What are the New IRS Collection Enforcement Tools?
As we know, the government debt keeps on growing and tax compliance is faltering, so there is less money to feed the beast. Starting in 2017, the IRS is employing new tools to make you "Belly up" to the tax bar. Here are some ways to make you pay your bar tab:
- Based upon recent tax legislation passed during the Obama Administration the IRS now has the means to prevent you from tossing 3 coins in the fountain in Rome or any other foreign country. If you owe the IRS $50,000.00, or more and do not have a payment plan in effect, your passport maybe "restricted" by the State Department. Imagine going to the airport for that vacation, and finding out you cannot leave, because you are a delinquent taxpayer. The lesson, reach an agreement, if not; you may not be able to travel until the restriction or passport hold is lifted. This can take a minimum of 30 days.
- In order to file for an Offer in Compromise("OIC"), you now must be in "compliance". This now means that you must have met all income tax return filing requirements before filing the OIC. If f you file before attaining compliance, the funds attached to the OIC, will be kept and the OIC immediately rejected.
- If you owe between $50,000.00-$100,00.00 in taxes, you may now qualify for a streamlined payment arrangement with IRS to pay off your debt within 84 months.
- IRS collection standards have increased amounts that the taxpayer may keep, and the IRS will not use to determine an installment payment amount. This may allow you to redo current arrangements and more room to negotiate a new payment plan.
If, I can answer any questions you may have, or Assist you in dealing with the IRS, please feel free to contact my office for assistance.
Why do I Need a Will?
A will is a document that allows you to designate where you want your property to go after your death. If you do not have a Will, the State of Florida will designate who gets your property and you will be giving up valuable rights.
WITHOUT A WILL YOU UP GIVE UP THE RIGHT TO:
- APPOINT YOUR PERSONAL REPRESENTATIVE
- NAME GUARDIANS FOR YOUR MINOR CHILDREN
- CREATE A TRUST FOR YOUR BENEFICIARIES
- DISINHERIT A CHILD
- SPECIFY HOW TAXES AND EXPENSES WILL BE PAID
What are the Benefits of a Revocable Trust?
A Revocable Trust is a document that you create during your lifetime and fund with assets. If you fund your Trust while you are living you will have the following advantages:
- Your estate should avoid Probate
- Your assets will remain probate and not subject to PUBLIC SCRUTINY
- You select who you want to manage your assets in the event of your disability or death
- In the event of your disability, assets placed in the Trust are not subject to Court control
- You set the terms under which your beneficiaries will receive your assets after your death
- You get to select who you want to manage your assets
- You will decrease the legal costs of administering your estate
What is Probate?
Probate is the court supervised legal process that includes determining the validity of your will, gathering your assets, paying your debts, taxes, and the expenses of will administration, and then distributing the remaining assets to those persons entitled to them.
Any asset held in your name alone at the time of your death is subject to Probate. The costs of Probate can equal 3% or more of your estate's value. These costs can be reduced through proper Planning.
What are the Other Necessary Estate Planning Documents
There are four(4) estate planning documents everyone should have and they are:
- Health Care Power of Attorney - This document allows you to designate individuals to make medical decisions on your behalf when you are unable to do so. It also gives those individuals the power to interact with your doctors and supervise a medical treatment plan for you.
- Living Will - This documents tells medical staff what to do in the event you're placed on life support and appoints an individual(s) who can implement your decisions when you are unable to do so.
- Durable/Financial Power of Attorney - This document allows you to designate individuals to handle your banking, real estate and financial affairs if you are unable to do so. It is an alternative to a Court supervised Guardianship.
- Pre-Need Guardian Designator - This document tells the Court who you want to manage you(your Guardian) in the event of your mental incapacity and a court ordered guardianship is necessary.
Retired? Moving? Don't Forget Your Estate Plan
Whether you have just moved to Florida or are leaving the Sunshine state, do not forget to have your current estate plan reviewed by an attorney. The reason, no two states have similar laws, regarding your Will, Trust, Power of Attorney for Assets and Health Care, Living Will and Designation of Guardian. What works/worked in one state may not work in another. If you had a Power of Attorney drawn in New Jersey and move to Florida, a Florida Bank may refuse to honor that Power of Attorney because it is based on another state's laws. Likewise, Hospitals and Doctors may refuse to honor your Living Will and Medical Power of Attorney, if based on another states laws. The result, a possible Court controlled Guardianship to access money, assets and dictate medical care and treatment, that you thought were free of Court control and consumes time and money that you did not plan for.
In addition although on the Federal Level, there is no estate tax if your estate does not exceed the date of death exemption amount($5,490,000.00 for 2017), your new state may impose a tax on a lesser amount. Thus, having your documents reviewed by a local attorney can plan for this unanticipated state inheritance tax.
The bottom line when you cross state lines, have your estate documents reviewed by an attorney, who can orient your estate plan to your new home.
Employee or Independent Contractor?
When you hire a new worker, it is important that you properly classify them as either an employee or independent contractor. If you misclassify a worker's status, this will have major implications for the Employer's taxes as well as the Workers'. If you classify a worker as an Employee, the Employer will be liable for payment of FICA, FUTA and State Unemployment taxes. In addition, the worker will be eligible to participate in any retirement or health benefit plans maintained by the Employer.
If you classify the worker as an independent contractor , they are not eligible for any benefit plans maintained by the Employer and the Employer need not pay and FICA or FUTA taxes on the worker's behalf. The worker is responsible for the payment of self employment and other taxes. An employer can incur large tax and other liabilities if a worker is incorrectly classified. It is important that you consult with a tax professional before classifying a worker as an independent contractor.
What is Innocent Spouse relief from Joint Income Tax Liability?
In the event IRS determines that you owe taxes because:
- You signed a joint return with your spouse or ex spouse
- Your spouse or ex spouse did not report all income or paid all taxes when due
- As a result of your spouses or ex spouse's actions, income taxes were increased and you had no knowledge of the former spouse's actions
Then you may qualify for innocent spouse relief. This will stop IRS collection activity against you, if granted by the IRS. There are time deadlines and other standards you must meet to qualify for innocent spouse status.
If you think that you may qualify for relief please contact Steve Eisenberg for assistance.
How Do I Divide my Retirement Plan in a Divorce?
Divorced and required to "share" your retirement plan with your ex-spouse? If you just give the money from your plan without following Federal guidelines, you will trigger severe income tax consequences. The way to avoid these consequences is by use of a Qualified Domestic Relations Order("QDRO"). A QDRO that meets IRS approved standards, will allow you to transfer retirement benefits to an ex spouse without causing you income tax problems. If you would like to discuss these standards and want a QDRO please contact this office for additional guidance.
How Do I Report a Change in Property Ownership?
CHANGE OF OWNERSHIP NOTICE - What is a Section 193.1556 "Change of Ownership" notice and when do I need to file one?
The Legislature adopted Section 193.1556, Florida Statutes, in 2008 in response to the voter passage of the constitutional amendment which granted a 10% annual assessment increase cap to all non-homesteaded property.
A change in ownership requires the assessment to be reset to full market value. No separate notice to the Property Appraiser is required when a deed is recorded. However, if the transfer is one without any deed (i.e., the private sale of controlling interest in a business owning such property), then the new owner must give written notice to the Property Appraiser. Click here to view the Department of Revenue's proposed DR-430 Notice Form. This notice requirement ONLY applies to non-homesteaded properties.
Divorce, Death, Remarriage and Revised Estate Planning
In the event you are SOON TO BE DIVORCED OR ARE DIVORCED, you need to revise your wills, living wills, power of attorney and all other estate planning documents you have. If you do not have an estate plan you need one.
Once you are divorced, if you have no estate plan and die owning assets in your name, Florida law will govern who gets the assets and who controls the assets. Your wishes will not bind the Court in any fashion. At the very least, a Will is required to dispose of your assets as you rather than a Court wishes.
After divorce or in the event your first spouse dies, should you remarry planning is required to make sure your new spouse and "old" children receive and/ or share in your assets after your death. If, you leave everything to your "new" spouse, your assets are now his/her property and he/she can dispose of those assets as he/she wishes. Your children could get nothing. With proper planning by use of a Trust, your "new spouse" gets use of the assets while alive and your "old" children get the assets when the new spouse dies as you stated in your trust document.
Should you have any questions, please contact my office for assistance.
Domestic Partner/Same Sex Marriage Information
In 2013, the Supreme Court struck down Section 3 of the Defense of Marriage Act (DOMA) in U.S. v. Windsor. The decision has broad tax implications.
For one, same-sex married couples can file joint federal income tax returns. It should be noted, however, that joint returns aren't always beneficial. If both partners in a same-sex marriage have high taxable incomes, filing a joint return could result in more taxes being paid. For example, the modified adjusted gross income threshold amounts for calculating the net investment income tax is $200,000 for taxpayers filing as single, $250,000 for couples filing joint returns, and $125,000 in the case of a married taxpayer filing a separate return.
The IRS has clarified that, for federal tax purposes, if a same-sex couple is married in a state where it is legal to perform same-sex marriages, the marriage is recognized for federal tax purposes regardless of where the married couple lives (i.e., whether or not they live in a state that recognizes same-sex marriages). However, individuals (whether of the opposite sex or the same sex) who have entered into a registered domestic partnership, civil union, or other similar formal relationship recognized under state law, but not denominated as a marriage under the laws of that state, are not treated as being married for federal tax purposes. Another result of the Supreme Court decision is that tax-free employer provided benefits to married same-sex partners that were previously includible in income under federal law are now excludible from income, so refunds can be claimed on this basis as well.
Also, the estate of a partner in a same-sex marriage is entitled to the marital deduction, which means the partner's estate passes tax-free to his or her spouse. Other benefits of the Court's decision include married same-sex partners being eligible to receive federal benefits if their partner is a federal employee, as well as married same-sex partners being eligible for social security survivor benefits upon the death of a partner.
Thus, as you can see, the Supreme Court's decision presents financial and tax planning opportunities. Please call me at your earliest convenience so we can discuss the impact of these opportunities on your particular situation.
Tax Reporting for Domestic Workers
If you hired an individual to perform household services for you (such as a maid, housekeeper, or nanny) to do household work then the worker is considered your employee if you can control not only what work is done, but how it is done. If the worker is your employee, it does not matter whether the work is full time or part time or that you hired the worker through an agency or from a list provided by an agency or association. It also does not matter whether you pay the worker on an hourly, daily, or weekly basis, or by the job. Generally, an employer must withhold and pay Federal Insurance Contribution Act (FICA) taxes (i.e., social security tax and tax and Medicare tax) for a household employee if the employer has paid the employee cash wages during the calendar year at least equal to the "domestic employee coverage threshold" in effect for that year. For 2017, that threshold is $2,000. An employer must pay Federal Unemployment Tax Act (FUTA) taxes for household employees if the employer has paid cash wages totaling $1,000 or more to household employees in any calendar quarter in either the current or preceding calendar year. Household employers generally are not required to withhold federal income tax from their household employees' wages, but may agree to do so if the employee requests withholding on a completed Form W-4, Employee's Withholding Allowance Certificate. A household employer that withholds federal income tax also must file Schedule H.
If you are subject to FICA tax or FUTA tax for one or more household employees, you generally must report the total household employment taxes on Schedule H (Form 1040), Household Employment Taxes, and then add those taxes to your income tax on Form 1040. You must also file Schedule H if you withhold federal income tax. You generally must file Schedule H with your federal income tax return by April 15 of the year following the year for which the schedule is being filed. If you get an extension to file your return, the extension also applies to your Schedule H. You use Schedule H to calculate the total household employment taxes (social security, Medicare, FUTA, and withheld federal income taxes), and then add those taxes to your income tax and pay the amount due by the due date of the return. You may be subject to a penalty for underpaying estimated tax if you do not pay enough income and household employment taxes during the year.
If you have business employees for whom you report FICA taxes on Form 941, Form 944, or Form 943, and FUTA taxes on Form 940, you can include the FICA and FUTA taxes for your household employees on those forms instead of filing Schedule H, and include the taxes with the tax deposits you make for your business employees.
Please call me at your convenience so that we can discuss any employment tax obligations you may have with respect to your household workers.