38 THE QUEENS COURIER • QUEENS BUSINESS • APRIL 11, 2019 FOR BREAKING NEWS VISIT WWW.QNS.COM
queens business
Elder Law Minute TM
Changes to the Kiddie Tax and its Eff ect on SNTs
BY RONALD A. FATOULLAH, ESQ.
AND DEBBY ROSENFELD, ESQ.
Th e kiddie tax was fi rst enacted by
Congress in 1986. Th e kiddie tax is a
tax that is imposed on the portion of a
child’s unearned income that exceeds
$2,100. For years, wealthy earners had
employed the practice of putting investments
in their children’s names in order
to avoid the imposition of higher taxes
on their gains. But then the Internal
Revenue Service (the “IRS”) got wise
to that ploy and implemented what is
referred to as the kiddie tax in order to
curtail this tactic. Th e kiddie tax kicks in
when children under a certain age limit
receive too much money in unearned
income. Although the kiddie tax used
to apply to children under the age of 14,
now any child under age 19 can trigger
the tax, as can an older child who is a fulltime
student.
Unearned income generally refers to
income that is not derived from wages,
such as income from capital gains, dividends
or assets that are placed in a trust,
ELDER LAW
including special needs trusts. Special
needs trusts are trusts that are created
for the benefi t of disabled children so
that they can still receive any governmental
benefi ts that they might be entitled to
(e.g., Medicaid and SSI). Th e kiddie tax
applies to unearned income only; if a child
has an aft er-school or summer job, those
wages will not be subject to a higher tax
rate because that income is being earned
directly. When the kiddie tax was initially
enacted, the IRS automatically taxed
all unearned income from children above
$2,100 at their parents’ highest tax rate.
Typically, a child’s investment gains are
subject to a lower tax rate. But if the parents
are in the top tax bracket (which is
currently 39.6%), their tax rate will be
applied to any unearned income the child
receives that exceeds the current threshold.
While there have been other changes to
the kiddie tax over the years, the Tax Cuts
and Jobs Act of 2017 changed the rules
for applying the kiddie tax. Under the
new law, a child’s investment income will
no longer be taxed at the parent’s tax rate.
Instead, it will be taxed at the rates applicable
to trusts and estates. Trust income
is typically taxed at a higher rate than
personal income. For 2018, an individual’s
personal income will not be taxed
at the highest tax rate until the income
exceeds $510,000. However, the threshold
for trust income is dramatically lower.
Th e highest tax rate for trust income
kicks in when the trust income exceeds
$12,500. Based on the new rules, the
kiddie tax rate could be greater than the
respective parents’ tax rates because the
highest rate will be triggered when the
income exceeds $12,500.
Th e changes in the tax law should
certainly serve as a caution for parents
and grandparents who are contemplating
fi nancial gift s to children and young
adults. But the change also impacts assets
held in supplemental needs trusts for the
benefi t of disabled children. Such income
will now also be subject to an increased
tax rate. Failing to consider the imposition
of the kiddie tax can inadvertently
increase a family’s taxes in unexpected
ways. We highly recommend that you
seek the advice of a tax or estate planning
professional or fi nancial adviser to make
sure the kiddie tax does not come as an
unwelcome surprise.
Ronald A. Fatoullah, Esq. is the founder
of Ronald Fatoullah & Associates,
a law fi rm that concentrates in elder
law, estate planning, Medicaid planning,
guardianships, estate administration,
trusts, wills, and real estate. Debby
Rosenfeld, Esq. is a senior staff attorney
at the fi rm. Th e law fi rm can be
reached at 718-261-1700, 516-466-4422,
or toll free at 1-877-ELDER-LAW or
1-877-ESTATES. Mr. Fatoullah is also
a partner with Advice Period, a wealth
management fi rm that provides a continuum
of fi nancial and investment advice
for individuals and businesses, and he
can be reached at 424-256-7273.
RONALD FATOULLAH
ESQ, CELA*
editorial
Sexual Harassment Prevention
Training is Required for All Employees
Who Work in New York State
Eff ective October 2018
New York State requires that
every employee (including
part-timers) be trained to
prevent sexual harassment
in the workplace. Th is training
must be attended annually
and must be interactive.
Relevant Q&As
By what date do all of
my employees need to be
trained? All NYS employees
must complete the model
training or a comparable training that
meets the minimum standards by
October 9, 2019.
How oft en must employees
receive sexual harassment
prevention training?
Employees must be trained
at least once per year. In subsequent
years, this may be
based on the calendar year,
anniversary of each employee’s
start date or any other date
the employer chooses.
What about new employees?
As employers may be liable
for the actions of employees
immediately upon hire, New York
State encourages training as soon as possible.
Employers should distribute their
sexual harassment policy to employees
prior to commencing work and should
have it posted where employees can easily
see it.
What if an employee only works
part-time? NYS employers are required
to ensure that all employees receive
training.
Record Keeping Requirements:
Employers must keep a record of all
antiharassment training conducted. Th e
record may be electronic. Employers
must maintain these records for at least
three years and make the records available
for Commission Inspection upon
request.
Interactivity Requirements: NYS
employer's sexual harassment prevention
training must be interactive, meaning
it requires some level of participation
by those being trained.
Mindy Stern, SPHR, SHRM-SCP, ACC
is a trusted HR advisor, career and
leadership coach, author, speaker and
president of AIM Resource Group Inc.
Visit the website at www.aimresourcegroup.
com or contact mstern@aimresourcegroup.
com to discuss how we can
help you can comply with NYS Sexual
Harassment Prevention Training.
EMPLOYMENT
MATTERS
MINDY STERN
SPHR, SHRM-SCP,
link
/www.aimresource-group.com
/www.aimresource-group.com
/www.aimresource-group.com
link
link
/WWW.QNS.COM