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Ross Buehler Falk & Company is committed to providing innovative and cost effective solutions to meet each client's unique personal and business goals. We build long-lasting client relationships through personal attention, integrity, and a dedicated pro-active team of professionals.


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An Interview with Olivia Metz, RBF’s Tax Season Intern

Olivia joined the RBF team as an intern in January 2023, working both with the Audit & Assurance and Tax departments. Originally from Upper Moreland, PA, she is a senior at Millersville University studying Business Administration with a concentration in Finance and Management. After graduating in May 2023, Olivia hopes to gain additional work experience while pursuing and master’s degree and studying for her CPA license. 

We talked to Olivia about what inspired her to pursue accounting, what a typical day as an intern looks like, and what drew her to working at RBF. 

What inspired you to study accounting?  

Two things. One: both of my parents work in the accounting and finance field, and they both really like their jobs. 

Two: I’ve always been interested in making money and creating my own budget. When I was little, I would set up a stand on the corner of my street to sell bracelets with other girls in my neighborhood. I applied for my first job on my 14th birthday.  

What does your role as an intern at RBF entail?  

One of the best things about my internship is that I don’t do busy work or “intern” tasks. My work is the same work that everyone else at the firm does.  

I started in the A&A department, putting together audit engagement letters and entering data from audit engagements the team was working on. I also got to observe the actual audit process.  

When tax filing season started, I switched to working with the Tax department, preparing individual tax returns.   

What does a typical workday look like for you?  

On a typical day during tax season, I come into the office and start at my computer. I check my email and see what tax returns are in my work queue. Then I start working through those returns. If I need help or have questions, I visit someone’s office. That’s something I really like about my days in the office; everybody is willing to answer questions or walk through the steps with me and understand the next time I see it.  

What are some of the most challenging things you deal with in your role?  

The most challenging thing for me was learning the systems and software that the firm uses to prepare tax returns, a platform called UltraTax. I had never used software like this before so getting the hang of it was a challenge. 

What is your favorite part of your internship?  

The work environment – everybody here is friendly and easy to talk to. The environment feels very genuine, and everyone is very willing to help. 

What drew you to RBF as a place to intern?  

I was interested in working with RBF from the way they talked about the internship in the interview. They really conveyed that they wanted to teach me and expose me to a lot of things in the accounting field. During the interview, they mentioned doing auditing and tax, but also going out to see clients. The other places I interviewed made it seem like I would just be doing busy work. 

I also really like that RBF is a smaller firm, so I have been able to meet everybody. There’s been more opportunity to build relationships than if I interned at a larger firm.  

What advice would you give to students looking to intern with an accounting firm?  

Take advantage of your school’s resources – use Handshake, for example.  

And go into it with an open mind. Initially I was looking for a finance internship, and there was a lot of opportunity to learn and grow by taking an internship at RBF. 

Want to Improve Your Cash Flow? Shorten the Amount of Time it Takes to Get Paid

To say that things are uncertain right now when it comes to the economy is, in all probability, a bit of an understatement. 

Inflation is at levels we haven’t seen in decades. Employment costs are rising across the board. Materials in a number of industries are more expensive than ever – if you can even get them at all thanks to still-ongoing issues with the fragile global supply chain. 

All of these issues can make it difficult for organizations to tackle one of their most essential challenges of all: cash flow. According to one recent study, approximately 82% of all businesses that fail do so due to poor cash flow management or just a general misunderstanding of the idea itself. 

Thankfully, this is only a hurdle if you allow it to be. Modernizing your back office processes can, among other things, help to dramatically reduce the amount of time it takes to get paid. That in turn can help with any current or potential cash flow issues, which is an excellent position to be in. 

Improving Cash Flow, One Change at a Time 

By far, one of the best ways to reduce the amount of time it takes to get paid by clients and other vendors involves asking for payment deposits at the beginning of any new business relationship. 

This particular method helps to accomplish a few different things all at once. For starters, if a client owes you $1,000 for a job that has already been completed, they’re more likely to settle the total balance if they’ve already paid $250 of it versus having paid none of it. If they’ve already put forth a deposit before any work even started, they’re motivated to quickly see things through to completion and are less likely to delay things any longer than they need to. 

It’s also a great way to help get at least some money coming in the door all the time so if a client does end up paying the remaining balance late, you were able to get at least part of it ahead of time. 

Another option that you’ll want to leverage has to do with switching to digital invoices. If you haven’t already done so, understand in no uncertain terms that this is no longer a recommendation – it is a requirement. 

Think about it from a purely logistical perspective if nothing else. If you send an invoice to a client via USPS and it takes five business days to reach them, and then another five days pass before they act on it, and then another five days pass before you finally receive that payment check in the mail, that’s 15 full days (at an absolute minimum) where your money was in limbo. A digital invoice, on the other hand, can be sent in seconds and paid just as quickly. Not only that, but you’re freeing up the valuable time of your back-office employees so that they can focus on more important matters. 

Not only that, but a lot of digital invoicing systems also integrate with a lot of the financial software that you’re likely already using. So you’ll have less paperwork to keep track of on your end and you’ll be able to easily see who has paid and who hasn’t (thus requiring a phone call to follow up). This will lead to more accurate financial statements overall, giving you a better foundation for making actionable decisions moving forward. 

Finally, if you want to motivate people to pay you quickly, you need to give them as many options as possible when it comes to precisely that. The easier it is for someone to take your desired step, the more likely they are to take it. 

Many businesses got away with just accepting cash or checks in the past but those days are no more. You should also, at a minimum, accept credit and debit cards. You could even choose to explore certain digital payment options like PayPal, Zelle, and others. Give people the chance to pay on their own terms and they’re less likely to delay the process any longer than necessary. 

In the end, addressing cash flow concerns is not something that you “do once and forget about.” It’s an ongoing process that you must remain proactive about or else economic uncertainty (not to mention client or vendor uncertainty) could exacerbate things significantly. But by taking steps like asking for payment deposits, embracing digital invoices, and offering more options when it comes to paying, you can reduce the amount of time it takes to get paid at all – thus improving cash flow along the way. 

When Can You Dump Old Tax Records?

Taxpayers often question how long records must be kept and the amount of time IRS has to audit a return after it is filed. 

It all depends on the circumstances! In many cases, the federal statute of limitations can be used to help you determine how long to keep records. With certain exceptions, the statute for assessing additional tax is 3 years from the return due date or the date the return was filed, whichever is later. However, the statute of limitations for many states is one year longer than the federal limitation. The reason for this is that the IRS provides state taxing authorities with federal audit results. The extra time on the state statute gives states adequate time to assess tax based on any federal tax adjustments that also apply to the state return. 

In addition to lengthened state statutes clouding the recordkeeping issue, the federal 3-year rule has several exceptions: 

  • The assessment period is extended to 6 years instead of 3 years if a taxpayer omits from gross income an amount that is more than 25 percent of the income reported on a tax return. 
  • The IRS can assess additional tax with no time limit if a taxpayer: (a) doesn’t file a return; (b) files a false or fraudulent return to evade tax; or (c) deliberately tries to evade tax in any other manner. 
  • The IRS gets an unlimited time to assess additional tax when a taxpayer files an unsigned return. 

If no exception applies to you, for federal purposes, you can probably discard most of your tax records that are more than 3 years old; add a year or so to that if you live in a state with a longer statute. 

Examples: Susan filed her 2020 tax return before the due date of April 15, 2021. She will be able to safely dispose of most of her records after April 15, 2024. On the other hand, Don filed his 2020 return on June 1, 2020. He needs to keep his records at least until June 1, 2024. In both cases, the taxpayers may opt to keep their records a year or two longer if their states have a statute of limitations longer than 3 years. 

Important note: Even if you discard backup records, never throw away your file copy of any tax return (including W-2s). Often the return itself provides data that can be used in future tax return calculations or to prove amounts related to property.You should keep certain records for longer than 3 years. These records include: 

  • Stock acquisition data. If you own stock in a corporation, keep the purchase records for at least 4 years after the year you sell the stock. This data will be needed to prove the amount of profit (or loss) you had on the sale. Although brokers are now required in most cases to keep purchase records and report the information to the IRS when the stock is sold, it is still a good idea for you to maintain your own records, as you the taxpayer are ultimately responsible for proving the cost to the IRS if your return is audited. 
  • Stock and mutual fund statements where you reinvest dividends. Many taxpayers use the dividends they receive from a stock or mutual fund to buy more shares of the same stock or fund. The reinvested amounts add to basis in the property and reduce gain when it is finally sold. Keep statements at least 4 years after the final sale. 
  • Tangible property purchase and improvement records. Keep records of home, investment, rental property, or business property acquisitions AND related capital improvements for at least 4 years after the underlying property is sold. 

As we become more and more a paperless society, you may wonder if you must keep the paper version of the records mentioned in this article. No, you don’t – the paper documents can be scanned and maintained on your computer or in the cloud. But if you do convert the records to electronic files, be sure to maintain a back-up that can be retrieved if you have a computer crash or cyber attack that takes over your computer. 

If you have questions about what records to retain and what you can dispose of now, please give this office a call. 

What is the Difference Between an HSA and a Health FSA?

The tax code provides two tax advantageous plans for taxpayers to pay medical expenses. One is a Flexible Spending Account (FSA) and the other is a Health Savings Account (HSA). The two are often misunderstood and their provisions are frequently mixed up by taxpayers who then fail to take advantage of the tax benefits available from these accounts. 

This article explains the workings, qualifications, and tax benefits of each with a side-by-side comparison chart of the two programs. Both have a common theme: contribution to both is made withpre-tax dollars (they reduce taxable income) and distributions to pay qualified medical expenses are tax free.After that the two plans are quite different. 

Flexible Spending Accounts (FSAs) 

There are three types of FSAs: dependent care assistance, adoption assistance and medical care reimbursements. This article will only be dealing with the latter, often referred to as aHealth FSA.A Health Flexible Spending Account is part of a qualified cafeteria plan offered by an employer, that allows employees to contribute pre-tax dollars annually to be used by the employee to pay medical expenses of the employee, their spouse, and dependents during the year. The maximum contribution is annually inflation adjusted, and for 2023 is $3,050 (up from $2,850 in 2022).In the case of a married couple where each spouse has an FSA account with an employer, both can contribute the maximum. 

Since an FSA is an employer plan, an employee cannot take it with them if they leave their employment. Thus, FSAs are not transferrable and cannot be rolled into an individual’s health savings plan. 

Common Features of an FSA – Funds can be used for health insurance deductibles, copays, medication, and other health care related out-of-pocket costs. For ease of use, most FSA accounts come with a debit card. Employees can spend the money in the account before it’s fully funded. 

FSA Allowable Medical Expenses Include Those For: 

  • The diagnosis, cure, mitigation, treatment, or prevention of disease, or for the purpose of affecting any structure or function of the body, 
  • Prescription Drugs, 
  • Medication available without a prescription (an over-the-counter medicine or drug) that is prescribed), 
  • Insulin, 
  • Transportation primarily for and essential to medical care, 
  • Supplementary medical insurance for the aged, 
  • Feminine menstrual products, and 
  • Personal Protective Equipment (COVID) 

No Double Dipping Medical expenses reimbursed from the FSA cannot be claimed as a Schedule A medical itemized deduction. 

Unused Amounts (Use It or Lose It) – Unused amounts at the plan’s year end are generally forfeited by the employee. However, a plan can have either: 

  • A grace period of up to 2½ months after the end of the plan year in which to use up the unused amount or 
  • Allow up to 20% of the annual contribution limit ($610 for 2023)of unused amounts from the end of the plan year to be used to pay or reimburse qualified medical expenses in the following year. 

Unused amounts more than the carryover amounts are forfeited (cannot be returned to the employee). The carryover amount does not reduce the maximum contribution amount allowed for the carryover year. 

FSA participants need to pay close attention to their FSA account balances to ensure they do not forfeit any funds at year’s end. 

Health Saving Accounts (HSAs)  

Individuals must meet the following requirements to contribute to an HSA: 

  • Not be claimed as a dependent on anyone else’s tax return. 
  • Not be enrolled in Medicare. 
  • Covered under a high-deductible health plan (HDHP) and not be coveredunder any other health plan which is not an HDHP, unless the other coverage is permitted insurance or coverage for accidents, disability, dental care, vision care, or long-term care. 

Enrolled in Medicare – The IRS has interpreted being “enrolled in Medicare” to mean both eligibility for and enrollment in Medicare. An individual who is otherwise eligible, but who is not enrolled in Medicare Part A, may contribute to an HSA until the month enrolled in Medicare. 

Covered Under a High-deductible Health Plan – HDHPs come in two varieties: Self-Only plans and Family plans. Use the flow chart below to determine if a plan qualifies as a high-deductible health plan. 

HSA Contributions and Contribution Limits – Individuals may establish an HSA either independently or with their employer. If made with an employer, and the individual subsequently leaves the employment, the individual can roll the funds into their own HSA or take a taxable distribution subject to a 20% penalty. 

In addition to the individual, others can make contributions to the HSA, including employers as well as other persons (e.g., family members) subject to the annual inflation adjusted contribution limits. Those limits for 2023 are: 

  • $3,850 for self-only coverage 
  • $7,750 for family coverage 
  • $1,000 additional amount for those aged 55 and older. 

An account holder gets the deduction for contributions to his HSA even if someone else (e.g., a family member) makes the contributions. Employercontributions to an HSA are excluded from the employee’s income – so these contributions are not deducted on the employee’s tax return. Distributions for qualifying medical expenses are tax-free. 

HSA Allowable Medical ExpensesGenerally the eligible medical expenses are the same as allowed for FSAs. The qualified medical expenses must be incurred only after the HSA has been established. Medical expenses paid or reimbursed by HSA distributions cannot also be claimed as a medical expense for itemized deduction purposes. 

HSA as a Supplemental Retirement VehicleEstablishing and contributing to an HSA can be more than just a way for individuals to save taxes and gain control over their medical care expenditures. It can also be a retirement vehicle, especially for taxpayers who are maxed out on their other retirement plan options or who can’t contribute to an IRA because of the income limitations. 

There is no requirement that medical expenses must be paid or reimbursed from the HSA, so a taxpayer can maximize tax-free growth in the account by using funds from other sources to pay routine medical costs. Later, distributions can be used tax-free to pay post-retirement medical expenses. Or, if used for non-medical purposes, a retiree aged 65 or older will pay income tax on the distribution, but not a penalty. Those younger than 65 who use their HSA funds for other than qualified medical purposes pay a penalty of 20% of the amount distributed in addition to income tax on the distribution. Unlike IRAs, no minimum distributions are required to be made from HSAs at any specific age. 

FSA-HSA Comparison Table  

The following table compares the key differences between Health Flexible Spending Accounts and Health Savings Accounts: 

As you can see, either an FSA or HSA can help you pay your out-of-pocket medical expenses. On top of that, contributions are made on a pre-tax basis directly reducing your taxable income. If in an employer plan, in addition to reducing your taxable income, contributions reduce payroll taxes. Plus an HSA can be a supplemental retirement vehicle. 

Please give this office a call if we can help you utilize the tax benefits of a health FSA or an HSA. 

Don’t Get Hit with IRS Underpayment Penalties

Under federal law, taxpayers must pay taxes during the year as they earn or receive income, or they can find themselves falling victim to substantial underpayment penalties. Even worse, they may have spent the money, and when tax time comes are unable to pay their past taxes and spiral into financial distress. 

To facilitate the pay-as-you-earn concept, the government has provided several means of assisting taxpayers in meeting that requirement. These include:  

  • Payroll withholding for employees – W-4; 
  • Pension withholding for retirees – W-4P; 
  • Voluntary withholding for Unemployment and Social Security benefits – W-4V; and 
  • Estimated tax payments for self-employed individuals and those with other sources of income not covered by withholding – Form 1040-ES. 

Employees with primarily wage income can use the IRS online tool, the Tax Withholding Estimator, to determine if their withholding closely matches their projected tax liability or if they need to adjust their tax withholding by providing a revised Form W-4 to their employer. 

Employees and those with significant income from other sources, multiple jobs, rentals, side gigs, children subject to the kiddie tax, capital gains, etc., may find it appropriate to consult with this office for a more sophisticated tax projection and estimate of needed withholding and/or estimated tax payments. 

Individuals should also check their tax withholding and estimated payments when: 

  • Changes in tax law affect their situation. 
  • They experience a lifestyle or financial change like marriage, divorce, birth or adoption of a child, home purchase, retirement, or filed chapter 11 bankruptcy. 
  • They change jobs or have a change in wage income, such as when the taxpayer or their spouse starts or stops working or starts or stops a second job. 
  • They have taxable income not subject to withholding, such as interest, dividends, capital gains, self-employment and gig economy income, and IRA distributions. 
  • Reviewing their planned deductions or eligible tax credits, including items like medical expenses, taxes, interest expense, gifts to charity, dependent care expenses, education credit, Child Tax Credit or Earned Income Tax Credit. 
  • Nonresident alien taxpayers should determine their tax withholding using the special instructions in Notice 1392, Supplemental Form W-4 Instructions for Nonresident Aliens. 

Once an individual has determined they need to change their tax withholding, the individual should complete a new Form W-4 to give to their employer. Individuals with other types of income should provide the payor with either a new Form W-4P or Form W-4V, as applicable. Those making estimated payments can mail the payment along with the Form 1040-ES to the address included on the form or use the IRS on-line payment system to make a payment electronically. 

When a taxpayer fails to prepay a safe harbor (minimum) amount, they can be subject to the underpayment penalty. This nondeductible interest penalty is higher than what might be earned from a bank. The penalty is applied quarterly, so for example, making a fourth quarter estimated payment only reduces the fourth-quarter penalty. However, withholding is treated as paid ratably throughout the year, so increasing withholding at the end of the year can reduce the penalties for the earlier quarters. This can be accomplished with cooperative employers or by taking an unqualified distribution from a pension plan, which will be subject to 20% withholding, and then returning the gross amount of the distribution to the plan within the 60-day statutory rollover limit. 

Federal law and most states have so-called safe harbor rules, meaning if you comply with the rules, you won’t be penalized. There are two Federal safe harbor amounts that apply when the payments are made evenly throughout the year. 

  1. The first safe harbor is based on the tax owed in the current year. If your payments equal or exceed 90% of your current year’s tax liability, you can escape a penalty.  
  1. The second safe harbor—and the one taxpayers rely on most often—is based on your tax in the immediately preceding tax year. If your current year’s payments equal or exceed 100% of the amount of your prior year’s tax, you can escape a penalty, regardless of the amount of tax you may owe when you file your current year’s return. If your prior year’s adjusted gross income was more than $150,000 ($75,000 if you file married separate status), then your payments for the current year must be 110% of the prior year’s tax to meet the safe harbor amount. 

There is also a “de minimis amount due” of $1,000. If the amount owed is less than $1,000 the underpayment penalties do not apply. 

Where taxpayers get into trouble is when their income goes up or their withholding goes down for the current year versus the prior year. Examples are having a substantial increase in income, such as when investments are cashed in, thereby increasing income but without any corresponding withholding or estimated payments. Another frequently encountered situation is when a taxpayer retires and their payroll income is replaced with pension and Social Security income without adequate withholding. Taxpayers who don’t recognize these types of situations often find themselves substantially underpaid and subject to the underpayment penalty when tax time comes around. 

The bottom line is that 100% (or 110% for upper-income taxpayers) of your prior year’s total tax is the only true safe harbor because it is based on the prior year’s tax (a known amount), whereas the 90% of the current year’s tax amount is a variable based on the income for the current year, and often that amount isn’t determined until it is too late to adjust the prepayment amounts. 

That being said, there are times when using the 100%/110% safe harbor method doesn’t make a lot of financial sense. For example, let’s say that in the prior year, you had a large one-time payment of income that boosted up your tax to $25,000, which is $10,000 more than you normally pay. You know that you won’t have that extra income in the current year. Rather than rely on the 100%/110% of prior tax safe harbor, where you’d be prepaying $10,000 more than your current year’s tax is likely to be, it may be appropriate to use the 90% of current-year tax safe harbor, determined by making a projection of your current year tax, and as the year goes along, monitoring your income and the tax paid in to be sure you are on track to reach the 90% goal. 

Unlike employees, a self-employed individual must either estimate his or her net earnings for the year (or use the 100%/110% safe harbor) and pay taxes on a quarterly basis according to that estimate or safe harbor. Failure to do so will result in interest penalties. 

Although these payments are called “quarterly” estimates, the periods they cover do not usually coincide with a calendar quarter. 

Quarter  Period Covered  Months  Due Date* 
First  January through March  3  April 15 
Second  April and May  2  June 15 
Third  June through August  3  September 15 
Fourth  September through December  4  January 15 

* If the due date falls on a Saturday, Sunday, or holiday, the payment is due on the next business day. 

The rules discussed apply to federal pre-payments. The rules vary for the states. 

Please contact this office for assistance. If you have a substantial increase in income, you should contact this office promptly so that your withholding or estimated tax payments can be adjusted to avoid a penalty. 

I Needed to Repay Part of My Compensation; Will I Get a Refund on My Taxes?

So, you filed and paid all your taxes on the money you earned in 2021. Now, the company you work for finds itself in trouble and you are forced to pay back part of your compensation. The big question is, will the IRS refund you for the taxes you already paid related to this compensation? While this seems like a bizarre scenario at first glance, it is more common that you might think.  

How it Happens 

Reducing or holding back compensation which hasn’t been earned yet is easy. Simply pay an executive or employee less or don’t grant the stock option or bonus. Just don’t pay it. 

Things get tricky in the situation where compensation has already been paid and needs to be reversed. This is much, much tougher. If you are still within the same calendar year, then logistically it’s easier to make an adjustment; but unwinding compensation already awarded is never simple or easy. 

Requiring an employee to pay back compensation is not as uncommon as many think. The situation can be as simple as receiving a signing bonus with the stipulation to stay at least a year. IRS treatment of repaid compensation depends on the details. 

Details on Compensation Clawbacks 

The answer to the core question can vary, with the legal context and timing being the biggest drivers. For example, both Dodd-Frank and the Consumer Protection Act grant regulatory authority to mandate clawbacks, even in cases where the taxpayer was unaware of any wrongdoing. The Sarbanes-Oxlet Act has its own set of clawback regulations. In cases such as this there is the possibility, due to legal concerns, that a refund is not due to the taxpayer.  

Generally, in cases of contractual issues, the IRS doesn’t allow a taxpayer to undo an economic event as if it never happened. The general exception to this rule is if you receive and give back the same compensation within the same calendar year. The problem, however, is that clawbacks usually come in later years after a tax return has been filed. 

If you are still employed at the same company, they could simply agree to reduce your current year salary. If you are a former employee, things get tricker. You also have the possibility of amending a prior tax return in some cases. Unfortunately, many people find themselves in a situation where they need to claim a tax refund under Section 1341 of the tax code. 

Section 1341 is based on the claim of right doctrine and attempts to put a taxpayer in the same position he or she would have been in had they never received the income. To qualify for and file under this provision, the taxpayer must have included money in income in the prior year because they had an unrestricted right to it at that time and then later learned they did not have an unrestricted right to it after all, therefore having to give it back. 


The rules and regulations around the taxability of compensation required to be repaid is not simple. While the core issue of whether one is voluntary or mandatory, givebacks almost always create tax problems. If you ever find yourself in a situation where you have to return a material amount of compensation, no matter what the source, it’s best to reach out to your trusted tax adviser for help navigating the complexities.

Estate Taxes vs. Inheritance Taxes: Understanding the Differences

Estate and inheritance (“death”) taxes are levied on the transfer of property at death. The difference between an estate tax and an inheritance tax is based on who pays the bill. An estate tax is levied on the estate of the deceased, while an inheritance tax is levied on the heirs of the deceased. That’s the simple explanation. As for execution, there are far more nuances based on the monetary value of a bequest; the status of the beneficiary/(ies); and where you live when you pass away. 

Federal Estate Tax  

An estate tax applies to the value of the assets left behind by a decedent and is paid out from the proceeds of the estate before the rest of the assets are distributed to heirs. Estate wealth is usually comprised of cash, securities and real estate.  

In 2023, if an estate is valued at more than $12.92 million ($25.84 million for couples), the estate will owe a progressive tax rate levied on the value above that amount. For example, if an estate is valued at $15 million, it will pay estate taxes on the $2,080,000 above the exemption. The federal tax rate ranges from 18 percent to 40 percent, depending on the taxable value of the estate.  

Generally, the estate tax applies to only the wealthiest 2 percent of Americans, and only 0.07 percent of estates end up paying the tax, according to the Tax Policy Center. Note that assets inherited by a spouse or charitable organizations are generally not subject to an estate tax. 

Some states also levy an estate tax, based on the location of the property. Presently, 12 states plus the District of Columbia levy an estate tax: 

  • Connecticut 
  • District of Columbia 
  • Hawaii 
  • Illinois 
  • Maine 
  • Maryland 
  • Massachusetts 
  • Minnesota 
  • New York 
  • Oregon 
  • Rhode Island 
  • Vermont 
  • Washington  

Estate Tax Strategies 

To minimize or eliminate estate taxes, the estate owner has several options. Among the more sophisticated are structuring an Irrevocable Life Insurance Trust, a Family Limited Partnership or funding a Qualified Personal Residence Trust. However, the easiest way to legally avoid estate taxes is to give assets away before you die. Estate owners can make tax-deductible contributions to charitable organizations or gift up to $17,000 in 2023 ($16,000 in 2022) a year, per person, to as many people as you want.  

Inheritance Tax 

An inheritance tax, on the other hand, is a state tax paid by the beneficiary (heir) of an estate. Not every state levies an inheritance tax, and the laws vary considerably by state. The tax is based on the relationship of the beneficiary to the decedent. For example, in some instances a beneficiary who is a surviving spouse, parent, child or grandchild may be exempt from the tax, whereas a brother, sister, niece or nephew may be subject to an inheritance tax. 

Presently, six states levy an inheritance tax (only Maryland levies both estate and inheritance taxes). Each state sets its own exclusion amount, ranging from $1 million to $9.1 million. Amounts above the state exclusion are then subject to a separate estate tax, which tends to range between 1 percent and 18 percent. The tax applies to decedents who lived in one of these states: 

  • Iowa (phasing out tax by 2025) 
  • Kentucky 
  • Maryland 
  • Nebraska 
  • New Jersey 
  • Pennsylvania 

Inheritance Tax Strategies 

Similar to estate tax strategies, an estate owner can minimize state inheritance taxes by transferring assets to a trust or family limited partnership, or by gifting assets. Be aware that assets owned under a Roth IRA or Roth 401(k) – that has been open for at least five years – are not subject to any taxes since contributions were already taxed and earnings grow tax free. You also might consider using a portion of your assets to purchase life insurance, naming your heirs as beneficiaries. Since life insurance proceeds are not taxable, this is a way to remove money from the estate to create a larger, tax-free inheritance.  

As for current estate assets, one surefire way to legally avoid inheritance taxes is to move to a state that doesn’t levy them. 


5 Tips for New and Confused QuickBooks Users

Learning new software is always a challenge. You have to learn the lay of the land before you can start working with it. How do I do this? How does the menu system work? How can I enter data without making a mistake? 

The learning process for financial software for your small business can be especially unnerving. Your livelihood depends on getting everything right. A mistake in an invoice you’re creating is more serious than using incorrect grammar or punctuation in a letter. 

We recommend that you let us give you a good introduction to QuickBooks, so you get the program set up correctly and learn the most basic, often-used functions. In the meantime, here are five things you can do to start getting your feet wet. 

Familiarize yourself with QuickBooks’ lists 

You’ll consult and use lists a lot in QuickBooks. Transaction forms offer access to data you’ve already created and will use. When you need to select a customer, for example, you can just open a drop-down list and click on one. 

QuickBooks also provides free-standing lists that you might need to use outside of transactions, though they’re often available there, too. Open the Lists menu to see them. They include Item List, Sales Tax Code List, and Class List. Click on one to open it, and you’ll see a series of menus running across the bottom of the window. They allow you to, for example, add or edit items, take actions like entering a sales receipt, and run related reports.  

Troubleshoot transactions 

What do you do when you know you’ve entered a transaction but you can’t find it? QuickBooks has good search tools, but sometimes you don’t have enough details to hunt effectively for the missing invoice, bill, etc. There are two reports that can help. 

It’s possible that the transaction you’re seeking was accidentally voided or deleted. Open the Reports menu and select Accountant & Taxes | Voided/Deleted Transactions Summary or Detail. If you have an idea of when the original transaction was entered, change the date range at the top of the screen. You really shouldn’t have many of these. If you do, let us help you determine why this is happening so frequently. You can get into some trouble if you void or delete transactions to solve a problem that should be resolved another way. 

While you’re in the Accountant & Taxes report list, open the Audit Trail. This is a listing of transactions that have been entered or modified, when, and by whom. If you have multiple users accessing and working with QuickBooks data, you should get to know this report. 

Work with windows 

Every time you open a window in QuickBooks, it stays open. You can always close it by clicking the X in the upper right corner of the window – not the program X in the farthest upper right corner. If you have a lot of windows open, all of that clicking can become tiresome. 

Open the Window menu to see your options there. You’ll see a list of all the windows that are open. Click on one to go there. You can also “tile” the windows vertically or horizontally so they overlap each other on the screen or “cascade” them, which places them on top of each other with only the window label showing. And you can close all of them at once by clicking Close All. 

Use “local” menus 

Most QuickBooks windows provide ways for you to take a related action. But most also offer “local” menus, or right-click menus. Open an invoice form to see how this works (Customers | Customer Center | Transactions | Invoices). Right click in the header of the invoice. Your menu options here include: 

  • Duplicate Invoice 
  • Memorize Invoice 
  • Transaction History, and 
  • Receive Payments. 

You’ll also find these commands and more in the toolbar at the top of the window.  

Practice with a QuickBooks sample file 

Before you start entering real data in QuickBooks, or if you’ve already done so and you want to try out a new feature without risking an error, use one of QuickBooks’ sample files. That’s why they’re there. 

You can open one of these when you’re loading QuickBooks. You’ll see a window labeled No Company Open. Click the arrow in the box on the lower right that says Open a sample file. You can choose between a product- and service-based business. 

Once you’re in QuickBooks, you can switch back and forth between your company file and a sample file by opening the File menu. Click Open Previous Company and select from the list. It should be obvious, but be sure you’re in the correct QuickBooks file before doing anything. 

How’s It Going? 

If you’ve been using QuickBooks for a while, how are you doing with it? Are you struggling with any functions? Feeling like you’re not using as much of the software as you should? Thinking that you’re outgrowing it and need to move up to a more senior version? Or are you having a hard time upgrading to QuickBooks 2023? We can help in all of these situations. Contact us, and we can set up a meeting or a series of them to make your accounting experience more productive and effective, and faster.  

Are You Caring for a Disabled Family Member? Read This.

Many taxpayers prefer to care for ill or disabled family members in their homes as opposed to placing them in nursing homes, but doing this can be expensive, time-consuming, and exhausting. The government also recognizes home care as a means of reducing the government’s costs in terms of caring for individuals who otherwise would be institutionalized (because they require the type of care that is normally provided in a hospital, nursing facility, or intermediate care facility). 

To promote home care and reduce the government’s institutional care expenses, Medicaid (through state agencies) pays home caregivers a small amount of compensation, referred to as a Medicaid waiver payment, to care for an individual in the care provider’s home. 

Originally the IRS took the position that these payments were taxable income to the caregiver. Back in 2014, the IRS changed its position and announced that, if the care met certain requirements, the compensation would be excludable and treated in the same manner as excludable difficulty-of-care payments under the foster care payments rule. This is the case even when the caregiver and the individual being cared for are related. 

The compensation exclusion applies if the following requirements are met: 

The compensation must be required due to a physical, mental, or emotional handicap with respect to which the State has determined that there is a need for additional compensation. 

The care must be provided in the care provider’s home. The “provider’s home” may be the care recipient’s home if the care provider resides there and regularly performs the routines of the provider’s private life, such as sharing meals and holidays with family. In contrast a care provider who sleeps at the care recipient’s home several nights a week but on weekends and holidays resides with his or her own family in a separate home would not be providing the care in the care provider’s home and would not qualify to exclude the Medicaid waiver payments received.  

The payments must be designated as compensation for qualified foster care or difficulty of care. 

To be excludable, the care payments are limited to a maximum of five individuals aged 19 and older or ten individuals aged 18 and younger.  

Since these payments are treated the same as qualified foster care difficulty-of-care payments, and since compensation for qualified foster care payments is mandatorily excluded, Medicaid waiver payments are also mandatorily excluded. That is, the care provider receiving these payments may not choose to include them in income. 

When the IRS originally ruled that the compensation was excludable from income that meant it was no longer earned income and thus lower-income caregivers who were previously able to qualify for the earned income tax credit (EITC) based on the compensation would no longer be eligible for EITC. 

The EITC is a refundable federal tax credit for lower-income taxpayers with earned income. The amount of credit is based on income and increases based on the number of children that the taxpayer has (qualified children include those under age 19 and full-time students under the age of 24; there is no age limit when the child is permanently and totally disabled). 

Lucky for all Medicaid waiver payment recipients, one recipient took the IRS to Tax Court over the earned income issue. The taxpayers in that court case received payments under a state Medicaid waiver program for providing care to their adult disabled children in the family home and excluded the Medicaid waiver payments from income but still treated them as earned income when computing the EITC, disregarding the IRS’s position that excluded payments were no longer earned income. The IRS subsequently disallowed the credit, and the taxpayers filed a timely Tax Court petition. 

The Tax Court held that the IRS could not reclassify the taxpayer’s Medicaid waiver payment to remove a statutory tax benefit provided by Congress. The IRS subsequently conceded to the court ruling so that even though the compensation is excluded from income it still retains it character as earned income and is to be used to determine the EITC if a taxpayer otherwise qualifies. 

As you can see, the impact of the exclusion can be quite different depending upon your circumstances. If you are receiving Medicaid waiver payments and have not yet dealt with the exclusion, please call this office to see how excluding these payments might affect you. 

Why Quality Bookkeeping Matters

If you had to make a list of all the things that most business owners hate, taking care of accounting and other financial matters is probably right at the top. 

Yet at the same time, a lot of those same business owners are struggling. Maybe they had a financial goal that they fell significantly short of. Maybe they tried to release a new product or service and it underperformed. 

Either way, much of this can be changed by returning to those records and making sure that they’re as accurate and as up-to-date as possible. 

In no uncertain terms: 2022 is over. We’re well into the new year and if you’re still trying to get your books closed from last year, you’ve got a major problem on your hands. 

Thankfully, all hope is not lost. There is a way that you can get caught up on things to make sure you’re on the right path from a financial point of view. You just may have to shift the way you’re used to thinking about what constitutes quality bookkeeping, to begin with. 

The Benefits of Proper Bookkeeping: Breaking Things Down 

One crucial thing to remember is that getting your books together for 2022 is about more than just retroactive financial maintenance. It can directly impact your business and its ability to function in the coming year, too. 

If your records aren’t up-to-date, you can never really be certain where you stand financially. You could have a much, much more positive impression regarding how things are going compared to the reality of the situation. This is especially true if yours is a business that experiences seasonal fluctuations in terms of the income you’re bringing in and the work you’re doing for clients. 

Speaking of that, without up-to-date records you also have no true idea of what you worked last year at all. This is about more than just figuring out how much money is sitting in a bank account somewhere. Knowing how much you’re working can help uncover trends and patterns that you likely would have missed. You can see who your biggest clients are, for example, and the ones that you absolutely want to hang onto. You can also see if you need to diversify your client base to avoid putting “all of your eggs in one basket.” 

Up-to-date records can also help shed more visibility into the parts of your business that are working and, more importantly, which ones aren’t. If you started offering a new product or service in 2022, for example, it stands to reason that you would want to know as much about its performance as possible. The same is true if you’ve expanded your operations in a way that maybe isn’t generating as much money as possible. That way, you can double down on what is working and get rid of what isn’t as soon as you can in 2023. Without this type of insight, you’re really only making decisions on little more than gut instinct. 

Finally, it’s likely that you’ve set out goals for yourself in terms of performance for the new year. They may not be achievable with all the processes and best practices you currently have in place, though. You may need to change to reach those goals and if that is the case, you need to know which direction you should be pivoting towards. 

All of this is to say that you are truly doing yourself a massive disservice if your books and other essential records are not up-to-date. Again, these types of records are more than just a “necessary evil” or a “frustrating cost of doing business.” For your business to remain healthy and grow, you need the insight and information contained in these records to stay informed. 

That’s why, if you are looking for a single step you can take to help improve your success, it’s this one. Spend the time to get your records up-to-date. Make sure the information contained in them is accurate. Put a process in place to help make sure those books stay accurate and, by all means, use that information in any way that you can in the future. 

Truly, you would be surprised by just how much easier it is to plan and remain successful once you have done precisely that. 

The Importance of Working With a Professional 

If all of the above sounds like it is equal parts time-consuming and frustrating, that’s because it largely is. But it’s still one of the most important things that you can do to build a foundation of financial success for your organization – and it’s also a road that you don’t have to travel down alone. 

Especially in the early days of a business, it’s natural for entrepreneurs to hang onto that “can-do spirit” and try to handle everything themselves. In a lot of ways, this is the mentality that got you so far in the first place. But you’re an expert in your industry – you’re not necessarily an expert in bookkeeping, nor can you be expected to be. 

At the same time, you don’t want to take chances and do a poor job because it almost always guarantees that you’ll be making decisions based on inaccurate financials. Not only could this potentially inhibit growth, but it could actually cause the types of cash flow issues that cause many organizations to prematurely close their doors every year. 

All of this is to say that once you realize the task is too much for you to handle, don’t be shy about bringing in a financial professional. At the very least, they can free up as much of your valuable time to focus on other daily aspects of your business – which for many is the most important benefit of all. 

If you’d like to find out more information about why quality bookkeeping matters for small business success, or if you’d just like to talk about your needs with a professional in more detail, please don’t hesitate to contact us today.