Do you have your own wealth management plan?

Fingerprints: There are no two alike. So it should be with your wealth management plan. Taking a boilerplate approach could prevent you from achieving your specific goals. Here are some key points to consider when devising a plan that’s all your own.

 

Many variables

For your plan to be as unique as you, it should reflect variables such as:

·      Age,

·      Health status,

·      Risk tolerance, and

·      How you plan to use your assets now and going forward.

Risk tolerance is a particularly important point. Some people are naturally more willing to risk a loss for the opportunity of a larger gain. Others are uncomfortable with any possibility of loss even though this certainty may mean a lower potential return.

But risk tolerance also may be affected by age. If you’re retired or close to retirement, for example, a more conservative approach to investing, saving and spending is likely appropriate. By contrast, if you’re several decades away from retirement, you’ll more likely benefit from taking at least a few carefully considered chances to build wealth and keep ahead of inflation.

Withdrawal strategy

Another important component of a personal wealth management plan is your withdrawal strategy. For example, if you’re close to retirement, you need to withdraw from your accounts carefully to avoid having insufficient funds during retirement. Withdraw too little, however, and you could miss opportunities to enjoy life. (You also could face severe tax penalties if you don’t take required minimum distributions.)

Like your wealth management plan, your withdrawal strategy will be highly personal. The amount of income you’ll need in retirement will depend on your priorities. If you’re planning to travel extensively, your needs will be very different from what they’ll be if your primary goal is to stay close to home to spend more time with your family.

If you own assets in a variety of tax-free (such as a Roth IRA), tax-deferred (such as a 401(k) plan or traditional IRA) and taxable savings vehicles, there can be some significant tax implications to how you withdraw your assets. Conventional wisdom says that taxable assets should be withdrawn first, leaving your tax-advantaged holdings more time to grow. This approach may work in some situations, but it’s not necessarily the correct approach for everyone. (And minimum annual distributions are required from certain tax-advantaged accounts, generally after age 70½.)

Necessary help

Your wealth management plan should be carefully designed and maintained to suit the many distinctive elements of your life. But that doesn’t mean you must go about it alone. Please contact our firm for help not only creating a plan, but also checking in on it regularly to see whether any adjustments are necessary.

 

Sidebar: Don’t forget about estate planning

If your net worth is large enough that estate taxes are a concern, making annual gifts can be a surprisingly powerful way to reduce your taxable estate. In fact, making annual gifts can help you accomplish two important goals: removing assets from your estate and passing along assets to loved ones. Current federal law allows annual tax-free gifts of $15,000 per recipient per year ($30,000 for married couples).

Just make sure your gifting strategy is well integrated into your overall estate plan. Such a plan might also involve trusts and other mechanisms for distributing your wealth.

Getting to Know Your Credit & Debit Cards a Bit Better

Virtually everyone has a credit and debit card these days. But many of us still live in fear of these plastic necessities because we’re not terribly familiar with the fine print of the arrangements under which they operate. Let’s get to know them a bit better.

Credit Cards

If your credit card is used without your permission, you may be responsible for up to $50 in charges, according to the Federal Trade Commission (FTC). If your card is lost or stolen and you report the loss before your card is used in a fraudulent transaction, you can’t be held responsible for any unauthorized charges. Some card issuers protect customers regardless of when — or if — they notify the card company.

When reporting a card loss or fraudulent transaction, contact the card company via phone; many provide toll-free numbers that are answered around the clock. In addition, the FTC advises following up via a letter or email. It should include your account number, the date you noticed the card was missing (if applicable), and the date you initially reported the card loss or fraudulent transaction.

Debit Dangers

Debit card liability can be a little riskier. It generally depends on whether the card was lost or stolen or is still in your possession, the type of transaction, and when you reported the loss or unauthorized transaction.

According to the FTC, if you report a missing debit card before any unauthorized transactions are made, you aren’t responsible for the unauthorized transactions. If you report a card loss within two business days after you learn of the loss, your maximum liability for unauthorized transactions is $50.

If you report the card loss after that time but within 60 calendar days of the date your statement showing an unauthorized transaction was mailed, liability can jump to $500. Finally, if you report the card loss more than 60 calendar days after your statement showing unauthorized transactions was mailed, you could be liable for all the funds taken from your account.

If you notice an unauthorized debit card transaction on your statement, but your card is in your possession, you have 60 calendar days after the statement showing the unauthorized transaction is mailed to report it and still avoid liability.

While the lower protections required on debit cards may make you wonder whether you’re safer using a credit card, some debit card companies offer protections that go above what the law requires. Check with your provider.

Risk Management Steps

Taking a few simple steps can help cut the risk that you’ll be held liable for unauthorized use of your credit or debit card. First, carry only cards you need and destroy old ones, shredding them if possible. Don’t provide your card number over the phone or online unless you’ve initiated the contact.

In addition, choose a PIN that’s not easily guessed and make sure to memorize it. If you have online access, take a few moments to scan transactions every time you log on or at least once a week. If you still use paper statements, be sure to review them when they arrive in the mail. If you notice a transaction that isn’t yours, report it to your credit card issuer or bank right away.

Finally, keep a list of important numbers and relevant data stored separately from the cards themselves. Having this information handy will make it easier to report a missing card or suspicious transaction quickly.

Ins and Outs

Many of us have grown so familiar with our credit and debit cards that we take them for granted. But keep in touch with their ins and outs. We can answer any further questions you may have.

Copyright © 2018

Upcoming Tax Deadlines

April 17 — Besides being the last day to file (or extend) your 2017 personal return and pay any tax that is due, 2018 first quarter estimated tax payments for individuals, trusts and calendar-year corporations are due today. Also due are 2017 returns for trusts, calendar-year estates and C corporations, FinCEN Form 114 (Report of Foreign Bank and Financial Accounts [but an automatic extension applies to October 15]), and any final contribution you plan to make to an IRA or Education Savings Account for 2017. In addition, Simplified Employee Pension and Keogh contributions are due today if your return isn’t being extended.

June 15 — Second quarter estimated tax payments for individuals, trusts and calendar-year corporations are due today.

Copyright © 2018

 

 

 

 

 

 

 

 

 

The New Deal on Employee Meals (And Entertainment)

Years and years ago, the notion of having a company cafeteria or regularly catered meals was generally feasible for only the biggest of businesses. But, more recently, employers providing meals to employees has become somewhat common for many midsize to large companies. A recent tax law change, however, may curtail the practice.

As you’re likely aware, in late December 2017 Congress passed and the President signed the Tax Cuts and Jobs Act. The law will phase in a wide variety of changes to the way businesses calculate their tax liabilities — some beneficial, some detrimental. Revisions to the treatment of employee meals and entertainment expenses fall in the latter category.

Before the Tax Cuts and Jobs Act, taxpayers generally could deduct 50% of expenses for business-related meals and entertainment. But meals provided to an employee for the convenience of the employer on the employer’s business premises were 100% deductible by the employer and tax-free to the recipient employee. Various other employer-provided fringe benefits were also deductible by the employer and tax-free to the recipient employee.

Under the new law, for amounts paid or incurred after December 31, 2017, deductions for business-related entertainment expenses are disallowed. Meal expenses incurred while traveling on business are still 50% deductible, but the 50% disallowance rule now also applies to meals provided via an on-premises cafeteria or otherwise on the employer’s premises for the convenience of the employer. After 2025, the cost of meals provided through an on-premises cafeteria or otherwise on the employer’s premises will be completely nondeductible.

If your business regularly provides meals to employees, let us assist you in anticipating the changing tax impact.

Copyright © 2018

What is “Reasonable Compensation”

The issue of reasonable owners’ compensation often comes up in federal tax inquiries. But it may also be an issue in shareholder disputes and divorce cases.

For instance, minority shareholders or spouses of controlling shareholders may claim that an owner is taking an excessive salary, thereby impairing the value of the business. Alternatively, a nonowner-spouse may claim that a salary is too low, because the owner-spouse is trying to minimize the base on which alimony and child support payments will be calculated.

If you find yourself embroiled in these situations or under fire from the IRS, a financial expert can help you support — or defend against — these claims.

Factors to Consider

What’s considered reasonable in shareholder disputes or divorces may vary based on state law or legal precedent. A reasonable compensation assessment generally starts by looking outside the company at external market conditions and geographic location. Then, the analysis turns to internal factors, such as the company’s size, financial performance and compensation programs. Finally, the individual’s contributions to the company, including his or her responsibilities, skills, reputation and experience, are factored into the analysis, along with any personal guarantees from the owner.

An owner may sometimes warrant a salary that’s higher or lower than what nonowner-employees receive for similar positions. For example, the U.S. Tax Court recently upheld a combined annual salary of more than $7.3 million for two owners of a large Arizona concrete contractor. That may seem like a lot of money, but the court ruled that the company’s investors still received a reasonable return on investment after owners’ salaries were paid. This type of analysis is known as the independent investor test.

Compensation Resources

Another type of analysis hinges on comparable salaries paid in arm’s length compensation arrangements. Reliable compensation data for a particular industry or geographic market can be found in several public and private salary surveys. A few common examples include Willis Towers Watson’s executive salary surveys, the Risk Management Association’s Annual Statement Studies® and MicroBilt’s Integra industry reports. An expert may also consult Economic Research Institute’s quarterly salary surveys, the Conference Board’s annual executive compensation reports and Dun & Bradstreet’s Key Business Ratios on the Web.

Additional industry- or location-specific data can be obtained from salary surveys that break down the data by industry, market or size; industry trade associations and publications; and executive headhunters.

Outside Expertise

Deciding what’s reasonable for a business owner to receive as compensation can be subjective and sensitive. Our firm can serve as an expert or work with yours to research comparable market data and use it to come up with a defensible estimate.

Copyright © 2018

No Kidding: Child Credit to Get Even More Valuable

The child credit has long been a valuable tax break. But, with the passage of the Tax Cuts and Jobs Act (TCJA) late last year, it’s now even better — at least for a while. Here are some details that every family should know.

Amount and Limitations

For the 2017 tax year, the child credit may help reduce federal income tax liability dollar-for-dollar by up to $1,000 for each qualifying child under age 17. So if you haven’t yet filed your personal return or you might consider amending it, bear this in mind.

The credit is, however, subject to income limitations that may reduce or even eliminate eligibility for it depending on your filing status and modified adjusted gross income (MAGI). For 2017, the limits are $110,000 for married couples filing jointly, and $55,000 for married taxpayers filing separately. (Singles, heads of households, and qualifying widows and widowers are limited to $75,000 in MAGI.)

Exciting Changes

Now the good news: Under the TCJA, the credit will double to $2,000 per child under age 17 starting in 2018. The maximum amount refundable (because a taxpayer’s credits exceed his or her tax liability) will be limited to $1,400 per child.

The TCJA also makes the child credit available to more families than in the past. That’s because, beginning in 2018, the credit won’t begin to phase out until MAGI exceeds $400,000 for married couples or $200,000 for all other filers, compared with the 2017 phaseouts of $110,000 and $75,000. The phaseout thresholds won’t be indexed for inflation, though, meaning the credit will lose value over time.

In addition, the TCJA includes (starting in 2018) a $500 nonrefundable credit for qualifying dependents other than qualifying children (for example, a taxpayer’s 17-year-old child, parent, sibling, niece or nephew, or aunt or uncle). Importantly, these provisions expire after 2025.

Qualifications to Consider

Along with the income limitations, there are other qualification requirements for claiming the child credit. As you might have noticed, a qualifying child must be under the age of 17 at the end of the tax year in question. But the child also must be a U.S. citizen, national or resident alien, and a dependent claimed on the parents’ federal tax return who’s their own legal son, daughter, stepchild, foster child or adoptee. (A qualifying child may also include a grandchild, niece or nephew.)

As a child gets older, other circumstances may affect a family’s ability to claim the credit. For instance, the child needs to have lived with his or her parents for more than half of the tax year.

Powerful Tool

Tax credits can serve as powerful tools to help you manage your tax liability. So if you may qualify for the child credit in 2017, or in years ahead, please contact our firm to discuss the full details of how to go about claiming it properly.

Copyright © 2018