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Posts from the ‘Charity & Non-profit’ Category

6
Jul

Qualified Charitable Distributions (QCD)

Changes in tax laws can require updating your planning.

The 2017 tax act has caused many to rethink their charitable giving. Charitable contributions for those over the age of 70.5 may benefit them by making their charitable contributions directly from their Individual Retirement Accounts (IRA).  These QCDs are treated as part of the Required Minimum Distribution (RMD) for the year they are distributed, but are not taxed.

You must be at least 70.5 when you make the contribution.

The contribution must be made from a traditional IRA. Payment from other retirement accounts do not qualify.

The payments must be to a public charity.

The maximum annual amount cannot exceed $100,000. There is no limit on the number of distributions or charities you make contributions to.

The distribution must be made directly from your IRA account to the charitable organization.

You may not receive benefits in exchange for the contribution. Examples include tickets to paid events and preferential seating.

The distribution must be part of your RMD. Amounts contributed after you have withdrawn your RMD do not qualify as QCD.  If you have already taken your annual RMD for the year, you cannot make a QCD for the year. Plan the timing of your QCD before you have taken your RMDs for the year. Distribute your QCDs early in the year before you have withdrawn all your RMDs for the year.

Include a cover letter specifying the payment is a QCD and request an acknowledgement.

The foregoing is provided for information purposes only.  It is not intended or designed to provide legal, accounting, tax, investment or other professional advice.  Such advice requires consideration of individual circumstances.  Before any action is taken based upon this information, it is essential that competent individual professional advice be obtained.  JAS Financial Services, LLC is not responsible for any modifications made to this material, or for the accuracy of information provided by other sources. 

7
Nov

2018 Year-end opportunity

The end of the year presents a unique opportunity to look at your overall personal financial situation.   With factors like tax reform, life changes or just working towards your goals, end of year is an especially important time to review things.  Weaving together your prior planning, subsequent changes and revised goals helps you stay on course. Following are some things you consider before the year ends.

Income Tax Planning –Ensure you are implementing tax reduction strategies like maximizing your retirement plan contributions, tax loss harvesting in portfolios and making charitable contributions can all help reduce current and future tax bills.   It is also good to review your current year tax projection based on your income and deductions year to date and how that may be different from before.

Estate Planning – Examine your current estate plan to visualize what would happen to each of your assets and how the current estate tax law will impact you.  Be sure that your estate planning documents are up to date – not just your will, but also your power of attorney, health care documents, and any trust agreements and beneficiary designations are in line with your desires. If you have recently been through a significant life event such as marriage, divorce or the death of a spouse, this is especially important right now.

Investment Strategy– The recent market volatility has some people feeling uncomfortable.  Market declines are a natural part of investing, and understanding the importance of maintaining discipline during these times is imperative.  Regular portfolio rebalancing will allow you to maintain the appropriate amount of risk in your portfolio.  And, if you are retired and living off your portfolio, you also want to maintain an appropriate cash reserve to cover living expenses for a certain period of time so that you do not have to sell equities in a down market.

Charitable Giving – There are many ways to be tax efficient when making charitable gifts. For example, donating appreciated stock could make sense in order to avoid paying capital gains taxes. Further, you may want to consider bunching charitable deductions by deferring donations to next year or making your planned 2019 donations ahead of time. If the numbers are large enough, you might even consider a private foundation or donor advised fund for your charitable giving.  If you are at least 70.5 you may want to consider Qualified Charitable Distributions (QCD) from your IRA.

Retirement Planning –Think about your future when working becomes optional.  Whether you expect a typical full retirement or a career change to something different, determining an appropriate balance between spending and saving, both now and in the future is important. There are many options available for saving for retirement, and we can help you understand which option is best for you.   If you are at least 70.5 you should be sure your 2018 Required Minimum Distributions (RMD) from your IRAs are paid before year-end. Qualified Charitable Contributions, up to $100,000, will be treated as part of your RMD but not taxed.

 

Cash Flow Planning – Review your 2018 spending and plan ahead for next year. Understanding your cash flow needs is an important aspect of determining if you have sufficient assets to meet your goals.  If you are retired, it is particularly important to maintain a tax efficient withdrawal strategy to cover your spending needs. If you have not yet reached age 70.5, it is prudent to ensure you are making tax-efficient withdrawal decisions.  If you are over age 70.5 make sure you are taking your RMDs because the penalties are significant if you don’t.

Risk Management – It is always a good idea to periodically review your insurance coverages in various areas. Recent catastrophic events like hurricanes serve as a powerful reminder to make sure your property insurance coverage is right for your needs. If you are in a Federal disaster area, there are additional steps necessary to recover what you can and explore the tax treatment of casualty losses. Other areas of risk management that may need to be revisited include life and disability insurance.

Education Funding – Funding education costs for children or grandchildren is important to many people.  While the increase in college costs have slowed some lately, this is still a major expense for most families. It is important to know the many different ways you can save for education to determine the optimal strategy. Often, funding a 529 plan comes with tax benefits, so making contributions before the end of the year is key.  With the added flexibility of funding k-12 years (set at a $10,000 limit), 529 accounts become even more advantageous.

Elder Planning – There are many financial planning elements to consider as you age, and it is important to consider these things before it’s too late. Having a plan in place for who will handle your financial affairs should you suffer cognitive decline is critical.  Making sure your spouse and/or family understands your plans will help reduce future family conflicts and ensure your wishes are considered.

The decisions you make each year with your personal finances will have a lasting impact.  I hope this has begun to generate some insight to areas of your personal finance that need attention. Please contact me if you have any comments or questions.

 

 

 

15
Dec

2017 Year-End Charitable Giving

There still is time for 2017 tax planning. It is also a time when charitable giving often comes to mind. The tax benefits associated with charitable giving could potentially enhance your ability to give and should be considered as part of your year-end tax planning.

Example(s): Assume you are considering making a charitable gift of $1,000. One way to potentially enhance the  gift might be if you increase it by the amount of any income taxes you save with the charitable deduction for the gift. With a 28% tax rate, you might be able to give $1,389 to charity ($1,389 x 28% = $389 taxes saved). On the other hand, with a 35% tax rate, you might be able to give $1,538 to charity ($1,538 x 35% = $538 taxes saved).

A word of caution

Be sure to deal with recognized charities and be wary of charities with similar sounding names. It is common for scam artists to impersonate charities using bogus websites and through contact involving email, telephone, social media, and in-person solicitations. Check out the charity on the IRS website, irs.gov, using the Exempt Organizations Select Check search tool. And don’t send cash; contribute by check or credit card.

Tax deduction for charitable gifts

If you itemize deductions on your federal income tax return, you can generally deduct your gifts to qualified charities. However, the amount of your deduction may be limited to certain percentages of your adjusted gross income (AGI). For example, your deduction for gifts of cash to public charities is generally limited to 50% of your AGI for the year, and other gifts to charity may be limited to 30% or 20% of your AGI. Charitable deductions that exceed the AGI limits may generally be carried over and deducted over the next five years, subject to the income percentage limits in those years. Your overall itemized deductions may also be limited based on your AGI.

Make sure you retain proper substantiation of your charitable contribution for your deduction. In order to claim a charitable deduction for any contribution of cash, a check, or other monetary gift, you must maintain a record of such contributions through a bank record (such as a cancelled check, a bank or credit union statement, or a credit card statement) or a written communication (such as a receipt or letter) from the charity showing the name of the charity, the date of the contribution, and the amount of the contribution. If you claim a charitable deduction for any contribution of $250 or more, you must substantiate the contribution with a contemporaneous written acknowledgment of the contribution from the charity. If you make any noncash contributions, there are additional requirements.

Year-end tax planning

When making charitable gifts at the end of a year, it is generally useful to include them as part of your year-end tax planning. Typically, you have a certain amount of control over the timing of income and expenses. You generally want to time your recognition of income so that it will be taxed at the lowest rate possible, and time your deductible expenses so they can be claimed in years when you are in a higher tax bracket.

For example, if you expect that you will be in a higher tax bracket next year, it may make sense to wait and make the charitable contribution in January so that you can take the deduction next year when the deduction results in a greater tax benefit. Or you might shift the charitable contribution, along with other deductions, into a year when your itemized deductions would be greater than the standard deduction amount. And if the income percentage limits above are a concern in one year, you might consider ways to shift income into that year or shift deductions out of that year, so that a larger charitable deduction is available for that year. A tax professional can help you evaluate your individual tax situation.

The existence of tax changes or what they would be is unknown at this time. You may want to consider if the proposed increase in the standard deduction eliminates the tax benefit of itemizing your deductions. You may want to consider making your 2018 contributions in 2017 if you think the that change will be made in 2018.

29
Nov

2017 contribution of appreciated securities

Charitable gifts of appreciated stock can be a tax efficient way to make your charitable gifts. The value on the date of the gift is deductible if you itemize your deductions subject to limitations. If held for more than one year, the appreciation is not taxed. The tax benefit reduces the cost of making the contribution.
Many of the investment firms have set time limits on making year-end charitable gifts of securities (stocks, funds, bonds). December 18th is a common deadline. Allow enough time to complete the forms required by your investment firm and to get a signature guarantee if required. Your bank or financial firm can provide the appropriate guarantee. Contact the charitable organization to get the name of their custodian, the title of their account, their DTC number and account number.
The transfer request should include the name of the security, the ticker symbol and number of shares to be transferred.
Let the charity know what securities are being transferred and ask them to notify you when they are received. You will need an acknowledgement from the charity to deduct the contribution.

Your referrals are appreciated!
Joe

 

17
Nov

Year-End Security and CASH Tax-Related Deadlines

Some year-end tax related transactions involve securities and cash.  Such transactions must be completed by December 31, 2015 to be reported on your 2015 tax return.  Check with your financial institution to find out their cut-off dates for 2015.

  • Deadline for Required Minimum Distributions (RMDs): Clients who are 70½ or older must take an RMD from their IRA and/or their QRP for the 2015 tax year. All RMDs must be withdrawn by December 31, 2015, with the exception of RMDs for clients who turned or will turn 70½ during this calendar year. These clients may defer their first distribution until April 1, 2016. Deferring the distribution is not always the best choice from a tax perspective. Check with your tax professional to see if you should take such distributions in 2015 or 2016.If you have already taken the required distribution for 2015, no other action is required. December 22 is a frequent cut-off date.  Check with your institution if you need additional time.

You may find it advantageous to take your RMD early in the year or establishing a systematic payment to ensure the annual RMD is satisfied every year. Check with your financial institution for instructions on implementing these alternatives.

  • Deadline for Roth IRA Conversions: A Roth conversion form may also need to be submitted before December 31, 2015 to be processed by December 31, 2015. Check with your financial institution to determine the cut-offs and procedures that are required.
  • Deadline for Establishing a 2015 QRP: Check with your financial institution to determine the cut-offs and procedures that are required.
  • Deadline for Removal of Non-marketable Securities: To have non-marketable securities removed from your accounts by the end of the calendar year there may be a cut-off date. Check with your financial institution to determine the cut-offs and procedures that are required.
  • Charitable and Gift Deadlines:
    Check with your financial institution to determine the cut-offs and procedures that are required. 

Mutual Funds:
Due to the nature of processing charitable mutual fund deliveries, you should provide the following information with each request:

    Mutual fund symbol or CUSIP
    Number of shares your client would like to donate
    Mutual fund account number at the receiving firm
    Client account number at the receiving firm

Cash delivered via check and/or federal funds wire:
Between accounts at your financial institution:
Stock delivered via the Depository Trust Company (DTC) system:
Additional information for charitable gifts:

Contact the charity to learn what procedures and accounts they have.
Inform the charity what the specific gift will be (cash or securities). Let them know the amount or securities that they will be receiving.  Identify the security (securities) and the number of shares being transferred.

4
Dec

2014 Year-End Charitable Giving

Two of the factors to consider in year-end tax planning are your own financial situation and the tax rules that apply.  Congress is considering making changes before year-end that may impact your situation.  Some changes may include reinstating all or some tax breaks the expired in 2013.  If you wait to determine what changes may be passed for 2014 you may not have enough time to implement your year-end tax planning moves.

Start by identifying the charities you would like to make contributions to and the amount to each charity.  Remember to consider the amounts you already contributed during the year.

Check to see if you will be able to deduct the contributions if receiving a tax benefit is part of you motivation for making charitable deductions.  In order to deduct your contributions you must file a tax return (Form 1040) and itemize your deductions.   That is, you will not receive a deduction if your itemized deductions are less than the standard deduction.  The 2014 standard deductions is: $12,400 if you are married and file a joint tax return, $9,100 if you qualify to file as head of household, $6,200 if you are single, and $6,200 if you are married filing a separate return.  Both spouses filing a separate tax rerun must itemize their deduction if one spouse itemized their deductions.  It maybe beneficial to postpone deductions to the next year if you receive a greater tax benefit in the next year.

The total deduction for contributions is limited to a percentage of your adjusted gross income (AGI).  For example gifts to public charities are generally limited to 50% of your 2014 AGI.  Other limitations, 30% or 20%, apply depending on the nature of the contribution and the type charity.  Amounts not deductible may generally be carried forward over the next 5 years in years that you itemize your deductions , subject to the income percentage limitations.

Contributions can only be deductible if made to a qualified organization.  IRS has a listing on their website, Exempt Organizations Select Check: https://www.irs.gov/Charities-&-Non-Profits/Exempt-Organizations-Select-Check

To claim a deduction for donated cash or property of $250 or more, you must have a written statement from the organization.  Generally you can deduct the fair market value of property rather than cash or a check.

The above is not intended as a complete discussion of this subject.  A tax professional, can help you evaluate your situation, keep you appraised of any legislative changes, and determine the best approach for your individual situation.

 

 

1
Nov

Now is the time to make 2014 charitable gifts of appreciarted assets.

Using appreciated assets for charitable gifts can be very beneficial.  The ta x deduction, if applicable,  is based on the fair market value on the date of the contribution.  The appreciation is not subject to income tax.  There are exceptions and special rules that may reduce or eliminate the benefit of the tax deduction.

The deduction limitations depend on the type of property given and the type of organization receiving the property.

Avoid using property that has depreciated in value.  The loss on such property cannot be deducted if the property if donated.  Sell the asset if you want to use it to fund a charitable contribution.  You can deduct the loss, subject to limitations and restrictions, if you sell the property and donate the proceeds.

Capital tax rates are determined by the type of asset and the holding period.  The appreciation will be taxed if the gain is does not qualify for capital gains (ordinary gain).    Make sure you have held the property long enough for capital gain treatments.

Do not assume the information is the same as the last time you used appreciated assets to make a charitable contribution.

Contact the charitable organization before making the contribution.  Verify that the organization is still a “qualified organization”.  Determine what their current procedures are before you make the contributions.  Make sure they will accept the property you want to donate.  Some organizations will not accept property other than cash, checks, credit card, etc.  Those that accept other forms of payment may only accept marketable securities.

Next check with your custodian to find out what their current procedures are. The forms required and the time to process the transaction may have changed.  All custodians (for corporations, brokerage, mutual funds, etc.) procedures are not the same.

Obtain a “qualified appraisal” if the property is not a marketable security.  The procedures are different depending on the type of property and the value of the contribution.

The above is not intended to be a complete discussion of this topic.  Be sure to consult with you tax advisor to determine how the transaction applies to you.

You may not be able to complete the gift before year-end if you wait too long.  Be sure to give your tax advisor adequate time to evaluate the planned transaction and see if the benefits are what you intend.

 

21
Nov

Limited time available to complete non-cash charitable gifts before year-end

Using appreciated publicly traded securities to make charitable contributions can be an excellent year-end tax strategies.  If the securities have been held more than a year the appreciation (gain) on the securities that are transferred directly to a charity are not taxed.  Your deduction is the full fair market value on the date of the transfer.  If you sold the securities, the proceeds would be reduced by taxes.  That is, you after tax cost of making the contribution is less if you use appreciated publicly traded securities. 
You do not want to use securities that are worth less than your cost (basis).  In that case it would be better to sell the stock, deduct the loss and donate the cash proceeds to charity.
Be sure to allow enough time for the transaction to be completed before year-end.  Some custodians require 30 days to process the transaction.  Many charities have established brokerage accounts for this purpose.  You will need accurate information about the charities’ brokerage account to complete the transaction.  You should verify the information even if you made contribution to that account in the past.  If the account has been changed or moved the information you have about the account may not be accurate.  
If you want to donate publicly traded securities for 2011 you should follow-up before the end of November.
There are limitations and restrictions that may determine if this strategy would be beneficial for you.  Discuss this with your tax advisor before making the non-cash contribution. 

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24
Mar

Finding a qualified independent financial advisor

There are many people who look for a financial planner when they have a specific question or problem.  Too often the person they contact concentrates on the question or problem presented without really looking for the cause of the problem or question. 

I believe that is why the solutions do not always work out.  Without trying to identify the problem and identify the consequence the solutions do not provide adequate flexibility.  Sometime they result in worse problems or not enough time to overcome the problem.  We have seen evidence of this in the headlines since 2007.

Fear is often used to create action.  Humans tend to do the wrong thing financially when they are reacting to fear.  This is evident when so many are buying investments when prices are high and selling investments when prices are low. 

The National Association of Personal Financial Advisors (NAPFA) recently released “Pursuit of a Financial Advisor – Field Guide.  It provides advice on how to find a qualified independent financial advisor.  
READ MORE

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13
Dec

“Tis the Season to Be Stupid”

This article discusses some financial mistakes that are made when giving to charities. 
I have observed that those who annually make their contributions make fewer mistakes.  There are advantages of doing this in November.  This allows time to make sure they are made by December 31.  This is particularly true for those who contribute appreciated securities.  If you do use appreciated securities, check with the charity to see that the account information you have for the charity is still active.  If you have to use securities to fund your contributions that have not appreciated, sell them and contribute the proceeds.  This preserves the deductibility of the loss.
Another advantage of this approach is that it minimizes the chance that more is given than intended.  Many people contribute when they receive a solicitation.  This could result in making multiple contributions, each for the amount you planned to give for the year.

Click here to read original article.

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