Estate planning for special needs

The process of estate planning for special needs children comes with some unique considerations. And in many cases, special needs dependents will be financially reliant on others for most of their lives.

This should be a family-wide conversation. Parents, grandparents, siblings, and even nieces and nephews are all part of the network that lends care and support to a special needs person.

It’s important to involve everyone. This maximizes the likelihood that they will have the opportunity to live a comfortable, meaningful and happy life.

Start the conversation

A good place to start is to discuss how much support the disabled person will need. This involves the family doctor, and any other healthcare professionals involved in their care. The support your special needs relative needs at one phase of his life will different from his needs in another phase.

Extending the plans out into the future will then involve financial and legal advisors. Dividing up an estate between multiple heirs depends on a number of factors. This includes elements like insurance policies or legal settlements.

The conversation will need to be ongoing as life evolves. If you have a special needs relative, you will need to include not just the distribution of wealth, but how your special needs relative care will be provided and who will be responsible for overseeing it.

Establishing a trust

Estate planning professionals suggest families consider establishing a trust to manage assets intended for the care of your special needs family member. Trusts are set up with very particular purposes in mind and limit disbursements of cash accordingly.

But why a trust?

Well, it removes the pressure placed on any one individual. As a precaution, don’t give assets directly to a family member to fund the care of your special needs relative. This is so important, even if it is a sibling because problems are certain to occur. Chances are that those assets will be commingled with the sibling’s assets. This will create more risks when life’s speed bumps arrive (losing a job, unexpected health care costs, lawsuits, etc).

The second benefit is that monies held in trust won’t block the dependent family member from qualifying for Supplemental Security Income (SSI). Also it does not affect any other federal, state, or local programs designed for the benefit of special needs persons.

You have a variety of ways to establish a trust. Selecting the right one will depend on:

• Where the assets are coming from
• How they will be used during the life of the dependent person and
• What will happen to any assets remaining at the end of the trustees life

There are also pooled special needs trusts that can be looked at.

Each has advantages and disadvantages. Seek the counsel of your CPA or lawyer that is familiar with estate planning so you have do it right.

Government support

You can find details specific to the Supplemental Security Income (SSI) at https://www.ssa.gov/

Currently, Supplemental Social Security Income is up to $735.00 per month. This income depends on the particular circumstances of the special needs person. It’s important when creating financial plans for a special needs person that you ensure compliance with the Social Security guidelines to receive benefits.

Qualification for financial needs for your special needs relative’s may be affected by assets under his control. Such assets could include inheritances etc. Therefore, is the family decides to establish a trust, it is important to do so before the beneficiary’s 65th birthday.

Update the plan

It’s important – regardless of your situation – to regularly review all your estate planning documents. When is the last time you checked who is listed as the beneficiary for your life insurance plan? Or your 401(k)?

Technically speaking these accounts are non-probate. This means that these companies will distribute assets to the beneficiary they have on file even if it conflicts with a recently updated living will.

Not surprisingly, there have been cases where assets from a life insurance plan have been transferred to an ex-spouse. This happened simply because the beneficiary hadn’t been updated in decades. Also, consider that if you rolled a 401(k) into an IRA, the new account won’t list your 401(k) beneficiary by default.

If you have established a trust to manage a special needs person’s care, the trust can be listed as a beneficiary in insurance plans and retirement accounts.

The needs of your special needs dependant can change over time. Have his or her conditions changed in a way that will affect how much help they will need? Will they need more resources? Will they need less?

A good rule of thumb is to review your plans every 3-to-5 years. Or anytime your family undergoes a life change (marriages, deaths, etc.). This is the best way to ensure your plans are best suited for your family’s situation.

Conclusion

Some families avoid estate planning because it’s unpleasant to think or talk about. However, when it comes to estate planning for special needs people, it’s essential to have those conversations. The more openly families can talk, the better plans they can make.

AccuPay Systems partners with Estate Planning companies that provide extra help and resources to families that need them. Contact us here for more information.

Your small business accounting essentials

As a business owner, it is important to follow some basic small business accounting essentials to help you succeed. It does not matter whether you are just starting off or you have been operating for a while. 

The reality is that for many excited business owners launching a startup, it’s easy to relegate accounting to the bottom of the to-do list. And it happens a lot more often that you can imagine. However, adopting effective accounting practices early is one of the first small business accounting essentials to start with. It will give your business the best chance to thrive in the future.

Accurate accounting allows you to easily view your business’s cash flow and financial obligations to creditors, suppliers or workers. With this information you can also plan for the long-term by generating financial reports. Such reports comprise of balance sheets, income and cash flow statements as well as statements of retained earnings. These can help you determine which parts of your business are profitable and which are under-performing. This would allow you to make changes as needed. Business owners who fail to take accounting and bookkeeping seriously could see their cash flows dry up unexpectedly. They may also face tax obligations that are higher than expected. However, you can easily avoid this by adhering to common accounting principles from your first day of business.

Steps to small business accounting

No matter what type of business you wish to start, it will follow the same basic accounting principles. You will need to create separate bank accounts for your business, choose the bookkeeping method and software most appropriate to your needs. Also, document all transactions, stay on top of customers to ensure payment and if you intend to hire workers, you will have to set up payroll with a provider and account for new expenses. Finally, you will need to keep track of your break-even point to know if your business is healthy or if it is heading for an emergency.

1. Create a bank account

Most businesses aside from sole proprietorships are required to have their own bank accounts that are separate from those of their owners. It is also highly recommended for sole proprietors to have separate bank accounts for their businesses.

This helps to protect you from personal liability for your business’s financial obligations. It also provides business owners with the foundation necessary to institute sound accounting practices. It gives you an external record of payments, expenses, tax obligations and more which you can reference against internal records.

Many banks offer some kind of merchant account, but you should take the time to find one that is best suited to your business. Some banks charge higher fees for services others might offer for a lower price. Be sure to also bring any necessary paperwork with you when you are first setting up your business accounts.

2. Bookkeeping

Bookkeeping refers to the process of recording, categorizing and reconciling daily business transactions. Accurate bookkeeping can reveal a business’s current cash flow. It helps track sales, purchases, and payments on financial obligations such as bills or loans. You should use this information to cross-reference or reconciled with external sources such as bank statements.

In bookkeeping, timing is everything. Payment for goods or services can happen at different times than when a contract is completed. This leaves most businesses with two different ways they can keep track of revenues and expenses:

Cash Basis

This option is available to small businesses with annual revenues under $5 million or inventory sales less that $1 million. With this approach, revenue and expenses are recorded once a business receives cash or pays it out. This allows a business to have an accurate view of its current cash flow. However, this can also obscure long-term trends. A spike in sales one month might actually be the result of payments for products you sold months ago. As a result, this can make it difficult to judge the long-term health of your business.

Accrual Basis

This approach relies on the matching principle.

What is the matching principle?

It is a methodology which holds that a business should record its expenses in the accounting periods in which they occur.

The date a transaction is agreed upon is more important than when a payment is made or received. There are times your business will agree to purchase a piece of equipment and not pay for it for several months. In such a case, you would still book the purchase in the period the agreement was made.

Likewise, you would credit a payment for services once your company delivers on a contract, even before receiving the payment it. This approach gives business owners a better understanding of the long-term health of their business. It can also allow them to take advantage of more tax write-offs, since expenses will be considered incurred within the tax year. However, this approach can lead to cash flow problems since some accounts receivable may become delinquent.

3. Use accounting software

Accounting software can streamline bookkeeping and accounting and is an essential component of any modern business. Programs such as Quickbooks and Xero allow business owners to easily do their bookkeeping.

More sophisticated accounting packages offer features such as audit trails for fraud protection, automated bank reconciliation and easy integration with web-based services such as PayPal and Google Analytics.

Advanced cloud-based software packages offer further advantages over desktop applications. They include greater storage capacity, enhanced security and a higher potential for both scalability and customization. Netsuite and Microsoft Dynamics fall in this advanced category.

4. Manage accounts receivable

Accounts receivable refers to money that is owed by clients for goods and services your business has already provided. Many businesses will offer their goods or services to clients in exchange for future payment. A large accounts receivable may have a large proportion of delinquent or uncollectible accounts. Many companies suffer or close their doors because their owners counted on receiving payments that never arrived.

One way to reduce the potential for loss from accounts receivable is to demand upfront payments for your goods or services. Your business could also refrain from sending anything to clients until they pay off outstanding balances. You could also offer incentives for early repayment such as discounts or a longer payoff period.

5. Record all transactions

Good accounting relies on complete and accurate information, so keep track of and organize financial documents relating to your business. These records can help you assess the state of your business, take advantage of tax breaks, and will also prove useful should your business be selected for an audit.

Some of the most common business expenses are rents and utilities, the cost of supplies, wages, taxes and insurance. However, capital depreciation, maintenance interest on loans or credit for your business, training for workers, and even meals and entertainment can qualify as expenses. Be sure to retain documentation for any payments your company receives as well. This will make bookkeeping much easier and will allow you to know the true state of your business.

6. Set up payroll

When you start your business, you might be the sole employee of your company. However, if you decide to hire more help, make sure that you accurately classify your workers as employees or independent contractors for tax and accounting purposes.

You will need to create a payroll schedule for employees to ensure regular payment of their wages. You will also have to properly account for pay, withheld taxes and most fringe benefits as gross wages in your balance sheet. These expenses will help determine your liability for payroll taxes.

If you decide to hire independent contractors, you will need to keep track of their personal information and file a 1099 form. Misclassifying employees as contractors can lead to nasty penalties from the IRS. Be sure you do the right thing. Read more about Employees vs Contractors. If you are not sure, talk to your CPA or payroll company.

7. Know your break-even point

One of the best ways to monitor the health of your business is to follow its break-even point. This is the point at which profits are zero and revenues earned and expenses incurred during an accounting period are equal.

To obtain your business’s break-even point, divide your company’s total expenses by its gross profit percentage. The latter is simply equal to gross profit divided by sales and gives you the profit obtained from each units of goods or services provided.

Once you know this information you can determine if your company is ahead or behind on revenues and determine ways to close the gap if necessary.

It’s no secret that many small business owners dread accounting. AccountingToday.com states that according to a 2015 report by SCORE, a small business guidance organization, 40% of small business owners polled said the worst parts about owning a business were bookkeeping and taxes.

Nearly half of those surveyed said they spent over 80 hours preparing for taxes annually. It’s important to take accounting seriously from the start so you can cut down on the time you spend swimming through paperwork and instead focus on what you do best.

So, if you have a small business, or just starting off, keep these small business accounting essentials in mind. Success will follow you through your hard work.

This article was contributed by Larry of Larry L. Bertsch, CPA and Associates, a Certified Public Accounting firm. Larry has been offering quality accounting and tax preparation services to entire Las Vegas market since 2003.

Larry L. Bertsch, CPA & Associates

Understanding the benefits of 401k plans

The benefits of 401k plans are not always clear to the first time savers. Even so, no matter your age, the importance of saving for retirement cannot be understated. 

Whether you plan to retire when your 65, 70, or older, you need to set enough money set aside. 

That’s where a 401k can help. But just what exactly are the benefits of 401k plans?

By asking this question, you’re most definitely asking the right question. Understanding how a 401k works and, what it can do for you, will ultimately equal a comfortable retirement. 

So let’s start with the basics. Think of this post as your guide to the perks of 401ks. 

What is a 401k?

In it’s most basic sense a 401k is just an employer-sponsored retirement plan.

Sounds intriguing, right? 

But what does that actually mean?

Well, the bare bones of a 401k plan looks something like this: 

Your employer provides the plan, which you can either enroll into or (in some cases) are automatically enrolled into. 

From each paycheck, a portion of your money is taken out and invested in the account. This money is taken before taxes. Taxes only apply to your 401k upon destribution. 

You employer then contributes match either dollar for dollar or a certain percentage. 

For example:

You make $50,000 a year. Each year you contribute 5 percent–$2,500– from your salary to the  plan. 

Your employer will then either match that amount, adding an additional $2,500 to your account, contribute $1,250, or a smaller sum.

Any way the scenario works out, this is extra money that is set aside for when you retire.

In cases of “matching” contributions, it makes sense to contribute as much as you can to this account. 

However there’s one very important issue to keep in mind:

The IRS puts a limit on the amount of money you can contribute to 401k plans in one year. For 2015, 2016 and 2017, this limit has been $18,000. 

Types of 401k plans

One of the most surprising benefits of 401k accounts: there is a variety of them.

Here’s a brief overview of some of the main kinds of 401k plans available today.

TRADITIONAL

Most employers will contribute to your 401k, but the they don’t have to. 

Employers can change how much they contribute depending on the financial health of their business.

SIMPLE 401k

This plan is for employers with no more than 100 employees. 

The employer must make a 3% matching contribution or a non-elective 2% contribution to each eligible employee.

SAFE HARBOR

Contributions made to this plan by your employer are non-forfeitable.

This means that contributions made by your employer cannot be withdrawn even after you’ve left the company.

SELF DIRECTED

With a Self-directed plan you have more options on how your money is invested.

Essentially, you have a bigger discretion in selecting what stocks, bonds and mutual funds to invest in.

Another thing you don’t want to overlook is a Roth 401k which also has it’s perks.

Roth 401k plans are funded with after tax dollars. This can be a nice benefit since you won’t have to pay taxes upon withdrawing the money.

This article from Fidelity addresses Traditional and Roth IRAs.  Check it out.

How do 401k accounts differ from other retirement funds?

401k plans are the most popular kind of retirement plans provided employers. 

While other traditional retirement programs require you to monitor and work with a fund manager, 401k plans require less work since they are managed by your employer.  

Additionally, you get the added advantage of an extra contribution to your account. In many cases, this can help you save double the amount of the money. 

Interested to learn a little about the difference between 401k plans and Individual Retirement Accounts (IRA)? Here is a blog post to educate you a little.

The perks of having a 401k account at any age

Whether you’re nearing the age of retirement or starting your first job, the importance of saving cannot be overstated. 

There are a lot of bonuses to saving for retirement via a 401k no matter your age. 

The most significant advantages include:

•  More control over other investments. Most plans offer about 25-30 investment options to select from. 
• Added contribution flexibility allows participants 50 years of age or older to contribute an additional $6,000 per year according to the IRS (2017).
• In many cases, 401k plans feature automatic enrollment (unless you opt out).
• You don’t pay taxes until you withdraw (unless you have Roth account). When you retire, you’re automatically placed in a lower tax bracket. Thus, you pay fewer taxes on the sum of your 401k.  

 But the best part? 

You benefit more from having a retirement fund at a younger age.

Why?

Well the first answer might seem a bit obvious:

The longer you save, the more money you’ll have in the future.

But there’s another key reason to start a 401k plan as soon as possible:

Younger employees have more time before they hit the age of retirement. This factor alone enables them to take greater risks on their investments since any impacts won’t be as significant to them if they lose money compared to someone on the cusp of retirement.

What’s more, such risks really pay off. 

If you play your cards right when it comes to investing in a 401k, you can end up with a completely stress-free retirement in terms of finances.

Conclusion

In short, the benefits of 401k plans definitely outweigh any present inconveniences. 

Although it’s hard to part with a portion of your paycheck, setting that money aside now can make a world of difference later. 

And in the scheme of things, only a very small portion of your check is cut. In most cases, you probably won’t even feel the difference. 

But that  money will be your lifeline when you retire, so don’t skimp on contributions –especially if your employer provides a matching contribution. 

You wouldn’t say no to free money, which is essentially what your employer is giving you when they set up a 401k account in most cases. 

It’s plain and simple: 

The smartest thing to do is to take advantage of it.

So learn as much about retirement plans, IRAs, and the rules behind 401ks now.  Believe me, if you do, you’ll want to hug yourself when you turn 65.

How to appeal your property tax bill

One of the downsides of being a property owner is the annual ritual of opening your property tax assessment. Unfortunately, you’re never going to open the envelope and be happy with what you see. But if you think you’re legitimately paying too much, you’re far from powerless. You can learn how to appeal your property tax bill.

A significant number of people simply throw up their hands in frustration and on sign the dotted line. However, there’s a decent chance that if you spend some time looking into the details that you can find some leeway or some leverage that you can take to the tax assessor and have them reduce this year’s (and possibly every year’s) assessment.

Here are some of the key points on how to appeal your property tax bill:

Pay your bill

Remember that dealing with a bureaucracy isn’t always a speedy process. Even if you think you’ve got a slam dunk case to appeal your property tax bill, you need to pay your outstanding assessment (in whatever form it currently takes) on time.

Initiating an appeal doesn’t exempt you from paying your taxes. Pay your assessment before the deadline. If and when the appeal comes up in your favor, you’ll receive a refund. It’s much easier to pay now than to try and argue your way out of fees and penalties later. Save yourself the headache.

Learn the rules

For the most part the process is fairly similar from region to region, but the details (and deadlines) will vary. If you intend to appeal your property tax bill, it’s important to understand what time constraints you have, and what hoops you have to jump through.

For example, some jurisdictions may give you 90 days to appeal, others only 30. If the information on how to appeal your assessment doesn’t arrive with your assessment, look to your tax assessor’s website or call them directly. They’ll be able to give you details on how it is they arrive at the amount outstanding.

They will also be generally very helpful with informing you on how to walk through the appeals process. You’ll need some time to gather your information and make your case. Don’t delay.

How did they come up with that number?

In its most basic form, they’ll take your property value (land and structure), multiply that by the tax rate and send you the bill. However, they won’t necessarily send someone to assess your property directly. They could be looking at a sample of other properties in the area, or possibly even looking at the amount you paid for the property.

Put in another way, there’s likely room for you to make a compelling argument for why your tax bill should be less.

1. Did they make an error? The Tax Assessor will be looking at the records it has about the building on the property. Double check it’s actually representative of what’s actually on the lot. Mistakes happen and it’s possible they might be calculating a bill based on wrong information. For example a house with a few extra bedrooms. They’re humans too – and if you spot an error, they might very well correct it on the spot.
2. Is your property value comparable? If you’re in a neighborhood where the lots and the houses are all nearly identical, it’s worth taking a look at how those properties are being assessed. If for some reason four of your neighbors are paying less, why are you being treated differently?
3. Are you different in ways they don’t see? If you’ve got problems with your foundation or your basement that would affect your property’s sale value in a significant way, the tax assessors won’t necessarily be aware of that. Properties are always more nuanced than they appear on paper. Aand there are many potential factors that could turn off a potential buyer. This isn’t a matter of opinion, you can gather documents to build your case.

Tax breaks

Looking into the tax shields is a little more legwork simply because these are more likely to be different depending on where you are in the country. Doing some research on the department of taxation’s website, or contacting them directly could reveal some rules that work out in your favor.

As an example, some states allow for a homestead exemption credit on properties that are the primary residence of the property owner. There are also tax credits set up for Seniors, Veterans or persons living with a disability.

It’s not impossible that the rules where you live allow for a completely sanctioned tax break you were unaware of. Doing some research upfront can reduce your tax bill year over year.

Paying off your mortgage may not always be the best move. Find out why by reading this insightful post.

Make a strong case

There are different levels at which you can appeal your property tax bill. Most start with an informal hearing, formal hearings where you present to a board, and possibly even appeals at the state level. However, you’re much better off if you do your best to make a compelling case at the informal level. If your situation warrants a quick change, this is where it will happen.

Read all the fine print to make sure you’re in compliance. Then gather all the information you reasonably can such as photographs, repair estimates, bill of sale, listings of comparable properties. In other words, gather whatever is appropriate for the claim you’re trying to make. You want to make it easy for them to agree with you that your assessment should be reduced.

If it strengthens your case (and if your community allows it) it may be worth spending a few hundred dollars on a nationally certified appraiser to look at your property. Look at the Appraisal Institute or the National Association of Independent Fee Appraisers.

Taking it to the next level

This can be a long game. Waiting for hearings can take months. However, if the saving is significant, and will roll over year-over-year, it may be worth being stubborn.

Hiring a law firm will quickly cost you more than you’d save. There are services that will do some or all of this work for you. However, the process to appeal your property tax bill is relatively straightforward that you can do most of this yourself. Consider hiring a professional if you’re lacking in time, or challenging the assessment on multiple properties.

Roth IRA or Traditional IRA: Do you qualify for both?

So often we talk about either Roth IRA or Traditional IRA, but what is an IRA anyway?

IRA stands for Individual Retirement Account. And in essence, and IRA is a savings account that allows individuals to contribute pre-tax or post tax dollars for retirement.

But before we go too far deep, it is important to talk about upcoming contribution deadlines. The deadline to make your IRA contributions for the 2016 tax year is April 18th, 2017. Eligible taxpayers under age 50 can contribute up to $5,500, and up to $6,500 for taxpayers age 50 and older. Mark it on your calendar to insure you contribute to your Roth IRA or Traditional IRA (or both) before the deadline.

People don’t realize that they do not have to pick either their Roth IRA or Traditional IRA at the expense of the other. How you allocate your funds is one more piece of the puzzle to consider in your retirement planning. It’s worth taking a moment to remind yourself, “So… What’s The Difference Again?”

The Traditional IRA

Like all IRAs, the Traditional IRA comes with some tax benefits. This plan is set up through your employer to allow you to contribute your salary before taxation. That means your contribution reduces your tax liability for the year. On the flip side, distributions from this account are taxable income. This is the case in retirement or even in early withdrawal.

Put simply, with Traditional IRA’s you don’t get taxed when the money goes in, but do get taxed when the money comes out.

Withdrawals made before you reach age 59 ½ incur a 10% penalty (excluding a few specific circumstances). You will be required to begin withdrawing ‘minimum required distributions’ (MRDs) starting in the year you reach 70 ½.

Also keep in mind that it’s possible that contributions may drop your taxable income into a lower tax bracket, further reducing the tax impact within that year.

The Roth IRA:

Contribution limits within the year remain the same, however, your contribution to the investing account will be with after tax dollars. The funds within the account will grow tax free and will not be subject to taxation upon their withdrawal.

Put simply, with ROTH IRAs you do get taxed on the money that goes in, but do not get taxed when it comes out.

Earnings (but not contributions) are subject to early withdrawal penalties. With either a Roth IRA or Traditional IRA, anything withdrawn before the age of 59 ½ is considered ‘early’. There are no MRDs required during the original owner’s life.

Approved withdrawals (after age 59 1/2) are not considered part of your taxable income. Therefore you will have some control over what tax bracket you will fall into in a given year during retirement.

So what combination makes sense for you?

There’s not one straightforward answer.

A good place to begin is by thinking about what your tax rate now is, and what you think it might be in the future. In principle, you’d want to select whichever of the two periods where the taxation is less.

Realize, though, that no one has a crystal ball. Speculation about future tax rates is really just a guess.

Other’s might want to look at their current tax bracket. If your income is high enough to push you into a higher tax bracket, using a Traditional IRA could reduce your taxes. It could reduce your taxable income and hence your tax rate. This is true assuming you crossed the threshold back into the lower tax bracket.

On the other hand, if your workplace uses a workplace plan like a 401(k) or 403(k), your traditional IRA contributions may not be fully tax deductible.

Consider that during retirement, having both would give you sources of income that are taxable and non-taxable. You could alternate between withdrawing from your Roth IRA or Traditional IRA to ensure you are in an ideal tax bracket. Being required to withdraw a MRD can be a nuisance – you’ll stop earning interest, and frankly, you might not have an immediate need for the cash.

A few other considerations to to keep in mind

Remember to invest your IRA funds

There is a deadline to contribute funds to your IRA, but don’t forget that you can move those funds around. Dropping and leaving the funds in cash equivalents means your money is not working for you. Take advantage of the compounding interest that other investment vehicles offer. Stocks, bonds, and mutual fund are just scratching the surface.

Read about some paramount reasons why you should contribute to an IRA today

That of course gets into a broader conversation about risk tolerance, time horizons, and portfolio diversification. Whether managing these yourself or paying a professional, there will still always be bull and bear markets. It can be stressful for novice and experienced investors alike – your emotional resilience should play a part in your decisions.

Spousal IRA

If your spouse doesn’t work, he or she can contribute to a spousal IRA so long as you are working and the two of you file your federal income tax return jointly. The IRA can be either a traditional or a Roth IRA, and the contribution limits are $5,500 for those under 50, and $6,500 for those 50 and older.

Converting retirement accounts into A Roth IRA

There are a number of reasons why you might consider converting accounts at some point in the future. It’s a potential part of inheritance planning. Or maybe you want to continue to work and contribute well past retirement age. Some people convert 401(k) accounts when they move on to a new employer. Keep this option in mind, it may be handy at some point down the road.

Conclusion

Don’t get locked in the notion that you have to pick a Roth IRA or Traditional IRA. They are all useful tools in the retirement planning toolkit. Educate yourself on your options, do a little scenario planning, and pick the combination that best suits your needs.