How to determine if you need to worry about estate taxes

Certified Public Accountant Estate Tax Expert

How to determine if you need to worry about estate taxes

Among the taxes that are being considered for repeal as part of tax reform legislation is the estate tax. This tax applies to transfers of wealth at death, hence why it’s commonly referred to as the “death tax.” Its sibling, the gift tax — also being considered for repeal — applies to transfers during life. Yet most taxpayers won’t face these taxes even if the taxes remain in place.

Exclusions and exemptions

For 2017, the lifetime gift and estate tax exemption is $5.49 million per taxpayer. (The exemption is annually indexed for inflation.) If your estate doesn’t exceed your available exemption at your death, then no federal estate tax will be due.

Any gift tax exemption you use during life does reduce the amount of estate tax exemption available at your death. But every gift you make won’t use up part of your lifetime exemption. For example:

  • Gifts to your U.S. citizen spouse are tax-free under the marital deduction. (So are transfers at death — that is, bequests.)
  • Gifts and bequests to qualified charities aren’t subject to gift and estate taxes.
  • Payments of another person’s health care or tuition expenses aren’t subject to gift tax if paid directly to the provider.
  • Each year you can make gifts up to the annual exclusion amount ($14,000 per recipient for 2017) tax-free without using up any of your lifetime exemption.

What’s your estate tax exposure?

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. (But keep in mind that there could be estate tax exposure on your surviving spouse’s death, depending on the size of his or her estate.) The net number represents your taxable estate.

You can then apply the exemption amount you expect to have available at death. Remember, any gift tax exemption amount you use during your life must be subtracted. But if your spouse predeceases you, then his or her unused estate tax exemption, if any, may be added to yours (provided the applicable requirements are met).

If your taxable estate is equal to or less than your available estate tax exemption, no federal estate tax will be due at your death. But if your taxable estate exceeds this amount, the excess will be subject to federal estate tax.

Be aware that many states impose estate tax at a lower threshold than the federal government does. So you could have state estate tax exposure even if you don’t need to worry about federal estate tax.

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. We also can keep you up to date on any estate tax law changes.

Tax Accounting and Business Consulting for Metairie, Louisiana
Industry Specific Accounting
Metairie CPA Services
Metairie CPA News

Tax Accounting and Business Consulting for Mandeville, Louisiana
Industry Specific Accounting
Mandeville CPA Services
Mandeville CPA News

Tax Accounting and Business Consulting for Baton Rouge, Louisiana
Industry Specific Accounting
Baton Rouge CPA Services
Baton Rouge CPA News

Tax Accounting and Business Consulting for Covington, Louisiana
Industry Specific Accounting
Covington CPA Services
Covington CPA News

Mandeville Notary Public Services
Madisonville Notary Public Services
Covington Notary Public Services

Mandeville Notary Public Glossary – Lesion

Mobile Notary Seal
Mandeville Louisiana Notary Public Seal Mobile

Mandeville Notary Public Glossary – Lesion

Also referred to as “lesion beyond moiety.” The sale of an immovable may be rescinded for lesion when the price is less than one-half of the fair market value of the immovable. Lesion can be claimed only by the seller and only in voluntary sales of corporeal immovables. C.C. art. 2589
Continue reading “Mandeville Notary Public Glossary – Lesion”

Mandeville Notary Public Glossary – Accession

Mobile Notary Seal
Mandeville Louisiana Notary Public Seal 

Mandeville Notary Public Glossary – Accession

Accession is defined in the Louisiana Civil Code Article 483. It refers to:

“Acquiring title to additions or improvements to property as a result of natural growth, labor, the annexation of fixtures or the accretion of alluvial deposits along the banks of streams”

In other words, this means that if you own a piece of property, under normal circumstances, you also become the owner of the things that grow on the property and the things that you build on the property.

Be aware that if someone else builds something on your property and you know about this action, they might have a claim to remove the item which they built.

Please call us if you would like more information or if you need notary services in Mandeville, Louisiana. Feel free to explore our other services as well at the following links.

Mandeville Notary Public Services

Tax Accounting and Business Consulting for Mandeville, Louisiana
Industry Specific Accounting
Mandeville CPA Services
Mandeville Notary Public Services
Tax Accounting and Business Consulting for Metairie, Louisiana
Industry Specific Accounting
Metairie CPA Services
Covington Notary Public Services

All fringe benefits aren’t created equal for tax purposes

All fringe benefits aren’t created equal for tax purposes

According to IRS Publication 5137, Fringe Benefit Guide, a fringe benefit is “a form of pay (including property, services, cash or cash equivalent), in addition to stated pay, for the performance of services.” But the tax treatment of a fringe benefit can vary dramatically based on the type of benefit.

Generally, the IRS takes one of four tax approaches to fringe benefits:

1. Taxable/includable. The value of benefits in this category are taxable because they must be included in employees’ gross income as wages and reported on Form W-2. They’re usually also subject to federal income tax withholding, Social Security tax (unless the employee has already reached the current year Social Security wage base limit) and Medicare tax. Typical examples include cash bonuses and the personal use of a company vehicle.

2. Nontaxable/excludable. Benefits in this category are considered nontaxable because you may exclude them from employees’ wages under a specific section of the Internal Revenue Code. Examples include:

  • Working-condition fringe benefits, which are expenses that, if employees had paid for the item themselves, could have been deducted on their personal tax returns (such as subscriptions to business periodicals or websites and some types of on-the-job training),
  • De minimis fringe benefits, which include any employer-provided property or service that has a value so small that accounting for it is “unreasonable or administratively impracticable” (such as occasional coffee, doughnuts or soft drinks and permission to make occasional local telephone calls),
  • Properly documented work-related travel expenses (such as transportation and lodging),
  • Up to $50,000 in group term-life insurance, as long as the policy meets certain IRS requirements, and
  • Employer-paid health care premiums under a qualifying plan.

3. Partially taxable. In some cases, the value of a fringe benefit will be excluded under an IRC section up to a certain dollar limit with the remainder taxable. A public transportation subsidy under Section 132 is one example.

4. Tax-deferred. This designation applies to fringe benefits that aren’t taxable when received but that will be subject to tax later. A common example is employer contributions to a defined contribution plan, such as a 401(k) plan.

Are you applying the proper tax treatment to each fringe benefit you provide? If not, you could face unexpected tax liabilities or other undesirable consequences. Please contact us with any questions you have about the proper tax treatment of a particular benefit you currently offer or are considering offering.

Tax Accounting and Business Consulting for Mandeville, Louisiana
Industry Specific Accounting
Mandeville CPA Services
Mandeville Notary Public Services

Tax Accounting and Business Consulting for Metairie, Louisiana
Industry Specific Accounting
Metairie CPA Services

 

Summer is a good time to start your 2017 tax planning and organize your tax records

Certified Public Accountant Expert Tax Advice Summer Planning

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.

Tax Accounting and Business Consulting for Mandeville, Louisiana
Industry Specific Accounting
Mandeville CPA Services

The Role of the Mandeville Notary Public

Mandeville Notary Public – Our Role

The commissioned notary serves an integral part in our legal system throughout the state. The Louisiana Notary is called a Civil Law Notary. Very few documents can be considered legal and used in a court of law without the seal and signature of a commissioned notary.

Mobile Notary Seal
Mandeville Louisiana Notary Public Seal Mobile

Tax Accounting and Business Consulting for Mandeville, Louisiana
Industry Specific Accounting
Mandeville CPA Services
Mandeville Notary Public Services

Claiming a federal tax deduction for moving costs

Mandeville La notary
Mandeville la Louisiana Notary Public Mobile Notary 24/7

Claiming a federal tax deduction for moving costs

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.

Tax Accounting and Business Consulting for Mandeville, Louisiana
Industry Specific Accounting
Mandeville CPA Services
Mandeville Notary Public Services

Breaks for business charitable donations you may not know about

Mandeville La notary
Mandeville la Louisiana Notary Public Mobile Notary 24/7

Metairie CPA – Breaks for business charitable donations you may not know about

Donating to charity is more than good business citizenship; it can also save tax. Here are three lesser-known federal income tax breaks for charitable donations by businesses.

1. Food donations

Charitable write-offs for donated food (such as by restaurants and grocery stores) are normally limited to the lower of the taxpayer’s basis in the food (generally cost) or fair market value (FMV), but an enhanced deduction equals the lesser of:

  • The food’s basis plus one-half the FMV in excess of basis, or
  • Two times the basis.

To qualify, the food must be apparently wholesome at the time it’s donated. Your total charitable write-off for food donations under the enhanced deduction provision can’t exceed:

  • 15% of your net income for the year (before considering the enhanced deduction) from all sole proprietorships, S corporations and partnership businesses (including limited liability companies treated as partnerships for tax purposes) from which food donations were made, or
  • For a C corporation taxpayer, 15% of taxable income for the year (before considering the enhanced deduction).

2. Qualified conservation contributions

Qualified conservation contributions are charitable donations of real property interests, including remainder interests and easements that restrict the use of real property. For qualified C corporation farming and ranching operations, the maximum write-off for qualified conservation contributions is increased from the normal 10% of adjusted taxable income to 100% of adjusted taxable income.

Qualified conservation contributions in excess of what can be written off in the year of the donation can be carried forward for 15 years.

3. S corporation appreciated property donations

A favorable tax basis rule is available to shareholders of S corporations that make charitable donations of appreciated property. For such donations, each shareholder’s basis in the S corporation stock is reduced by only the shareholder’s pro-rata percentage of the company’s tax basis in the donated asset.

Without this provision, a shareholder’s basis reduction would equal the passed-through write-off for the donation (a larger amount than the shareholder’s pro-rata percentage of the company’s basis in the donated asset). This provision is generally beneficial to shareholders, because it leaves them with higher tax basis in their S corporation shares.

If you believe you may be eligible to claim one or more of these tax breaks, contact us. We can help you determine eligibility, prepare the required documentation and plan for charitable donations in future years.

Tax Accounting and Business Consulting for Mandeville, Louisiana
Industry Specific Accounting
Mandeville CPA Services
Mandeville Notary Public Services

Choosing the best way to reimburse employee travel expenses

Mandeville La notary
Mandeville la Louisiana Notary Public Mobile Notary 24/7

Choosing the best way to reimburse employee travel expenses

If your employees incur work-related travel expenses, you can better attract and retain the best talent by reimbursing these expenses. But to secure tax-advantaged treatment for your business and your employees, it’s critical to comply with IRS rules.

Reasons to reimburse

While unreimbursed work-related travel expenses generally are deductible on a taxpayer’s individual tax return (subject to a 50% limit for meals and entertainment) as a miscellaneous itemized deduction, many employees won’t be able to benefit from the deduction. Why?

It’s likely that some of your employees don’t itemize. Even those who do may not have enough miscellaneous itemized expenses to exceed the 2% of adjusted gross income floor. And only expenses in excess of the floor can actually be deducted.

On the other hand, reimbursements can provide tax benefits to both your business and the employee. Your business can deduct the reimbursements (also subject to a 50% limit for meals and entertainment), and they’re excluded from the employee’s taxable income — provided that the expenses are legitimate business expenses and the reimbursements comply with IRS rules. Compliance can be accomplished by using either the per diem method or an accountable plan.

Per diem method

The per diem method is simple: Instead of tracking each individual’s actual expenses, you use IRS tables to determine reimbursements for lodging, meals and incidental expenses, or just for meals and incidental expenses. (If you don’t go with the per diem method for lodging, you’ll need receipts to substantiate those expenses.)

The IRS per diem tables list localities here and abroad. They reflect seasonal cost variations as well as the varying costs of the locales themselves — so London’s rates will be higher than Little Rock’s. An even simpler option is to apply the “high-low” per diem method within the continental United States to reimburse employees up to $282 a day for high-cost localities and $189 for other localities.

You must be extremely careful to pay employees no more than the appropriate per diem amount. The IRS imposes heavy penalties on businesses that routinely fail to do so.

Accountable plan

An accountable plan is a formal arrangement to advance, reimburse or provide allowances for business expenses. To qualify as “accountable,” 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.
  • 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 taxes (employee) and employment taxes (employer and employee).

Whether you have questions about which reimbursement option is right for your business or the additional rules and limits that apply to each, contact us. We’d be pleased to help.

Tax Accounting and Business Consulting for Mandeville, Louisiana
Industry Specific Accounting
Mandeville CPA Services
Mandeville Notary Public Services

Coverdell ESAs: The tax-advantaged way to fund elementary and secondary school costs

Mandeville La notary
Mandeville la Louisiana Notary Public Mobile Notary 24/7

With school letting out you might be focused on summer plans for your children (or grandchildren). But the end of the school year is also a good time to think about Coverdell Education Savings Accounts (ESAs) — especially if the children are in grade school or younger.

One major advantage of ESAs over another popular education saving tool, the Section 529 plan, is that tax-free ESA distributions aren’t limited to college expenses; they also can fund elementary and secondary school costs. That means you can use ESA funds to pay for such qualified expenses as tutoring and private school tuition.

Other benefits

Here are some other key ESA benefits:

  • Although contributions aren’t deductible, plan assets can grow tax-deferred.
  • You remain in control of the account — even after the child is of legal age.
  • You can make rollovers to another qualifying family member.

A sibling or first cousin is a typical example of a qualifying family member, if he or she is eligible to be an ESA beneficiary (that is, under age 18 or has special needs).

Limitations

The ESA annual contribution limit is $2,000 per beneficiary. The total contributions for a particular ESA beneficiary cannot be more than $2,000 in any year, no matter how many accounts have been established or how many people are contributing.

However, the ability to contribute is phased out based on income. The phaseout range is modified adjusted gross income (MAGI) of $190,000–$220,000 for married couples filing jointly and $95,000–$110,000 for other filers. You can make a partial contribution if your MAGI falls within the applicable range, and no contribution if it exceeds the top of the range.

If there is a balance in the ESA when the beneficiary reaches age 30 (unless the beneficiary is a special needs individual), it must generally be distributed within 30 days. The portion representing earnings on the account will be taxable and subject to a 10% penalty. But these taxes can be avoided by rolling over the full balance to another ESA for a qualifying family member.

Would you like more information about ESAs or other tax-advantaged ways to fund your child’s — or grandchild’s — education expenses? Contact us!

Tax Accounting and Business Consulting for Mandeville, Louisiana
Industry Specific Accounting
Mandeville CPA Services
Mandeville Notary Public Services