IRS Raises Tangible Property Expensing Threshold to $2,500

The Internal Revenue Service is simplifying the paperwork and recordkeeping requirements for small businesses by raising the safe harbor threshold for deducting certain capital items from $500 to $2,500.

The change affects businesses that do not maintain an applicable financial statement such as an audited financial statement. It applies to amounts spent to acquire, produce or improve tangible property that would normally qualify as a capital item.

The new $2,500 threshold applies to any such item that is substantiated by an invoice. As a result, small businesses will be able to immediately deduct many expenditures that would otherwise need to be spread over a period of years through annual depreciation deductions.

“We received many thoughtful comments from taxpayers, their representatives and the professional tax community, said IRS Commissioner John Koskinen in a statement. “This important step simplifies taxes for small businesses, easing the recordkeeping and paperwork burden on small business owners and their tax preparers.“

Responding to a February comment request, the IRS said it received more than 150 letters from businesses and their representatives suggesting an increase in the threshold. Commenters noted that the existing $500 threshold was too low to effectively reduce administrative burden on small business. In addition, the cost of many commonly expensed items such as tablet computers, smart phones, and machinery and equipment parts typically exceed the $500 threshold.

As before, businesses can still claim otherwise deductible repair and maintenance costs, even if they exceed the $2,500 threshold.

The new $2,500 threshold takes effect starting with tax year 2016. In addition, the IRS will provide audit protection to eligible businesses by not challenging use of the new $2,500 threshold in tax years prior to 2016.

For taxpayers with an applicable financial statement, the de minimis or small-dollar threshold remains $5,000.

3 Great Web Sites for Organizing Estate-Planning Documents

Web sites that organize and store all of your important documents in one place are the latest in just-in-case insurance. If you become disabled or die, loved ones are just a click away from the financial and estate-plan information they need.


Of course, you can store your paper documents in boxes, file cabinets and safe deposit boxes -- and hope family members can sort everything out during a crisis. These Web sites can make life for your loved ones easier. Depending on the site, you can collect and upload wills, deeds, health care directives and powers of attorney. You also can store passwords, financial-account information and the names of your advisers. And you can leave instructions for your funeral.

All of these sites are encrypted for safety. You name two or three people who have full or partial access
to information. You can provide full access to a spouse, let's say, while limiting an adult child's access to certain sections. And you can specify under what conditions someone gets your information -- such as after you die or become incapacitated.


Estate Map (www.estatemap.com). Joe Henderson, a Minneapolis estate lawyer, knows from experience that people are "leaving all sorts of assets on the table" after they die. Bank accounts and property in safe deposit boxes often go unclaimed because heirs don't know about them.

Henderson, who created Estate Map in 2014, says many people don't think about disability or who will get access to their information when they're incapacitated. Rather, people often keep critical documents "in a desk drawer, hoping the right person finds it at the right time," he says.

His Web site divides the data into three categories: information on assets, the estate, and personal health and life. Estate Map costs $96 the first year and $24 a year to renew.

Everplans (www.everplans.com). Co-founder Abby Schneiderman says she doesn't think of the site as a "platform before you die, but a place to organize all details of your life when you are living." That could include informing people where to find an extra set of keys.

You first take a short, personal assessment, including your marital status, ages of children, and whether you have a will and health care directives. Then you receive customized recommendations on what to tackle first. Everplans provides links to sites where you can download legal and health forms from your state.

There's space to write your own obituary and to upload a photo for your obit. And you can leave a letter to your family or instructions about possessions.

Launched in March 2014, the site offers both a free version and a premium version for $75 a year. With the free model, you can't upload documents but you can read 2,000 articles on estate and end-of-life planning. A premium user gets access to live chat support.

The Torch (www.thetorch.com). Those skittish about putting sensitive documents online
can use The Torch. This site doesn't ask for personal information, such as account numbers. Instead, it allows at least two people you've designated to know what documents you have and where to find them.

Lenore Vassil, a former corporate technology executive, founded the company
in 2012. In her research, Vassil learned that people are often reluctant to put a lot of personal information online. "My sister doesn't need to see a copy of my will, she just needs to know I have it," she says.

The Pro or Lifetime version ($24 a year, or a one-time charge of $144) allows you to upload the location of your Social Security card, birth certificate, safe deposit box and other information. You can create virtual notebooks on a number of topics, including what a loved one will need to know about your car, real estate, pet and people in your life.

A free version provides basic information, such as whether you have a retirement account or insurance. If you don't have these assets, your family won't go scrambling to find them.

How to Care For Two Parents At Once Without Going Broke

FROM WEALTHMANAGEMENT.COM

For years, Madeleine Smithberg has been at the forefront of American comedy as co-creator of "The Daily Show" and a talent coordinator for "Late Show with David Letterman."

That sense of humor was especially handy during the last few years. That is because Smithberg had to cope with not one, but two elderly parents in rapid decline.

"It's heartbreaking," says Smithberg, 56, who heads a production company in Los Angeles. "And yet it's invisible, because nobody talks about it."

Dealing with one aging parent is challenging enough, whether you are helping navigate the complex healthcare system, paying for an assisted living facility or struggling with cognitive decline as the parent slips away. But the emotional and financial stress can be more than double if you are caring for both parents at the same time.

"It's like having toddlers," says Smithberg, whose father passed away in 2014 after she moved her parents to Los Angeles. "They're hot, they're cold, they're hungry, they ask repetitive questions, and their needs become the most important thing in the world at that second... The biggest challenge of all is holding onto your patience."

According to a new study by Northwestern Mutual, the childrearing comparison is apt: 59 percent of Americans feel that taking care of two parents between ages 85 and 90 would be even harder than handling two kids between ages 3 and 5.

Caregivers may also have kids of their own. In that case, it's not just the "Sandwich Generation" - it's a Triple-Decker.

The Northwestern Mutual report found that 38 percent of those surveyed have not planned at all for handling the financial burdens of caring for elderly parents.

The costs can be gigantic: National median costs for an assisted-living facility are now $43,200 annually, according to insurer Genworth Financial in its annual Cost of Care study. A private room in a nursing home? $91,250.

That is more than enough to blow up any financial plan. The following is advice on how to care for your parents without going bankrupt yourself.

Long-Term Care

"Long-term care, long-term care, long-term care." That's the simple advice from Smithberg. Her father had taken out coverage for himself and his wife, which she calls "the best thing he ever did."

Long-term care insurance covers expenses for nursing home or home care if you become incapacitated - most of which is not covered by Medicare. The coverage, like the care, can be extremely expensive, and to be sure, it did not cover all of Smithberg's parents' assisted-living costs. But, combined with their own life savings, the policy has meant that she has not yet had to dip into her own savings to pay for their care.

Have the Talk

With the holidays right around the corner, it is one of the few times of year when far-flung families tend to gather in one place. Don't let the opportunity slip by to discuss your parents' expectations, should illness arrive. Find out if they have advance directives - documents that spell out what treatment they would and would not want during a life-threatening health crisis. Make sure you establish who has power of attorney, should they need someone to make important decisions.

"It's the perfect time to have this kind of conversation," says Kamilah Williams-Kemp, Northwestern Mutual's vice president of long-term care. Her spouse's grandmother lived to 102, and her mother-in-law has been diagnosed with Parkinson's.

Consider a Reverse Mortgage

Reverse mortgages allow homeowners aged 62 and above to borrow against their home equity and to receive either a lump sum, a series of monthly checks or a line of credit that can be tapped as needed. The upside of a reverse mortgage? With the bank paying you every month, instead of the other way around, that check can help cover costs for in-home caregivers.

Tom Davison, a financial planner in Columbus, Ohio, is working with a 90-year-old woman whose daughter moved in with her as a caregiver. "A reverse mortgage could help (the daughter) pay her the wages she has given up," Davison said.

The downside, of course: The family home will eventually become property of the bank.

Get Help

Your first instinct as a child may be to drop everything and handle all your parents' needs yourself. But if it comes at the cost of your own career, think about the ripple effects - on your retirement savings, on the needs of your own kids, even on your own sanity.

With Americans extending their lifespan - 76.4 years for men, 81.2 years for women, according to the National Center for Health Statistics - this is a family challenge that won't be going away anytime soon.

Denver financial planner Kristi Sullivan recommends hiring a case manager to do the heavy lifting.

"For an hourly fee, these people can handle tasks quickly that it might take you hours to do - scheduling doctor's appointments, handling medical payments and dealing with insurance, helping find a good nursing home or in-home care," Sullivan says. "Spending this money may seem expensive, but it's less than putting someone's career on hold to become a full-time caregiver."

Make These Moves by Year-End to Lessen Your Tax Burden

Each year in December, Congress meets and decides whether to extend certain tax provisions, but only for one year. They make the changes retroactive, and they expire at the end of the year that they are made.

This process can make tax planning hard, because we don’t know what the representatives and senators will do. However, individuals can take steps before year-end to mitigate their tax liability for 2015.

Here are a few tips that can save you money on your taxes.

Accelerate or defer your income

The end of the year sometimes offers the opportunity to decide whether to push income to the next year for tax purposes, called “deferring” income, or to take on additional income during that current year, called “accelerating” income.

Some circumstances call for deferring income. For example, let’s say your income in 2015 places you at the high end of the 25% tax bracket. In that case you may want to defer any year-end bonuses to 2016 to avoid slipping into a higher tax bracket.

Or if you are getting a divorce in 2016 and have children, you may want to defer income to 2016, when you would be filing as Head of Household and able to take advantage of a higher standard deduction.

At other times it makes more sense to accelerate income. If you know that you are going to receive a substantial raise in 2016, you may want to take that bonus in 2015, so that you don’t take a big hit in the 2016 tax year. Or if you plan to get married in 2016, you might want to accelerate your income to 2015, when you wouldn’t be subject to the marriage penalty, which refers to the higher tax burden for a dual-income married couple filing jointly.

Donate items to charity

Before the holiday season, many people thoroughly clean their homes because they will have family visiting from out of town. While you’re at it, why not go through all of your unwanted items and donate them to charity? Doing so would allow you to take a charitable deduction for the fair market value of what you donated.

Keep in mind that you don’t have to donate only old clothes, old cars or housewares. You can also donate the required minimum distributions from your IRA. People over age 70½ are required to take these distributions even if they don’t need or want them; in fact, taking these RMDs could cause taxpayers to be pushed into a higher tax bracket and make more of their Social Security income taxable.

You can instead donate your RMD directly to a charity of your choice. Because the RMD does not go directly to you, you would not have to claim it as income and would not have to pay tax on it. This provision expired at the end of 2014, but it should be extended through 2015.

Harvest your gains and losses

If you are carrying forward a capital loss, you may want to sell some securities in 2015 that have done well, and limit your tax exposure. This is known as “harvesting gains.” For instance, if you are carrying forward a $25,000 capital loss from 2014, you could sell up to $25,000 of stocks at a gain and it would effectively be tax-free.

The same goes for losses. If you sold securities in 2015 and made money, you should look for some securities in your portfolio that you could sell at a loss to offset your gains. This is known as “harvesting losses.”

Use your health savings account

Be sure to use the tax advantages of your health savings account, which enables you to set aside pre-tax money from your salary and use it for health expenses. If your medical plan has a minimum deductible of $1,300 and a maximum out-of-pocket cost of $6,450, for single individuals, you can contribute $3,350 to an HSA. If you are age 50 or over, you can contribute an additional $1,000.

If you have a family, and your minimum deductible is $2,600 with a maximum out-of-pocket cost of $12,900, you can contribute $6,650 to your HSA. If you are age 50 or over, you can contribute an additional $1,000.

These accounts aren’t just a good way to pay for health care in a given year. They also let account holders roll the funds over year after year and let them grow, tax-free.

As you start gearing up for the holidays, don’t forget that you can make your tax burden lighter. Talk to your tax advisor and see what makes sense for you.

Here’s Why You Shouldn’t Tap 529 Plans To Repay Loans

Funds in 529 college-savings plans can be withdrawn without incurring taxes and penalties if they’re used to pay for qualified education expenses including tuition and fees, required books and supplies, and eligible room and board. But families should think twice before tapping these plans to repay student loans.

The Internal Revenue Service classifies student loans as nonqualified education expenses, and the earnings portion of nonqualified distributions is subject to ordinary income tax at the beneficiary’s rate plus an additional 10 percent tax penalty.

The cost of taking a nonqualified distribution from a 529 plan to pay down student debt -- not including the 10 percent penalty -- is up to about $750 per $10,000.

“If a family has been saving from birth, about a third of the distribution will be earnings,” he says. “If a family started saving in high school, about 10 percent will be from earnings.” So with earnings ranging between $1,000 and $3,000 on a $10,000 distribution, beneficiaries in the 15 percent or 25 percent tax brackets can figure on paying additional income tax of $150 to $750 per $10,000.

When a child first enrolls in college, the family should plan how it’ll pay for each year in school, ncluding how much will be distributed from 529 plans. “With careful planning, the family should not have 529 plan money left over and student loans,” .

Tom Fisher, founder and principal of Fisher Financial Strategies, a Cambridge, Mass.-based independent RIA firm, suggests that parents target saving for the first three years of college in a 529 plan. “You don’t want to over-save and have money you can’t take out penalty-free,” he says.

Fisher, who estimates he has helped nearly half his 150 clients plan for college, encourages them to revisit their college-planning decisions every few years, in the context of their overall financial plan, as their children grow up and their post-high school plans become clearer. To estimate college costs, he suggests using the expected family contribution (EFC) calculator on the College Board website and the net price calculators on the websites of individual schools.

He thinks it’s better to spend 529 funds first before kicking into borrowing mode—particularly if a child may drop out of school.

Should families accumulate excess funds in a 529 plan, there are some options. Remaining funds can be used later for graduate school. The IRS also permits parents to shift funds between their children’s 529 accounts, says Fisher, and to designate a different family member as the beneficiary. This includes a parent seeking additional education, or a future grandchild. If a child receives a scholarship, the parent can withdraw up to the amount of the award from a 529 plan without paying a penalty, although income tax will be owed.

Fisher encourages parents to discuss college interests, expectations and finances with their children. What’s needed is “more meeting of the minds,” he says, “before starting to fork over money.”

Steps to Take Now to Make Filing Your Income Taxes Easier

FROM usnews.com

In mid-April, shortly after the income tax filing deadline for millions of Americans, we encouraged readers to begin planning for their 2015 return. Here’s another timely reminder, and this one is especially worth heeding: Steps you take between now and the end of the year can dramatically reduce your income tax burden in April and beyond.

If you’ve been planning all along, you’re in good shape. But if you need an extra jolt, now’s the time to set up an organization system (put it on your holiday wish list!), review your withholdings or research charities for end-of-year donations. Planning now can help you avoid costly mistakes.

First and foremost, Cari Weston, senior technical manager on the American Institute of CPAs tax staff, recommends dusting off last year’s paperwork.

“Pull out last year’s return and see which items were used for preparing the return, because that’s going to be your starting point for this year’s return,” she says. “Create a list of all the things you’ll need, and keep track of them as they all come in.”

If you’re not incredibly tech-savvy and you haven’t been using apps all year to track your spending and saving, there’s still the traditional approach: clean out a drawer, empty a basket or start a folder – almost anything will do as long as you keep all your records in one place.

While mortgage statements and W-2s can wait a bit longer, if you’ve been keeping all your receipts in a drawer, now’s the time to start sorting them. Weston recommends taking advantage of winter holidays to do a little bit at a time. “If you have itemized information, go through what you can now, on the holiday break, and sort them out by category,” she says. “Get them organized and total them as much as you can, so you can go to your [certified public accountant] with totals and still have supporting information if you need it.”

Kelley C. Long, a CPA, personal financial specialist, certified financial planner and a member of the National CPA Financial Literacy Commission, encourages her clients to run an income tax projection before the end of the year. “Your CPA is going to be the easiest way to go about running the project. If you’re not working with one, go to TurboTax or the IRS website [and] fill out a tax form for yourself. That can help you get organized,” she says.

Long adds that by playing with the figures, taxpayers can get a sense of how and where they need toscale up or back on their deductions.

“Start asking yourself questions: What happened this year that’s new that I didn’t have last year?” Weston says. “Did you have or adopt a child this year? Did you send a kid off to college? Do you go yourself?” A new job, a refinanced mortgage or a student loan that’s finally paid off represent a change to your income tax return. 

Long also suggests offsetting capital gains by selling some stocks at a loss if your portfolio increased in value this year, and consider making an extra mortgage payment or pay next semester’s college tuition before Jan. 1 to help save on taxes.

While April 15 might seem far in the future, you really only have a few weeks left for certain tasks. If you’ve waited to buy your accountant a cup of coffee to discuss your finances, act soon, or that coffee may now have to be ordered to go. 

“If you’re someone who has a more complicated return, hopefully you’re hearing from your CPA, and they’re telling you to go see them now,” Weston says. “If not, you should call them.” While a late-year chat with a tax advisor can be a smart move for any taxpayer, it’s especially important for the self-employed, those with rental properties or anyone falling outside the parameters of a standard W-2 return.  

If you don’t have a CPA or tax preparer, or you aren’t especially keen on the one you have, now’s also a good time to begin looking for one. Don’t just check online; ask friends or family members who might be a good fit. If your records and filings are all digital, having an accountant who only works via snail mail and telephone will be an incredibly frustrating experience. If you’re nearing retirement, having an accountant who focuses on the millennial set might not be the best fit.

Not hiring a CPA anytime soon? Now is also a great time to try out different online tax-prep software to see which one is right for you.

Some Difficult But Important Conversations To Have This Thanksgiving

FROM FORBES.COM

Thanksgiving is right around the corner and with it comes family gatherings and overindulging. While I enjoy a good turkey dinner as much as anyone else, let’s not forget that the holiday is really about being thankful for our loved ones and not taking them for granted. I was recently reminded of this when I read the story of a woman named Chanel Reynolds. Her husband went for a bike ride one day and ended up in the hospital after being hit by a van. Chanel was forced to make the difficult decision of removing his medical support after she was told that he had no chance of recovery, leaving her a single mom.

With all her trauma and grief, what pushed her “over the edge” was the stress of not knowing basic things such as how much life insurance he had, if his will was valid or even what the password to his phone was. To help others avoid the same fate, Chanel created a website that provides a checklist of steps to take to get your stuff (although Chanel uses a more attention-grabbing word in the name of her site) together, free templates for basic estate planning documents, a free “Monthly Nudge” email newsletter, and links to other resources. We all know we need to get our “stuff” together, but sometimes it takes a story like that to motivate us to act.

Even if we know the importance of it, it’s easy to procrastinate since we always think we have more time…until it’s too late. So after enjoying a wonderful Thanksgiving dinner, make the time to have some important family conversations with those who may be directly affected. After all, there may be few other times when you’re all together. Tell your family your wishes – what type of medical care you’ll want when you can’t talk for yourself, what you want your final services to be like, who you want to raise your minor children, and how you want your possessions handled. Then help make sure your wishes are actually carried out with this checklist of documents and insurance policies:

A health care directive includes a living will specifying your wishes for end-of-life care and a health care proxy or power of attorney appointing someone to make health care decisions for you if you’re unable to.

A durable power of attorney appoints someone to make financial decisions and manage your money on your behalf. If you make it “springing,” it would only take effect if you’re incapacitated.

Disability insurance can replace up to 60% of your income if you’re unable to work. See if it’s offered through your employer since it’s generally much more expensive on the individual marketplace. In deciding how much you need, just keep in mind that the benefits are taxable if your employer is paying for it and tax-free if you are.

A will can designate who inherits your assets and perhaps even more importantly, who would be the guardian of any minor children you may have.

Beneficiary designations on any retirement accounts, HSAs, education savings accounts, and life insurance policies you have trump your will and allow those assets to pass on directly to your beneficiaries without going through the time and cost of probate. This is especially important if you live in one of these states with high probate fees.You can also generally add beneficiaries to a bank account by asking them for a POD (payable on death) form and to an investment account by asking for a TOD (transfer on death) form. In some states, you can even add beneficiaries to real estate with a beneficiary deed and vehicles with a TOD registration with your DMV.

A living trust can prevent any remaining assets from going through probate and establish more complex rules for administering and passing on your estate.

Life insurance can close the gap between what your dependents will receive from their inheritance and pension and Social Security survivor benefits and the income they will need. For any additional coverage you need, compare the cost of getting it  through your employer (check to see if it’s portable or able to be taken with you if you leave your employer) with the cost of purchasing it individually.

An ethical will isn’t a legal document but a way to convey personal stories, messages, or explanations to your loved ones after you pass away.

In addition to Chanel’s site, you may be able to draft any documents you need through your employer. Many employers offer a basic estate planning document drafting program for free or through a pre-paid legal benefit. The latter can also include discounted attorney services for reviewing any documents you create on your own and for drafting more complex documents like a trust.

Otherwise, you can find an estate planning attorney through referrals from family, friends, or other professionals you work with, through your local bar association’s lawyer referral service or through estate planning organizations like the American Academy of Estate Planning Attorneys and the National Network of Estate Planning Attorneys. It’s a good idea to interview at least three before picking the person you’re most comfortable with. You can find some questions to ask prospective attorneys here.

Finally, all the perfect documents and insurance policies won’t do much good if your loved ones can’t easily locate them when needed. Make several copies of your documents and give one to the executor of your will, your trustee, and your powers of attorney. Keep another copy with your other important documents, like your life insurance policies, titles and deeds, and a list of your accounts along with usernames and passwords. You can use an online storage site, like MyDirectives. The Doc Safe, Everplans, and AfterSteps,  but don’t forget to communicate how to login to that site as well. That way, if something happens to you, your loved ones can carry out your wishes as easily as possible.

I know these are not always comfortable topics to think about and discuss. However, the only certainty is that some type of estate plan will be needed someday. When that time comes, having your “stuff” together can really make things much easier on your loved ones and they’ll be thankful you did.