2023 officially started and tax planning for the year could become burdensome. The early bird catches the worm, so start the thought process now and defend against any tax burdens at the end of the year.
Tired of advertisements that cater to high refunds without an understanding that each tax situation is different? We provide a face to face approach, "human approach", that tax software systems do not offer. Even our virtual appointments offer a face to face approach.
We provide individual tax preparation and filing along with any small businesses you may have. Additionally, we offer tax preparation and filing for Trusts.
As you start to examine my website and peruse this blog, you will notice a simplistic approach to some complex tax situations. In the Trust world - there are major differences between a Grantor Trust and a Complex Trust. For this blog we will take a simplistic view on the tax differences.
Grantor Trust - A Grantor Trust, for tax purposes
As you start to examine my website and peruse this blog, you will notice a simplistic approach to some complex tax situations. In the Trust world - there are major differences between a Grantor Trust and a Complex Trust. For this blog we will take a simplistic view on the tax differences.
Grantor Trust - A Grantor Trust, for tax purposes, is one in which the income and deductions will flow to the Grantor. This means, the activity within the trust will be reported on the Grantor's Individual Tax return. How will the Grantor know how much to report? The amounts will appear on a Grantor Letter that the Grantor will receive once the Trust files it's tax return. So for Grantor Trusts, the income and deductions flow to the Grantor.
Complex Trusts - A Complex Trust, for tax purposes, is one in which it is taxed on its items of income and deductions. So, opposite of the Grantor Trust. However, if a Complex Trust were to make distributions (i.e.: distribute money to a beneficiary), then a portion of the income would then be allocated and taxed at the individual level. Again, this is a simplistic explanation, and Complex Trusts can become very complicated tax wise. So, to keep a simplistic approach, if you have a Complex Trust, the Trust will be liable for tax on all items of income and deductions. Unless distributions are made, then the tax situation becomes a little more "complex".
So, we have two different Trust vehicles that are taxed differently. I look at it this way:
Grantor Trusts - income and deductions pass through to the Grantor - Trust not liable for tax
Complex Trusts - Income and deductions taxed at the trust level, unless distributions are made then the tax situation becomes "complex" and portion of the income and deductions are taxed at the Trust level and at the individual level.
There may be an influx of new hires at the Internal Revenue Service. This could cause an increase in tax audits. If you are using an online program to file your taxes, maybe now is the time to have a second pair of "eyes" review. Stay ahead of the game, with a great defense. Then when audit time comes, there won't be a need for a counter-attack.
Proverb from the Founder
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