Tax STrategies Archives - Pearson & Co., PC

HOW TO CHOOSE THE EXECUTOR OF YOUR ESTATE
Never a Popularity Contest

How to select an Executor of your Will

Who Will Implement My Estate Plan Upon My Disability or Death?

Choosing the executor of your estate is the single most important decision you will make to minimize future unknowns, provide peace-of-mind for your family and create an orderly transition of assets in the event of your death or disability.

Your choice of capable people to administer your estate plan is critical. The individual or entity chosen will shoulder significant responsibilities in managing your estate plan directives.

Competency, harmony and willingness to serve are the operative bywords in selecting the people or entities that will carry out your wishes at a time you are no longer able to do so. Any of these managing “slots” may be filled by one or more individuals or a corporate entity such as a bank – or some combination of all three.

Competency

Your choice of an executor is not in the category of a popularity contest, nor the ranking of a family member. Choices should never be made simply because an individual is a close friend or your oldest child. Your selection should reflect the individual’s capabilities and certainly never on the basis of hurting someone’s feelings.

Harmony

In some instances, it may be prudent to appoint two or more adults as joint executors. That said, there are at least a few circumstances to carefully consider. For example:

Appointing two siblings with an adversarial relationship creates the potential for an explosive and protracted delay in settling your estate according to your wishes.
Likewise, choosing two or more executors who have no history of successfully working together may be a recipe for a confrontational atmosphere that may lead to less than efficient management of your affairs.

If there is a need for co-executors and no clear choices of compatible individuals to fulfill those roles, you may appoint an entity such as a bank, trust company or a law firm that offers executor services.

Willingness

This element is closely tied to the above discussion of Competency. Assuming the executor candidate is competent, it is important to determine that person’s readiness to assume the required duties of the role he or she is expected to play. Depending on the complexity of the estate, it may be a far more overwhelming task than expected. Additionally, there are potential legal liabilities for negligent handling of the estate.

Of course, expertise does not have to be personally demonstrated in all aspects of “a life in the day of an executor”, as there is plenty of help available from a capable team of accounting, legal and investment professionals.

Of course, when you seek to name an executor, you are urged to seek counsel and direction from competent accounting and legal professionals for guidance. This article is meant as a general discussion document and not to be construed as providing legal, accounting or tax advice.

Of course, at Pearson & Co. our work as accountants is to maximize your estate value and minimize your tax bite. In serving you, we can also introduce you to skilled estate planning professionals. If we can help with a referral … just ask.

END OF YEAR TAX STRATEGIES

For Business Owners and Individual Taxpayers

Pearson & Co. CPAs - November 2018 Blog Post

Yes … it’s hard to believe … the 2018 income tax season is nearly upon us. Certainly, seems like we just finished with 2017.

As the old adage goes, “No time like the present”, to start thinking about what steps to take to be sure you enjoy maximum tax-savings advantage in the first taxable year under the Tax Cuts and Jobs Act (TCJA). So here are considerations for you to discuss with your professional tax advisor.

As ever, Pearson & Co. stands ready to serve you in your tax and accounting needs.

Pearson & Co. CPAs - Year End Tax Strategies

Business Owners

The TCJA reforms can affect the bottom line of many small businesses. Notably, the tax-saving benefits come down to three major categories:

Qualified Business Income Deduction
100% Expense Deduction for Depreciable Business Assets
Employee Fringe Benefits

Qualified Business Income Deduction

This provision in the tax reform legislation applies to so-called pass-through businesses, i.e. enterprises’ income that is taxed on the firm-owners’ personal tax return. These entities include partners in partnerships, shareholders in S corporations, members of limited liability companies (LLCs) and sole proprietors.

All taxpayers who qualify as described above and who earn less than $157,500 and file singly ($315,000 for a married couple) can now deduct from their overall taxable income 20% of the income they receive via pass-through businesses.

There is more to the story, so be sure to seek guidance from a qualified tax professional. For example, S corporation owner’s salary must meet the “reasonable compensation” standard.

100% Expense Deduction for Depreciable Business Assets

For tax years 2018 through 2025, businesses are now able to write off most depreciable business assets in the year the business places them in service. The 100-percent depreciation deduction generally applies to depreciable business assets with a recovery period of 20 years or less and certain other property.

Machinery, equipment, computers, appliances and furniture generally qualify. Additionally, the TCJA expands definition of eligible property improvements made to non-residential property.

Note: The maximum deduction increased from $500,000 to $1 million per year.

So if you’ve been holding off on these types of purchases, reconsider your position in light of the considerable tax savings that may result.

Employee Fringe Benefits

Entertainment and meals: The new law eliminates the deduction for expenses related to entertainment, amusement or recreation. However, taxpayers can continue to deduct 50 percent of the cost of business meals if the taxpayer or an employee of the taxpayer is present and other conditions are met. The meals may be provided to a current or potential business customer, client, consultant or similar business contact.

Qualified transportation: TCJA disallows deductions for expenses associated with transportation fringe benefits or expenses incurred providing transportation for commuting unless necessary for employee safety.

Bicycle commuting reimbursements: Employers can deduct qualified bicycle commuting reimbursements as a business expense for 2018 through 2025. However, these reimbursements in must be included in the employee’s wages.

Qualified moving expenses reimbursements: Reimbursements an employer pays to an employee in 2018 for qualified moving expenses are subject to federal income tax.

Employee achievement award: Special rules allow an employee to exclude certain achievement awards from their wages if the awards are tangible personal property. The new law clarifies that tangible personal property doesn’t include cash, cash equivalents, gift cards, gift coupons, certain gift certificates, tickets to theater or sporting events, vacations, meals, lodging, stocks, bonds, securities and other similar items.

An employer also may deduct awards that are tangible personal property, subject to certain deduction limits.

Pearson & Co. CPAs - Year End Tax Strategies

Individual Taxpayers

Double-check Your W-4 Form

If you haven’t already done so check to be sure that your employer is withholding the correct amount of federal taxes from your paycheck. The idea is to have your withholdings match your anticipated tax bill, thereby avoiding owing taxes or penalty. On a more positive note, you may find that it is more advantageous to have less withheld and enjoy more take-home pay.

The IRS has made your reality check simple. Just use the IRS Withholding Calculator. Here’s what to do.

Just click here and answer a few questions … Withholding Calculator

Harvest Stock Losses That Qualify as Tax Deductions

If you file jointly you may deduct up to $3,000 ($1,500 if filing singly) in losses on stocks you sell before year-end. Doing so will reduce your taxable income, plus offset any gain on stocks you sell as well.

Compare Benefits of Standard Deduction vs. Itemizing

The new tax law essentially doubled the standard deduction and significantly reduced the qualifications for itemized deductions. Even if you have a history of itemizing, this year you may be better off taking the standard deduction.

Note: Traditionally, Virginia tax law has conformed to federal. However, that is not the case today as the state standard deduction has not been increased to track with the revised federal rules. There are proposals to revise the Commonwealth’s law, so be sure to check with your tax advisor to determine your best tax strategy.

Maximize Your Tax Advantaged Retirement Plan Contributions

Make the most of your 401K, IRA and other tax favored savings plans.

Flexible Spending Accounts

Check on your plan’s deadline for withdrawals and your current account balance. To avoid losing funds, schedule your medical appointments and purchase other health care items covered by your plan.

Divorce Considerations – Possible Sense of Urgency

Thanks to the Tax Cuts and Jobs Act (TCJA), alimony payable for divorces entered into after this year will no longer be tax deductible to the payor and will not be taxed as income to the recipient. That may result in conflicting desires on the part of divorcing couples based on comparative benefits.

Couples considering a divorce should study five areas of concern before the end of the year … ideally with guidance from a tax professional and other expert advisors with a success history of dealing with married partners calling it quits.

Alimony
Business Valuation
Pensions
Other Assets
Prenuptial Agreements

Takeaways

Is the tax code complex? Yes … for both business owners and individual taxpayers. And this, the first taxable year under the revised tax code, stands to be even more complex as there are unanswered questions and interpretations that will continue to surface.

Pearson & Co. stands ready to help. Call or email … we’ll respond promptly!

HOW TO CHOOSE THE EXECUTOR OF YOUR ESTATE Never a Popularity Contest