We believe in creating a strong working relationship with our clients to determine their specific accounting and compliance needs.

If you made gifts last year, you may (or may not) need to file a gift tax return

Gifting assets to loved ones is one of the simplest ways of reducing your taxable estate. However, what may not be as simple is determining whether you need to file a gift tax return (Form 709). With the April 17 filing deadline approaching, now is the time to find out an answer.

Return required

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 (for 2017),
  • 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 $149,000 noncitizen spouse annual exclusion amount (for 2017),
  • 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.

Return not required

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.

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.

In some cases it’s even advisable to file Form 709 to report nongifts. For example, suppose you sold assets to a family member or a trust. Again, 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.

Contact Holbrook & Manter if you made gifts last year and are unsure if you should file a gift tax return.

Medicare Blog Series: Part 3

 By: Linda Fargo- Tax Manager

Original Medicare: Includes Part A & Part B

  • Medicare provides this coverage directly
  • Choice of doctors, hospitals, and other providers that accept Medicare anywhere in the country
  • The patient pays the deductibles and coinsurance
  • Will usually pay a monthly premium for Part B
  • If drug coverage is desired, must join a Part D – Medicare Prescription Drug Plan and pay additional monthly premiums
  • May also want to consider purchasing additional Medigap coverage from a private insurance company to fill the gaps in Original Medicare
  • Individuals who also have Federal Health Benefits (FEHB) or some other public retirement health benefits may have some additional considerations.

Medicare Advantage- Part C: Includes BOTH Part A & Part B

  • Private insurance companies approved by Medicare provide this coverage
  • In most cases the patient is required to use plan doctors, hospitals, and other providers or pay more or all of the costs. This type of plan is not a good choice for people that don’t live in the same location all year.
  • Generally there is a monthly premium in addition to the Part B premium as well as deductibles, copayments or  coinsurance for covered services
  • Costs, extra coverage, and rules vary by plan
  • If drug coverage is desired and it’s offered by the chosen Medicare Advantage plan will normally need to get it through the plan.  Some types of plans don’t offer drug coverage.  In this case can join a Medicare Part D plan.

There are many different kinds of Medicare Advantage options available. Not every plan provider will have each kind, and it is advisable to shop around to see all the options available in the enrollee’s service area.

Decide when to apply – Considerations:

TIMING IS CRITICAL! Medicare has many enrollment periods for the various “Parts” of Medicare. Enrollees that miss the optimal “window of opportunity” will incur higher out-of-pocket costs in the interim as well as permanent lifelong penalties.  (See NASTY COST OF NOT ENROLLING ON TIME – Penalty Calculation at the end of this article.)

Timing for Parts A & B –

Initial Enrollment Period (IEP)

This is the beneficiary’s first opportunity to enroll in Medicare Part A and B (except those who are medically disabled under the age of 65).  The IEP is 7 months long, beginning 3 months before the 65th birthday month and ending 3 months after the 65th birthday month.  All Medicare eligible people need to enroll for Medicare Part A and B during this period unless they are eligible for a Special Enrollment Period (SEP) later.  Those that do not enroll during their IEP or, if applicable, SEP will pay lifelong penalties, and will have a delay in applying to get access to Medicare coverage.

Circumstances that would indicate necessity or benefit for application for Part A and B during the IEP:

  • No other health insurance
  • Self-paid, non-employer insurance
  • Employer health insurance with high costs or inadequate coverage
  • Eligible for health benefits under the military’s TRICARE for Life (TFL) retiree program, which requires taking Medicare Part B as a condition of continued TFL coverage
  • Not entitled to premium-free Part A benefits

Special Enrollment Periods (SEP)

Those who have coverage under group health plans for an employer for which the individual or their spouse are still actively working (the employer that is providing the coverage) will qualify for a SEP to sign up for Part A and/or Part B when the job or coverage ends, whichever comes first. Although it is possible to enroll in Medicare any time between the end of the IEP and before work or employer coverage ends, the SEP lasts for 8 months after the employment or coverage ends.  There is usually not a late enrollment penalty for those who sign up during the SEP.  However, Part B coverage begins on the first day of the month after enrollment.

For those who continue working beyond 65, the law requires the employer to offer exactly the same health benefits that are offered to younger workers in the same company or organization.

However, some caveats:

  • It is important to sign up as soon as possible because there is no primary coverage during the SEP! Even coverage such as COBRA or retirement benefits will only provide secondary coverage.  (When Medicare eligible individuals do not have Medicare Part A or B coverage the secondary coverage will only cover 20% of the cost leaving 80% to be paid by the individual.)
  • The employer coverage needs to cover a group with 20 or more members. (The 20 workers don’t have to be full-time and don’t have to be enrolled in the employer’s health plan.) If the group is smaller than 20 members, enrollment for Part A and B must be made during the IEP.  If not, the enrollee will only have secondary coverage through their employer plan!There is an obscure rule worth knowing:  Someone who fails to sign up during their IEP and then realizes that their employer plan isn’t paying because it’s become secondary to Medicare, is entitled to an immediate SEP without penalty if they are will working.
  • The employer coverage needs to be deemed Medicare Part D “creditable”.  This means the employer coverage includes a prescription plan comparable to Medicare Part D.
  • Those retiring or stopping work before the IEP ends – even on the very last day – will not be eligible for a SEP.  An IEP always trumps an SEP if they overlap!

Most people who delay Part B nonetheless sign up for Part A during their initial enrollment period at age 65. Even though delaying Part A beyond age 65 doesn’t, generally, risk penalty, signing up has the advantage of making sure that a Social Security official enters into the record the fact that Part B is being delaying on the basis of current employment.

However, for those for which their employer health insurance takes the form of a high-deductible plan paired with a Health Savings account, there may be a very good reason to delay Part A.  Under IRS rules, enrollment in any part of Medicare makes an individual ineligible to contribute to an HSA. Those covered by their spouse’s HSA at work aren’t affected by the rule because they are not the contributing employee.  It’s suggested that contributions to the HSA be stopped several months before starting to draw Social Security benefits as any retroactive “back pay” will cause the Medicare coverage to be retroactive as well. Those who have an HSA may also want to delay signing up for Part D as well.

Even those who can delay Part B in favor of employer insurance have some choices:

  • Can continue with employer and postpone Medicare
  • Can drop employer benefits and rely totally on Medicare
  • Can decide to have both

When covered by health insurance at work as well as Medicare, that insurance is automatically primary to Medicare unless the employer has fewer than 20 workers.  Primary means the employer plan pays your medical bills first; Medicare kicks in only in the event the plan doesn’t cover a service or item that Medicare covers.  Medicare doesn’t cover any out-of-pocket costs, such as deductibles and co-payments so, unless the employer coverage is sub-standard, Medicare would probably not pay anything at all.

That is really what the SEP is all about.  It allows the postponing of Part B – and the required monthly premiums – without risking late penalties.  But only in certain circumstances.

There are also a few circumstances for which a SEP is available to drop out of a Medicare Advantage or Part D drug plan without joining another.  These include getting health benefits from a new job, becoming eligible for TRICARE or VA drug coverage, or moving out of the US.

A plan must dis-enroll someone that moves permanently out of its service area, gets imprisoned, loses eligibility for Medicare or if someone has misrepresented other coverage they have.

Timing for Part D

Part D coverage for prescription drugs comes with its own set of rules on enrollment.  These rules are more flexible and allow more choices.  Although Part D is voluntary, there are still penalties for not enrolling when first eligible.

The “best” time to enroll will depend on individual circumstances.

For those without creditable drug coverage, the “best” time is, generally, during the 7 month IEP around age 65.

A Part D plan isn’t required for those who already have creditable drug coverage from another source.  Drug coverage is creditable if its value is at least as good as Part D’s – specifically, if whoever sponsors it pays at least as much money overall for everybody in the plan as Medicare would. Having creditable coverage generally allows the ability to switch to a Part D drug plan without penalty if the other coverage is lost sometime in the future.  It is a good idea to ask for annual confirmation from your plan administrator that your employer’s plan is creditable, though.

Since those who aren’t enrolled in Part A or Part B aren’t eligible for Part D, there should be no late penalties even if the drug coverage at work isn’t creditable.

The SEP for enrolling in a drug plan is only two months after the other coverage ends.  Additionally, the law says that those with Medicare Part A and/or Part B that go for more than 63 days without Part D or other creditable coverage will get a late penalty. It is important to note that they must be actually receiving Part D coverage within 63 days to avoid a penalty.  Since drug coverage actually begins on the first of the month after enrollment, it is better to consider the SEP as two months, not 63 days!

Timing for Medigap Policies

Medigap insurance has no annual open enrollment periods of the kind that exist for other Medicare drug and health plans.  However, there is a six month time frame after enrollment in Part B when Medigap can be bought with full federal protections.  This is a one-time opportunity to buy a policy with no fear of being turned down. Once purchased the policy owner has a guaranteed right to be renewed.

Since federal law doesn’t provide an absolute right to switch from one Medigap policy to another, some consumer advocates advise purchasing the best policy that can be afforded to save the hassle and loss of federal protections of changing plans later on.

Other Enrollment Periods -

Annual Open Enrollment Period (OEP)

The OEP runs from October 15th through December 7th each year and is only for people already enrolled in Medicare.  During the annual OEP beneficiaries may sign up for, drop or change Part D prescription drug plans, switch Medicare Part C Advantage plans, enroll in a Medicare Part C Advantage plan for the first time, or go from a Medicare Advantage plan to traditional Medicare. Enrollment changes take effect on January 1 of the following year.  Coverage in existing plans continue until midnight on December 31st.

Plans will send Annual Notice of Changes (ANOC) no later than September 30th.  It is important to read them so that informed decisions can be made as to whether or not changes should be made during the OEP.  It can pay to compare plans annually.  Shopping around can definitely be worth the time it takes.

General Enrollment Period (GEP)

The GEP runs from January 1st to March 31st each year.  During the annual GEP those who missed their IEP or SEP for enrolling in Medicare Part B can enroll.  However, coverage will not start until July 1 of the same year and they may be hit with late penalties that are added to their monthly Part B premiums for all future years!

Medicare Advantage Dis-enrollment Period (MADP)

The MADP provides Medicare beneficiaries another opportunity to dis-enroll from a Medicare Advantage plan and switch to traditional Medicare, but not vice versa.  The MADP extends from January 1st through February 14th each year.  The change will take place the first of the following month.  The same beneficiary can enroll in a standalone Prescription Drug Plan (PDP) for Part D coverage during the MADP as well.  The person may also enroll in a Medigap plan.

THE NASTY COST OF NOT ENROLLING AT THE PROPER TIME – Calculation of penalties

There are a few, limited situations when it is possible to appeal a penalty.  However, the government enforces the rules strictly and being ignorant of them isn’t considered a defense.

Part A Penalties –

Part A penalties only apply to those who could’ve gotten Part A services by paying monthly premiums (those without 10 years of work credits in Social Security) but failed to enroll as soon as they were eligible.  Part A penalties add 10% to the premium, but that percentage isn’t multiplied by the number of years of delayed enrollment and they only go on for double the length of time that enrollment was delayed.

Part B Penalties –

Part B penalties amount to an additional 10% for every full 12-month period elapsed between the end of the IEP and the end of the GEP when someone finally signs up less any time covered by group health insurance after age 65 from active employment. Not only are they permanent, but they tend to increase over time as they are calculated based on a percentage of the Part B standard premiums for any given year.

Part D Penalties –

Although Part D prescription drug coverage is voluntary, it also comes with consequences for enrolling later than eligible.

  • Probably won’t be able to enroll in a drug plan until open enrollment
  • Penalized for every month enrolled in Part A or Part B but didn’t have Part D or other creditable coverage after becoming eligible for Medicare at age 65 or through disability at a younger age.

The basis for the penalties is the national average percentage (NAP). Every fall, Medicare works out the average of all the premiums that Part D plans nationwide will charge during the following year.  This dollar amount becomes the NAP for the next year.  The late penalty consists of 1% of the NAP for every month without creditable coverage or Part D.  It works out to 12% a year.  These penalties are permanent and will increase as the NAP increases.

Scrambling to get your 1099-MISC information together? Here’s some advice.

By: Natalie Bruns, CPA- Senior Accountant

As the deadline to file 1099s quickly approaches, more and more clients seem to stress out because they’ve waited until the last minute to file their 1099s or to gather the information needed to file.  Throughout the year, they say “I don’t have time to get information before paying a bill,” or “I’ll just wait until the end of the year to gather 1099 information.”  Then, when it’s the end of the year, they spend hours gathering tax IDs, addresses, and amounts paid to vendors to report on their 1099s.  Here are a few tips that small business owners can do throughout the year to make the 1099 filing process seamless – and stress free!

Gather Vendor Information When a Bill is Received

When you receive a bill from a new vendor that may require a 1099, request a W-9 immediately and save the document in your records for year-end.  Requesting W-9s throughout the year can save lots of time calling vendors for their information at the end of the year.

Mark the Vendor as a 1099 Vendor

In most accounting software such as QuickBooks, Sage, as well as various others, there is an option to indicate whether a vendor is a 1099 vendor or not.  When a new vendor is added, within the vendor details indicate that the vendor is a 1099 vendor just by checking a box.  Also in the vendor details is a place to enter the Social Security Number or Tax Identification Number of the vendor.   If a W-9 is requested and received in a timely manner, this number can be saved within the software, ready to be used at the end of the year.   Again, this can save a significant amount of time at the end of the year searching for these numbers because they’re saved right in the system.

Set up 1099 Accounts

Using the accounting software can save so much time when preparing 1099s.  Setting up certain expense accounts as 1099 accounts allows you to pull reports for payments to vendors expensed to those accounts.  For example, contract labor is a service that needs to be reported on a 1099.  This is an account that would be indicated as a 1099 account within the chart of account settings.

1099 Reports

If the above three steps are taken, 1099 reports can easily be run through the accounting software at year-end.  These reports can include the vendor, address, EIN or Social Security Number, the expense account, and the amount to be reported, all in one summarized report.  After a quick review of the information, 1099’s can be easily filed.

 As a reminder, a 1099-MISC needs to be filed to each vendor that an employer paid $600 or more in services, rents, prizes, or other income payments.  Generally payments to corporations are not required to be reported on a 1099-MISC.

Starting the year off right by tracking your 1099 vendors can make for a seamless filing process come January 2019.  If you have questions regarding 1099s or setting up 1099 vendors and accounts in your accounting software, contact Holbrook & Manter today.

Life insurance: A Powerful Estate Planning Tool for Nontaxable Estates

For years, life insurance has played a critical role in estate planning, providing a source of liquidity to pay estate taxes and other expenses. It’s been particularly valuable for business owners, whose families might not have the liquid assets they need to pay estate taxes without selling the business.

Under the Tax Cuts and Jobs Act, the estate tax exemption has climbed to an inflation-adjusted $10 million through 2025 (projected to be just over $11 million for 2018). Even before the increase, federal estate taxes weren’t a concern for the vast majority of families, and now even fewer families are at risk. But even for nontaxable estates, life insurance continues to offer significant estate planning benefits.

Replacing income and wealth

If you die unexpectedly, life insurance can protect your family by replacing your lost income. It can also be used to replace wealth in a variety of contexts. For example, suppose you own highly appreciated real estate or other assets and wish to dispose of them without generating current capital gains tax liability. One option is to contribute the assets to a charitable remainder trust (CRT).

As a tax-exempt entity, the CRT can sell the assets and reinvest the proceeds without triggering capital gains tax. In addition, you can enjoy an income stream and charitable income tax deductions. Typically, distributions you receive from the CRT are treated as a combination of ordinary taxable income, capital gains, tax-exempt income and tax-free return of principal.

After the end of the CRT’s term (which can be a specific number of years, your lifetime or even the joint lifetimes of you and your spouse), the remaining trust assets pass to charity, reducing the amount of wealth available to your children or other heirs. But you can use life insurance to replace that lost wealth.

You can also use life insurance to replace wealth that’s lost to long term care (LTC) expenses, such as nursing home costs. Although LTC insurance is available, it can be expensive, especially if you’re already beyond retirement age.

For many people, a better option is to use personal savings and investments to fund their LTC needs and to purchase life insurance to replace the money that’s spent on such care. One advantage of this approach is that, if you don’t need LTC, your heirs will enjoy a windfall.

Finding the right policy

These are just a few examples of the many benefits provided by life insurance. We can help you determine which type of life insurance policy is right for your situation as this is an important part of your overall estate plan. Contact Holbrook & Manter today for more information on Trust & Estate services.

Hooray for Continued Valuation Discounts for Family Limited Partnerships and for Francis Ford Coppola and “The Godfather!”

By: Mark Rhea, J.D.- Senior Assistant Accountant

Valuation discounts are not very hard to understand. I’ll start by asking a simple question, if you had an opportunity to purchase one share of ABC , Inc., which share would you pay more for – the share that had no restrictions on its resale or the share with restrictions? The natural answer is that you would pay less for the shares that had  restrictions on their resale. This raises the question of how much less does the share with restrictions on its resale command. Whatever that amount is, that is a valuation discount, specifically a discount for lack of marketability or lack of control – depending upon the precise fact pattern of the situation.

Since in the issuing of Rev. Rul. 59-60 which provided the foundation for guidance for valuation discounts almost 60 years ago, valuation discounts have been applied to shares of all kinds of business entities including family entities such as family limited partnerships. However, recently under the prior administration the IRS did not like the fact that family limited partnerships were able to use valuation discounts for gift and estate tax purposes. Many family entities have agreements and guidelines that contain restrictions for who can own an interest in the entity and how it can be sold. The IRS believed that using these restrictions as justification for a lack of marketability was primarily a way to dodge taxes. Their solution through proposed Sec. 2704 regulations was to eliminate the lack of marketability discount for family entities for gift and estate tax purposes.

Thankfully, through the recent actions of the U.S. Treasury under the current administration, these proposed regulations by the prior administration are not going anywhere and family entities can still use lack of marketability discounts when valuing an interest in a family entity for gift and estate tax purposes.

However,  the restrictions that are placed in the operating agreement or guidelines of a family entity regarding who can own it and who can control it have non-tax benefits. In watching “The Godfather” you can see the benefits of these kinds of restrictions demonstrated in the actions of the Corleone family. Don’t want your abusive and betraying son-in-law Carlo Rizzi from doing anything important in the family business? Put restrictions on who can control or own portions of the family business. Afraid your feeble-minded son, Fredo could assume any control over the important aspects of the family business? Place restrictions on who can control decision-making by limiting it to a small number of trusted family members. Do you know that your son, Michael has a great plan to keep the family business and its wealth going for years to come? Restrictions on who is in charge can help with ensuring smart wealth management and transfers of wealth in the future.

Regardless of how many of the these restrictions are in place for a family limited partnerships, without communication and an understanding of the restrictions regarding the roles all family members play in the partnership, trouble may ensue. Just as Vito Corleone called a meeting of the all of the families in New York and beyond after Sonny met his demise on the causeway, it is important for families to keep the lines of communication open and meet on a regular basis to discuss issues of concern. Not only is regular communication important, but also the family members must understand issues facing the partnership and their rights and roles that they play in it. After all, what good is a meeting if no one understands what’s happening?

At Holbrook & Manter, CPAs we want to help you succeed and address issues that your family limited partnership has and guide it in a prosperous direction. Inspiration for the blog was not only from Francis Ford Coppola’s “The Godfather,” but also from the article “Nontax Concerns Raise Need for Family-Entity Planning” by Jim Brennan and Daisy Medici. See Brennan, J. and Medici, D. (2017). Nontax concerns raise need for family-entity planning. Retrieved December 19th, 2017, from RIA Checkpoint.

Have you taken state estate taxes into account?

The Tax Cuts and Jobs Act has doubled the federal gift and estate tax exemption, with inflation-adjustments projected to raise it to $11.18 million for 2018.This means federal estate taxes are a concern for fewer families, at least in the short term. (The doubled exemption expires December 31, 2025.) But it’s important to consider how state estate or inheritance taxes may affect your estate plan.

There’s uncertainty about how states will respond to the increased federal estate tax exemption. One line of thought is that many states will continue to “decouple” from the federal exemption and impose their own estate tax exemptions at a lower amount.

Establishing residency in a new state

If your estate is large enough that estate tax liability is a concern, one option is to move to a state that imposes low or no estate or inheritance taxes. But moving to a tax-friendly state doesn’t necessarily mean you’ve escaped taxation by the state you left. Unless you’ve cut all ties with your former state, there’s a risk that the state will claim you’re still a resident and are subject to its estate tax.

Even if you’ve successfully established residency in a new state, you may be subject to estate taxes on real estate or tangible personal property located in the old state (depending on that state’s tax laws). And don’t assume that your estate won’t be taxed on this property merely because its value is less than the federal exemption amount. In some states, estate taxes are triggered when the value of your worldwide assets exceeds the state’s exemption amount.

Terminating residency with a previous state

If you’re relocating to a state with low or no estate taxes, consult with us about steps you can take to terminate residency in the old state and establish residency in the new one. Examples include acquiring a residence in the new state, obtaining a driver’s license and registering to vote there, receiving important documents at your new address, opening bank accounts in the new state and closing the old ones, and moving cherished personal possessions to the new state.

If you own real estate in the old state, consider transferring it to a limited liability company or other entity. In some states, interests in these entities may be treated as nontaxable intangible property. Contact Holbrook & Manter to learn more about how state estate or inheritance taxes may affect your estate plan

H&M’s Brian Ravencraft Pens Tax Article for Ohio’s Country Journal

Now in his third year of writing articles for Ohio’s Country Journal, H&M’s Brian Ravencraft turned his attention towards the new tax law for his most recent write-up.

His article begins like this:

On Dec. 22, President Donald Trump signed HR 1 into law. This new law implements the most significant changes to our tax code in more than 30 years. This article provides a general overview of some of the provisions that most impact farmers.

Read the rest of Brian’s summary at the link below and contact H&M with any questions you may have about the new tax law:

http://ocj.com/2018/01/summary-of-the-new-tax-law-and-its-impact-on-ohio-agriculture/

Tax Cuts and Jobs Act Expands Appeal of 529 Plans in Estate Planning

It’s common for grandparents to want to help ensure their grandchildren will get a high quality education. And, along the same lines, they also want the peace of mind that their wealth will be preserved for their children and grandchildren after they’re gone. If you’re facing these challenges, one option that can help you conquer both is a 529 plan. And it’s become even more attractive under the Tax Cuts and Jobs Act (TCJA).

529 plan in action

In a nutshell, a 529 plan is one of the most flexible tools available for funding college expenses and it can provide significant estate planning benefits. 529 plans are sponsored by states, state agencies and certain educational institutions. You can choose a prepaid tuition plan to secure current tuition rates or a tax-advantaged savings plan to fund college expenses. The savings plan version allows you to make cash contributions to a tax-advantaged investment account and to withdraw both contributions and earnings free of federal — and, in most cases, state — income taxes for “qualified education expenses.”

Qualified expenses include tuition, fees, books, supplies, equipment, and a limited amount of room and board. And beginning this year, the TCJA has expanded the definition of qualified expenses to include not just postsecondary school expenses but also primary and secondary school expenses. This change is permanent.

529 plan and your estate plan

529 plans offer several estate planning benefits. 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 $15,000 per year ($30,000 for married couples) to any number of recipients, without triggering gift or GST taxes and without using any of your lifetime exemption amounts.

For estate tax purposes, all of your contributions, together with all future earnings, are removed from your taxable estate even though you retain control over the funds. Most estate tax saving strategies require you to relinquish control over your assets — for example, by placing them in an irrevocable trust. But a 529 plan shields assets from estate taxes even though you retain the right (subject to certain limitations) to control the timing of distributions, change beneficiaries, move assets from one plan to another or get your money back (subject to taxes and penalties).

529 plans accept only cash contributions, so you can’t use stock or other assets to fund an account. Also, their administrative fees may be higher than those of other investment vehicles. Contact Holbrook & Manter to help you plan for the distribution of your wealth using various estate planning strategies, such as a 529 plan.

Important Audit Changes on the Horizon

By: William Bauder, CPA, CGMA, CITP- Manager of Assurance & Advisory Services

Our firm has been keeping you updated on the most recent events surrounding tax reform, but, taxes aren’t the only things changing these days.  The accounting standards are also changing, and more frequently and more drastically than in recent history.  From 2014 to 2017 there were 70 separate Accounting Standards Updates (ASU’s) implemented.  In three year period preceding, 2011-2013, there were only 33 ASU’s implemented. There are more coming too.  In 2017 the FASB put out 14 standards for comment. During 2015 and 2016 only a combined 10 standards were put out for comment.  Currently, the FASB has 29 separate projects in some phase of exploration.  The changes are going to keep coming.  Make sure you are staying up to date and working closely with your accounting professionals. 

Below are some of the larger standards on the horizon:

New Revenue Recognition Standards:

  • ASU 2014-09 (ASU 2015-14 delays implementation by 1 year)
  • This goes into effect for fiscal years beginning after 12/15/18 for all non-public entities.
  • It is important to note, this standard will affect all industries; all those who follow GAAP accounting standards will be affected by this.

New Not-For-Profit Standards:

  • ASU 2016-14 brings about the largest change to NFP accounting in 25 years.
  • This standard goes into effect for fiscal years beginning after 12/15/17.
  • These new standards change the three classes of net assets to two. Increased disclosure on liquidity. A statement of functional expenses must be presented. New standards may also present a direct method cash flow without also doing an indirect cash flow.

New Lease Standards:

  • ASU 2016-02 goes into effect for fiscal years beginning after 12/15/19 for non-public companies.
  • As an extreme generalization: any lease the entity has will now be treated as a capital lease- meaning there should be an asset and liability on the books.

Income Taxes Disclosure:

  • ASU 2015-17 goes into effect for fiscal years beginning after 12/15/17 for non-public companies.
  • In the case of this change, a breakout of deferred tax assets/liabilities between current and long term will no longer be required.

Standards to look for this year:

  • Keep an eye on ASU 2015-11 – this one relates to inventory. This one goes into effect for fiscal years beginning after 12/15/16 and means that inventory should be valued at the lower cost or net realizable value (no longer at lower of cost or market).

Again, these were just a few of the standards that have changed, are scheduled to change, or the FASB is looking into changing in the coming years.  If you have questions about these or any other accounting matters, feel free to give our firm a call or send me an email.  Thanks and good luck navigating these changes!

Ohio Tax Amnesty: Could you be Eligible?

Ohio is offering tax amnesty on penalty and interest for both business and individual tax returns from January 1, 2018-February 15, 2018. This could be good news for those that are delinquent on tax returns or tax payments.

According to the Ohio Department of Taxation, all penalties and half the interest will be waived on qualified delinquent taxes for both individuals and businesses.

We invite you to visit www.ohiotaxamnesty.gov if you are behind on your tax payments. This website is a powerful resource that will not only explain tax amnesty to you, but will also allow you to see if you are eligible. Be sure to visit the FAQs page to have all of your questions answered about this savings opportunity.

Please contact Holbrook & Manter today for assistance with this matter. Now is the time to wipe the slate clean and become current on your taxes. We can help you and set you on the right tax path moving forward.

Again, that website is: www.ohiotaxamnesty.gov