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CBIZ & MHM Executive Education Series™

Individual Year End Tax Planning Tips for 2015 and Beyond Naomi Ganoe and David Levi November 5 and December 2, 2015

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About Us

• Together, CBIZ & MHM are a Top Ten accounting provider • Offices in most major markets • Tax, audit and attest* and advisory services • Over 2,900 professionals nationwide

A member of Kreston International A global network of independent accounting firms

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Before We Get Started…

• To view this webinar in full screen mode, click on view options in the upper right hand corner.

• Click the Support tab for technical assistance.

• If you have a question during the presentation, please use the Q&A feature at the bottom of your screen.

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CPE Credit

This webinar is eligible for CPE credit. To receive credit, you will need to answer periodic participation markers throughout the webinar. External participants will receive their CPE certificate via email immediately following the webinar.

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Disclaimer

The information in this Executive Education Series course is a brief summary and may not include all

the details relevant to your situation.

Please contact your service provider to further discuss the impact on your business.

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Naomi is a director with CBIZ and has 17 years experience providing

advisory services to individuals and closely held businesses on estate,

fiduciary, gift, business and personal tax planning matters. She is a

trusted advisor to CEOs and high net worth individuals. She is an active

member of CBIZ's Private Client Service technical community and

presenter at the CBIZ National Level Training.

330.668.6500 • nganoe@cbiz.com Naomi D. Ganoe, CPA

Director

Presenters

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David is based in our Minneapolis, MN office and specializes in providing

services to companies in the financial service, law, hospitality, and their

owners, as well as tax and estate planning to individuals. David joined

the organization over 30 years ago.

612.376-1208 • dlevi@cbiz.com

David Levi, CPA, PFS Senior Managing Director

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Agenda

Top Year End Income Tax Reduction Ideas

02

01

03

04

Top Estate and Gift Tax Planning Ideas

Navigating the AMT

Reduce Net Investment Income Tax

05 Top Tax Provisions that expired in 2014

06 Questions

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INDIVIDUAL YEAR END TAX PLANNING TIPS FOR 2015 AND BEYOND

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Tax strategies that consider your income tax liabilities and your retirement and estate planning opportunities

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Top Year End Income Tax Reduction Ideas

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2015 Federal Tax Rates:

Top Marginal Federal Income Tax Rates

Pre-2013 Today % Change

Qualified Dividends

15%

23.8% 59%

Long-Term Capital Gains

15 23.8 59

Taxable Interest 35 43.4 24

Earned Income (including OASDI and Medicare)

40.65 48.15

18

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Challenges You are Facing Today:

• Higher and More Progressive Tax Rates • Longer Time Horizons • Lower Expected Returns

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Tax Savings Considerations

• Harvest capital gains to offset recognized capital losses (consider end-of-year mutual fund capital gain dividends)

• Harvest capital losses to offset recognized capital gains (consider wash sale rules)

• Transfer mutual funds to children prior to December dividend record date (consider kiddie tax, gift tax)

• Maximize 401(k) or SEP contributions • Pay 4th quarter state estimated tax payments and

2015 real estate taxes by Dec. 31 (if not in AMT)

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Tax Savings Considerations

• Pay January mortgage by Dec. 31 • Make charitable donations, especially appreciated

stock • Bunch miscellaneous itemized deductions to exceed

2% AGI floor (if not in AMT) • Bunch medical deductions to exceed 7.5%/10% floor • Review withholdings, especially if subject to 0.9%

Medicare tax on earned income

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People are Living Longer

65

70

75

80

85

90

95

100

105

Man Woman

HNW - Top 25%Today - Top 25%Today1960

Average Life Expectancy for a 65 Year Old

Source: Social Security Administration, Society of Actuaries, and M Financial Group

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Key Questions

Core Capital: • Are your core assets sufficient to support your

lifestyle? • Can Income Tax Deferral help you meet your

spending goals? • Opportunity to reserve more for Long-Term

Care? Surplus Capital:

• How much will stay in estate without estate tax exposure?

• What are the income tax characteristics of capital earmarked for wealth transfer?

• What are the income tax consequences to the beneficiary upon liquidation?

• Lifestyle Spending

• Personal Reserve

• Extra Spending

• Children and

Grandchildren

• Charity

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Wealth Considerations:

• Financial Goals • Liquid Assets • Illiquid Assets • Spending Requirements • Risk Tolerance • Tax Rates • Time Horizon

• Retirement Date • Future Tax Domicile • Pension Alternatives • Asset Allocation

Personal Profile: Personal Decisions:

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Retirement Tax Deferral

• In order to secure your retirement, you may need to increase your pre-tax savings rate late in your career to make up for earlier years inefficiencies

• Increasing tax deferral through a cash balance or similar plan can significantly increase your savings rate

• State income tax differentials can have a dramatic effect on retirement security

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Other Planning Opportunities

• Private Investments – are they worthless? • Section 1244 rules

• Max out cafeteria plan election • Wages to your children under 18 – fund retirement • Contributions to Roth IRA or Conversion • Contribution to non-deductible IRA and then Convert

to Roth • State Income Tax considerations:

• State of Residency • Non Resident Tax consequences • Consequence of Investments

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Top Estate and Gift Tax Planning Ideas

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Estate and Gift Taxes

Maximum Gift/Estate Tax Rates 40%

Lifetime Gift/Estate Exclusion (2015) $5,430,000

Annual Gift Exclusion (2015) $14,000

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Estate and Gift Considerations

• Gift directly to educational/medical institutions – are not gifts for gift tax purposes

• Gift annual exclusion amount each year ($14,000 per person for 2015)

• Split gifts with spouse to maximize annual exclusion/lifetime exemption

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Estate and Gift Considerations

• Gift assets with high appreciation potential • Use a grantor retained annuity trust (GRAT) or sale to

intentionally defective grantor trust to remove appreciation from estate

• Use a charitable lead trust to remove appreciation from the estate

• Be aware of potential elimination of the ability to use discounts for Family Limited Partnerships as part of your estate and gift plan

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Estate Planning in the Current Environment

• Stability of estate transfer tax laws • Small percentage of population subject to transfer tax • Cannot ignore GST tax • Fear of estate tax uncertainty is no longer driving

clients to estate planners • Increased importance of income tax issues • Traditional credit shelter trust/marital trust needed? • Portability approach has become more predominant • Planning is more difficult for planners

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Estate Planning in the Current Environment

• Transfer planning still important for wealthy families • Be careful before making lifetime gifts of low basis

assets • Grantor trust planning still advantageous • Undoing prior planning strategies • Basis adjustment planning • Trust planning • Estate and trust distribution planning • State estate taxes

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Decanting Trusts : Common Uses

• Correct drafting mistakes or clarify ambiguities • Segregate trustee duties, appoint trust protector • Combine trusts for efficiency • Divide “pot trusts” for beneficiaries divergent needs • Change investment language to provide flexibility • Change situs of trust • Add spendthrift language for creditor protection • Adapt to changed circumstances of beneficiary:

substance abuse, divorce, delay distributions

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Digital Assets:

• Personal Assets: ITunes, memories, pictures, other treasures

• Financial Assets: Bank accounts, brokerage accounts • Business Assets: Customer list, documents, files • Social Assets: Facebook account, other social media

accounts, email accounts

• Need to inventory these accounts, list of passwords to appropriate person

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Navigating the AMT

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Top Expenses NOT Deductible for AMT

• State and local income taxes • Real estate taxes • Personal property taxes • Interest on home equity loan (not used to improve

residence) • Investment expenses • Unreimbursed employee business expenses • Other 2% miscellaneous itemized deductions

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Top Ideas to Reduce Net Investment Income Tax (NIIT)

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Net Investment Income Tax

Rate 3.8% x lesser of:

Net Investment Income, or MAGI in excess of threshold

MAGI Threshold – Single Taxpayer $200,000

MAGI Threshold – Married Filing Joint $250,000

Included in Net Investment Income Interest and Dividends Capital Gains Annuity Distributions Rents and Royalties Income from Passive Activity

NOT Included in Net Investment Income Salary and Wages Self-Employment Income Distributions - qualified retirement plans Gains on sale of active interests Income excluded from federal income

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Net Investment Income Tax Considerations

• Fund a charitable remainder trust with appreciated securities to reduce or avoid NIIT on recognized gains, and spread out investment income to lower income years

• Group passive activities that comprise an appropriate economic unit to qualify them as non-passive

• If current investments generate passive income, consider new investments that generate passive losses

• If you loaned money to your C Corp, then consider reducing interest rate and increase wages (3.8 to .9)

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Net Investment Income Tax Considerations

• Shift investments to tax-exempt bonds, deferred annuities, insurance products

• Taxpayer’s age 70 ½ or older can donate required minimum distributions from retirement plans (assumes provision is extended for 2015)

• Shift assets to relatives not subject to NIIT (consider gift tax)

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Top Tax Provisions that Expired in 2014*

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• IRA distribution exclusion for amounts donated to charity (taxpayer ages 70 ½ or older)

• State sales tax deduction • Tuition and fees deduction • 50% bonus depreciation • $500,000 equipment expensing election • *Provisions may be extended for 2015

Top Tax Provisions that Expired in 2014*

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• 15 – year depreciation for qualified leasehold, restaurant & retail improvement property

• Research and experimentation credit • 100% exclusion on gain from sale of qualified small

business stock • 5 – year recognition period for built-in gains of S

Corporations • * Provisions may be extended for 2015

Top Tax Provisions that Expired in 2014*

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• Record Keeping • 401K – 2015 and 2016 max $18,000 • 401K catch up – 2015 and 2016 max $6,000 • IRA contribution – 2015 and 2016 max $5,500 • IRA catch up – 2015 and 2016 max $1,000 • Cafeteria Plan election • For 2016 Deductible IRAs will phase-out by income • 2016 Lifetime Exemption (Estate and Gift) is projected

to be $5,450,000 per BNA.

2016 Considerations

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? QUESTIONS

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If You Enjoyed This Webcast…

Upcoming Courses: • 11/10: Maximizing Tax Savings for Closely Held Companies with the IC-DISC Federal Export Tax

Incentive

• 11/11: Revenue Recognition Updates for Manufacturers

• 12/1 & 12/15: Recent Tax Developments Impacting the Construction Industry

• 12/8: Lobbying and Political Activity Guidance for 501(c)(3) Organizations

• 12/10: Revenue Recognition Update for the Technology Industry

Recent Thought Leadership: • A Chance of Clouds: Sales Tax Considerations of Cloud Computing

• Local Deductibility of Management Services Charges

• FASB Updates Business Combination Accounting

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