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Who will access your digital assets when you can’t?

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Digital Assets

Proper Estate Planning Can Help Safeguard Your Digital assets

An increasing number of individuals are utilizing online tools, including email, social media and other electronic applications. With a click of a keyboard, they can take care of everything from email and text messages to activities like paying bills online and managing bank and other financial accounts.

Many individuals aren’t aware that the “digital assets” on their computers may represent an important component of estate planning. One study estimated that individuals have more than $35,000 each of personal records locked away on their electronic devices; and an executor or other fiduciary may not be able to access them after an individual has passed on.

Digital Assets Need an Estate Plan

Without an estate plan that addresses digital assets upon death, they may be subject to restrictive federal or state laws, or even the “terms of service” of an online service provider. A surviving spouse who tries to use the decedent’s password to log on to his or her online bank account may be violating the Stored Communications Act of 1986 and/or the federal Computer Fraud and Abuse Act, which keep Internet service providers from disclosing the contents of a user’s information.

These kinds of restrictions can even become an issue during a person’s life, since agents for an incapacitated individual—acting under a power of attorney or as conservators and trustees—may also be barred from access.

Digital assets that may be inaccessible to fiduciaries—and potentially lost to heirs—could include login credentials for online bank accounts, email accounts, social media accounts, and Word documents, PDFs, music and other information stored on computers, tablets, or Smartphones.

Proposed Legislation May Help

A bill recently passed in NJ—the “Uniform Fiduciary Access to Digital Assets Act (UFADAA)- would enable a fiduciary to manage the digital property of a person who has passed away or has lost the ability to manage his own property.

The act covers four types of fiduciaries: executors, guardians of incapacitated persons; agents appointed under powers of attorney; and trustees. It would allow fiduciaries to manage certain digital property, including computer files, web domains, and virtual currency,

Urbach & Avraham Can Help

If Gov. Christie signs the UFADAA, it will be simpler for individuals to ensure that their digital assets are properly protected. The bill would still restrict a fiduciary’s access to email, text messages, and social media accounts—unless the original user consented to expanded access in a will, trust, power of attorney, or other record.

Urbach & Avraham, CPAs works closely with estate and elder law attorneys, and we will be pleased to work with you to address your estate planning and other needs.

Should I Pay my Spouse a Salary?

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 It’s not worth the Taxes, Right? 

Spouses Working Together

It is not uncommon for one’s spouse to work in the family business, whether as manager or in some other capacity. Assume that Nicole Neurologist owns a medical practice. Her husband, Josh, supervises billing and IT operations. Is it worthwhile for both spouses to receive a salary? It may seem pointless. After all, their money ends up in the same bank account anyway. If Nicole has reached the maximum Social Security and unemployment thresholds, why pay Josh a salary and incur additional steep payroll taxes? While that is true, there are several advantages to employing the spouse that are worth considering.

Social Security Disability Benefits and Lost Wages

If Josh became permanently disabled, he would not receive Social Security benefits for his disability unless he satisfied two different earnings tests.  He must meet a “recent work” test based on his age at disability. For example, at age 31 or more, an individual must work five out of the ten years prior to claiming disability. He must also satisfy a “duration of work” test based on his age at disability. At age 50, he needs to have worked seven years in total prior to his disability.  If Josh was injured by an insured party, unless he has proof of a history of employment, he would not be able to recover any lost wages.

Enjoy Self-Employment Tax Savings

If Nicole’s business income is reported on Schedule C, she deducts the medical insurance expense for her and her family on page 1 of Form 1040. However, if Josh is an employee, then he can be the insured. She can deduct the medical insurance as a business expense on Schedule C.  This would result in significant tax savings, as she now saves the 3.8% Medicare portion of the self-employment tax; good deal for an expense she is incurring anyway.

Good Credit is Essential

Even if Nicole is the breadwinner, there may come a time that Josh will need to rely on his own credit history. If he is paid a salary it will be easier to obtain the credit he will need.

Boost his Social Security Benefits

The amount of Social Security benefits one receives is determined by the average of the 35 highest yearly salaries. Even if Josh’s earning power appears meager, one never knows what the future holds. If he eventually gets a more lucrative job, the years he received a salary from Nicole’s firm may ultimately boost his benefits significantly.

Maximize Pension Contribution

As an employee, Josh can be enrolled in the company pension. This allows the company to make contributions on his behalf. By adding Josh’s pension contribution to Nicole’s, the couple will enjoy increased tax free growth on their retirement funds, while the couple saves on both US and NJ income taxes.

Get a Dependent Care Credit

Unless both spouses have earned income they are not entitled to the dependent care credit, which is currently up to 35 percent of qualifying expenses of $3,000 for one child or dependent, or up to $6,000 for two or more children.

Additional Benefits

There are additional benefits to paying your spouse a salary. Call for a consultation.

 

 

Payroll Tax Savings for NJ Employers- August Deadline

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Did you check your NJ SUI rates?

Tax Savings

On July 28, 2017, the annual Notice of Employer Contribution Rates were mailed to all New Jersey employers. This is not a bill, but rather a summary of the way the NJ Department of Labor calculates your employer contribution rate for unemployment and disability. This form enables you to determine whether a voluntary contribution would save you money in the subsequent year.

Can I reduce my NJ SUI rate?
A voluntary contribution increases your reserve balance and may reduce your contribution rate. Each employer should calculate the amount of the voluntary contribution required to reduce the rate. The required voluntary payment should be compared to the savings realized from a lower rate.

The unemployment expense is a substantial component of the labor cost of staffing agencies. You should give it careful attention. If you wish to make a voluntary contribution to your reserve balance you have 30 days from the date of your notice to do so. We recommend that you verify all the NJ DOL calculations including the amount of the employer contributions and the benefits charged to your account. Report any discrepancies to the NJ Dept. of Labor.

By making a voluntary payment, employers may reduce the NJ SUI rate for the coming year. Please be aware that this payment increases your reserve balance and helps reduce the NJ SUI rate in future years as well.

Checked your TWES Account?

Good news…if you didn’t receive the Notice and have a Tax Web Enabled System (TWES) account online…you can find your contribution rates there as well. The TWES system provides a wealth of information allowing employers to review their account status, open balance, payment history, employer and worker contribution rates, credit balance and any delinquency. You can log on to the TWES website at https://my.state.nj.us/

Remember doing your summer homework now may save you money down the road! If you would like assistance in determining if a voluntary contribution will save you money, please do not hesitate to contact us immediately.

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.