January 29, 2020

Anders Releases Annual Community Impact Report

Giving back is part of our social responsibility and corporate culture at Anders, and we proudly support local charitable, civic, community and trade organizations. The Anders Community Impact Report takes an in-depth look at our commitment, connections and involvement in the community in the past year, individually and collectively as a firm.

In 2019, Anders employees gave back to the community by:

  • Volunteering 3,024 hours

  • Sitting on 94 not-for-profit boards

  • Being active members of 176 local organizations

  • Participating in 115 charitable sponsorships

  • Donating over $24,700 to our 2019 Charity of Choice

Read more in the Anders Community Impact Report.

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January 28, 2020

Can I Transfer My Social Security Benefits to Children or Heirs?

When planning for social security distributions, a common question we hear from retirees is, can I provide a portion of my social security benefits to my child or grandchild? The answer is yes, but there are stipulations. Below are a few high-level points on this tax savings scenario and if it may be applicable for you.

Who can I transfer my social security benefits to?

Your biological, adopted child, or dependent stepchild may be eligible to receive your social security benefits if you become disabled, retire or pass away. The child must be:

  • Unmarried
  • Under the age of 18, or
  • 18-19 years of age and a full-time student in secondary school through grade 12, or
  • A child who is 18 or older and disabled with a disability that started before age 22

Grandchildren also qualify to receive a portion of social security benefits if the grandchild is a dependent and both of their parents are disabled, deceased, or you have legally adopted the grandchild.

How much can my family member receive?

If your family meets the criteria above, the qualified child is eligible for up to 50% of your full retirement age benefit or 75% for death benefits, subject to the family maximum. The benefits will stop when the child turns 18, unless the child is still in secondary school and taking a full course load. If the latter is the case, the benefits will stop when the child turns 19 or when they graduate, whichever comes first. Multiple children can claim a portion of the benefit, so you are not required to choose your favorite child!

When should they receive my social security benefits?

For a household with children, the decision of when to begin receiving social security retirement benefits is more complicated. In many cases, there are various reasons to delay filing for social security benefits depending on your situation.

If you have children at home, filing for social security early could make more sense because your children cannot collect a social security benefit until you file. If you file early, it will allow your children to also collect a portion of the benefit.

To learn more about how you could benefit from providing a portion of your social security benefit to your heirs, please contact an Anders advisor.

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January 27, 2020

VIDEO – From Then to Now: The State of South Dakota v. Wayfair

It’s been over a year since states across the country started implementing sales tax regulations. But how have businesses been impacted? The Anders State and Local Tax Services Group and Aegis Law are back with a recorded discussion on how the South Dakota v. Wayfair case has affected out of state retailers and multi-state businesses in the past year and what’s to come. The video goes into detail about how state and local tax requirements are impacting companies like yours, and other related topics including:

  • Examples of Post-Wayfair Legislation
  • Economic Nexus by State
  • How State Regulations Impact the Seller’s Journey
  • Practical Effects of Post-Wayfair Legislation
  • What Businesses Can Do

Complete the form below to download the free video recording.

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January 21, 2020

Making the Decision between Cash or Accrual Accounting for Contractors

Choosing the appropriate accounting method, cash vs. accrual, is one of the first decisions business owners should make. Contractors may use one or both methods for internal accounting and handling contracts.

Cash vs Accrual Method

Cash method

The cash method accounts for revenue only when money is received and for expenses only when the money is paid out. This method does not recognize accounts receivable or accounts payable.

Accrual method

The accrual method accounts for revenue when it is earned and expenses when they are incurred. Revenue is recorded even if the cash has not yet been received.

Contractors may use one or both tax accounting methods:

  • One overall method for reporting general company income and expenses
  • One or both methods for long-term contracts

The choice of accounting method depends on the type of contract you have, the contracts’ completion status at the end of the tax year, and average annual gross receipts.

New Opportunities for Contractors to Use the Cash Method

Before the Tax Cuts and Jobs Act (TCJA), only small contractors could qualify for the cash method of accounting. Large contractors were automatically disqualified. Small contractors were defined as:

  • C-corporations with a 3-year average of annual gross receipts less than $5 million
  • Partnerships with a 3-year average of annual gross receipts less than $5 million in which one of the partners is a C-corporation
  • Partnerships without C-corporation partners and S-Corporations with a 3-year average of annual gross receipts less than $10 million

The TCJA changes that took effect in 2018 increased the gross receipts ceiling for cash basis accounting to $25 million. It also redefined a small business as “a corporation or partnership with less than $25 million in gross receipts for the prior three-year period”. The increase in the gross receipts threshold from $10 million to $25 million creates an opportunity for more contractors to take advantage of the cash method.

Benefits of the Cash Method for Contractors

Below are a few advantages of using the cash method brought on by tax reform:

  • Easier administration and simplified accounting
  • Tax savings through deferred income recognition
  • Accurate portrayal of cash on hand
  • 481a adjustment to adjust from accrual to cash could potentially offset current year taxable income

Which accounting method is allowable and most appropriate for tax purposes is not a question that can be easily answered in all cases. If you would like to learn more about your options when choosing the cash or accrual accounting method, please contact an Anders advisor.

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January 21, 2020

2020 Tax Pocket Guide

Access the 2020 Anders Tax Pocket Guide for this year’s corporate and individual tax rates, retirement plan contribution limits and more, including:

  • Estate tax and lifetime gift tax exemption increase to $11,580,000
  • AMT exemption increase
  • Standard deduction increase

View the 2020 Anders Tax Pocket Guide.

Contact an Anders advisor to learn how these rates affect you and your business.

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January 20, 2020

Anders Cannabis Group Receives LEA EDGE Award for Emerging Markets

The Anders Cannabis Group was honored with the 2019 Leading Edge Alliance (LEA) EDGE Award in the Emerging Markets category. This award, given at the LEA North American Conference in Las Vegas, recognizes outstanding innovation in untapped, underserved, or emerging areas especially opportunities in high-potential markets.

In 2019, the Anders Cannabis Group was formed to help Missouri’s medical marijuana license applicants through the application process and navigating complex tax and regulatory updates. Members of the Cannabis Group stay educated on the new and evolving industry by attending conferences, networking with referral sources and researching the developing regulation and application updates. Since forming, Anders Cannabis Group clientele has expanded across the country as states continue to pass new regulations around medical and recreational marijuana.

Anders is an affiliate of the Leading Edge Alliance (LEA), one of the largest global accounting networks in the world. LEA brings together more than 1,600 experienced partners and 23,500 staff members from 450 firms around the globe. This is the 10th EDGE Award for Anders, including awards for Outstanding Women’s Leadership Program, Innovative Firm of the Year, Young Professionals Program and Outstanding Marketing Initiative.

Learn more about the Anders Cannabis Group.

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January 15, 2020

Chad Gall and Tom Helm, Jr. Named Principals at Anders

Chad R. Gall, CPA/CGMA, TEP, AEP and Thomas S. Helm, Jr., CPA, MBA have been promoted to principals at Anders, effective January 1, 2020.

About Chad Gall

Chad started his career at Anders in 2001, working his way through the ranks in the Tax Services Group. As a vital member of the firm’s Family Wealth and Estate Planning Services Group, Chad lends his expertise to business owners and families on Roth IRA conversions, retirement planning, estate and trust planning and multi-state tax planning. He also works with employee benefit plans. In addition to his individual tax experience, his knowledge of Caseware software helps guide accounting and audit services throughout the firm.

Chad is a Certified Public Accountant and a Chartered Global Management Accountant. He is also a Registered Trust and Estate Practitioner and an Accredited Estate Planner, both great assets to his clients. Chad holds a B.S. in Accountancy from Southern Illinois University in Edwardsville. Named a Top Estate Planning Professional by the St. Louis Small Business Monthly in 2018, Chad stays actively involved in professional organizations. He currently serves as a board member for the Estate Planning Council of St. Louis, an organizing committee member in the Society of Trust and Estate Practitioners and a member of the International Foundation of Employee Benefit Plans. He is also a member of the firm’s Rainmaker Academy.

About Tom Helm, Jr.

Tom joined the Audit and Advisory Services Group at Anders in 2005. He has 15 years of experience performing and leading financial statement audits. Tom has worked on client audits in a broad range of industries, including manufacturing, hospitality and not-for-profit organizations. He also performs SOC 1 and SOC 2 audits to help companies get a handle on the internal controls and cybersecurity of their service providers.

Tom is a Certified Public Accountant and holds an MBA and B.S. in Accountancy from Missouri State University. In the community, Tom is on the golf tournament committee for the National Tooling & Machining Association and has served as the treasurer and on the finance committee for the Grace Hill Settlement House. Tom is also a member of the firm’s business development Rainmaker Academy.

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January 14, 2020

How Portability Can be a Valuable Estate Planning Tax Strategy

Good news came for taxpayers with large estates when the Tax Cuts and Jobs Act (TCJA) was passed. The TCJA doubled the estate and gift tax lifetime exemption, from $5.49 million per taxpayer to $11.18 million per taxpayer. For 2019, the exemption has been adjusted for inflation to $11.4 million per taxpayer, and $22.8 million per married couple. On top of this generous amount, the IRS also allows for portability of the exemption between spouses – an important consideration in estate planning.

What is the lifetime exemption?

The lifetime exemption refers to the amount the IRS allows you to exclude from your gross estate when calculating your estate tax. This exemption means that should spouses both pass away in 2019, they have the potential ability to pass on $22.8 million to their heirs tax-free. However, this amount can be reduced by gifts given from your estate during your lifetime. For example, gifts given to any one person over $15,000, applicable for the tax year 2019, will reduce the exemption by the amount over $15,000, whereas the payment of medical, dental, or tuition expenses will not reduce your exemption.

Where does portability come into play?

Prior to 2010, any amount of the lifetime exemption that went unused by an estate was simply lost. A large component of estate planning involved married couples trying to split the ownership of the estate’s assets as evenly as possible. For example, say the lifetime exemption is $3 million and a married couple had an $8 million estate. The wife passed away first with only $2 million of those assets in her name. Her assets would be sheltered by her lifetime exemption, however she would lose the exemption amount that went unused. When her husband passes with $6 million in assets, he would only be able to shield $3 million of his assets and the rest would be subject to the estate tax. If the couple were to both own about 50% of the assets, the potential to waste any unused exemption amount would have been greatly reduced.

However, when the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 passed, it allowed for portability. This term refers to the ability to transfer that unused portion to the surviving spouse, referred to as the deceased spouse’s unused exemption (DSUE). This transfer is accomplished by completing the election on the Form 706 Estate Tax Return and can be completed without regard to the legal ownership of each spouse.

Calculating the DSUE is simple. The DSUE will be equal to the unused amount from the year the spouse passed away, based on the inflation-adjusted exemption from that year. When the surviving spouse passes, their exemption will be the DSUE plus the exemption for that spouse in the year of their death.

Are there any caveats to the DSUE?

Form 706

To use the DSUE, the estate must timely file an Estate Tax Return when the first spouse passes away, and the “portability” election must also be properly completed. These steps could be easily overlooked, since an Estate Tax Return does not necessarily have to be filed if the estate is below the exemption amount.

Second Marriages

The IRS has imposed a “last deceased spouse rule”, meaning that if a taxpayer had a DSUE and then subsequently remarries, they forfeit the first DSUE in the event their second spouse passes away. There are some tax planning strategies that can be used to protect the first DSUE. One potential tactic is to use up the DSUE through gift giving by using it as a shield for gifts given over the annual limit of $15,000. The DSUE will be reduced before it becomes unusable and the taxpayer will not have to pay taxes on these gifts. Portability agreements can also be written into a marital agreement.

What are some considerations for taxpayers in their estate planning?

Married couples should first consider what the expected value of their estate will be over the lifetime and if they expect their estate to be subject to estate taxes.

Taxpayers should also be aware that currently, the $11.8 million exemption amount is set to expire in 2026. There has been concern that there could be adverse effects to an estate who gave gifts in years when this exemption was in place, but the taxpayer passes away after the expiration date and the exemption amount drops. The IRS has consequently included a rule stating that an estate will essentially be allowed to determine its tax based on the $11.8 million exemption amount, rather than the exemption in place at the time of death.

It’s important to work with a trusted advisor on developing your estate plan. The Anders Family Wealth and Estate Planning Services Group can help ensure you and your family are preparing for the future. Contact an Anders advisor to learn more.

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January 13, 2020

Anders Selects the Partners for Pets as 2020 Charity of Choice

Anders partners and staff have selected Partners for Pets as the firm’s 2020 Charity of Choice. Now in its 15th year, the Charity of Choice program combines fundraising activities and volunteer efforts to support one local charity each year. Charities are submitted by members of the firm, and all members of the firm, from interns to partners, have the opportunity to vote for their choice at the firm’s meeting each January. In 2019, Anders raised more than $24,000 for the Saint Louis Crisis Nursery.

Elena Graber, an accountant in the Anders Outsourced Accounting Services Group, volunteers and fosters animals for Partners for Pets and nominated the organization for our 2020 Charity of Choice. Partners for Pets regularly visits animal control facilities and rescues animals that have used up their time, need medical care, and/or are too fragile for shelter life.

While activities such as Pick Me Up Carts, busy season games and volunteer activities are held throughout the year, the first major Anders fundraising event will be the annual “Hoops for Hope” NCAA basketball pool, which draws participation from clients, colleagues, referral sources and friends of the firm from all over the country.

In addition to Partners for Pets, other beneficiaries of the Anders Charity of Choice program have included the Saint Louis Crisis Nursery, Angels’ Arms, Shriners Hospitals for Children – St. Louis, Stray Rescue of St. Louis, Friends of Kids with Cancer, Basket of Hope, Young Friends of Habitat for Humanity, Nurses for Newborns, Girls on the Run, Lafayette Industries, KidSmart, Re-Building Together and Kids Under Twenty-One (KUTO). Anders has raised over $330,000 in the past 15 years.

Learn more about Partners for Pets.

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January 7, 2020

How the Real Estate and Construction Industries Can Benefit from the Research and Development (R&D) Tax Credit

The Research and Development (R&D) tax credit is commonly used for companies performing and paying for qualified research. The credit offsets federal income tax liabilities for these expenses, and can even be used to offset payroll tax liabilities for eligible small businesses. Although most people think of research as laboratory sciences or medical research, the real estate and construction industries also have a huge opportunity to take advantage of these credits.

What research qualifies for the R&D tax credit?

For expenses to be eligible as “qualified research” for the R&D tax credit, they must be all of the following:

  • Produced while working towards discovering information that is technological in nature
  • Intended for making a new or improved business component
  • Proposed to settle technical uncertainty around a product or process
  • Substantially all the events are related to experimentation and are updating or creating a new function, performance, reliability or quality

How does the R&D tax credit work?

Tax credits offset a company’s tax liability dollar for dollar, making them more advantageous than an ordinary deduction.

There are a couple different ways to calculate the R&D credit. The first is referred to as the regular method and requires detailed historical records regarding items such as wages and supplies. The second is the alternative simplified method. This method is an election that cannot be applied retroactively.

Additionally, for eligible small businesses, the tax credit can be used to offset Alternative Minimum Tax (AMT). These businesses cannot be publicly traded and must have average annual gross receipts of less than $50 million for the 3 preceding years.

How can the real estate and construction industries use the R&D tax credit?

One eligible expense for construction contractors and real estate developers is the use of complex software to generate designs or to experiment with multiple options. The costs of highly skilled architects and engineers can add further eligible expenses.

Contracts are important to keep in mind if you are considering these tax credits. Only the construction company or third-party that is paying the construction company can utilize the credit for a particular project. As a contractor, the company would need to have economic risk. A fixed-price model has shown to substantiate economic risk better than a cost-plus model. For a fixed-price model, the contractor is obliged to produce an end product even if they cannot do so within the set price.

Below are some examples of construction projects that could potentially qualify:

  • Experimentation with water usage efficiencies
  • Experimentation with electrical usage efficiencies
  • Experimentation with other energy usage efficiencies such as lighting and building design
  • Experimentation with alternative energy design
  • Experimentation to mediate regional climate issues
  • Experimentation in waste reduction

The R&D tax credit has many different use cases for the real estate and construction industries. Contact an Anders advisor to discuss your situation and if your business qualifies.

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