CPA Blog

3 strategies for tax-smart giving

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Published: Monday, 15 August 2016 08:21

Written by Phillip Strickler, CPA.CITP

Giving away assets during your life will help reduce the size of your taxable estate, which is beneficial if you have a large estate that could be subject to estate taxes. For 2016, the lifetime gift and estate tax exemption is $5.45 million (twice that for married couples with proper estate planning strategies in place).

Even if your estate tax isn’t large enough for estate taxes to be a concern, there are income tax consequences to consider. Plus it’s possible the estate tax exemption could be reduced or your wealth could increase significantly in the future, and estate taxes could become a concern.

That’s why, no matter your current net worth, it’s important to choose gifts wisely. Consider both estate and income tax consequences and the economic aspects of any gifts you’d like to make.

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Prevent expense account padding with the right policies

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Published: Monday, 08 August 2016 08:39

Written by Phillip Strickler, CPA.CITP

Ask employees whether padding expense account reports is wrong and just about everyone will say “yes.” Yet inflated expenses continue to cost businesses thousands of dollars annually. For this reason, every company must establish the right policies to stop it.

How it works

To stop expense padding, you need to know how it works. Expense inflation — where an employee exaggerates the amount of the actual cost of a meal or cab ride and pockets the change — may be the most common expense-padding method.

But cheaters are also capable of inventing expenses and submitting fake documentation to support them or requesting multiple reimbursements by submitting the same receipt more than once. And watch out for mischaracterized expenses. In such schemes, employees provide legitimate documentation for non-business-related expenses, such as treating friends to a night out on the town, and characterize them as “business development” costs.

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Offer deferred compensation? Be careful about compliance

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Published: Tuesday, 02 August 2016 10:53

Written by Phillip Strickler, CPA.CITP

Congress enacted Section 409A of the Internal Revenue Code more than 10 years ago in response to scandals involving Enron and other corporations. If you offer employees deferred compensation as a benefit, it’s critical to stay familiar with Sec. 409A and its many requirements.

Applicable plans

Sec. 409A applies to most nonqualified deferred compensation arrangements, including bonus plans, supplemental executive retirement plans, certain severance pay plans, and equity-based incentive compensation plans — such as stock options, stock appreciation rights (SARs) and phantom stock.

The requirements don’t apply to qualified retirement plans, such as 401(k) plans. They also don’t apply to most welfare benefit plans — for example, vacation, sick leave, compensatory time, disability and death benefit plans.

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QSB stock offers 2 valuable tax benefits

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Published: Tuesday, 02 August 2016 10:24

Written by Phillip Strickler, CPA.CITP

By investing in qualified small business (QSB) stock, you can diversify your portfolio and enjoy two valuable tax benefits:

1. Tax-free gain rollovers. If within 60 days of selling QSB stock you buy other QSB stock with the proceeds, you can defer the tax on your gain until you dispose of the new stock. The rolled-over gain reduces your basis in the new stock. For determining long-term capital gains treatment, the new stock’s holding period includes the holding period of the stock you sold.

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