Tax

Tax

Understanding the Gift Tax

If you gave money or property to someone as a gift, you might owe federal gift tax. Many gifts are not subject to the gift tax, but there are exceptions. Here are eight tips you can use to figure out whether your gift is taxable.

1. Most gifts are not subject to the gift tax. For example, there is usually no tax if you make a gift to your spouse or to a charity. If you make a gift to someone else, the gift tax usually does not apply until the value of the gifts you give that person exceeds the annual exclusion for the year. For 2018 the annual exclusion is $15,000 (up from $14,000 in 2017).

2. Gift tax returns do not need to be filed unless you give someone, other than your spouse, money or property worth more than the annual exclusion for that year.

3. Generally, the person who receives your gift will not have to pay any federal gift tax because of it. Also, that person will not have to pay income tax on the value of the gift received.

4. Making a gift does not ordinarily affect your federal income tax. You cannot deduct the value of gifts you make (other than deductible charitable contributions).

5. The general rule is that any gift is a taxable gift. However, there are many exceptions to this rule. The following gifts are not taxable gifts:

  • Gifts that are do not exceed the annual exclusion for the calendar year,
  • Tuition or medical expenses you pay directly to a medical or educational institution for someone,
  • Gifts to your spouse,
  • Gifts to a political organization for its use, and
  • Gifts to charities.

6. You and your spouse can make a gift up to $30,000 to a third party without making a taxable gift. The gift can be considered as made one-half by you and one-half by your spouse. If you split a gift you made, you must file a gift tax return to show that you and your spouse agree to use gift splitting. You must file a Form 709, United States Gift (and Generation-Skipping Transfer) Tax Return, even if half of the split gift is less than the annual exclusion.

7. You must file a gift tax return on Form 709 if any of the following apply:

  • You gave gifts to at least one person (other than your spouse) that are more than the annual exclusion for the year.
  • You and your spouse are splitting a gift.
  • You gave someone (other than your spouse) a gift of a future interest that he or she cannot actually possess, enjoy, or receive income from until some time in the future.
  • You gave your spouse an interest in property that will terminate due to a future event.

8. You do not have to file a gift tax return to report gifts to political organizations and gifts made by paying someone’s tuition or medical expenses.

Questions about the gift tax? Don’t hesitate to call.

Quickbooks Tax

How to Enter Bills in QuickBooks

You may have noticed recently that business bill-paying is undergoing a transition. While some paper bills still come via the U.S. Mail, you may also be getting some of those bills via email. Sometimes, you might get a reminder email, but then must go to the vendor’s site to make a payment.

How do you keep track of it all, so you don’t miss any due dates? You could record them on a calendar, but you’d still have to go back to the actual bill to retrieve the amount. But where is it? Is it online, in your email inbox, in a file folder, or pinned to the corkboard on the wall?

QuickBooks can organize this unpleasant process, saving time and helping you avoid confusion. Here’s how it works.

A 2-Step Process

QuickBooks divides your accounts payable tasks into two separate processes: entering bills and paying them. It requires some extra time upfront as you complete the first step, but streamlines the second so that the actual bill-paying only takes a few seconds.

To get started, click Enter Bills on QuickBooks’ home page to open a window like this:


Figure 1: Before you can pay a bill in QuickBooks, you need to create a record for it. 

The toolbar for the Enter Bills window is not pictured in the image above, but you don’t need it yet. Rather, you start by clicking the down arrow in the field next to VENDOR and selecting the biller’s name from your list (or clicking if you haven’t yet created a record for that entity). The ADDRESS should fill in automatically, as should the date.

If you set up default payment TERMS in that vendor’s record, your preference should show in that field and the BILL DUE date should be correct. Enter the AMOUNT DUE and complete any of the optional fields that the transaction requires (REF. NO., DISCOUNT DATE, and MEMO).

Since this is a utility bill, the Expenses tab should be highlighted, and the amount you entered above should appear in it. Below that is the ACCOUNT field; open that list and choose the right one. Don’t worry about the CUSTOMER:JOB and BILLABLE fields. These will only be completed when you’re charging a customer for an expense or item.

Warning: If you’re not familiar with the concept of assigning accounts to transactions, please schedule some time one of the QuickBooks professionals at the office. This is a critical designation that affects so many other areas of QuickBooks.

Saving Your Work


Figure 2: The toolbar from the Enter Bills window. 

Once you save your bill, you’ll be able to access it when it’s time to apply the payment. How will you remember when it’s due, though? QuickBooks can remind you – or even pay it automatically. So, before you leave the Enter Bills window, click Memorize in the toolbar pictured above.

The Memorize Transaction window will open with your vendor already entered in the Name field. You’ll have three options here:

  • Add to my Reminders list. QuickBooks can add this bill to its list of Reminders. To ensure that you’ll see this every time you open the software and can make any changes necessary, open the Edit menu and click Preferences | Reminders | My Preferences. Click in the box in front of Show Reminders List when opening a Company file. Then click the Company Preferences tab (if you’re the administrator) and find the Bills to Pay row. Click the appropriate button to indicate whether you want QuickBooks to Show Summary or Show List, and enter the number of days before due date.
  • Do Not Remind Me. Just what it sounds like.
  • Automate Transaction Entry. You can only select this if the transaction will be exactly the same every time (except for the date). If the number of transactions will be limited, enter the Number Remaining. And tell QuickBooks how many Days in Advance To Enter.


Figure 3: If you choose the third option here, be very careful when you define the automation. You should really do this only if you’re an advanced user. 

When you’re done, click OK to close the box, and save the bill.

Next month, the second step will be discussed: the actual paying of bills. In the meantime, please call if you want to schedule a session to go over any aspect of your accounts payable – or anything else in QuickBooks.

Tax

IRS Relief for Taxpayers Affected by Hurricanes

FEMA (Federal Emergency Management Agency) has declared a number of counties in Florida, Georgia, North Carolina, South Carolina and Virginia disaster areas due to hurricanes Michael and Florence. Any area declared a major disaster as designated by FEMA qualifies for individual or public assistance. As such, individuals and residing or located in these counties are eligible for tax relief–including an extension to file beyond the October 15 deadline.

Extended deadlines apply to filing returns, paying taxes, and performing certain other time-sensitive acts and taxpayers in these areas receive the extensions automatically.

Furthermore, the IRS will work with any taxpayer (including workers assisting with relief activities with a recognized government or philanthropic organization) who lives outside the disaster area but whose records necessary to meet a deadline occurring during the postponement period are located in the affected area. Tax relief for taxpayers living outside the disaster area should be aware that tax relief is not automatically granted. Please call the office or contact the IRS directly at 866-562-5227.

The tax relief postpones various tax filing and payment deadlines that occurred starting on October 7, 2018. As a result, affected individuals and businesses will have until February 28, 2019, to file returns and pay any taxes that were originally due during this period. This means individuals who had a valid extension to file their 2017 return due to run out on October 15, 2018, will now have until February 28, 2019, to file. The IRS noted, however, that because tax payments related to these 2017 returns were due on April 18, 2018, those payments are not eligible for this relief.

The February 28, 2019, deadline also applies to quarterly estimated income tax payments due on January 15, 2019, and the quarterly payroll and excise tax returns normally due on October 31, 2018, and January 31, 2019. It also applies to tax-exempt organizations, operating on a calendar-year basis, that had a valid extension due to run out on November 15, 2018. Businesses with extensions also have the additional time including, among others, calendar-year corporations whose 2017 extensions run out on October 15, 2018.

In addition, penalties on payroll and excise tax deposits due on or after October 7, 2018, and before October 22, 2018, will be abated as long as the deposits are made by October 22, 2018.

Personal casualty losses attributable to certain 2018 federally declared disasters, including Hurricanes Michael and Florence, may be claimed as a qualified disaster loss.

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