Day: March 21, 2024

Act Now to Protect Your Estate from Tax Changes

There are some big changes coming to gift and estate tax laws that can significantly increase estate taxes and decrease your financial legacy. As you work so hard to take care of animals, their owners, and your employees, make sure you’re also taking steps to protect the wealth you’ve built by making gift and estate tax planning a priority this year.

Without legislative action, the valuable Tax Cuts and Jobs Act’s (TCJA’s) gift and estate tax exemption is set to revert to pre-2018 levels starting in 2026. This will significantly increase the amount of an estate subject to Federal taxes. Add to that New York’s estate tax rules and taking the time to create and/or update your estate plan will make a big difference in how much of your estate goes to the people and causes you care about, and how much goes toward taxes.

On January 1, 2018, the TCJA took effect. Certain provisions increased the amount of assets individuals and married couples may gift annually and over a lifetime (as well as leave as part of an estate), with no federal taxes owed. Each year, exemption amounts are adjusted for inflation. For 2024:

The annual gift exclusion limit is $18,000 (or $36,000 for a married couple) per person. You do not pay taxes on gifts up to the limit. What’s more, amounts up to the annual limit do not count toward the gift and estate tax lifetime exemption. So, let’s say you are married and have two children. You and your spouse may each gift $18,000 to each child, for a total combined gift of $36,000/child in 2024. You won’t have to pay taxes on the gift and the gift won’t apply toward your lifetime gift and estate tax exemption. (There is an exception: if you are married and your spouse is a U.S. citizen, you can gift an unlimited amount to your spouse tax-free. If your spouse is not a U.S. citizen, there is an annually adjusted limit on tax-free gifts. For 2024, that amount is $185,000.) To qualify for the annual gift exclusion, the gift must be a present interest gift.
The gift and estate tax lifetime exemption is $13.61 million (or $27.22 million/married couple). Amounts above the lifetime exemption are taxable. Even though the exemption is scheduled to decrease starting January 1, 2026, any exemptions for 2018 through 2025 will be honored at the higher exemption amounts in effect at the time. The Federal tax law has a portability provision that provides for the unused exemption of the first spouse to die to be available to the surviving spouse if an estate tax return is filed when the first spouse passes away and the surviving spouse is a U.S. citizen.

Both the annual limit and lifetime exemption will be adjusted for inflation again at the start of 2025. Then, on January 1, 2026, the gift and estate lifetime exemption goes back to its pre-2018 level of $5 million, adjusted for inflation (so it’s expected to be in the $7 million to $8 million range). This will significantly reduce the amount of assets that can be gifted over a lifetime and passed on as part of an estate tax-free. In New York, it’s a bit more complicated.

New York does not have a gift tax; however, it does have different rules for estate taxes. Key differences include:

An estate tax exclusion is tied to federal tax laws from 2014 and gradually indexed for inflation. For 2024, the New York estate tax exclusion amount is $6,940,000.
However, there is a “cliff” built into the calculation. If a decedent’s taxable estate is between 100% and 105% of the exclusion amount as of the date of death, exclusion benefits phase out. There is no exclusion benefit if a taxable estate is more than 105% of the exclusion amount as of the date of death. This means New York State estate taxes are due starting with the first dollar of assets.
Gifts made within three years of death are not excluded and are “clawed back” to be included in the calculation of New York estate taxes.
New York does not have a portability provision and, thus, does not allow an unused exclusion amount to transfer to a surviving spouse.

There are actions New Yorkers can take to stay within the state’s exclusion amount while avoiding the “cliff” and maximizing opportunities under Federal estate tax laws. To learn more about your options, contact RBT CPA Trust, Estate and Gift Practice professionals by emailing Ita Rahilly, CPA, at irahilly@rbtcpas.com. Your RBT CPA client manager is also available to help start the discussion, in addition to handling your accounting, tax, audit, and business advisory needs. Give us a call today.

RBT CPAs is proud to say 100% of its work is prepared in America. Our company does not offshore work, so you always know who is handling your confidential financial data.

Are You Classifying Employees and Contractors Correctly? DOL Final Rule Took Effect March 11

This past Monday, the Department of Labor’s (DOL’s) final rule on how to analyze whether a worker is classified as an employee or independent contractor under the Fair Labor Standards Act (FLSA) took effect.

Considering the growth of the gig economy, the number of people operating as independent contractors or freelance workers has skyrocketed. While this has opened opportunities to “be your own boss,” there has been growing concern about businesses misclassifying workers as contractors to gain an unfair competitive advantage and avoid the higher costs associated with actual employees (i.e., minimum wage, overtime pay, benefits, and other employment protections). The DOL final rule on classifying employees seeks to rectify the situation. It is more consistent with judicial precedent and more clearly delineates when a worker qualifies as an employee versus a contractor under the FLSA. Here are the highlights…

Who is subject to the rule?

Employers subject to the FLSA are impacted by this rule. So, it applies to private sector employers, as well as federal, state, and local government employers.

What does it entail?

The final rule rescinds the 2021 independent contractor rule and restores the multifactor analysis previously used by courts to determine an employee’s classification based on their relationship with an employer. The six factors include:

Any opportunity for profit or loss a worker might have;
The financial stake and nature of any resources a worker has invested in the work;
The degree of permanence of the work relationship;
The degree of control an employer has over the person’s work;
Whether the work the person does is essential to the employer’s business;
The worker’s skill and initiative.

No factor is weighted higher than another – the total circumstances of the employment relationship is considered. For more details about the six factors, as well as examples and FAQs, the DOL’s Small Entity Compliance Guide is a terrific resource. Access it by clicking here.

When does the final rule take effect?

March 11, 2024.

Where can I learn more?

Click here for the Final Rule.
Click here for DOL FAQs.
Call the Wage and Hour Division’s (WHD) Division of Regulations, Legislation, and Interpretation at (202) 693-0406 if you have questions about the final rule.
Contact your local WHD District Office with questions about employment classification of a work/group of workers.

Why should employers ensure compliance?

Failure to comply can result in having to pay unpaid wages owed to an employee, liquidated damages, civil penalties, and lawyers’ fees. In addition, fines may be levied by federal and state governments if misclassification occurs.

If you have questions or need assistance with employee classifications and Final Rule compliance, Visions Human Resource Services – an RBT CPAs affiliate – is available to help. Contact a client manager at info@VisionsHR.com or call 845-567-3978.

And, as always, if your organization needs any accounting, audit, tax, or advisory services, you can continue to count on RBT CPAs to do the job professionally, ethically, on-time and within budget. Give us a call to learn more.

RBT CPAs is proud to say 100% of its work is prepared in America. Our company does not offshore work, so you always know who is handling your confidential financial data.

Securing the Future: Effective Succession Strategies for Your Manufacturing Business

In an ever-evolving business landscape, the importance of succession planning, particularly in manufacturing businesses, cannot be overstated. An unexpected or unplanned for departure of a key employee can be devastating to a company’s productivity, reputation, and business. Proactively protect what you’ve built by making succession planning an ongoing part of doing business.

Succession planning is a strategic process that ensures business continuity by identifying and developing potential successors for key positions, thereby mitigating the risks associated with unexpected absences, departures, or retirements.

In the realm of manufacturing, the stakes are even higher as these businesses are often highly specialized, with unique operational nuances and specific skill requirements. This sector thrives on stability and predictability, and unexpected leadership gaps can have a disruptive impact on production, client relationships, and overall business performance.

Succession planning involves forecasting the future needs of the business, identifying the competencies and skills required for key roles, and developing existing employees to take on these roles when the need arises. It is a proactive approach, focusing on the development of a talent pipeline that can step up when an executive or key staff member leaves.

There are several steps to effective succession planning. First, recognize critical roles that are vital to the organization’s operations and performance. These positions often have a high degree of responsibility and require specific skill sets.

Next, identify high-potential employees who demonstrate the aptitude and ambition to rise to these roles. Utilize performance appraisals, leadership assessments, and feedback from supervisors to pinpoint these individuals. Remember, potential does not only refer to performance. It also includes the ability to learn, adapt, and grow, which are crucial in a manufacturing environment.

Once potential successors are identified, invest in their professional growth. Tailored development plans can help them acquire the necessary skills and knowledge. This could involve on-the-job training, mentoring, job rotations, or even further education.

Communication is also a key aspect of succession planning. Be transparent about the process, the identified successors, and their development plans. This can help manage expectations and ensure everyone is on board with the plan.

Periodic review of the succession plan is crucial. As the business changes, so too may the requirements for key roles, and the identified successors. Regular reviews allow for adjustments and ensure the plan remains aligned with the business’s strategic direction.

However, the succession planning process does not end with the appointment of a successor. There should be a structured handover process to facilitate a smooth transition. This includes knowledge transfer, introduction to key stakeholders, and gradual assumption of the role’s responsibilities.

Succession planning is an indispensable strategic process for manufacturing businesses. It fosters a culture of continuous learning and development, ensures leadership continuity, and minimizes disruption during transitions.

By identifying and nurturing potential successors, manufacturing businesses can ensure their long-term sustainability and success. Remember, the future can be unpredictable, but with a robust succession plan, your business can be prepared for whatever comes its way.

RBT CPAs business advisory services professionals are available to assist you with creating, monitoring and updating succession plans. We are also prepared to handle all of your accounting, tax, and audit needs. Interested in learning more? Please don’t hesitate to give us a call and find out how we can be Remarkably Better Together.

RBT CPAs is proud to say 100% of its work is prepared in America. Our company does not offshore work, so you always know who is handling your confidential financial data.