taxes

October 26, 2020

Simple End of Year Tax Planning and Wealth Transfer Tips

Believe it or not, the end of 2020 is quickly approaching (insert collective sigh of relief). While I think most of us are ready to start looking forward to 2021 and would prefer to not even have to utter the words 2020 anymore, now is the time to finish off the year strong by reviewing simple, yet important, year-end tax planning and wealth transfer tips.

When most people think of tax planning and wealth transfer, they may have in mind complex estate planning documents and an overload of legal and accounting advice. But that doesn’t have to be the case. Here are three simple tips that you can implement with relative ease, though you will want to consult your tax advisor first.

1. The Annual Gift Tax Exclusion. The simplest tax planning and wealth transfer technique involves the all-too-familiar annual gift tax exclusion. The annual gift tax exclusion is an amount that a person may give to another person without having to file a gift tax return or otherwise report to the IRS. The current exclusion is $15,000 per person receiving the gift. The exclusion is indexed for inflation, but it may only increase in $1,000 increments. Further, married taxpayers may elect “gift-splitting,” which basically doubles the amount of the gift that they may make to one person using the gift tax exclusion; for each person receiving the gift, the limitation would be $30,000 rather than $15,000. For example, if a married couple has two children and four grandchildren, they can give up to $30,000 to each of these people tax-free and without having to report it to the IRS. Therefore, the married couple may transfer $180,000 total to the children and grandchildren. Going further, if the children are also married, the taxpayers may give an additional $30,000 to each child’s spouse, which may be desirable if the child and the spouse hold a joint checking or investment account. Note, however, that a gift tax return would need to be filed if the taxpayers elect gift-splitting. The gifts are not taxable at all, but the IRS would like to know that the $30,000 was gifted via gift-splitting.

December 12, 2019

Wayfair the Sales Tax Fanfare

by English, Lucas, Priest & Owsley LLP

Well here we are. It has been well over a year since the United States Supreme Court’s decision in South Dakota v. Wayfair, Inc. As a refresher and not to make your eyes agonizingly glaze over with the down and dirty tax details, Wayfair essentially upheld South Dakota’s tax law that required remote retailers with no physical presence in the state to collect and remit South Dakota sales tax. Prior to Wayfair, states could not require retailers without a physical presence in such states to collect and remit sales tax pursuant to the Supreme Court’s decision in Quill Corp v. North Dakota.

Nathan Vinson

South Dakota’s remote retailer law sets a threshold requirement for its application. A remote retailer must, on an annual basis, deliver more than $100,000 of goods or services into the state or engage in 200 or more separate transactions for the delivery of goods or services into the state. The law therefore contains a so-called small retailer exception.

August 12, 2019

Nonprofits and Sales Tax: Is your organization still affected?

by English, Lucas, Priest & Owsley LLP

By Leah Morrison

Leah Morrison

English, Lucas, Priest & Owsley, LLP

2018 Kentucky legislation expanded the types of services subject to sales and use tax, established economic nexus thresholds for remote retailers, and amended certain excise taxes. In other words, 2018 brought new headaches to Kentucky businesses statewide. But one group in particular was more burdened than the rest: nonprofit organizations. New legislation forced nonprofits to pay sales tax on all the extended services, if applicable, plus, most notably, on sales of admission. This cut deeply into a nonprofit’s ability to raise funds at fundraising events.

Nonprofits had to employ some creative techniques to separate sponsorships and donations from the costs associated with being allowed entry into their fundraising events. Additionally, sales tax had to be collected and paid on certain items auctioned during these events. If the auction item in question was a physical object, tax had to be paid on it – and at the auctioned price, not the actual, retail value of the item. But auction items such as lawn care services or vacations were exempt from sales tax collection. These are only a few examples of the nightmare nonprofits were forced to navigate. Compliance with sale tax laws drained their resources and significantly impacted the ability of nonprofits statewide to provide their charitable purposes in draining the resources they had available to them.

September 12, 2018

Buy lots online? Be prepared to pay state taxes

by English, Lucas, Priest & Owsley LLP

By Nathan Vinson, Partner

English, Lucas, Priest and Owsley, LLP

If you aren’t paying Kentucky sales tax on items you buy online, you will be soon – and you have the great state of South Dakota to thank for it.

June 6, 2018

All about probate, part 2

by English, Lucas, Priest & Owsley LLP

Editor’s note: This is the second of two blog posts exploring probate: what it is, how it works and what Kentucky law has to say about this process. You can read the first in the series here.

By Leah Morrison, Attorney
English, Lucas, Priest and Owsley, LLP

Leah Morrison, attorney

Probate is one of those things that people universally dismiss as an unduly burdensome process. In fact, many clients tell me they need a will or estate plan so that they can avoid probate.

Outside of the small estate scenario that we explored in the first blog post, Kentucky law provides additional mechanisms for avoiding probate. Not everyone has a Will. Perhaps most often people do not want to write one because they don’t want to think about dying, or they plan to write one and simply put it off. Some purposefully choose intestacy. Even without any planning not all assets owned by the decedent are subject to the probate process. Probate assets include everything the decedent owned in his or her individual name.

These can include:

bank accounts;
brokerage accounts;
real estate held in the decedent’s individual name or in a tenancy in common;
vehicles;
furniture;
jewelry; and
an interest in a partnership, corporation, or limited liability company.

October 26, 2017

Treasury Department announces new limitations for pension and retirement plans, other changes for 2018

by English, Lucas, Priest & Owsley LLP

Each year, the Treasury Department examines the cost of living in the U.S. and adjusts limitations for retirement plans and many other similar items that affect taxpayers throughout the U.S. As has happened previously, the Treasury raised the limits for contributions to pensions and other retirement plans such as 401(k)s, 403(b)s and most 457 plans. All of this helps today’s workers save for retirement with pre-tax dollars, which is a tremendous benefit.

Our tax code requires the Secretary of the Treasury to make this adjustment.

The biggest news is that the contribution limit to employer-sponsored retirement plans, such as the above-mentioned 401(k)s, etc., has gone from $18,000 for calendar 2017 to $18,500 for calendar 2018. If you were bumping up against this limit in 2017, you can now adjust and put in just a little bit more, which is always good news.

August 22, 2017

Tax reforms could threaten some popular tax cuts

by English, Lucas, Priest & Owsley LLP

By Nathan Vinson, Attorney
English, Lucas, Priest and Owsley, LLP

Improvements to tax law and reducing taxes are a very popular item on most politicians’ platforms. You won’t find anyone who openly says people should pay more. At least, not anyone currently serving in office.

They’re right, by the way – our tax code is far too cumbersome and it changes constantly. (And no, I’m not running for office.)

President Trump has indicated he wants to reform the tax code and change the way people pay taxes. Lawmakers are reportedly discussing how to do that while paying for expensive new initiatives. How can you do it all?

June 1, 2017

Dying without a will causes legal disputes for Prince

by English, Lucas, Priest & Owsley LLP

By Nathan Vinson, Attorney
English, Lucas, Priest and Owsley, LLP

Prince performing in concert in Louisville, Kentucky. Photo by Bob Young.

It’s been more than a year since music legend Prince died unexpectedly at his home in Minnesota. He was actively touring and working at the time of his death on April 21, 2016, at the young age of 57.

You’re forgiven if you assumed his estate was long settled, since he died more than a year ago. But it’s not done yet – and may not be for quite a while – due to the fact that he died without a will.

It’s astounding to think that someone who is as famous, prosperous and with as many assets as Prince would die without this basic legal document. But as it turns out, he’s no different than anyone else – he probably didn’t want to think about death.

Whether you die a famous millionaire or with few assets, if you don’t have a Will you can leave a large mess. Heirs you would have never wanted to have your property could get it. Your estate will spend more probating your assets as well, and those who you wished to receive items from your estate may never see them.

Prince was a very charitable man, yet none of his millions he had nor future royalties will benefit those he likely would have preferred to benefit. Plus, the estate will shell out much more than anyone would want to pay in estate taxes.

Your children and family will be far happier if you take care of this before you die – and there’s no doubt it will bring you piece of mind, too.

April 5, 2017

Doing good does a business well, too

by English, Lucas, Priest & Owsley LLP

By Nathan Vinson, Attorney
English, Lucas, Priest and Owsley, LLP

This is that time of year when we all start thinking about taxes – and how to pay less. We’ve often gotten the news from our accountants that perhaps our refunds won’t be as large as we’d like or that we owe. Ugh to both.

This is a good time to consider if your business can be more charitably minded, and perhaps help you pare back the tax burden next year.

January 17, 2017

2016 tax exemptions numbers you’ll need to do your taxes

by English, Lucas, Priest & Owsley LLP

By Nathan Vinson, Attorney
English, Lucas, Priest and Owsley, LLP

Photograph 047 by Lauren Mancke found on minimography.com

Each year, the IRS sets dollar amounts for specific types of exemptions. Usually, these don’t change much – $100 here, $50 here, etc. You’ll need these numbers as you do your taxes this year.

The personal exemption amount for 2016 taxes is $6,300 for an individual or for a married couple filing separately (so that’s per person). As you’d expect, married filing jointly is twice that at $12,600. Head of households can claim $9,300, and surviving spouse $12,600. For anyone who takes the standard deduction and doesn’t itemize, that is the amount you’ll claim.

However, the exemption is subject to a phase-out that begins with adjusted gross incomes of $259,400 ($311,300 for married couples filing jointly). It phases out completely at $381,900 ($433,800 for married couples filing jointly.)

Forbes published an extensive piece that goes into more detail, including tax tables, which you can read here.