Q:

Subject: inheritance tax question

 

Hi. You know my cousin … and she suggested I could try to ask you a question.When my mom dies all of her accounts have her 3 kids as beneficiaries. We should share almost 300,000. These are cd’s, bank accounts, treasuries, mutual funds…some in an IRA account. Do we pay any tax? She has paid tax on all of the money except her IRA.

Thank you,

A:

These are the kinds of things you need to work on with your own personal professional tax advisor.

Basically, in most cases inheritances are tax free to the heirs.  The most common exception to this is with pre-tax retirement accounts, such as conventional IRA accounts.  If the account was a conventional IRA, where your mom claimed deductions for the deposits, or a rollover from another pre-tax account, the balances passed on to the heirs will be taxable on their 1040s.

If the IRA was a different kind, such as a Roth or non-deductible, part or all of its balance could be tax free.  You will need to work with the account’s custodian, as well as your mom’s professional tax advisor

If the account is of the fully taxable type, you have a variety of different options as to when you will report it on your 1040 and pay the taxes.  You can do it all at once in the first year.  You can take it out in increments, completing the withdrawals by the fifth year following death.   There are also some different rules depending on whether your mother had already begun a withdrawal program before she died.

As you can see, there is no quick and easy answer.

Good luck.

Kerry Kerstetter

 

Q:

Subject: QB classes

 

Hello,

 

I read an article you wrote about classes, and I’m starting a new business and just setting up QB and trying to decide the best way to do it.

 

I don’t know if you have time, but I’ll try anyway.

 

This business is to be an employer agent, and will handle the payroll & taxes for people who are medicaid recipients. This allows a consumer to be the employer of record and to hire/fire their own homehealthcare workers. My company will get paid an amount per month per person to do this, the company will file electronically to the state for both the fee and the $ to pay the clients employees, and we’ll pay the employees every 2 weeks, and print a report showing how much has been paid YTD and whats left in each persons yearly budget.

 

I’m trying to decide the best way to set this up. I was told once that each Client/Customer should be setup as a separate class within Quickbooks, and there are some bookkeeping and accounting entries that need to be made to adjust for this type of set-up, but I haven’t figured out how to do it.

 

Do you have an idea as to how best to set this up that you might share with me?

 

Thanks,

A:

There are several ways in which you can set up your QB for your business.  There are too many options to consider for me to be able to advise which specific one would be the most practical for your unique situation; so you need to work with a professional accounting advisor.

I can make a few observations that may help you focus in on the best format for you.  One mistake I often see is when people set up a class for each customer.  This frequently makes the Class list too large and unwieldy to be practical, especially when you run a P&L with columns by Class.  I have normally found it more appropriate to have classes by type of business or tax return schedule (C, E, F, etc) and then make sure each income & expense entry is coded with the Customer or Project name.  That will enable you to produce plenty of different reports for each customer or project. 

Good luck.

Kerry Kerstetter