Divorce and Retirement Plans

divorceRetirement plans are often one of the most valuable assets a couple acquires during a marriage. If a couple divorces and there is an agreement or judgment that requires all or a portion of the employee spouse’s retirement plan to be shared with the spouse or former spouse, the division is accomplished through a Qualified Domestic Relations Order (QDRO). The spouse or former spouse of the employee is often called an “alternate payee” for purposes of the QDRO. While state law governs the division of most marital assets, most employment related retirement plans are governed by the Employee Retirement Income Security Act of 1974 (ERISA) and the Internal Revenue Code (Code). In general, ERISA and the Code prohibit a retirement plan participant from assigning a portion of his or her interest in the plan to another person.
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The Very Basics of Blockchain

blockchain

Blockchain is the technology that makes Bitcoin possible and it has been around the edge of my consciousness since Bitcoin came on the scene about ten years ago, but I never really wanted to know more about what it is and how it works until the most recent lettuce recall when experts opined that Blockchain could have identified the source of the contamination and kept lettuce in our stores. How do we get from Bitcoin to lettuce with the same technology? I asked a lot of my very bright friends, many of whom are involved professionally with computers, and not one knew more than I did. So after a trip to the library (where only one book was helpful) and a few Google searches, Ihave a simplistic overview that I can share with you.
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Social Security and Taxes

social security and taxesAfter contributing through payroll and self-employment taxes for decades of work, many Social Security beneficiaries are astonished when they learn that their benefits may be subject to federal and sometimes state income taxes. When benefits were first paid in 1940, they were explicitly and completely excluded from federal taxable income. However, in the 1970s and in the midst of Social Security’s first funding crisis, it became necessary to contemplate some changes. The National Commission on Social Security, chaired by Alan Greenspan, recom­mended taxing 50% of Social Security benefits. Congress did not like the thought of taxing low-income retirees. In 1983, Congress passed and President Reagan signed into law legislation which would potentially require up to 50% of Social Security benefits to be included in taxable income. As you will see in this article, some low-income taxpayers can exclude some, and in certain cases, all their benefits from taxable income.
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When to File a Gift Tax Return

Federal gift taxIf you give someone money or property during your lifetime, you may be subject to federal gift tax. The federal gift tax exists for one reason: to prevent taxpayers from avoiding the federal estate tax by giving away their money before they die. When it comes into play, the tax is owed by the gift giver and not by the recipient. You probably have never paid it and probably will never have to.
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Social Security: Types of Benefits and Marriage/Divorce Considerations

social securityThere are a many different benefits offered by the Social Security Administration, and knowing your options and requirements is essential. Don’t expect the Social Security Administration to know who you married, who you divorced, whether your spouse or ex-spouse died, whether or not you are caring for a young or disabled child, or if you are taking care of dependent parents. You need to equip yourself with some knowledge of the benefit provisions, ask if you don’t know, and/or find a well-informed advisor. Decisions made regarding claiming Social Security are critically important. This is the third piece of a series of articles with the objective of assisting you in making better decisions regarding claiming Social Security.
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Should I Give My Home to My Children?

elderlyI am often asked whether it is a good idea for elderly parents to transfer their home to their children. I always ask: “Why do you want to do this?” The most common reason is to protect the house in the event one or both of the parents need nursing home care.

First, I want to emphasize that there is no easy answer to this question without knowing the full asset and income picture, as well as the health status of the parents. If I get all that information, the answer can be easy (for me!).
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Charitable Giving Strategies

Charitable GivingWhile there may be a lot of wisdom in the proverb “May your charity increase as much as your wealth,” there can also be wealth in properly planning your charitable giving. This wealth is derived from the economic benefit that can result from tax savings achieved by implementing certain charitable giving strategies.

Bunching of deductions is one such charitable contribution strategy. Because the Tax Cuts & Jobs Act limits many allowable itemized deductions beginning in 2018 and increases the standard deduction, many taxpayers will find that the standard deduction is more beneficial than itemizing, thus losing the tax benefit of making the gift.
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HOW SOCIAL SECURITY BENEFITS ARE DETERMINED

Determining Social Security Benefits

Social Security is a valuable resource for older and disabled workers as well as the worker’s survivors and dependents. It provides 90% of the cash flow for one-third of retirees. It delivers 28% of the cash flow for high income retirees. A mistake in claiming these benefits can be permanent and costly to the worker and his/her family. This is the second in a series of articles on Social Security. The objective of the series is to help you make better decisions regarding claiming benefits. To make good decisions we need to identify, determine, and appreciate certain terms and concepts. The theme of this installment is the procedure used to calculate Social Security benefits and a brief discussion of average benefits. Estimating your benefits is the essential first step in the SS decision-making process.
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REPEAL OF ENTERTAINMENT DEDUCTIONS

Entertainment Tax Deduction

The Tax Cuts & Jobs Act (TJCA) repealed the deduction for business entertainment beginning in 2018.  This includes expenditures for taking clients to sporting events and shows, and paying for season tickets for various sporting events.   Generally, any dues for social clubs such as country clubs or athletic clubs will also be non-deductible.

Most business-related meals will be 50% deductible.  If no business is discussed, the meal is not deductible for tax purposes and should be classified as entertainment.

Deductions will be permissible for sponsorship payments, net of the fair market value of any meals and entertainment, as well as for payments for professional dues and meetings such as civic organizations, trade associations and professional organizations.

Proper classification of the above-cited expenditures will be important for proper tax reporting.  Accordingly, it is essential to have your company’s internal accounting set up appropriately.  Please contact us if you would like assistance in identifying and classifying these expenses to treat them correctly on your tax return.

By Terri L. Marakos, CPA

NEW JERSEY HEALTH INSURANCE MANDATE

New Jersey Health Insurance MandateNew Jersey Health Insurance Mandate to be effective in 2019: In response to the repeal of the Affordable Care Act’s (ACA) federal health insurance mandate that will become effective in 2019, legislation was signed on May 30, 2018 by New Jersey Gov. Phil Murphy whereby New Jersey will impose a similar mandate effective in taxable years beginning January 1, 2019.   The New Jersey law requires all state residents to have health insurance or pay a penalty.  The penalty will be calculated based upon the current federal formula, which is 2.5% of income or $695 per adult taxpayer and $347 per child, whichever is greater.  A family’s maximum penalty is $2,085.   The penalty is designed to increase each year that someone is not covered, but cannot exceed the price of a lower-cost bronze-level plan on New Jersey’s ACA marketplace.  The cost of such a plan averaged just under $3,300 in 2017.

New Jersey is the second state to enact a health insurance mandate.  In 2006, Massachusetts was the first state to adopt an individual mandate.  Other states are currently developing similar legislation.

By Terri L. Marakos, CPA