Tuesday, May 29, 2018

Tax year 2018

The new Tax Cuts and Jobs Act increased the Standard Deduction for Married Filing Jointly is now $24,000; for Head of Household it is now $18,000 and for Single taxpayers or Married Filing separately, it is $12,000. With these changes, it is expected that more taxpayers will be choosing to take the Standard Deduction instead of itemizing their deductions.

For those taxpayers who still choose to itemize their deductions, it is important to note that an entire category of expenses are no longer deductible as itemized deductions in 2018.  Wage-earners who have qualified to deduct unreimbursed employee expenses in the past, need to be aware that these items are no longer deductible.  One of the most common of these is union dues.  Other items such as uniforms and professional licenses and training paid for by the employee are not deductible either.

If you are concerned that these changes will result in higher taxes for you in 2018, then it may be advisable to review your income tax withholding from your wages. Making adjustments to the amount of your withholding now can help avoid a liability and possible interest and penalties being due for the year. Taxpayers can also make estimated tax payments to correct this situation. The tax professionals at Ken R. Ashworth & Associates are available to assist you with your tax planning needs.

Wednesday, May 23, 2018

Starting A New Business

Starting a new Business can be very exciting and daunting endeavor.  There are few things you will want to think about when formatting a new business.

The key to obtaining financing for your business, whether through a banking institution or private investors is to have a good concise business plan. A good business plan consists of a company description, an executive summary, a market analysis and a financial projection and financial breakdown.

A budget is pivotal when preparing to start a business. You can set and achieve profit goals, track expenses and estimate your revenue as well as be estimating your cash flow to pay for expenses and required purchases such as equipment and materials.

Remember to seek advice from professionals on the entity formation of your business.  Tax planning is very important part of your business whether you form an LLC or an S-Corporation or a C-Corporation. You will want to form the entity that is the most tax advantageous for your situation.

These are just a few things to think about when starting your new business.

Disclaimer- This article has been prepared by Ken Ashworth & Associates and is provided for informational purposes only.  This material does not provide legal, Tax, regulatory or accounting advice. Prior to entering into any proposed transaction, you should determine, in consultation with your own advisors, the potential economic, legal and tax risks.

Friday, May 18, 2018

Why Do You Need A Registered Agent?

Nevada Requires businesses to have a registered agent. A registered agent is a responsible party designated to receive service of process notices, correspondence from the Secretary of State and other official notifications.

A registered agent can give you peace of mind knowing that you will not miss receiving an important notice or have to accept official documents at your place of business, a possibly embarrassing situation and disruption to your clients.

If you do not have a physical location in Nevada, you must select a registered agent to accept notification and documents on your entities behalf.

Monday, May 14, 2018

A-Z of Estate Planning

V – “V” stands for Valuation of the estate.  The VALUATION of your estate will determine whether or not it will be subject to tax.  Of course, there are vehicles, such as gifts to charity, whether at death or before that can help reduce exposure to tax, it is the final value that will determine how much tax, if any, that will be due. It can be the case that an estate VALUE is unfairly high due simply to the fact that a person died on a day that, for example, the stock owned by the decedent was unusually high on that date.  Fortunately, the Internal Revenue Code allows a trustee to choose a VALUATION date six months after the date of death, thus, perhaps, increasing the chance of a more favorable (less tax heavy) VALUATION for the estate. 

W – “W” stands for WILL.  Sometimes formally called “LAST WILL & TESTAMENT”, your WILL (very much like a living TRUST) is a written set of instructions for how you want your assets distributed at your death.   Once again, one of the main differences between a WILL and a TRUST is that the administration of a WILL is generally required to go through the public PROBATE process, while a TRUST administration is typically handled privately.  

X – “X” stands for GENERATION X.  Typically considered be those born after the Baby Boomers, this generation, which began in 1961 and ended around 1981 are reaching middle age now, and if they have not already, should very seriously consider putting their estate in order. It is really never too early to begin estate planning, even if it is obtaining a low priced life insurance policy and having a simple WILL when you are in college, or soon thereafter.

 Y – “Y” stands for YOU and YOUR.  A well thought out estate plan, which has been put in place will put YOU at ease knowing YOUR family and beneficiaries are provided for and will not have to pay for or struggle with an incomplete estate.

Z – “Z” stands for ZERO.  The goal of many individuals is to have their estate pay ZERO taxes at their death.  Until the recent Trump tax cuts, this was far more difficult even for modest estates.  Now, and until the year 2025, a single person can leave his heirs over $11 million dollars and pay ZERO tax on the transfer.  Individuals leaving in excess of $11 million dollars, can most definitely still benefit from estate planning, greatly reducing the tax owed at their death.  

Friday, May 11, 2018

A-Z of Estate Planning

S – “S” stands for SPENDTHRIFT TRUST PROVISION.  A SPENDTHRIFT TRUST PROVISION allows the creator of a trust (“Settlor”) to create a trust (SPENDTHRIFT TRUST) for a beneficiary so that the assets in that SPENDTHRIFT TRUST are secure against creditors of the beneficiary.  This is often times utilized by parents who are concerned that money left to their children will be spent without restraint once the child gains control of the asset.  A SPENDTHRIFT TRUST gives the trustee in charge of the children’s (or other beneficiary’s assets) the sole discretion of when, if at all, to release any of the SPENDTHRIFT TRUST’s assets.  In Nevada, there is specific statutory provisions governing this kind of trust, which will likely be used as a guide when your estate plan is drafted.   

T – “T” stands for TRUST. A TRUST is generally (and ideally) a written set of instructions to a named individual or entity, such as a bank, or a law firm (“Trustee”) with regard to the assets held by the TRUST.  The person drafting the set of instructions, and who FUNDS the TRUST is called either a “Settlor” or a “Grantor”; these terms are used interchangeably.  A TRUST gains control of assets as a result of the grantor/settlor, transferring their property into the name of the trust. If the Grantor/Settlor fails to FUND their TRUST it will be ineffective to accomplish the intent of the Grantor/Settlor.  It is, therefore, vital that once a TRUST is drafted that assets be transferred into it. 

U – “U” stands for UNIFIED TAX CREDIT.   This is the amount total monetary value (currently $11,200,000) that each U.S. citizen subject to the tax laws of the United States can either gift or bequeath during their lifetime tax free.  At one time lifetime gifts were tracked separately from transfers at death, but were later consolidated (“unified”), which in at least that respect simplified tax planning and tax return preparation. 

To Be Continued................

Monday, May 7, 2018

A-Z of Estate Planning

P – “P” stands for PROBATE, which is the legal process by which property passes from a deceased individual to his or her heirs.  Unfortunately, the PROBATE process can take months, and even years (depending on the size of the estate and the number of challenges by potential heirs), and can be very costly, with legal fees potentially totaling tens of thousands of dollars. PROBATE is also a public process, which means your will, and what was left to every heir will become public knowledge.  For some people, this may cause little or no concern, but for those who wish for their private affairs to remain private, a trust is often a better choice.  

Q – “Q” stands for Q-TIP ELECTION.  This option is frequently used for individuals who have remarried and have children from a first marriage.  Essentially, the Q-TIP ELECTION establishes a separate trust for the benefit of the children or other class of final beneficiaries but allows the new spouse to receive the income earned by the Q-TIP TRUST for the remainder of their lifetime.  The surviving spouse is also allowed to live in the home owned by the Q-TIP TRUST during his/her lifetime.  Assets transferred into trust as a result of making a Q-TIP ELECTION will not be subject to estate tax until the second spouse passes away.  Of course, taxes will only be due if the value of the property in the Q-TIP TRUST added to the surviving  (new) spouse’s assets at the time of their death exceeds the exempt amount then allowed under the Tax Code.

R – “R” stands for REPORT.  It is vital to the effectiveness of your estate plan that you report any changes in your circumstances to your estate planning attorney.  These include: the purchase or sale of real property; a marriage or divorce; the birth of a child or grandchild and so forth. Failure to amend your estate documents in light of any of these events can have a significant impact on the overall plan. 

To Be continued............

Thursday, May 3, 2018

A-Z of Estate Planning

M – “M” stands for MARRIAGE. Perhaps more than any other single factor, MARRIAGE, RE-MARRIAGE, and DIVORCE (See, DIVORCE, above) can have a significant impact on the amount of taxes owing on an estate.  Under current tax law, a married couple can leave a combined estate of $22,400,000 and not be subject to estate tax. (This assumes the couple has not used any portion of their lifetime gift exclusion at the time of their respective deaths).  For an individual, that amount is cut in half.  RE-MARRIAGE, especially where there are stepchildren from a prior marriage, can require careful drafting of the estate plan to ensure children from the first marriage are not overlooked.

N – “N” stands for NEW TAX LAW.  As mentioned earlier, the tax law that took effect this year, and will remain in effect until the end of 2025, doubled the amount of an estate that will be subject to tax at an individual’s death.  This will have a significant effect on estate and tax planning during this time, and is anticipated to have a positive impact on the transfer of family businesses that have, in the past, faced difficulties passing the business to the next generation due to tax burdens.

O – “O” stands for ­OUT-OF-STATE-PROPERTY. If you own property outside the state where you establish your trust or where you reside, it is important, when funding the local trust with OUT-OF-STATE property that the deed transferring the property meets the requirements of recording where the real property is located.  If it does not, there is the risk that the property may end up in probate, rather than in your trust. 

To Be Continued ....................

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