The collision of Medicare and Health Savings Accounts (HSAs). In an Information Letter (IL), the IRS outlined how retroactive Medicare coverage may affect a taxpayer’s eligibility to add to an HSA, which is subject to contribution limits. Eligibility for Medicare makes an individual ineligible to have an HSA. If Medicare coverage is retroactive, it may trigger a 6% excise tax on the excess contributions. The IL advised taxpayers how to avoid the excise tax on contributions that are deemed excessive by virtue of retroactive Medicare coverage. (IL 2016-0082)
As the saying goes, nothing lasts forever — and that goes for most companies. Then again, with the right succession plan in place, you can do your part to ensure your business continues down a path of success for at least another generation. From there, it will be your successor’s job to propel it further into perpetuity.
Some business owners make the mistake of largely ignoring succession planning under the assumption that it’s taken care of within their estate plans. Others create a succession plan but fail to adequately integrate it into their estate plan. To avoid these mistakes, it’s important to recognize the difference between succession planning and estate planning.
Similar, but different
Essentially, succession planning is the careful identification and training of those who will not only take over the day-to-day operations of your company, but also lead it forward to future growth. Your family members and other heirs will likely be affected here. But many others will be as well — including your named successor (whether or not a family member), business partners, employees, vendors and customers.
Estate planning, meanwhile, involves determining the distribution of your assets through gifting strategies, wills and other tools (such as trusts and insurance). The people affected by it are your family members and other heirs.
Because of this important distinction, it’s critical to undertake succession planning and estate planning as a joint effort. After all, who gets leadership responsibilities in the business and who gets ownership interests in the business may or may not be the same.
You must ask yourself who is best suited to run the business when you depart, and what ownership transfer plan will treat you and all of your heirs fairly or otherwise achieve your estate planning goals. This includes, among other things, knowing when you want to retire and how much income you’ll need to do it.
Success today and tomorrow
Do you have both a clear succession plan and a well-documented estate plan? And are the two compatible in every respect? To make absolutely sure you can answer “yes” to both of these questions, please contact us. Our firm can help you develop plans that will distribute your assets per your wishes while putting your company in the best position to succeed going forward.
Here are some of the key tax-related deadlines affecting businesses and other employers during the first quarter of 2017. Keep in mind that this list isn’t all-inclusive, so there may be additional deadlines that apply to you. Contact us to ensure you’re meeting all applicable deadlines and to learn more about the filing requirements.
File 2016 Forms 1099-MISC with the IRS and provide copies to recipients. (Note that Forms 1099-MISC reporting nonemployee compensation in Box 7 must be filed by January 31, beginning with 2016 forms filed in 2017.)
If a calendar-year partnership or S corporation, file or extend your 2016 tax return. If the return isn’t extended, this is also the last day to make 2016 contributions to pension and profit-sharing plans.