-27 09:16:06 AM

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Dec 31 2015
The New Year is the Perfect Time for an Estate Planning Checkup

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An annual estate plan checkup is critical to the health of your estate plan. Because various exclusion, exemption and deduction amounts are adjusted for inflation, they can change from year to year, impacting your plan:

 

2015

2016

Lifetime gift and estate tax exemption

$5.43 million

$5.45 million

Generation-skipping transfer tax exemption

$5.43 million

$5.45 million

Annual gift tax exclusion

$14,000

$14,000

Marital deduction for gifts to noncitizen spouse

$147,000

$148,000

You may need to update your estate plan based on these changes. But the beginning of the year isn’t the only time for an estate plan checkup. Whenever there are significant changes in your family — such as births, deaths, marriages or divorces — it’s a good idea to revisit your estate plan. Your plan also merits a look any time your financial situation changes significantly.

If you’d like us to conduct your annual estate plan checkup, we’d be happy to. Or, if you don’t yet have an estate plan, we can help you create one.

© 2015

Last Updated by Admin on 2015-12-31 10:04:00 AM

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Dec 30 2015
No Changes to Retirement Plan Contributions for 2016

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Retirement plan contribution limits are indexed for inflation, but with inflation remaining low, the limits remain unchanged for 2016:

Type of limit

2016 limit

Elective deferrals to 401(k), 403(b), 457(b)(2) and 457(c)(1) plans

$18,000

Contributions to defined contribution plans

$53,000

Contributions to SIMPLEs

$12,500

Contributions to IRAs

$5,500

Catch-up contributions to 401(k), 403(b), 457(b)(2) and 457(c)(1) plans

$6,000

Catch-up contributions to SIMPLEs

$3,000

Catch-up contributions to IRAs

$1,000

Nevertheless, if you’re not already maxing out your contributions, you still have an opportunity to save more in 2016. And if you turn age 50 in 2016, you can begin to take advantage of catch-up contributions.

However, keep in mind that additional factors may affect how much you’re allowed to contribute (or how much your employer can contribute on your behalf). For example, income-based limits may reduce or eliminate your ability to make Roth IRA contributions or to make deductible traditional IRA contributions. If you have questions about how much you can contribute to tax-advantaged retirement plans in 2016, check with us.

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Last Updated by Admin on 2015-12-30 09:57:55 AM

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Dec 24 2015
How Much Time Is Left To Make Donations You Can Deduct On Your 2015 Return?

Posted in general

If reducing your taxable estate is an important estate planning goal for you, making lifetime charitable donations can help achieve that goal and benefit your favorite organizations. In addition, by making donations during your lifetime, rather than at death, you’ll receive income tax deductions.

To take a 2015 charitable donation deduction, the gift must be made by December 31, 2015. According to the IRS, a donation generally is “made” at the time of its “unconditional delivery.” But what does this mean? Is it the date you, for example, write a check or make an online gift via your credit card? Or is it the date the charity actually receives the funds — or perhaps the date of the charity’s acknowledgment of your gift?

The delivery date depends in part on what you donate and how you donate it. Here are a few examples for common donations:

Check. The date you mail it.

Credit card. The date you make the charge.

Pay-by-phone account. The date the financial institution pays the amount.

Stock certificate. The date you mail the properly endorsed stock certificate to the charity.

Many additional rules apply to the charitable donation deduction, so please contact us if you have questions about the deductibility of a gift you’ve made or are considering making. But act soon — you don’t have much time left to make donations that will reduce your 2015 tax bill.

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Last Updated by Admin on 2015-12-24 08:25:56 AM

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Dec 23 2015
They’re Back! Depreciation Breaks Extended

Posted in general

 

For much of this year, uncertainty surrounded whether Congress would extend relief in the area of depreciation-related tax breaks. On December 18, clarity finally arrived with the passage of the Protecting Americans from Tax Hikes Act of 2015 (the PATH Act). Here’s a look at the impact on two “classic” depreciation breaks:

1. Enhanced Section 179 expensing election. In 2014, Sec. 179 permitted companies to immediately deduct, rather than depreciate, up to $500,000 in qualified new or used assets. The deduction was phased out, dollar for dollar, to the extent qualified asset purchases for the year exceeded $2 million. Under the PATH Act, these amounts have been made permanent (indexed for inflation beginning in 2016) rather than allowed to fall to much lower limits.

2. 50% bonus depreciation. In 2014, this provision allowed businesses to claim an additional first-year depreciation deduction equal to 50% of qualified asset costs. Bonus depreciation generally was available for new (not used) tangible assets with a recovery period of 20 years or less, and certain other assets. That 50% amount has been extended for the 2015, 2016 and 2017 tax years. But it will drop to 40% for 2018 and 30% for 2019.

To reap these benefits on your 2015 tax return, you must acquire qualified assets and place them in service by December 31, 2015. These are but a few of the ways the PATH Act affects business tax planning. Please contact us for more information.

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Last Updated by Admin on 2015-12-23 08:55:54 AM

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Dec 22 2015
Congress Passes "Extenders" Legislation Reviving Expired Tax Breaks for 2015

Posted in general

Many valuable tax breaks expired December 31, 2014. For them to be available for 2015, Congress had to pass legislation extending them — which it now has done, with the Protecting Americans from Tax Hikes Act of 2015 (PATH Act), signed into law by the President on December 18. The PATH Act not only revives expired breaks for 2015 but also makes many breaks permanent, generally extends the rest through either 2016 or 2019, and enhances some breaks.

Here is a sampling of extended breaks that may benefit you or your business:

  • The deduction for state and local sales taxes in lieu of state and local income taxes (extended permanently),
  • Tax-free IRA distributions to charities (extended permanently),
  • Bonus depreciation (extended through 2019, but with reduced benefits for 2018 and 2019),
  • Enhanced Section 179 expensing (extended permanently and further enhanced beginning in 2016),
  • Accelerated depreciation for qualified leasehold-improvement, restaurant and retail improvement property (extended permanently),
  • The research tax credit (extended permanently and enhanced beginning in 2016),
  • The Work Opportunity credit (extended through 2019 and enhanced beginning in 2016), and
  • Various energy-related tax incentives (extended through 2016).

Please contact us for more information on these and other breaks under the PATH Act. Keep in mind that, for you to take maximum advantage of certain extended breaks on your 2015 tax return, quick action may be required.

© 2015

Last Updated by Admin on 2015-12-22 11:01:51 AM

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Dec 14 2015
Holding Joint Title To Property With Loved Ones Has Pitfalls

Posted in general

Owning assets jointly with one or more of your children or other heirs is a common estate planning “shortcut.” Two potential advantages are convenience and probate avoidance. But joint ownership can also create a number of problems, including:

Unnecessary taxes. Adding a child’s name to the title may be considered an immediate taxable gift of one-half of the property’s value. And when you die, the property’s value then will be included in your taxable estate, although any gift tax paid with the original transfer would be allowed as an offset.

Creditor claims. Joint ownership exposes the property to claims by your co-owner’s creditors or former spouses.

Loss of control. Your co-owner may be able to dispose of certain property without your consent or prevent you from selling or borrowing against certain property.

Unintended consequences. If your co-owner predeceases you, his or her share of the property may pass according to his or her estate plan or the laws of intestate succession. If you hold the property as co-tenants, you’ll generally have no say in the ultimate disposition of that portion of the property.

One or more properly drafted trusts can avoid each of these problems without the need for probate. Please contact us for answers about owning assets with your children or other heirs.

© 2015

Last Updated by Admin on 2015-12-14 05:57:33 AM

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Dec 14 2015
Don't Miss Your Opportunity To Make 2015 Annual Exclusion Gifts

Posted in general

Recently, the IRS released the 2016 annually adjusted amount for the unified gift and estate tax exemption and the generation-skipping transfer (GST) tax exemption: $5.45 million (up from $5.43 million in 2015). But even with the rising exemptions, annual exclusion gifts offer a valuable tax-saving opportunity.

The 2015 gift tax annual exclusion allows you to give up to $14,000 per recipient tax-free — without using up any of your gift and estate or GST tax exemption. (The exclusion remains the same for 2016.)

The gifted assets are removed from your taxable estate, which can be especially advantageous if you expect them to appreciate. That’s because the future appreciation can avoid gift and estate taxes.

But you need to use your 2015 exclusion by December 31. The exclusion doesn’t carry over from year to year. For example, if you and your spouse don’t make annual exclusion gifts to your grandson this year, you can’t add $28,000 to your 2016 exclusions to make a $56,000 tax-free gift to him next year.

Questions about making annual exclusion gifts or other ways to transfer assets to the next generation while saving taxes? Contact us!

© 2015

Last Updated by Admin on 2015-12-14 05:56:03 AM

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Dec 14 2015
Getting Everyone To Buy Into Your Succession Plan

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It’s easy to fall into the trap of thinking about a succession plan as being about only two people: you and your successor. But a truly graceful passing of the baton to the next leader hinges on total staff buy-in — or, at least, acceptance. Getting managers and key employees involved in the planning can help you garner that buy-in and, ultimately, ensure a successful transition.

Remember: Misinformation, rumors, threats about quitting or refusals to support the new boss are often inevitable in a succession. To help keep potential sources of conflict in check, identify stakeholders who may have strong concerns about the next leader or the succession planning process itself. Then work out problems with them early on. You may want to start with the easiest of the bunch and work your way up to the individual who appears most dead-set in his or her opposition.

In reality, a succession plan isn’t just a plan — it’s actions as well. Please contact us for help devising the best approach and executing it every step of the way.

© 2015

Last Updated by Admin on 2015-12-14 05:54:51 AM

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Dec 08 2015
Craft Your Mission Statement For Maximum Impact

Posted in general

The right mission statement can be a strong motivational force for employees — and a powerful marketing and branding tool. But, whether you’re writing one for the first time or creating a new statement as part of a rebranding effort, you’ve got to craft it carefully for maximum impact. Here are a few guidelines to follow:

Don’t limit yourself. Granted, you can’t be all things to all people. But the world in which businesses operate and compete is constantly changing. Your mission statement should be broad enough to let your company adapt when necessary.

Aspire to inspire. Make your statement visionary, expressing your business’s purpose, aspirations, philosophy and values. It needs to resonate with the people working for and with you. But, at the same time, it must be realistic, practical and workable so as to inspire confidence.

Keep it concise and understandable. A mission statement shouldn’t confuse people seeing it or hearing it. Avoid buzzwords and technical jargon. The true test? Whether your employees can remember and repeat it.

One might say that a mission statement is where a company’s strategic planning begins. For help crafting a statement that will inspire your staff and impress your customers, please contact us.

© 2015

Last Updated by Admin on 2015-12-08 08:31:56 AM

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Dec 08 2015
Should A CRT Be Part Of Your Estate Plan?

Posted in general

To benefit a charity while helping ensure your own financial future, consider a charitable remainder trust (CRT):

  • For a given term, the CRT pays an amount to you annually (some of which generally is taxable).
  • At the term’s end, the CRT’s remaining assets pass to one or more charities.
  • When you fund the CRT, you receive an income tax deduction for the present value of the amount that will go to charity.
  • The property is removed from your estate.

A CRT also can help diversify your portfolio if you own non-income-producing assets that would generate a large capital gain if sold. Because a CRT is tax-exempt, it can sell the property without paying tax on the gain at the time of the sale. The CRT can then invest the proceeds in a variety of stocks and bonds. You’ll owe capital gains tax when you receive CRT payments, but because the payments are spread over time, much of the liability will be deferred.

You can name someone other than yourself as income beneficiary or fund the CRT at your death, but the tax consequences will be different.

If you’re charitably inclined but also would like to provide an income stream for yourself or your loved ones, a CRT may be right for you. Please contact us with any questions.

© 2015

Last Updated by Admin on 2015-12-08 08:29:55 AM

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Dec 08 2015
Protect Your Deduction: Verify That A Charity Is Eligible To Receive Tax-Deductible Contributions Before You Donate

Posted in general

Donations to qualified charities are generally fully deductible, and they may be the easiest deductible expense to time to your tax advantage. After all, you control exactly when and how much you give. But before you donate, it’s critical to make sure the charity you’re considering is indeed a qualified charity — that it’s eligible to receive tax-deductible contributions.

The IRS’s online search tool, Exempt Organizations (EO) Select Check, can help you more easily find out whether an organization is eligible to receive tax-deductible charitable contributions. You can access EO Select Check at http://apps.irs.gov/app/eos. Information about organizations eligible to receive deductible contributions is updated monthly.

Also, with the 2016 presidential election heating up, it’s important to remember that political donations aren’t tax-deductible.

Of course, additional rules affect your charitable deductions, so please contact us if you have questions about whether a donation you’re planning will be fully deductible. We can also provide ideas for maximizing the tax benefits of your charitable giving.

© 2015

Last Updated by Admin on 2015-12-08 08:26:47 AM

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Nov 24 2015
Revisiting Your Estate Plan After a Divorce is Must

Posted in general

People generally remember to amend their wills or revocable trusts after a divorce, but there are many other estate planning and financial arrangements you should address that are easily overlooked. These include:

Jointly owned assets. Be sure your former spouse doesn’t retain access to joint assets, such as bank accounts, investments or real estate.

Retirement accounts. Did you designate your former spouse as beneficiary of any IRAs, 401(k) plans or other retirement accounts? If so, amend the beneficiary designations for those accounts.

Life insurance. If your former spouse is the beneficiary of your life insurance policy, you’ll likely want to update the beneficiary designation. Also, consider whether your life insurance needs have changed in light of the divorce.

Powers of attorney. Is your former spouse still named as your representative in any financial or health care powers of attorney or similar documents? In some states, divorce automatically nullifies powers of attorney, but in others you may need to rewrite them.

It’s important to take action quickly after a divorce to avoid inadvertently enriching a former spouse at the expense of your children, new spouse or other family members. Contact us for help with reviewing your estate plan in light of a divorce.

© 2015

Last Updated by Admin on 2015-11-24 05:23:43 AM

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Nov 24 2015
Considering Refinancing Your Home?

Posted in tax

Now may be a great time to refinance, because mortgage rates are still low but expected to increase. Before deciding to refinance, however, here are a couple of tax consequences to consider:

1. Cash-out refinancing. If you borrow more than you need to cover your outstanding mortgage balance, the tax treatment of the cash-out portion depends on how you use the excess cash. If you use it for home improvements, it’s considered acquisition indebtedness, and the interest is deductible subject to a $1 million debt limit. If you use it for another purpose, such as buying a car or paying college tuition, it’s considered home equity debt, and deductible interest is subject to a $100,000 debt limit.

2. Prepaying interest. “Points” paid when refinancing generally are amortized and deducted ratably over the life of the loan, rather than being immediately deductible. If you’re already amortizing points from a previous refinancing and you refinance with a new lender, you can deduct the unamortized balance in the year you refinance. But if you refinance with the same lender, you must add the unamortized points from the old loan to any points you pay on the new loan and then deduct the total over the life of the new loan.

Is your head spinning? Don’t worry; we can help you understand exactly what the tax consequences of refinancing will be for you. Contact us today!

© 2015

Last Updated by Admin on 2015-11-24 05:12:41 AM

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Nov 17 2015
Estate vs. Income Taxes: The Estate Planning Focus is Shifting

Posted in general

Until recently, estate planning strategies typically focused on minimizing federal gift and estate taxes, such as by giving away assets during life to reduce the taxable estate. Today, however, the focus is shifting toward income taxes.

Since 2001, the federal exemption has grown from $675,000 to $5.43 million, meaning that fewer people have to worry about estate tax liability. In addition, the top estate tax rate has decreased from 55% to 40%, while the top individual income tax rate has increased to 39.6% — nearly as high as the top estate tax rate.

The heightened importance of income taxes means that holding assets until death rather than giving them away during your life may be advantageous. If you give away an appreciated asset, the recipient takes over your tax basis in the asset, triggering capital gains taxes should he or she turn around and sell it.

When an appreciated asset is inherited, on the other hand, the recipient’s basis is “stepped up” to the asset’s fair market value on the date of death, erasing the built-in capital gain. So retaining appreciating assets until death can save significant income taxes.

If you have questions about whether it’s better to focus on reducing estate taxes or income taxes, please give us a call.

© 2015

Last Updated by Admin on 2015-11-17 05:05:13 AM

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Nov 17 2015

Posted in general

Last Updated by Admin on 2015-11-17 05:04:49 AM

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Nov 17 2015
Should You "Bunch" Medical Expenses into 2015?

Posted in tax

Medical expenses that aren’t reimbursable by insurance or paid through a tax-advantaged account (such as a Health Savings Account or Flexible Spending Account) may be deductible — but generally only to the extent that they exceed 10% of your adjusted gross income.

Taxpayers age 65 and older can enjoy a 7.5% floor through 2016. The floor for alternative minimum tax purposes, however, is 10% for all taxpayers.

By “bunching” nonurgent medical procedures and other controllable expenses into alternating years, you may increase your ability to exceed the applicable floor. Controllable expenses might include prescription drugs, eyeglasses and contact lenses, hearing aids, dental work, and elective surgery.

If it’s looking like you’re close to exceeding the floor in 2015, consider accelerating controllable expenses into this year. But if you’re far from exceeding it, to the extent possible (without harming your or your family’s health), you might want to put off medical expenses until next year, in case you have enough expenses in 2016 to exceed the floor.

For more information on how to bunch deductions or exactly what expenses are deductible, please contact us.

© 2015

Last Updated by Admin on 2015-11-17 05:04:40 AM

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Nov 10 2015
Selling Rather Than Trading in Business Vehicles Can Save Tax

Posted in tax

Although a vehicle’s value typically drops fairly rapidly, the tax rules limit the amount of annual depreciation that can be claimed on most cars and light trucks. Thus, when it’s time to replace a vehicle used in business, it’s not unusual for its tax basis to be higher than its value.

If you trade a vehicle in on a new one, the undepreciated basis of the old vehicle simply tacks onto the basis of the new one (even though this extra basis generally doesn’t generate any additional current depreciation because of the annual depreciation limits). However, if you sell the old vehicle rather than trading it in, any excess of basis over the vehicle’s value can be claimed as a deductible loss to the extent of your business use of the vehicle.

For example, if you sell a vehicle with an adjusted basis of $20,000 for $12,000, you’ll get an immediate write-off of $8,000 ($20,000 – $12,000). If you trade in the vehicle rather than selling it, the $20,000 adjusted basis is added to the new vehicle’s depreciable basis and, thanks to the annual depreciation limits, it may be years before any tax deductions are realized.

For more ideas on how to maximize your vehicle-related deductions, contact us.

© 2015

Last Updated by Admin on 2015-11-10 11:09:10 AM

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Nov 04 2015
Gearing Up for the ACA's Information Reporting Requirements

Posted in estate

Starting in 2016, applicable large employers (ALEs) under the Affordable Care Act (ACA) will have to file Forms 1094-C and 1095-C to provide information to the IRS and plan participants regarding their health care benefits for the previous year. Both the forms and their instructions are now available for ALEs to study and begin preparations for required filings. In addition, organizations that expect to file Forms 1094 and 1095 electronically can peruse two final IRS publications setting out specifications for using the new ACA Information Returns system.

Keep in mind that ALEs are employers with 50 or more full-time employees or the equivalent. And even ALEs exempt from the ACA’s shared-responsibility (or “play or pay”) provision for 2015 (that is, ALEs with 50 to 99 full-timers or the equivalent who meet certain eligibility requirements) are still subject to the information reporting requirements in relation to their 2015 health care benefits.

If your company is considered an ALE, please contact us for assistance in navigating the ACA’s complex requirements for avoiding penalties and properly reporting benefits. If you’re not an ALE, we can still help you understand how the ACA affects your small business and determine whether you qualify for a tax credit for providing coverage.

© 2015

Last Updated by Admin on 2015-11-04 08:55:55 AM

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Nov 03 2015
Accounting for Digital Assets in Your Estate Plan

Posted in estate

If you die without addressing your digital assets (such as online bank and brokerage accounts) in your estate plan, your loved ones or other representatives may not be able to access them without going to court — or, worse yet, may not even know they exist.

The first step in accounting for digital assets is to conduct an inventory, including any computers, servers or handheld devices where these assets are stored. Next, talk with your estate planning advisor about strategies for ensuring that your representatives have immediate access to these assets in the event something happens to you.

Although you might want to provide in your will for the disposition of certain digital assets, a will isn’t the place to list passwords or other confidential information, because a will is a public document. One solution is writing an informal letter to your executor or personal representative that lists important accounts, website addresses, usernames and passwords. Another option is to establish a master password that gives the representative access to a list of passwords for all your important accounts, either on your computer or through a Web-based “password vault.”

If you have significant digital assets and need help incorporating them into your estate plan, please give us a call.

© 2015

Last Updated by Admin on 2015-11-03 07:00:24 AM

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Oct 07 2015
How To Determine If You Need To Worry About Estate Taxes

Posted in general

Here’s a simplified way to project your estate tax exposure. Take the value of your estate, net of any debts. Also subtract any assets that will pass to charity on your death.

Then, if you’re married and your spouse is a U.S. citizen, subtract any assets you’ll pass to him or her. Those assets qualify for the marital deduction and avoid potential estate tax exposure until the surviving spouse dies. The net number represents your taxable estate.

You can transfer up to your available exemption amount at death free of federal estate taxes. So if your taxable estate is equal to or less than the estate tax exemption (for 2015, $5.43 million) reduced by any gift tax exemption you used during your life, no federal estate tax will be due when you die. But if your taxable estate exceeds this amount, it will be subject to estate tax. Many states, however, now impose estate tax at a lower threshold than the federal government does, so you’ll also need to consider the rules in your state.

If you’re not sure whether you’re at risk for the estate tax or if you’d like to learn about gift and estate planning strategies to reduce your potential liability, please contact us.

© 2015

Last Updated by Admin on 2015-10-07 08:38:09 AM

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Sept 28 2015
Why You Should Contribute More To Your 401(K) In 2015

Posted in general

Contributing to a traditional employer-sponsored defined contribution plan, such as a 401(k), 403(b) or 457 plan, offers many benefits:

  • Contributions are pretax, reducing your modified adjusted gross income (MAGI), which can also help you reduce or avoid exposure to the 3.8% net investment income tax.
  • Plan assets can grow tax-deferred — meaning you pay no income tax until you take distributions.
  • Your employer may match some or all of your contributions pretax.

For 2015, you can contribute up to $18,000. If your current contribution rate will leave you short of the limit, consider increasing your contribution rate through the end of the year. Because of tax-deferred compounding, boosting contributions sooner rather than later can have a significant impact on the size of your nest egg at retirement.

If you’ll be age 50 or older by December 31, you can also make “catch-up” contributions (up to $6,000 for 2015). So if you didn’t contribute much when you were younger, this may allow you to partially make up for lost time. Even if you did make significant contributions before age 50, catch-up contributions can still be beneficial, allowing you to further leverage the power of tax-deferred compounding.

Have questions about how much to contribute? Contact us. We’d be pleased to discuss the tax and retirement-saving considerations with you.

© 2015

Last Updated by Admin on 2015-09-28 10:38:28 AM

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Sept 23 2015
Review Your Fringe Benefits To See What You Might Be Missing

Posted in tax

A business can offer many things as fringe benefits. So it’s a good idea to occasionally review the possibilities to see whether you might be missing something that could help you attract and retain the best employees. Two broad categories that are generally deductible by the employer and tax-free to employees are:

1. Working-condition fringe benefits. These are expenses that, if employees had paid them, they could have deducted on their personal tax returns. Examples include employer-paid subscriptions to business periodicals or websites and employer expenditures for some types of on-the-job training.

2. De minimis fringe benefits. Included here is any employer-provided property or service that has a value so small in relation to the frequency with which it’s provided that accounting for it is “unreasonable or administratively impracticable,” according to the IRS. Some examples of these items are group meals; occasional coffee, doughnuts or soft drinks; and permission to make occasional local telephone calls.

Also worth looking into are qualified transportation fringe benefits. These include covering expenditures (up to certain limits) related to commuter transportation, such as mass transit, van pooling, parking and bicycling.

Bear in mind that various rules must be followed to ensure the tax-advantaged treatment of fringe benefits. And that’s where we come in. Please contact us for help not only choosing the right offerings for your size and type of business, but also ensuring that the tax consequences will be what you expect.

© 2015

Last Updated by Admin on 2015-09-23 08:12:00 AM

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Sept 22 2015
All Income Investments Aren’t Alike When It Comes To Taxes

Posted in tax

The tax treatment of investment income varies, and not just based on whether the income is in the form of dividends or interest. Qualified dividends are taxed at the favorable long-term capital gains tax rate (generally 15% or 20%) rather than at the applicable ordinary-income tax rate (which might be as high as 39.6%). Interest income generally is taxed at ordinary-income rates. So stocks that pay qualified dividends may be more attractive tax-wise than other income investments, such as CDs and taxable bonds.

But there are exceptions. For example, some dividends aren’t qualified and therefore are subject to ordinary-income rates, such as certain dividends from:

  • Real estate investment trusts (REITs),
  • Regulated investment companies (RICs),
  • Money market mutual funds, and
  • Certain foreign investments.

Also, the tax treatment of bond income varies. For example:

  • Interest on U.S. government bonds is taxable on federal returns but exempt on state and local returns.
  • Interest on state and local government bonds is excludable on federal returns. If the bonds were issued in your home state, interest also might be excludable on your state return.
  • Corporate bond interest is fully taxable for federal and state purposes.

While tax treatment shouldn’t drive investment decisions, it’s one factor to consider — especially when it comes to income investments. For help factoring taxes into your investment strategy, contact us.

© 2015

Last Updated by Admin on 2015-09-22 08:32:18 AM

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Sept 10 2015
When Will Congress Pass “Extenders” Legislation To Revive Expired Tax Breaks For 2015?

Posted in tax

With Congress returning from its August recess, this is the question on tax-savvy Americans’ minds. Many valuable tax breaks aren’t permanent, so Congress has to pass legislation extending them to keep them in effect. Unfortunately, Congress often waits until the last minute to do so.

For example, Congress didn’t pass 2014 extenders until December 2014, making the legislation retroactive to January 1, 2014 — but not extending the breaks to 2015. So we’re again in a waiting game to see what will happen with extenders legislation. Some believe Congress will act soon, while others think we’ll again be waiting until December.

Here are several expired breaks that may benefit you or your business if extended:

  • The deduction for state and local sales taxes in lieu of state and local income taxes,
  • Tax-free IRA distributions to charities,
  • 100% bonus depreciation,
  • Enhanced Section 179 expensing,
  • Accelerated depreciation for qualified leasehold improvement, restaurant and retail improvement property,
  • The research tax credit,
  • The Work Opportunity tax credit, and
  • Various energy-related tax incentives.

Please check back with us for the latest information. Keep in mind that quick action after extenders legislation is passed may be required in order to take maximum advantage of the extended breaks.

© 2015

Last Updated by Admin on 2015-09-10 09:00:33 AM

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Aug 31 2015
Who Should Be The Executor Of Your Estate?

Posted in tax

Choosing the right executor — sometimes known as a “personal representative” — is critical to the smooth administration of an estate. An executor’s duties may include:

  • Collecting, protecting and taking inventory of the estate’s assets,
  • Filing the estate’s tax returns and paying its taxes,
  • Handling creditors’ claims and the estate’s claims against others,
  • Making investment decisions,
  • Distributing property to beneficiaries, and
  • Liquidating assets if necessary.

You don’t have to choose a professional executor or someone with legal or financial expertise. Often, family members can effectively perform the job, hiring professionals as needed (at the estate’s expense) to handle matters beyond their expertise. However, appointing a loved one can lead to problems. For example, if your executor stands to gain from the will, he or she may have a conflict of interest, which can lead to will contests or other disputes by disgruntled family members. If this is a concern, consider choosing an independent outsider as executor.

Regardless of whom you choose, designate at least one backup executor to serve in the event that your first choice dies or becomes incapacitated before it’s time to settle your estate.

If you have questions about whom you should consider as an executor, please contact us.

© 2015

Last Updated by Admin on 2015-08-31 06:50:28 AM

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Aug 27 2015
Keep An Eye On Kpis As Your Company Rolls Along

Posted in business

Like race car drivers, business owners need to monitor gauges on their dashboards to keep an eye out for serious operational failures before a total breakdown occurs. These gauges are commonly referred to as key performance indicators (KPIs).

There are two broad categories of KPIs: financial and nonfinancial. Financial KPIs often take the form of ratios, such as:

  • Debt to Equity: Total Debt / Shareholder’s Equity,
  • Current Ratio: Current Assets / Current Liabilities, and
  • Days Sales Outstanding: Number of Days × Accounts Receivable / Credit Sales.

Nonfinancial KPIs may include measurable metrics in the areas of customer service, sales and marketing. For example, if a company’s goal is to improve its response time to customer complaints, its KPI might be to initially respond to complaints within 24 hours, and to eventually resolve at least 80% of complaints to the customer’s satisfaction.

KPIs differ from one company to the next based on industry, company type (B2B or B2C, for example) and, most important, strategic objectives. Your KPIs will stem mainly from your mission statement and your short-, medium- and long-term goals.

We can help you target the KPIs best suited to your business, and ensure the calculations are accurate and based on the timeliest financial data. Contact us today!

© 2015

Last Updated by Admin on 2015-08-27 11:18:04 AM

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Aug 26 2015
What You Need To Know Before Donating Collectibles

Posted in tax

If you’re a collector, donating from your collection instead of your bank account or investment portfolio can be tax-smart. When you donate appreciated property rather than selling it, you avoid the capital gains tax you would have incurred on a sale. And long-term gains on collectibles are subject to a higher maximum rate (28%) than long-term gains on most long-term property (15% or 20%, depending on your tax bracket) — so you can save even more taxes.

But choose the charity wisely. For you to receive a deduction equal to fair market value rather than your basis in the collectible, the item must be consistent with the charity’s purpose, such as an antique to a historical society.

Properly substantiating the donation is also critical, and this may include an appraisal. If you donate works of art with a collective value of $5,000 or more, you’ll need a qualified appraisal, and if the collective value is $20,000 or more, a copy of the appraisal must be attached to your tax return. If an individual item is valued at $20,000 or more, you may also be required to provide a photograph of that item.

If you’re considering a donation of artwork or other collectibles, contact us for help ensuring you can maximize your tax deduction.

© 2015

Last Updated by Admin on 2015-08-26 06:31:29 AM

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Aug 24 2015
Don’t Forget To Plan For Long-Term Care Expenses

Posted in estate

 

Too often, people planning their estates focus on tax and asset-protection issues and overlook long-term health care needs. But the high cost of long-term care (LTC) can quickly devour resources you need to maintain your lifestyle during retirement and provide for your children or other heirs.

LTC expenses, which can easily reach into six figures annually, aren’t covered by regular health insurance policies. And Medicare provides little assistance, if any. So it’s important to have a plan for financing these costs.

One option to consider is an LTC insurance policy. Although these policies are expensive, under the right circumstances they can prevent LTC costs from depleting assets you’ve set aside for retirement and estate planning.

If your LTC policy is “tax-qualified,” any benefits you receive will be excluded from your taxable income — subject to certain limited exceptions — and you’ll be able to deduct a portion of your premium payments. Tax-qualified policies are guaranteed renewable and noncancelable, don’t delay coverage of pre-existing conditions more than six months, and meet certain other requirements.

To be sure that LTC costs are considered as part of an integrated estate and financial plan, contact us. We can help you determine whether LTC insurance or another funding option best fits your needs.

© 2015

Last Updated by Admin on 2015-08-24 08:14:32 AM

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Aug 18 2015
Independent Contractors Offer Expertise and Potential Risks

Posted in tax

Turning to independent contractors can be a smart option in a number of situations, such as when you have a seasonal upswing in workload or need a specialized skill for a short period. But independent contractors come with potential risks, too. They may not help you trim your total workforce costs if you use them excessively. More important, there can be tax and legal ramifications if you mishandle the relationship.

The IRS has long scrutinized employers’ use of independent contractors as a way to avoid payroll tax obligations. If the IRS recharacterizes an independent contractor as an employee, you could be on the hook for:

  • Back payroll taxes you should have paid,
  • Back payroll and income taxes you should have withheld, and
  • Interest and penalties.

Also, earlier this year, the Department of Labor renewed its focus on employee misclassification. Its Wage and Hour Division released Administrator’s Interpretation No. 2015-1, which includes six factors to help employers determine proper classification and warns of serious potential penalties.

Independent contractors can give you flexibility to even out the peaks and valleys of your workforce needs. But these arrangements have risks. We can help you understand the tax implications and work with your legal advisors to keep you in compliance. Contact us today!

© 2015

Last Updated by Admin on 2015-08-18 02:52:52 PM

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Aug 17 2015
Act Soon If You Want To Help Your Child Buy A Home

Posted in tax

 

Mortgage interest rates are still at historically low levels, but they’re expected to go up by year end. So if you’ve been thinking about helping your child — or grandchild — buy a home, consider acting soon. There also are some favorable tax factors that will help:

0% capital gains rate. If the child is in the 10% or 15% tax bracket, instead of giving cash to help fund a down payment, consider giving long-term appreciated assets such as stock or mutual fund shares. The child can sell the assets without incurring any federal income taxes on the gain, and you can save the taxes you’d owe if you sold the assets yourself. As long as the assets are worth $14,000 or less (when combined with any other 2015 gifts to the child), there will be no federal gift tax consequences — thanks to the annual gift tax exclusion.

Low federal interest rates. Another tax-friendly option is lending funds to the child. Now is a good time for taking this step, too. Currently, Applicable Federal Rates — the rates that can be charged on intrafamily loans without causing unwanted tax consequences — are very low by historical standards. But these rates are also expected to increase by year end.

If you have questions about these or other tax-efficient ways to help your child or grandchild buy a home, please contact us.

© 2015

Last Updated by Admin on 2015-08-17 08:29:23 AM

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Aug 13 2015
Discuss Planned Gifts With The Charities That Will Receive Them

Posted in estate

 

If your estate plan includes charitable donations, discuss any planned gifts with the intended recipients before you finalize your plans. This is particularly important for donations that place restrictions on the charity’s use of the gift, as well as donations of real estate or other illiquid assets.

Some charities have policies of rejecting gifts that come with strings attached. And many charities are reluctant to accept gifts of real estate or other noncash assets that may expose them to liability or require an investment in order to convert the assets into operating funds.

If a charity rejects your gift, the assets will end up back in your estate and will go to any contingent or residual beneficiaries. If these beneficiaries aren’t other charities, rejection of the gift may increase your estate tax liability.

Real estate is particularly risky for nonprofits. The charity may be exposed to liability for environmental issues, zoning and building code violations, and other risks. It may require a cash investment to pay the mortgage or maintain the property.

If you’d like to make a charitable donation through your estate plan, we can help ensure that you’re taking the proper steps so your wishes are carried out as you intended.

Last Updated by Admin on 2015-08-13 11:46:16 AM

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Aug 12 2015
6 Ways to Mitigate Uncertainty in Strategic Planning

Posted in business

 

To succeed at strategic planning, business owners must look to actively mitigate the many uncertainties under which every company operates. Here are six ways to do that:

1. Be curious. Identify the demographic, technological, cultural and other changes occurring outside your company and industry.

2. Assess how those changes might impact your organization and industry. For example, trends toward a more ethnically diverse and older population have been well documented. How will they affect your business?

3. Gain insight on how to succeed in today’s world. Talk with employees at all levels and from across departments. Network with peers at companies within and outside your industry.

4. Figure out what you know. Soak up as much information as you can through industry journals, trade association gatherings and social media.

5. Challenge your assumptions. As markets, technology and industries advance, determine whether your current plans are still relevant. If they aren’t, make competitive adjustments.

6. Focus on flexibility, agility and resilience. Continually ask “what if” questions and plan for a range of scenarios. For instance, what if your supply chain breaks down?

Strategic planning should be approached prudently and decisively — not rashly or hesitantly. We can help chart your company’s course toward a brighter, more profitable future. Contact us today!

© 2015

Last Updated by Admin on 2015-08-12 08:33:17 AM

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Aug 10 2015
How To Begin Collecting Your 2015 Tax Refund Now

Posted in tax

If you usually receive a large federal income tax refund, you’re essentially making an interest-free loan to the IRS. Rather than wait until you file your 2015 tax return in 2016, why not begin enjoying your “refund” now by reducing your withholdings or estimated tax payments for the remainder of 2015?

It’s particularly important to review your withholdings, and adjust them if necessary, when you experience a major life event, such as marriage, divorce, birth or adoption of a child, or a layoff suffered by you or your spouse.

If you’d like help determining what your withholding or estimated tax payments should be for the second half of the year, please contact us.

© 2015

Last Updated by Admin on 2015-08-12 08:33:27 AM

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Aug 05 2015
Tread Carefully When Determining Compensation For S Corp. Shareholder-Employees

Posted in business

 

By distributing profits in the form of dividends rather than salary, an S corporation and its owners can avoid payroll taxes on these amounts. Because of the additional 0.9% Medicare tax on wages in excess of $200,000 ($250,000 for joint filers and $125,000 for married filing separately), the potential tax savings may be even greater than it once would have been. (S corporation dividends paid to shareholder-employees generally won’t be subject to the 3.8% net investment income tax.)

But paying little or no salary to S corporation shareholder-employees is risky. The IRS has targeted S corporations, assessing unpaid payroll taxes, penalties and interest against companies whose owners’ salaries are unreasonably low. To avoid such a result, S corporations should establish and document reasonable salaries for each position using compensation surveys, company financial data and other evidence.

Do you have questions about compensating S corporation shareholder-employees? Contact us — we can help you determine the mix of salary and dividends that can keep tax liability as low as possible while standing up to IRS scrutiny.

© 2015

Last Updated by Admin on 2015-08-05 07:02:25 AM

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Aug 05 2015
Independent Contractors Offer Expertise, Potential risks

Posted in business

Turning to independent contractors can be a smart option in a number of situations, such as when you have a seasonal upswing in workload or need a specialized skill for a short period. But independent contractors come with potential risks, too. They may not help you trim your total workforce costs if you use them excessively. More important, there can be tax and legal ramifications if you mishandle the relationship.The IRS has long scrutinized employers’ use of independent contractors as a way to avoid payroll tax obligations. If the IRS recharacterizes an independent contractor as an employee, you could be on the hook for:

Back payroll taxes you should have paid,

Back payroll and income taxes you should have withheld, and

Interest and penalties.

  • Also, earlier this year, the Department of Labor renewed its focus on employee misclassification. Its Wage and Hour Division released Administrator’s Interpretation No. 2015-1, which includes six factors to help employers determine proper classification and warns of serious potential penalties.Independent contractors can give you flexibility to even out the peaks and valleys of your workforce needs. But these arrangements have risks. We can help you understand the tax implications and work with your legal advisors to keep you in compliance. Contact us today!

© 2015

Last Updated by Admin on 2015-08-05 06:57:02 AM

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Aug 03 2015
Use Caution When Transferring Home Ownership To Your Children

Posted in estate

Many people mistakenly believe they can transfer their home to their children while retaining the right to continue living in it for the rest of their life, and remove the home’s value from their taxable estate. But, on the contrary, retaining such a “life estate” guarantees that the home’s value will be included in your taxable estate when you die. This means that, if your estate exceeds your available exemption at your death, some or all of your home’s value will be subject to estate taxes.

If instead you give your home to your children outright, you’ll remove it from your taxable estate. But your children will take over your tax basis in the property. So if the home has appreciated significantly, your children won’t be able to sell it without triggering substantial capital gains taxes. On the other hand, if the home passes to your children as part of your estate, they’ll receive a stepped-up basis, which reduces potential capital gains.

To determine the best course, compare the potential tax implications of each strategy. Retaining a life estate may be a good option if, for example, you believe that potential capital gains taxes would outweigh any estate tax savings an outright gift would create.

We can answer your questions regarding transferring home ownership.

© 2015

Last Updated by Admin on 2015-08-05 06:53:54 AM

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July 26 2013
Welcome to Our Blog!

Posted in general

This is the home of our new blog. Check back often for updates!

Last Updated by Admin on 2013-07-26 10:28:52 AM

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