Monthly Tax Tip
Check out the Edgar & Edgar website for tax organizers to help you get your documents in order. These forms also make great check lists to make sure you have all the items you need to file your taxes smoothly.
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'Tis the Season
 We’ve had a few clients ask about taxes on gifts. Well, here’s the low-down.
A tax-payer can give up to $15,000 per year/per recipient (2018) without triggering gift tax. The recipient can be family, non-family, adult or child. Here’s an example: A person wants to give out some gifts to the following people; Daughter, son-in-law, three grandchildren, and mailman. Each person can receive up to $15,000 without any tax effect to the giver or receiver. That’s a total of $90,000. This can be done in December of 2018 and then again to the same people in January 2019. If the tax-payer is married, the spouse can give the same amount to the same people, thus doubling the potential gifts.
What if you want to give more than $15,000 to a recipient in one year? Normally a gift in excess of the exemption ($15,000 in 2018) would trigger potential gift tax, HOWEVER, thankfully we have the Unified Credit. What does this mean? When a person dies their estate can exclude a certain amount of their estate from estate tax. In 2018 the estate tax exemption is $5.6 million per person (married couple would double this). So, if a person dies in 2018, the first $5.6 million passes to the heirs without tax. The nice thing about the Unified Credit is that if you give gifts during your life that exceed the annual exclusion, you can use your estate tax exemption. Let’s take a look at an example. Here’s a breakdown of gifts the tax-payer would like to make:
- Family Members: 5 x $100,000 = $500,000 (exceeds gift tax exclusion by $425,000)
- 1 x $15,000 = $15,000 (exceeds gift tax exclusion by $0)
When doing his taxes, the donor would claim $90,000 in gift tax exemptions AND $425,000 towards his estate tax exemption amount. If when the giver dies the estate exemption was the current 2018 amount ($5.6 million), the executor of the executor of the estate would need to reduce the exemption by $425,000, thus allowing the estate to pass along $5,175,000 tax-free.
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1099 with Edgar & Edgar
 Hey business owners, if you paid more than $600 to vendors in 2018, you better file 1099's for each vendor. Penalties for failure to file can be really steep; up to $260/return for small businesses that don't intentionally neglect to file and up to $530/return for businesses that intentionally don't file. Here's the great news; Edgar and Edgar CPAs can eFile your 1099's for you. 1099's are due by January 31, 2019, so don't delay, call us today to get started.
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From Sawtooth
 If you're looking to defer taxes on business or self-employment income (think Schedule C) and save for retirement, a Simplified Employee Pension (SEP) may be right for you. So, what is a SEP?
SEPs are intended as an alternative to “qualified” retirement plans (401k, 403b), particularly or small businesses. SEPs are relatively easy to setup and administer and you, as the employer, have complete discretion deciding whether to make annual contributions. Annual contributions made to you and your employees’ SEP accounts are deductible from your income, thus lowering current year taxes. Tax isn’t paid on these contributions until funds are withdrawn by the employee. The maximum contribution an employer can make to an employee’s SEP account in 2018 is the lesser of 25% of compensation or $55,000. Employees are not allowed to contribute funds to their SEP account.
Business owners should be aware that contributions cannot discriminate in favor of highly compensated employees. Therefore, for businesses with a larger work-force, the SEP may not be the right retirement plan.
The ease with which a SEP can be created and administered, as well as the flexibility of contributions, make the SEP a very attractive way to defer taxes for business owner.
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Monthly Recipe
The Holidays are a time to celebrate, so why feature just one recipe this month? If you're counting down the days to Christmas, why not mark each day with a festive Holiday drink. This month's feature comes from the blog section of WebstaurantStore.com. 12 Days of Christmas... How about 12 Drinks of Christmas. Try the Peppermint Hot Cocoa on a cold day next to a warm fire.
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