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Distribute by March 6, 2017 to Reduce 2016 Estate & Trust income taxes

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If you are the executor of an estate or the trustee of a trust, you should know that egregiously high income tax rates apply to estates and trusts at very low levels of income. In 2016, for estates and trusts, the 39.6% income tax rate as well as the 3.8% Net Investment Income (NII) tax kicks in at $12,400 of income. That’s not very high. And don’t forget, you don’t need $12,400 of investment income to pay the NII tax. If the total income exceeds the $12,400 threshold, the NII tax might be due on all of the investment income. For example, let’s say an estate has income of $212,400. The tax on the $200,000 (income in excess of the $12,400 threshold), at 43.4% equals a tax of $86,800. Ouch!
Help! Is there any hope?
Yes, the estate and trust only pays tax on what’s not distributed. Distributions lower the income tax for the trust and at the same time increase the recipient’s personal income tax. However, individuals do not pay the highest rates unless they are wealthy. In our example, if there are four beneficiaries and each receives $50,000 (one-fourth of the $200,000) many individuals will only pay 15% on that $50,000. That’s $7,500 per beneficiary for a total of $30,000 instead of $86,800 for a tax savings of $56,800.

Is there anything I can do?
It’s not too late. There’s a rule allowing distributions made in the first 65 days of the next year to be treated as if made in the preceding year. A special election must be made on the Fiduciary Income Tax Return. This year’s deadline is March 6, 2017. Executors and trustees should act soon to take advantage of this opportunity for substantial tax savings.

Please contact us for assistance with making distributions or any other tax related questions about managing a trust or estate.

Delay of NJ 2016 refunds

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The New Jersey Division of Taxation will not begin issuing 2016 tax refunds until March 1, 2017.

Due to enhanced efforts to protect NJ taxpayers from identity theft and refund fraud, early filers could experience delays in receiving their 2016 refunds.  Tax returns filed electronically may now take a minimum of 4 weeks to validate and process.  Paper filed tax returns may take a minimum of 12 weeks to validate and process. 

To check the status of your refund click here:  Online Refund Service or call 1-800-323-4400.

Immigration Eyes New 1-9

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Statute of LIberty

What’s New?

Beginning January 22, 2017, employers must use only the new Form I-9 as reported by the US Citizenship and Immigration Services on their website www.uscis.gov. The new form is dated 11/14/2016 on the bottom of each page and expires 8/31/2019.

 

Why Should I Be Concerned?

The changes are minor, mainly to promote ease of use, particularly when completed on a computer. However, the consequences of using the old form are not necessarily minor. The penalties for Form I-9 violations have recently been doubled. The penalty for failing to comply with Form I-9 employment verification requirements are a minimum of $216 and a maximum of $2,156 per individual.  As of January 22, 2017, one of those requirements, is to use the new form.

Managing NJ Dept. of Labor Audits

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Pamela Avraham, CPA, partner in Urbach & Avraham, CPAs, will be presenting at the 2017 NJ Staffing Alliance (NJSA) Law Day VI which will be held on Feb. 8, 2017. She will discuss NJ Dept. of Labor (DOL) audits; how best to avoid them and to effectively handle them.

The NJ DOL conducts two types of audits: (1) Wage & Hour audits which focus on hourly wage and overtime issues. (2) Independent Contractor vs. Employee audits which determine if a worker is an independent contractor or an employee subject to the state unemployment tax.

Urbach & Avraham has a concentration of clients in the staffing industry. Pamela has successfully handled numerous US and State Dept. of Labor audits for clients in the staffing industry as well as in many other industries.

The 2017 NJSA Law Day VI will be an all-day conference held at the Eisenhower Conference Center in Livingston, NJ.

Executor of Estate? Use our Executor Checklist

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In Charge of Dad’s or Mom’s Estate? 

Overwhelmed?

When a loved one passes away and you’re named as executor of his or her estate, you’re likely to feel a mix of emotions. Sadness over the individual’s demise, of course but mixed with that, will be feelings of apprehension: “How can I be sure I’m honoring the decedent’s last wishes and fulfilling all my responsibilities?”

What Do I Need to Know?
The responsibilities aren’t limited to deciding who gets which assets – it also means identifying all the decedent’s assets, and ensuring that the proper paperwork is filed with the IRS, the State and other agencies. To help you through this overwhelming time, Urbach & Avraham, CPAs has prepared an Executor Checklist that outlines the issues that an executor needs to consider.

Click here for the link to our Executor Checklist

Difficult Beneficiaries?….Family Owned Business?….IRA Nightmares?
The checklist is a roadmap of tasks, from probating the will, to filing a final Income Tax return and other required estate filings, to dealing with beneficiaries and distributing the assets. It’s loaded with tips on how to locate all assets, save various taxes and efficiently manage the estate administration.

This handy guide is packed with reminders about technical questions for your CPA, legal or other financial advisor. We work with many qualified estate attorneys to seamlessly coordinate your situation.

Finally, the Urbach & Avraham Executor Checklist highlights the complexities presented when a family owned business is involved. Was there a buy sell agreement? Who is paying the estate tax on the business, and are funds available to pay the tax?

As an executor, you’re already coping with a lot of emotional and other issues. We’re available to help lift the financial burden by assisting you with accounting and tax matters during this difficult time.

Lost in a divorce? Use Divorce Checklist as your GPS

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Divorce Guidebook

When a couple ties the knot, they plan on a lifetime union. Unfortunately, close to 50 percent of marriages end in divorce.  A divorce is never pleasant, but careful planning may make the process less stressful and enable you to obtain a better financial arrangement. To help you through this difficult time, Urbach & Avraham, CPAs has prepared a Divorce Checklist that outlines steps couples should consider.

Click here for Divorce Checklist

Diversion of assets? Unreported income? Family business?

The checklist is an easy-to-understand guide, starting with pre-divorce planning, guiding you through the financial aspects of the proceedings, and highlighting post-divorce issues. This comprehensive list can assist you in navigating through this nerve-wracking ordeal.

The roadmap can help with technical and other questions for your CPA, legal or other financial advisors. We work with many qualified divorce attorneys to seamlessly coordinate your issues.

The Urbach & Avraham Divorce Checklist also highlights complexities presented when a family owned business is involved: Have you engaged a valuation specialist? Suspect unreported income? Accounted for five years of business records?

You’re already coping with many emotional and other issues. We’re here to help lift the burden by assisting you with financial, tax and other matters during this trying time.