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Making Large Gifts Now Won’t Harm Estates After 2025

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On November 20th, the IRS announced individuals taking advantage of the increased gift and estate tax exclusion amounts in effect from 2018 to 2025 will not be adversely impacted after 2025 when the exclusion amount is scheduled to drop to levels before 2018.

The Treasury Department and the IRS issued proposed regulations which implement changes made by the 2017 Tax Cuts and Jobs Act (TCJA).  As a result, individuals planning to make large gifts between 2018 and 2025 can do so without concern that they will lose the tax benefit of the higher exclusion level once it decreases after 2025.

In general, gift and estate taxes are calculated, using a unified rate schedule, on taxable transfers of money, property and other assets. Any tax due is determined after applying a credit – formerly known as the unified credit – based on an applicable exclusion amount.

The applicable exclusion amount is the sum of the basic exclusion amount (BEA) established in the statute, and other elements (if applicable) described in the proposed regulations. The credit is first used during life to offset gift tax and any remaining credit is available to reduce or eliminate estate tax.

The TCJA temporarily increased the BEA from $5 million to $10 million for tax years 2018 through 2025, with both dollar amounts adjusted for inflation. For 2018, the inflation-adjusted BEA is $11.18 million. In 2026, the BEA will revert to the 2017 level of $5 million as adjusted for inflation.

To address concerns that an estate tax could apply to gifts exempt from gift tax by the increased BEA, the proposed regulations provide a special rule that allows the estate to compute its estate tax credit using the higher of the BEA applicable to gifts made during life or the BEA applicable on the date of death.

To discuss more about your gift and estate tax situation, contact WFY’s Estates and Trusts Partners, Marisa Alvarado and Kevin Wiest, at info@cpa-wfy.com or (949) 910-2727.

© Copyright 2018. All rights reserved.

Tax Saving Moves to Improve Your Tax Situation

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Since 2018 is coming to a close now is the time to take action to proactively reduce your tax liability before the new year.  Included are a few strategies that may help with your tax situation:

  1. Harvest stock losses while substantially preserving one’s investment position. This can be accomplished by selling the shares and buying other shares in the same company or another company in the same industry to replace them, or by selling the original shares, then buying back the same securities at least 31 days later.
  2. Apply a bunching strategy to deductible contributions and/or payments of medical expenses. Beginning in 2018 the standard deduction has been increased and the itemized deduction of state and local taxes limited to $10,000 which will cause many taxpayers to lose the benefit of their itemized deductions. By bunching multiple years of charitable contributions and medical expenses into one year a taxpayer may create a taxable benefit that would not otherwise exist.  For example, a taxpayer who expects to itemize deductions in 2018 and usually contributes a total of $10,000 to charities each year, should consider refunding 2019 and 2020 charitable contributions by contributing a total of $30,000 into a donor advised charitable fund and then distribute the funds to the charities over the following two years.
  3. Take required minimum distributions (RMDs). Taxpayers who have reached age 70-½ should be sure to take their 2018 RMD from their IRAs or 401(k) plans (or other employer-sponsored retired plans). Failure to take a required withdrawal can result in a penalty of 50% of the amount of the RMD not withdrawn. Those who turned age 70-½ in 2018 can delay the first required distribution to 2019, however, this can result in taking a double distribution in 2019 (the required amount for 2018 and 2019).
  4. Use IRAs to make charitable gifts. Taxpayers who have reached age 70-½, own IRAs, and are thinking of making a charitable gift should consider arranging for the gift to be made by way of a qualified charitable contribution, or QCD—a direct transfer from the IRA trustee to the charitable organization. Such a transfer (not to exceed $100,000) will neither be included in gross income nor allowed as a deduction on the taxpayer’s return. A qualified charitable contribution before year end is a particularly good idea for retired taxpayers who don’t need all of their as-yet undistributed RMD for living expenses.
  5. Make year-end gifts. A person can give any other person up to $15,000 for 2018 without incurring any gift tax. The annual exclusion amount increases to $30,000 per donee if the donor’s spouse consents to gift-splitting. Anyone who expects eventually to have estate tax liability and who can afford to make gifts to family members should do so.

These are broad suggestions that will benefit some but not all taxpayers.  To discuss and create a personalized tax strategy be sure to contact a WFY tax specialist at info@cpa-wfy.com or (949) 910-2727.

© Copyright 2018. All rights reserved.

WFY Welcomes New Partner Cyndi LeBerthon

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Wright Ford Young & Co. would like to welcome our newest addition to the firm: Cyndi LeBerthon, CPA.  With more than 15 years of public accounting experience, Cyndi has joined WFY as Partner in the Audit Department.

Cyndi is responsible for planning and supervising audit and review engagements in a wide range of industries, including distribution, manufacturing, professional service, technology and hospitality.  Having extensive experience in Employee Benefit Plan audits and ERISA regulations, she also works with plan sponsors in private and public sectors performing annual DOL required audits of their 401(k), 403(b), ESOP, and Pension and Welfare Benefit Plans.

Cyndi is an AICPA authorized peer reviewer and works with other CPA firms throughout California and Arizona, performing their peer reviews and providing consultant services on quality control.  She is also a committee member of the CalCPA Peer Review Committee.   This committee has oversight responsibilities of all peer reviews performed throughout California, Arizona and Alaska.

To learn more about Cyndi LeBerthon, go to https://www.cpa-wfy.com/who-we-are/practice-leaders/cyndi-leberthon/

WFY is Hiring

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Wright Ford Young & Co. is seeking qualified candidates to join our growing team! We are looking for hard-working, dedicated people who are willing to learn and flourish in their careers.  Full-time positions are available for the following departments:

Tax Department

  • Staff
  • Preparer

Estates & Trusts Department

  • Senior
  • Supervisor
  • Manager

Audit Department

  • Staff

If interested in any of the positions above, please email your resumes careers@cpa-wfy.com or directly contact the following:

Tax Department: Richard Huffman, rhuffman@cpa-wfy.com

Estates & Trusts Department: Marisa Alvarado, malvarado@cpa-wfy.com

Audit Department: Jeff Myers, jmyers@cpa-wfy.com

 

 

WFY Sponsors Veterans Legal Institute’s American Patriots Ball

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On Saturday, September 22nd, some of Wright Ford Young & Co.’s Partners attended Veterans Legal Institute’s The American Patriots Ball, an event honoring and celebrating veteran empowerment.  Veterans Legal Institute is an organization that provides pro bono legal assistance to homeless, at risk, disabled and low income current and former service members.

The Ball included hundreds of community and business leaders that gathered on Saturday which featured dancing, dining, and a live auction.

Not only did WFY sponsor the event, they also commended the following honorees and organizations: Philip V. Brozenick for Veteran of the Year, Rochelle Karr for Veteran Advocate of the Year, OC Women2Women for Community Partner of the Year, and Veterans Legal Institute.

To find out more about The American Patriots Ball and Veterans Legal Institute, go to https://www.vetslegal.com/

Landmark SCOTUS Decision on Sales Tax Collection Requirements

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The U.S. Supreme Court recently issued a ruling that could have a dramatic impact on American retailers, and not only those who primarily operate on the Internet.  In what has been called the Wayfair sales tax case, the court on June 21, 2 018 said that states can impose sales taxes on businesses even if they do not have a physical presence in the state.

The ruling effectively overturns Quill Corp. v. North Dakota, which was a Supreme Court decision handed down in 1992.  In that case, the court said that the Commerce Clause in the U.S. Constitution forbids states from imposing sales tax on companies without a physical presence.  The court said that states could only impose sales tax on a company if it had an actual location in the state, or if it had another bright-line physical presence, such as in-state employees, inventory, or sales representative in the state.

South Dakota, in the Wayfair sales tax case, bypassed interstate commerce restrictions in a law that it enacted back in 2016, called S. B. 106. Justice Anthony Kennedy, who wrote the majority decision for the court in this case, said that the South Dakota law was constitutional because of the following reasons:

  • The law allows out-of-state companies to be exempt from sales taxes if they only do limited business in the state. That is, if they have less than $100,000 in sales revenue and less than 200 transactions in a calendar year;
  • The law does not try to collect sales tax retroactively; and
  • South Dakota abides by the Streamlined Sales and Use Tax Agreement, which reduces compliance and administrative costs associated with collecting sales tax.

Essentially, the court allowed South Dakota to collect sales taxes from Internet retailers because its law did not place a significant burden on interstate commerce.  Currently, 31 states have laws that impose sales taxes based on economic, as opposed to physical presence nexus standards. While it is possible that not all these laws pass the standard set by Wayfair, the court has now given them guidance toward making their laws constitutional.  Furthermore, it can be expected that other states will impose similar laws in the future.

On the federal level, there are two bills currently making their way through congress that will let states impose sales taxes on out-of-state entities.  Both the Marketplace Fairness Act (MFA) and the Remote Transactions Parity Act (RTPA) allow states to collect sales taxes if they keep the process of paying the taxes simple.

Because of the court’s decision, it is important for retailers selling into multiple states to understand in which states it has sales tax obligations, which will require it to both register and file taxes in these states.  Fortunately, if your business operates in multiple states, you do not have to figure all this out by yourself.

If you have questions regarding your sales tax filing requirements, please call 949-910-2727 or email info@cpa-wfy.com.

© Copyright 2018. All rights reserved. 

California Competes Tax Credit

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The California Competes Tax Credit is an income tax credit for businesses wanting to stay and grow in California. The purpose is to attract and retain employers in California industries with high economic multipliers and that provide their employees good wages and benefits. Any business can apply.

The credit applies to any type of business expecting to increase headcount and/or make a capital investment in California.  Businesses compete for these tax credits by asking for a percentage return on investment.

California plans to grant $230 Million in Cal Competes tax credits to California businesses over three separate application rounds in 2018.  Typically, a business can get up to 20% ROI.

If you think your company may qualify for this tax credit and would like to learn more about how to take advantage of this cost savings opportunity, please contact us today at srobinson@cpa-wfy.com or call 949-910-2727.

© Copyright 2018. All rights reserved. 

WFY Expands Firm with Three New Hires

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Wright Ford Young & Co. continues to grow the firm with three new hires: Andrew Abeyta, Cameron Lee, and Jennifer Nguyen.  All three are the newest additions to WFY’s Tax Department.  WFY is pleased to welcome these new hires to the WFY team.

Andrew Abeyta

In the beginning of July, Wright Ford Young & Co. welcomed Andrew Abeyta as Tax Staff. He graduated from Cal State Fullerton in 2016 and jumped into public accounting straight after that. Andrew’s previous experience in accounting includes working at another CPA firm after college. In his spare time, he’s passionate about photography and teaches 5th & 6th grade Sunday school at his church.

Cameron Lee

This month, Wright Ford Young & Co. had the pleasure of adding Cameron Lee as one of the newest Tax Staff. Before coming to WFY, Cameron graduated from Cal State Fullerton with his Bachelor’s degree in accounting, worked as an intern at another tax firm and worked in finance as a loan officer. Outside of the office, he enjoys volunteering and playing in a city basketball league.

Jennifer Nguyen

In mid-July, Jennifer Nguyen joined the Wright Ford Young & Co. team as a Tax Intern. She’s currently a senior at Cal State Fullerton and plans to graduate this fall with a degree in Business Administration with an emphasis on Accounting. Jennifer’s previous tax experience includes working as a Tax Administrative Assistant at a family office for 2 years. In her spare time, she likes volunteering and fostering cats from OC Animal Care in Tustin.

IRS To Issue More ACA Penalties

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The IRS began issuing Affordable Care Act penalty assessments in its Letter 226J tax notice in November 2017. These notices are being sent to employers who the IRS identified through its recently developed Affordable Care Act Compliance Validation System “ACV” System, as having failed to comply with the ACA’s employer mandate.  So far, the IRS has issued more than 30,000 of these notices containing employer shared responsibility payments (ESRPs) assessments of more than $4.4 billion.

Under the ACA, organizations with 50 or more full-time employees and full-time equivalent employees, are required to offer minimum essential coverage to at least 95% of their full-time workforce (and their dependents) whereby such coverage meets minimum value and is affordable for the employee or be subject to IRS 4980H penalties. These organizations are referred to by the IRS as applicable large employers (ALEs).

According to the latest report from the Treasury Inspector General for Tax Administration (TIGTA), the IRS identified 318,296 organizations that qualified as ALEs for 2015. Of that amount, TIGTA reports that 49,259 are at risk for compliance action by the IRS. Employers who have not yet received a Letter 226J penalty notice for 2015 should not breathe a sigh of relief yet.  There are still more Letter 226J penalty notices to be issued for 2015.

The TIGTA report also indicated that the IRS now has the data to begin the analysis to calculate the potential ESRPs for tax year 2016 to be issued to those ALEs determined not to be in compliance with the ACA.  TIGTA reports that the IRS has spent over $2.8 million to improve the process for identifying, calculating, and processing ALEs who are not in compliance with the ESRP.

As the IRS improves its ACA enforcement process, employers need to assess their potential risk of receiving IRS penalties for not complying with the ACA.  We find many vendors are not providing clients with copies of their filed 1094-C, 1095C, and Receipt IDs provided by the IRS for the 2015-2017 tax years.  Consider undertaking a spot audit of your IRS information filings for 2015, 2016 and 2017. We are providing this service at no cost to your business by working with First Capitol Consulting.

To see how this program can benefit your company, please contact us at info@cpa-wfy.com or 949-910-2727

WFY Continues to Grow Firm with New Hires

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Wright Ford Young continues to grow the firm with four new hires: Marisa Alvarado, Nicholas Valdez, Collin Sidler, and Cameron Bauer.  Marisa and Nicholas are the newest additions to WFY’s Estates & Trusts Department while Collin and Cameron are the newest additions to the Audit Department.  WFY is pleased to welcome these new hires to the WFY team.

Marisa Alvarado

Wright For Young & Co. welcomed Marisa Alvarado as its Estates & Trusts Tax Partner in June. Marisa has over 30 years of experience in public accounting with the last 20 years in High Net Worth Advanced Estate Planning. She has worked as management at a few of the leading accounting firms including RSM LLP and KPMG LLP. Her specialties consist of tax planning for high net worth clients as well as successful strategies in tax, estate, gift, and succession planning.

Nicholas Valdez

This month, Nicholas Valdez joined Wright Ford Young & Co. as a Family Office Accountant. For the past twelve years, he’s been a family office bookkeeper for high net worth clients. While pursuing his degree in business administration with an emphasis on accounting at Cal Stat University Fullerton, Nicholas worked as a Manager in Golf Services at Shady Canyon Golf Club in Irvine.

Collin Sidler

Collin Sidler joined the Wright Ford Young & Co. team as Audit Staff in May. After achieving his Bachelor’s degree in accounting at Cal State Fullerton, his first job out of college was an Audit Staff at Deloitte. Collin is also a co-founder of a small internet-based start-up company.

Cameron Bauer

This month, we had the pleasure of adding Cameron Bauer to Wright Ford Young & Co. Cameron is a member of the Audit Staff and will be working in Wright Ford Young’s audit department.   He recently graduated from Biola University Crowell School of Business where he played golf for 4 years.