Tax Planning | Begin the Begin

IRS Issues Tips for Refunds

February 9, 2017

Earlier this month the IRS issued IR-2017-16 to provide taxpayers with information regarding refunds. In particular, the IRS was interested in debunking a few myths that may be circulating out on the internet about refunds. First, the IRS has indicated that the statement “all refunds are delayed” is false. More than 90% of refunds are issued within the normal timeframe, which is less than 21 days. However, some refunds may be delayed including for those taxpayers claiming the earned income tax credit (EITC) or the additional child tax credit (ACTC). Delays for refunds on those returns are until mid-February. Other refunds may be held because of increased security to reduce and prevent identity theft and refund fraud.

Second, the IRS has indicated that either calling the IRS or the individual’s tax advisor is not the best way to determine the status of a refund. Instead, taxpayers should go online to “Where’s My Refund?” or use the IRS2Go mobile app. The IRS will update the status of refunds once a day, which is typically done overnight.

Next, the IRS stated that ordering a tax transcript will not help taxpayers determine the statue of a refund. The tax transcript may not contain any relevant information as to the amount or timing of a refund. Additionally, the IRS reminded taxpayers who have claimed either EITC or ACTC that the projected deposit dates will not be available under after February 15th. So, even if a taxpayer claiming those credits checks online for the status of his or her refund, no information will be available until later in February. The IRS published “What to Expect for Refunds in 2017” for additional information.

Finally, for those claiming either EITC or ACTC, the entire refund, not just the portion associated with the credits, will be delayed until after February 15th as dictated by law. Again, the IRS directs taxpayers online to “Where’s My Refund?” or the IRS2Go mobile app for status updates on a refund. #taxseasonishere #taxplanning #whereismyrefund @bgnthebgn

Update from the Virginia Tax Department

January 28, 2017

(h/t to my colleague, David A. Lawrence, Esq. who recently attended the Annual Virginia Tax Roundtable and provided the summary below. The Roundtable hears from the Virginia Tax Commissioner, his staff, the Virginia Attorney General’s staff, local Commissioners of Revenue and a U.S. Tax Court Judge about current issues and ways to improve tax administration in Virginia.)

Identity Theft – Refund Fraud Dramatically Rising
Identity theft and refund fraud continue to rise dramatically in Virginia & other states. Over $54 million in 2015 & 2016 of refund fraud was caught in Virginia before the state issued the fraudulent refund checks. It’s taking a significant amount of Tax Department resources and time to review more refund returns, collaborate with other states & the IRS, and match data before letting refund checks go out. It sounds like people should continue to try to file their returns as early as possible before others attempt to file fraudulent claims, using information they can find out about you. It seems that federal agency employees who are slow to get their W-2s are at a greater risk for fraud claims.

Staffing Changes & Budget Cuts continue at State & Local Tax Levels
For several years in a row, many long-time employees of state & local tax offices continue to retire. The government is trying to replace the loss of institutional memory with newbies and technology. But continued budget cuts are hitting technology upgrades & the ability to make some new hires.

Tax Appeals
Appeals of tax cases – particularly income tax – continue to increase 3 years in a row, while sales tax decisions are down significantly in Virginia. But with strained staff, it’s taking a lot longer for appeals to be completed. If a taxpayer doesn’t fully document the appeal, then the Tax Commissioner is dismissing the appeal – so don’t be sloppy out there. Local tax appeals continue to drop – it appears the Tax Department doesn’t like dealing with local tax appeals & the localities don’t like being told they’re wrong by the Tax Department.

Updating Tax Regs; Little Tax Legislation
The Tax Department is in the process of updating its Regulations, especially any which are over 4 years old. Based on the few inquiries from the General Assembly, there doesn’t appear to be a lot of new tax legislation expected this coming legislative session.

Local Taxes Being Pursued
Local tax offices are getting much more active in capturing tax revenue, and using more technology to find taxpayer nexus and tax it. Restaurants are big targets for meals & sales taxes; as well as their owners & managers who are pursued on a responsible officer type of liability. Large businesses, especially multi-state ones, are filing 1-3 years back refund claims. Localities are complaining that those claims are hitting the locality’s budget, and thus are fighting the refunds, making the taxpayers work at those claims. Local tax collectors are documenting their defense, expecting tax appeals. So the taxpayers had better document their claims and arguments as well.

US Tax Court Practice Tips
Beginning in 2017, the Tax Court will have electronic filing. Other practical suggestions were offered involving pretrial memoranda, stipulating facts, objections to IRS experts and post-trial briefs.

As tax season is upon us, if you have questions regarding your taxes, please feel free to reach out to your professional advisor. #taxplanning #estateplanning #taxseasonishere @bgnthebgn

Five New Year’s Resolutions for Your Estate Plan

January 12, 2017

Happy New Year! Very often the New Year brings all sorts of ‘changes’ for individuals, particularly after having spent any time with family members and friends over the holiday season. Here is a quick list of five resolutions to consider for your estate plan.

Is it time to update your plan? If a plan is in place, when was the last time you reviewed it? Is it simply a binder of documents you received several year ago when you finished the estate planning process and you haven’t looked at since? Have circumstances changed that are not captured in the documents? Who are the fiduciaries (i.e., executor, trustee, healthcare power of attorney, financial power of attorney, guardian, etc.) listed? Are the fiduciaries still capable of serving? Does the plan do what you want it to do? There have been a lot of changes to estate tax laws in recent years, is your plan from before 2013? In some cases, does ‘updating’ your plan, actually mean finishing the process? Or does it mean starting the process so that your theoretical plan is memorialized?
Are there beneficiary designations? When was the last time you checked beneficiary designations on life insurance, retirement accounts (i.e., 401(k), IRAs, 403(b), 457, etc.) and annuities? What about any payable on death (POD) or transfer on death (TOD) designations you have on bank accounts or brokerage accounts…do those designations reflect your wishes? For government employees, are beneficiary designations up-to-date on your Federal, state or local benefits?
Families come in all shapes and sizes -Family Fiduciaries. Are you named as a fiduciary in any family member’s or friend’s plan? Have you touched base with that person recently to see how they are doing both health-wise and financially? Do you understand what your role is as the fiduciary? Do you know the family member’s or friend’s goals and objectives? Are you able to still serve, that is, are you distracted by a health event or financial crisis and perhaps you should not take the role? Have you considered options for a care manager if you are caring for an elderly family member or friend? How about looking at assisted living or skilled nursing or home health aides, if the circumstances warrant such considerations?
Are you charitably inclined? Do you have a charitable giving plan for this year? For future years? For at your death? Have you researched your options including direct giving, donor advised funds, private foundations and/or charitable trusts? Is there a planned gift that you would like to consider? Is now the time to investigate annual giving?
Succession planning occurs at many levels. Who will be in charge of any business whether it is a limited liability company, partnership or corporation? Are shareholders’ agreements and operating agreements up-to-date? And beyond a business interest, who will be in charge of your pets? Are there monies set aside for their care? What about digital assets? Have you ensured a smooth transition of online accounts to a successor? What about your tangible personal property? Is there an inventory? Appraisals? Designated recipients?

True, there are a lot of questions and not a lot of answers here, but that is the planning process. One has to begin with the questions to reach the answers. Working with a professional advisor can both provide you with the guidance needed to navigate these questions and ensure that you complete the process. #planyourjourney #lifeplanning #legacyplanning #estateplanning @bgnthebgn

2017 Estate and Gift Tax Exemptions

November 3, 2016

money-2 The IRS recently announced the estate and gift exemption levels for 2017 and they continue to increase as per legislation passed in January 2013. The applicable exclusion amount from Federal estate tax will increase to $5.49 million per person allowing a married couple to shelter $10.98 million from Federal estate tax, the rate for which is currently set at 40%. The lifetime exemption from gift tax remains coupled with the exemption from Federal estate tax, and therefore, this exemption will also increase to $5.49 million per person. The annual gift exclusion amount will remain at $14,000 per person. Virginia continues to not impose a state level estate tax. Maryland’s exemption from estate tax will increase to $3 million while the District of Columbia’s exemption will remain at $1 million until certain revenue surplus targets are met, which may not be until 2018, at which point the exemption will increase to $2 million. As a reminder, proposed regulations issued in August will significantly reduce the availability of valuation discounting on certain transfers of interests held in closely held or family owned businesses, and therefore, taking advantage of 2016 exemption levels is critical for some individuals, business owners and families.

For seniors and those with disabilities, a cost-of-living adjustment (COLA) for Social Security and Social Security Income (“SSI”) will increase monthly benefits by 0.3%. In addition, the cap on the amount of earnings subject to payroll tax will increase to $127,200. Finally, the tax brackets, standard deductions, Pease and PEP limitations, kiddie tax and other credit and deduction levels for 2017 were announced. #estateplanning #estatetax #gifttax #annualgift #exemptionlimits #COLA2017 @bgnthebgn

The Marriage of Divorce and Estate Planning

August 11, 2016

In case you missed the series about the impact of divorce on estate planning, here is a brief recap of some points to consider.

1. The Property Settlement Agreement may require that you maintain life insurance for any minor children. If that is the case, then have you revisited your estate plan recently? What obligations to maintain life insurance do you have? Does the Property Settlement Agreement have certain requirements for the creation of a trust, and if so, what are those requirements? Have the requirements of the Property Settlement Agreement been fulfilled or incorporated through your estate plan? Are there any provisions of the Property Settlement Agreement that will survive death?

2. When was the last time you updated your beneficiary designations on qualified retirement accounts (e.g., 401(k) or IRA accounts), annuities, life insurance or payable on death or transfer of death designations on bank or brokerage accounts?

3. What should happen to your real and personal property? Are there steps you need to take to ensure your real and personal property are distributed to the individuals or entities you want to have benefit?

4. If you are divorcing and have a disabled child, how is that child being provided for upon the incapacity or death of a parent? Is eligibility for public benefits preserved through a properly structured special or supplemental needs trust? Who has authority to make healthcare decisions for the child and in what manner? Has guardianship been determined and the terms in which parents plan to share guardianship specified, if applicable?

5. What happens if an estate plan already exists and you do nothing to update it?

#estateplanning #divorce @bgnthebgn

ALERT – Valuation Discounting Impacted By New Regulations

August 4, 2016

Estate planners and valuation experts have been advising clients for the last year that the IRS and Treasury would be issuing new regulations that would make it harder to transfer business interests without incurring estate or gift tax. The proposed regulations are now here and will reduce the availability of discounting for transfers of business interests that are subject to certain restrictions (e.g., restrictions on marketability). The proposed regulations will go through a 90 day public comment period and a public hearing is scheduled for December 1, 2016. The proposed regulations will be effective as to transfers that occur on or after the date the regulations become final, and in certain circumstances, as to transfers occurring 30 or more days after the regulations become final. Thus, those who hold interests in closely held businesses should contact their professional advisors to determine whether they need to take action before the regulations are finalized. #valuationdiscounts #2704regulations #businessvaluations #estateplanning #businessplanning @bgnthebgn

May is National Elder Law Month

May 5, 2016

In 1963, President Kennedy declared May to be Senior Citizens Month to honor those who are 65 and older. Since then every President has proclaimed May to be a month to show support for older Americans. President Jimmy Carter changed the name in 1980 to Older Americans Month and the National Academy of Elder Law Attorneys supports this annual proclamation by declaring the month of May to be National Elder Law Month.

But what is encompassed in elder law? And how can an elder law attorney assist older Americans? Here is a brief list of some of the major issues that an elder law attorney advises upon:

Incapacity planning that would include a discussion regarding financial and medical powers of attorney
Tax planning
Estate planning, including a discussion surrounding the management of assets during incapacity and upon death
Medicaid
Medicare
Long-term care, including continuing care retirement communities (CCRCs), skilled nursing facilities (SNFs) and assisted living facilities (ALFs)
Social Security (SSDI and SSI)
Special Needs planning (e.g., special/supplemental needs trusts)
Conservatorship and guardianship
Asset protection
Elder abuse and exploitation
Retirement planning, including beneficiary designations, death benefits and spousal benefits
Mental health law
Estate and Trust Administration

Keep in mind that some elder law attorneys are like your internist, that is, they can spot the issues and advise in broad terms. Other elder law attorneys are specialists. For example, certain elder law attorneys may handle only social security disability claims and appeals while others only litigate nursing home abuse cases. Whatever the issue, it is important to make sure the relationship with an elder law attorney is a good fit for your circumstances and helps achieve your goals. In the meantime, this month and beyond be sure to celebrate older Americans! #elderlaw #olderamericansmonth @aclgov #nationalelderlawmonth

Prince Dies Without A Will; Special Administrator Appointed

April 28, 2016

Although the quote: “Where there is a will, there is a way” is meant to encourage perseverance, it also seems appropriate in the estate planning realm as a Last Will and Testament can guide surviving family members as to the disposition of assets after a person’s death. In the case of Prince, the quote is better modified to say: “Where there is no will, there is a messy road ahead.” As reported earlier this week, Prince’s sister filed an emergency petition asking the court to appoint a special administrator to oversee the initial stages of administering Prince’s estate. She did so because no Last Will and Testament could be located. The Court agreed and appointed Bremer Bank, National Association as the special administrator. The Court’s actions allow Bremer Bank to marshal or gather the assets and preserve such assets until a personal representative or executor can be appointed. In short, it appears that Prince failed to plan and the laws of Minnesota will now dictate what happens to his estate.

And what does this all mean? Dying without a Last Will and Testament or a revocable living trust means that a person is intestate and the laws of the state in which they resided at death will spell out who is to receive the assets of the estate. In Prince’s case, since he had no spouse or surviving children or parents, his siblings, both full and half siblings, are the beneficiaries of his estate under Minnesota law. Thus, the law of unintended consequences may now apply as Prince may not have wanted his siblings to become the beneficiaries. He may have wanted to include charity or friends perhaps even other relatives. But, without a Last Will and Testament or revocable living trust, we will never know what his wishes may have been.

It will also be interesting to see how the administration of Prince’s estate unfolds. A number of questions will have to be asked and answered, including, but not limited to: Who will end up being the personal representative or executor? What debts does the singer have? How will the estate tax be paid (both at the Federal and state level since Minnesota has an estate tax)? What assets will each beneficiary ultimately receive? Will an agreement be reached amongst the beneficiaries regarding the management and distribution of the assets? Unfortunately, the process that has begun will be lengthy, likely expensive and may result in the dismantling of a legacy if the process devolves into an ugly court battle. All of which could have been avoided or at least minimized had Prince simply planned. #PrinceDiesWithoutWill; #Prince; #estateplanning #intestacy

ALERT – UPDATE 2.0 – New Rules for Basis Consistency

March 26, 2016

In an earlier post I described the new rules for basis consistency about which executors and their advisors must be aware. In an update to that earlier post, I highlighted the regulations that had been issued. The deadline for complying with the new rules was March 31, 2016. On March 23, 2016, the IRS issued another notice further extending the deadline to comply with the new rules until June 30, 2016. This extension gives executors and their advisors more time to digest the new rules and regulations, and hopefully, more accurately complete Form 8971 and Schedule A. #estateadministration #taxplanning #basisconsistency #form8971 #IRSregulations #taxplanning #estatetax

ALERT – UPDATE: New Rules for Basis Consistency

March 6, 2016

I previously posted about the new rules for basis consistency about which executors and their advisors must be aware. I noted that the IRS had indicated that regulations would be forthcoming. Late last week the proposed regulations were released relating to both Section 1014(f) and Section 6035 and I have highlighted a few points below.

One of the biggest issues about which clarity was being sought was whether an executor of an estate in which an estate tax return is being filed to take advantage of portability needs to complete and file Form 8971. The proposed regulations exclude such returns from the requirement; that is, if an executor is simply filing for portability, then Form 8971 is not required.

For those who are required to file an estate tax return, the regulations provide some additional guidance as to how an executor is to go about satisfying this new requirement. For example, if at the time the Form is due, the executor does not yet know what assets a beneficiary will receive, then the executor must report all assets the beneficiary may receive. This ultimately means that the same assets may be reported to several different beneficiaries. This also means that an executor will be required to supplement the initial filing of Form 8971 and make it clear to the beneficiaries which filings are the final ones.

Moreover, it now appears that when a beneficiary who originally received an asset from an estate subsequently transfers that asset to another family member or entity, the transferring beneficiary will also be required to file Form 8971 with the IRS and report the basis to the family member or entity. This requirement impacts many individuals who otherwise had no reporting requirement to the IRS and may not be paying attention to the fact they now have these requirements.

Lastly, the new rules, as clarified by the regulations, do not allow for a step-up in basis (a discussion from an earlier post) in certain circumstances. After discovered assets that should have been disclosed on the estate tax return and were initially not, will have a zero basis, and therefore, be subject to greater income taxes consequences when sold unless certain corrective measures are taken.

What these new rules and proposed regulations tell us is that if you are dealing with a taxable estate, then you should consult with your professional advisor about various filing requirements to avoid missing a filing and incurring the resulting penalties. #estateadministration #basisconsistency #form8971 #IRSregulations #taxplanning #estatetax