Category: Henderson, KY
You probably don’t have to be told about the need for a will. But do you know what provisions should be included and what’s best to leave out? The answers to those questions depend on your situation and may depend on state law.
1. Basic provisions
Typically, a will begins with an introductory clause, identifying yourself along with where you reside (city, state, county, etc.). It should also state that this is your official will and replaces any previous wills. After the introductory clause, a will generally explains how your debts and funeral expenses are to be paid. The provisions for repaying debt generally reflect applicable state laws.
Don’t include specific instructions for funeral arrangements. It’s likely that your will won’t be accessed in time. Spell out your wishes in a letter of instructions, which is an informal letter to your family. A will may also be used to name a guardian for minor children. To be on the safe side, name a backup in case your initial choice is unable or unwilling to serve as guardian or predeceases you.
2. Specific bequests
One of the major sections of your will — and the one that usually requires the most introspection — divides up your remaining assets. Outside of your residuary estate, you’ll likely want to make specific bequests of tangible personal property to designated beneficiaries. If you’re using a trust to transfer property, make sure you identify the property that remains outside the trust, such as furniture and electronic devices. Typically, these items won’t be suitable for inclusion in a trust. If your estate includes real estate, include detailed information about the property and identify the specific beneficiaries.
Once you’ve covered real estate and other tangible property, move on to intangible property, such as cash and securities. Again, you may handle these items through specific bequests where you describe the property the best you can. Finally, most wills contain a residuary clause. As a result, assets that aren’t otherwise accounted for go to the named beneficiaries, often adult children, grandchildren or a combination of family members.
3. Naming an executor
Toward the end of the will, name the executor — usually a relative or professional — who is responsible for administering it. Of course, this should be a reputable person whom you trust. Also, include a successor executor if the first choice is unable to perform these duties. Frequently, a professional is used in this backup capacity.
4. Cross the t’s and dot the i’s
Your attorney will help you meet all the legal obligations for a valid will in the applicable state and keep it up to date. Sign the will, putting your initials on each page, with your signature attested to by witnesses. Include the addresses of the witnesses in case they ever need to be located. Don’t use beneficiaries as witnesses. This could lead to potential conflicts of interest. Contact us with questions. © 2019
“Gamification.” It’s perhaps an odd word, but it’s a cool concept that’s become popular among many types of businesses. In its most general sense, the term refers to integrating characteristics of game-playing into business-related tasks to excite and engage the people involved.
Might it have a place in your company?
Internal focus
Sometimes gamification refers to customer interactions. For example, a retailer might award customers points for purchases that they can collect and use toward discounts. Or a company might offer product-related games or contests on its website to generate traffic and visitor engagement.
But, these days, many businesses are also using gamification internally. That is, they’re using it to:
- Engage employees in training processes,
- Promote friendly competition and camaraderie among employees, and
- Ease the recognition and measurement of progress toward shared goals.
It’s not hard to see how creating positive experiences in these areas might improve the morale and productivity of any workplace. As a training tool, games can help employees learn more quickly and easily. Moreover, with the rise of social media, many workers are comfortable sharing with others in a competitive setting. And, from the employer’s perspective, gamification opens all kinds of data-gathering possibilities to track training initiatives and measure employee performance.
Specific applications
In most businesses, employee training is a big opportunity to reap the benefits of gamification. As many industries look to attract Generation Z — the next big demographic to enter the workforce — game-based learning makes perfect sense for individuals who grew up both competing in various electronic ways on their mobile devices and interacting on social media.
For example, safety and sensitivity training are areas that demand constant reinforcement. But it’s also common for workers to tune out these topics. Framing reminders, updates and exercises within game scenarios, in which participants might win or lose ground by following proper or improper work practices, is one way to liven up the process.
Game-style simulations can also help prepare employees for management or leadership roles. Online training simulations, set up as games, can test participants’ decision-making and problem-solving skills — and allow them to see the potential consequences of various actions beforegranting them such responsibilities in the real-word situations. You might also consider rewards-based games for managers or project leaders based on meeting schedules, staying within budgets, or preventing accidents or other costly mistakes.
Intended effects
Naturally, gamification has its risks. You don’t want to “force fun” or frustrate employees with unreasonably difficult games. Doing so could lower morale, waste time and money, and undercut training effectiveness.
To mitigate the downsides, involve management and employees in gamification initiatives to ensure you’re on the right track. Also consider involving a professional consultant to implement established and tested “gamified” exercises, tasks and contests. We can help you identify and assess the potential costs involved and keep those costs in line.
© 2019
You may have heard of the “nanny tax.” But even if you don’t employ a nanny, it may apply to you. Hiring a housekeeper, gardener or other household employee (who isn’t an independent contractor) may make you liable for federal income and other taxes. You may also have state tax obligations.
If you employ a household worker, you aren’t required to withhold federal income taxes from pay. But you may choose to withhold if the worker requests it. In that case, ask the worker to fill out a Form W-4. However, you may be required to withhold Social Security and Medicare (FICA) taxes and to pay federal unemployment (FUTA) tax.
FICA and FUTA tax
In 2019, you must withhold and pay FICA taxes if your household worker earns cash wages of $2,100 or more (excluding the value of food and lodging). If you reach the threshold, all the wages (not just the excess) are subject to FICA.
However, if a nanny is under age 18 and child care isn’t his or her principal occupation, you don’t have to withhold FICA taxes. So, if you have a part-time babysitter who is a student, there’s no FICA tax liability.
Both an employer and a household worker may have FICA tax obligations. As an employer, you’re responsible for withholding your worker’s FICA share. In addition, you must pay a matching amount. FICA tax is divided between Social Security and Medicare. The Social Security tax rate is 6.2% for the employer and 6.2% for the worker (12.4% total). Medicare tax is 1.45% each for both the employer and the worker (2.9% total).
If you want, you can pay your worker’s share of Social Security and Medicare taxes. If you do, your payments aren’t counted as additional cash wages for Social Security and Medicare purposes. However, your payments are treated as additional income to the worker for federal tax purposes, so you must include them as wages on the W-2 form that you must provide.
You also must pay FUTA tax if you pay $1,000 or more in cash wages (excluding food and lodging) to your worker in any calendar quarter. FUTA tax applies to the first $7,000 of wages paid and is only paid by the employer.
Reporting and paying
You pay household worker obligations by increasing your quarterly estimated tax payments or increasing withholding from wages, rather than making an annual lump-sum payment.
As a household worker employer, you don’t have to file employment tax returns, even if you’re required to withhold or pay tax (unless you own your own business). Instead, employment taxes are reported on your tax return on Schedule H.
When you report the taxes on your return, you include your employer identification number (not the same as your Social Security number). You must file Form SS-4 to get one.
However, if you own a business as a sole proprietor, you include the taxes for a household worker on the FUTA and FICA forms (940 and 941) that you file for your business. And you use your sole proprietorship EIN to report the taxes.
Keep careful records
Keep related tax records for at least four years from the later of the due date of the return or the date the tax was paid. Records should include the worker’s name, address, Social Security number, employment dates, dates and amount of wages paid and taxes withheld, and copies of forms filed.
Contact us for assistance or questions about how to comply with these employment tax requirements.
© 2019
Watch the video here.
Let’s talk about Roth versus Traditional. IRAs or 401ks. An IRA is an individual retirement account not associated with your employer. A 401k is a retirement account maintained by your employer.
A question we get all the time is: should I invest in a Tradition or Roth retirement account? A primary difference between a Roth and Traditional retirement account is the timing of the tax benefit. With a Roth, you receive the tax benefit at the end when you retire. With a Traditional, you receive the tax benefit at the beginning when you make the contribution.
There are numerous resources on the internet to give you all of the details you could ever want on this topic, including the IRS website. In my forty years of experience, my opinion is generally Roth retirement accounts are best suited for young people. Because they have a long working life before they retire and that gives their investments time to increase substantially and that increase will not be taxable to them when they draw it out at retirement.
Traditional IRAs and 401ks are best suited to those who are in a higher tax bracket. They will save significant tax dollars immediately and will likely be in a lower tax bracket when they retire because their income will be reduced. This usually describes mature individuals. They are in their later years of working and usually have higher incomes. Therefore, the tax savings currently are greater and the time for investments to increase in value is shorter.
When you decide to put money in a retirement account, that is for retirement. That is not college savings, savings for a car, etc. The penalty for early withdrawal is 10% plus you pay income tax on the amount you withdraw.. As an example for a traditional IRA or 401k: if you withdraw $10,000 and you are in the 22% tax bracket, you will pay $3,200 of the $10,000 to the government. Not a good deal.
With Traditional IRAs, you must be at least 59 and a half to avoid any early distribution penalties. However, once you reach the age of 70 and a half, you must start taking required minimum distributions. These distributions are generally 100% taxable. With a Roth IRA or 401k, there are no Required Minimum Distributions and distributions at retirement are 100% tax free.
Since no one has a crystal ball, we don’t know what tax rates will be and both plans have some great benefits. If your tax rates are higher now, use the Traditional, however, if your tax rates are expected to be higher when you retire, choose the Roth.
One suggestion is the hedge, use a Roth IRA or 401k when you are younger. When you mature and income has increased, you can always change to traditional to get the immediate tax savings. But talk to your CPA and investment advisor to get the best solution for you.
As a rule of thumb, contribute more than you think you can afford to your retirement plan. Your retirement self will thank you later.
Now that most schools are out for the summer, you might be sending your children to day camp. It’s often a significant expense. The good news: You might be eligible for a tax break for the cost.
The value of a credit
Day camp is a qualified expense under the child and dependent care credit, which is worth 20% to 35% of qualifying expenses, subject to a cap. Note: Sleep-away camp does not qualify.
For 2019, the maximum expenses allowed for the credit are $3,000 for one qualifying child and $6,000 for two or more. Other expenses eligible for the credit include payments to a daycare center, nanny, or nursery school.
Keep in mind that tax credits are especially valuable because they reduce your tax liability dollar-for-dollar — $1 of tax credit saves you $1 of taxes. This differs from deductions, which simply reduce the amount of income subject to tax.
For example, if you’re in the 32% tax bracket, $1 of deduction saves you only $0.32 of taxes. So it’s important to take maximum advantage of all tax credits available to you.
Work-related expenses
For an expense to qualify for the credit, it must be related to employment. In other words, it must enable you to work — or look for work if you’re unemployed. It must also be for the care of your child, stepchild, foster child, or other qualifying relative who is under age 13, lives in your home for more than half the year and meets other requirements.
There’s no age limit if the dependent child is physically or mentally unable to care for him- or herself. Special rules apply if the child’s parents are divorced or separated or if the parents live apart.
Credit vs. FSA
If you participate in an employer-sponsored child and dependent care Flexible Spending Account (FSA), you can’t use expenses paid from or reimbursed by the FSA to claim the credit.
If your employer offers a child and dependent care FSA, you may wish to consider participating in the FSA instead of taking the credit. With an FSA for child and dependent care, you can contribute up to $5,000 on a pretax basis. If your marginal tax rate is more than 15%, participating in the FSA is more beneficial than taking the credit. That’s because the exclusion from income under the FSA gives a tax benefit at your highest tax rate, while the credit rate for taxpayers with adjusted gross income over $43,000 is limited to 20%.
Proving your eligibility
On your tax return, you must include the Social Security number of each child who attended the camp or received care. There’s no credit without it. You must also identify the organizations or persons that provided care for your child. So make sure to obtain the name, address and taxpayer identification number of the camp.
Additional rules apply to the child and dependent care credit. Contact us if you have questions. We can help determine your eligibility for the credit and other tax breaks for parents.
© 2019
Is your business hiring this summer? If the employees come from certain “targeted groups,” you may be eligible for the Work Opportunity Tax Credit (WOTC). This includes youth whom you bring in this summer for two or three months. The maximum credit employers can claim is $2,400 to $9,600 for each eligible employee.
10 targeted groups
An employer is generally eligible for the credit only for qualified wages paid to members of 10 targeted groups:
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Qualified members of families receiving assistance under the Temporary Assistance for Needy Families program
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Qualified veterans
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Designated community residents who live in Empowerment Zones or rural renewal counties
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Qualified ex-felons
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Vocational rehabilitation referrals
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Qualified summer youth employees
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Qualified members of families in the Supplemental Nutrition Assistance Program
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Qualified Supplemental Security Income recipients
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Long-term family assistance recipients
- Qualified individuals who have been unemployed for 27 weeks or longer
For each employee, there’s also a minimum requirement that the employee have completed at least 120 hours of service for the employer, and that employment begins before January 1, 2020. Also, the credit isn’t available for certain employees who are related to the employer or work more than 50% of the time outside of a trade or business of the employer (for example, working as a house cleaner in the employer’s home). And it generally isn’t available for employees who have previously worked for the employer.
Calculate the savings
For employees other than summer youth employees, the credit amount is calculated under the following rules. The employer can take into account up to $6,000 of first-year wages per employee ($10,000 for “long-term family assistance recipients” and/or $12,000, $14,000 or $24,000 for certain veterans). If the employee completed at least 120 hours but less than 400 hours of service for the employer, the wages taken into account are multiplied by 25%. If the employee completed 400 or more hours, all of the wages taken into account are multiplied by 40%. Therefore, the maximum credit available for the first-year wages is $2,400 ($6,000 × 40%) per employee. It is $4,000 [$10,000 × 40%] for “long-term family assistance recipients”; $4,800, $5,600 or $9,600 [$12,000, $14,000 or $24,000 × 40%] for certain veterans. In order to claim a $9,600 credit, a veteran must be certified as being entitled to compensation for a service-connected disability and be unemployed for at least six months during the one-year period ending on the hiring date. Additionally, for “long-term family assistance recipients,” there’s a 50% credit for up to $10,000 of second-year wages, resulting in a total maximum credit, over two years, of $9,000 [$10,000 × 40% plus $10,000 × 50%].
The “first year” described above is the year-long period which begins with the employee’s first day of work. The “second year” is the year that immediately follows. For summer youth employees, the rules described above apply, except that you can only take into account up to $3,000 of wages, and the wages must be paid for services performed during any 90-day period between May 1 and September 15. That means that, for summer youth employees, the maximum credit available is $1,200 ($3,000 × 40%) per employee. Summer youth employees are defined as those who are at least 16 years old, but under 18 on the hiring date or May 1 (whichever is later), and reside in an Empowerment Zone, enterprise community or renewal community.
We can help
The WOTC can offset the cost of hiring qualified new employees. There are some additional rules that, in limited circumstances, prohibit the credit or require an allocation of the credit. And you must fill out and submit paperwork to the government. Contact us for assistance or more information about your situation. © 2019
Fight money laundering with visual analytics
Money laundering is an insidious and ever-present issue for community banks. Rapidly advancing technology enables criminals to invent new ways of gaming the system. But that same technological progress, in the form of data visualization software, can give your community bank an edge in detecting and preventing money laundering and ensuring your institution’s compliance with the Bank Secrecy Act and Anti-Money Laundering (BSA/AML)
Compliance
Banks that fail to take reasonable steps to detect and prevent money-laundering activity risk government fines. They also may receive severe negative publicity that harms their reputations.
Several developments over the past few years reflect the federal banking agencies’ increasing concern about BSA/AML compliance efforts. For one thing, the Financial Crimes Enforcement Network (FinCEN) introduced customer due diligence (CDD) rules that require institutions to incorporate beneficial ownership identification requirements into existing CDD policies and procedures.
In 2016, the Office of the Comptroller of the Currency (OCC) alerted banks to increasing BSA/AML risks associated with technological developments and new product offerings in the banking industry. In addition, regulators increasingly have been scrutinizing automated monitoring systems used by banks to detect suspicious activity to ensure that they’re configured properly.
For several years now, regulators haven’t limited their heightened scrutiny to larger banks. In fact, some large banks have restricted certain customers’ activities or closed their accounts because of BSA/AML concerns. As a result, higher-risk customers often have moved to smaller banks with less experience managing the associated BSA/AML risks.
Visual analytics
Data visualization software — also known as visual analytics — can be a powerful AML tool. Traditional AML software products and methods do a good job of detecting known AML issues. But data visualization software, which is commonly used as an antifraud weapon, excels at spotting new or unknown AML activity.
As criminal activity becomes more sophisticated and more difficult to detect, traditional AML software or methods may no longer be enough. Data visualization software creates visual representations of data. These representations may take many different forms, from pie charts and bar graphs to scatterplots, decision trees and geospatial maps. Visualization helps banks identify suspicious patterns, relationships, trends or anomalies that are difficult to spot using traditional tools alone. It’s particularly useful in identifying new or emerging risks before they do lasting damage.
Criminal enterprises that wish to launder money typically use multiple entities and multiple bank accounts, both domestic and foreign. Using data visualization software, banks can map out the flow of funds across various accounts, identifying relationships between accounts and the entities associated with them. Data visualization can reveal clusters of interrelated entities that would be difficult and time-consuming to spot using traditional methods.
These clusters or other relationships don’t necessarily indicate criminal activity. But they help focus a bank’s AML efforts by pinpointing suspicious activities that warrant further investigation.
Money-laundering maps
To counter today’s sophisticated money-laundering schemes, community banks need to consolidate their databases and stay up to date on the latest technological tools at their disposal. By using data visualization software to map trends, clusters and relationships that would be difficult to discern otherwise, community banks can more quickly and easily detect potential money-laundering activities — and take steps to head them off.
© 2019
As part of National Small Business Week (May 5-11), the IRS issued a reminder about a change in backup withholding. Under the Tax Cuts and Jobs Act, the backup withholding tax rate dropped from 28% to 24%. Backup withholding applies in various situations, including when a taxpayer fails to supply a correct taxpayer identification number (TIN) to a payer. Usually, a TIN is a Social Security number, but in some cases, it can be an employer identification number, individual taxpayer identification number or adoption taxpayer identification number. Backup withholding also applies when a taxpayer under-reported interest or dividend income on a federal tax return.
