NJ Death Tax Changes: NJ has totally eliminated the Estate Tax after 12/31/17!!! This does not mean forget about an estate plan......... NJ has retained the Inheritance Tax and depending who inherits your assets, your estate could be liable! Make sure your retirement assets and insurance policies all have individuals or trusts as beneficiaries (and not your estate!). Do your executor a favor, and if possible title your assets including the name of the desired beneficiary (the person to whom you want the asset to go after you pass). Even if you have a Will, the title on the asset will dictate and thereby maybe eliminate the need to go through Probate in the Surrogate's Office!
NOTICE from IRS or New Jersey!!!!!! Don't automatically go nuts! Often times their computers simply don't match up with how you reported the information on your tax returns. Respond immediately and explain the situation. Provide whatever information is necessary (with documentation) to prove the information was reported!!!! If you don't understand their proposed adjustments, contact me to help with your response. Knowing how to respond can save a lot of tax, interest, and penalties!
IRA, 401(k), and other Retirement Plan Contributions: Most contributions can be made until it's time to file your tax return on April 18th, but this is not true for all type of plans. Most contributions will reduce your current taxable income, and are generally a good idea.
3.8% Net Investment Income Tax (the additional "Medicare Tax"): This tax applies to almost all investment income, like interest, dividends, annuities, rents, capital gains, etc., IF (big IF!) adjusted gross income exceeds $250,000 ($200,000 for singles). Idea is to try to reduce AGI so the tax doesn't apply, and deductions generally don't help! Trusts are hit hard because the tax applies to trusts with only $12,150 of taxable income. Trustees should consider distributions to beneficiaries if this additional tax would otherwise apply!
Avoid Tax Withholding Penalties...... Any tax you have withheld from your paycheck (or Pension/IRA distribution) is treated as having been withheld evenly throughout the year. So if you expect to owe tax, increase withholdings on December payments so that you will have prepaid either 90% of your current year (2018) liability, OR 100% of your prior year (2017) liability (110% if your 2017 AGI was more than $150,000).
2018 Annual Gift Exclusion: $14,000 Give anybody up to $15,000 this year, without filing a gift tax return. Split gifts made by spouses may require a gift tax return to utilize the annual exclusion. Be sure the donee deposits the check before year end!
Flexible Spending Accounts (FSA): If you have an FSA speak with your employer to determine if you have to use the funds before year end. Some arrangements have carryover provisions, but others do not!
2019 tax season! Start thinking about how changes in the tax law affect you. Go over your prior year returns, especially if you have had a major change in your life, ie. new job, new baby, new house, marriage, divorce, big bonus, big investment, big sale, etc., etc. I invite you to call me if you have a question!!!
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