California Tax Attorney Blog

Where should you keep estate planning documents prepared by your attorney licensed in California? Where should people expect to find your living trust, will, durable power of attorney and advance health care directive? You want to be sure that those documents stay safe and can be easily found when your family needs to find them.

Do not keep them in a safe deposit box at the bank.

The best place is in your home where they can easily be found when they are needed. Don’t lock them into a box for safekeeping inside your home since that would be as difficult to penetrate as a safe deposit box. Simply leave them in the open inside a desk, on a shelf or somewhere else that is obvious to anyone looking for them.

Your safe deposit box won’t be easy for your friends or family to open it if you’re not there. This is true even if they are co-owners of the box. Having the key isn’t enough to get the bank to open it up for them — the bank wants you to prove that you have the legal authority to require them to open it up. So here’s the conundrum: the document granting your friends or family the right to act on your behalf as an executor or as the power of attorney/agent is inside the box, and until the box is opened, they can’t prove that they have the authority to get the bank to open it…etc.

Safe deposit boxes are often inside a bank which may be closed over the weekend. If a durable power of attorney or advance health care directive is needed over the weekend, no one will be able to get to it until Monday. In a medical emergency, the advance health care directive should be easily accessible.

To speak with a tax attorney about your estate plan, call Mitchell A. Port at (310) 559-5259.

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New legislation doesn't change probate in California. It does change, however, the requirement for doctors to provide terminally ill patients with counseling and disclosure about their options for end-of-life care.

California’s health care providers are now required to let their patients know about their options when they've been diagnosed with a terminal condition, including:

their right to give individual health care instructions in their California Advance Health Care Directive

their prognosis with and without disease-targeted treatment

their right to continue such treatment with or without palliative care, and

hospice care

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The Internal Revenue Bulletin (IRB) is the authoritative instrument of the Commissioner of Internal Revenue for announcing official rulings and procedures of the Internal Revenue Service and for publishing Treasury Decisions, Executive Orders, Tax Conventions, legislation, court decisions, and other items of general interest. It is published weekly and may be obtained from the Superintendent of Documents on a subscription basis. Bulletin contents are compiled semiannually into Cumulative Bulletins, which are sold on a single-copy basis.

It is the policy of the Service to publish in the Bulletin all substantive rulings necessary to promote a uniform application of the tax laws, including all rulings that supersede, revoke, modify, or amend any of those previously published in the Bulletin.

All published rulings apply retroactively unless otherwise indicated. Procedures relating solely to matters of internal management are not published; however, statements of internal practices and procedures that affect the rights and duties of taxpayers are published.

Revenue rulings represent the conclusions of the Service on the application of the law to the pivotal facts stated in the revenue ruling. In those based on positions taken in rulings to taxpayers or technical advice to Service field offices, identifying details and information of a confidential nature are deleted to prevent unwarranted invasions of privacy and to comply with statutory requirements.

Rulings and procedures reported in the Bulletin do not have the force and effect of Treasury Department Regulations, but they may be used as precedents. Unpublished rulings will not be relied on, used, or cited as precedents by Service personnel in the disposition of other cases. In applying published rulings and procedures, the effect of subsequent legislation, regulations, court decisions, rulings, and procedures must be considered, and Service personnel and others concerned are cautioned against reaching the same conclusions in other cases unless the facts and circumstances are substantially the same.

The Bulletin is divided into four parts as follows:

Part I.—1986 Code.

Part II.—Treaties and Tax Legislation.

Part III.—Administrative, Procedural, and Miscellaneous.

Part IV.—Items of General Interest.

Interested in knowing more about how the IRS works? Call a tax attorney with experience working with the IRS. Call Mitchell A. Port at 310.559.5259.

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The Government Accounting Office (GAO) was asked to review and report on the Internal Revenue Service's (IRS) processes and procedures to prevent and collect unpaid payroll taxes. Specifically, GAO was asked to determine (1) the magnitude of unpaid federal payroll tax debt, (2) the factors affecting IRS’s ability to enforce compliance or pursue collections, and (3) whether some businesses with unpaid payroll taxes are engaged in abusive or potentially criminal activities with regard to the federal tax system.Over 1.6 million businesses owed over $58 billion in unpaid federal payroll taxes, including interest and penalties as of September 30, 2007. Payroll taxes consist of your income tax withheld, social security and Medicare contributions, and the employer’s contributions.

Some of these businesses “abuse” the federal tax system and took advantage of the existing tax enforcement and administration system to avoid fulfilling or paying federal tax obligations. Over a quarter of payroll taxes are owed by businesses with more than 3 years (12 tax quarters) of unpaid payroll taxes. Some of these business owners repeatedly accumulated tax debt from multiple businesses. For example, the IRS found 18 individuals were responsible for not remitting payroll taxes for a dozen different businesses and over 1,500 individuals to be responsible for nonpayment of payroll taxes at three or more businesses.

IRS has not always promptly filed liens against businesses to protect the government's interests and has not always taken timely action to hold responsible parties personally liable for unpaid payroll taxes.

Although IRS has tools at its disposal to prevent the further accumulation of unpaid payroll taxes and to collect the taxes that are owed, IRS's current approach does not provide for their full, effective use. IRS's overall approach to collection focuses primarily on gaining voluntary compliance - even for egregious payroll tax offenders - a practice that can result in minimal or no actual collections for these offenders.

If your business has payroll tax problems you are at risk of the IRS putting you out of business, and assessing the trust fund recovery penalty resulting in owners, and officers having substantial personal tax liability. If you would like assistance in dealing with these, and other types of tax problems contact Los Angeles tax attorney Mitchell A. Port at 310.559.5259.

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The University of Chicago Hospitals (“UCH”) brought a refund action (in an appeal entitled "University of Chicago v. USA", Case No. 07-3686, decided October 29, 2008 by the 7th Circuit Court of Appeals) against the United States to recover taxes it paid in 1995 and 1996 under the Federal Insurance Contributions Act (“FICA”), §§ 3101-3128, on behalf of its medical residents. UCH maintained it was entitled to a refund because its residents qualified for the “student exception” from FICA tax under the Internal Revenue Code (“IRC”), 26 U.S.C. § 3121(b)(10), and the controlling Treasury Regulation in place during the relevant time period, § 31.3121(b)(10)-2.

After the IRS took no action in response to the refund claim, UCH filed this refund action, seeking $5,572,705 it had paid in FICA contributions for its residents in those years.

The district court agreed initially to entertain the government’s motion on the question of whether medical residents are categorically not “students” under § 3121(b)(10) and therefore not exempt from FICA tax as a matter of law. If the answer to this question was “no”—that is, if residents may qualify for the student exception—then the case would proceed on the question of whether UCH’s residents were students within the meaning of § 3121(b)(10).

The district court rejected the government’s argument that residents were per se ineligible for the student exception.

The U.S. Court of Appeals for the Seventh Circuit granted the government’s petition and affirmed the U.S. District Court holding that the student exception under § 3121(b)(10) is not per se inapplicable to medical residents as a matter of law; rather, a case-by- case analysis is required to determine whether medical residents qualify for the statutory exemption from FICA taxation. The implementing Treasury Regulation applicable at the time set forth a method for determining eligibility for the student exception— one that focused on the character of the employing organization as a school, college, or university and the relationship of the employee-student to that organization. This necessarily implies a case-specific analysis, not a categorical ineligibility for certain classes of employee-students.

Have a FICA tax problem? Speak with a Los Angeles tax attorney about it and call Mitchell A. Port at (310) 559-5259.

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Simply put:

"Provide America’s taxpayers top quality service by helping them understand and meet their tax responsibilities and by applying the tax law with integrity and fairness to all."

In carrying out its mission, the IRS creates tax problems for which you may need help from a qualified tax attorney. Call Mitchell A. Port at (310) 559-5259 and discuss how to fix your tax trouble.

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Both California employers and California workers can ask the IRS to make a determination on whether a specific individual is an independent contractor or an employee by filing a Form SS-8, Determination of Worker Status for Purposes of Federal Employment Taxes and Income Tax Withholding, with the IRS. To read other articles on the topic of independent contractor, see previous blog entries by clicking here and here.

Are your workers independent contractors or employees? For more information, see the IRS website by clicking here.

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California probate courts use PVP attorneys. What is a PVP attorney? Do you need one? How do you get one? What exactly does a PVP attorney do?

The abbreviation “PVP” is short for “Probate Volunteer Panel”, which is a panel of attorneys who register with the Los Angeles Superior Court to assist with the resolution of various California probate issues. The PVP panel consists of California attorneys who the court appoints in probate and family law matters, including conservatorships, guardianships and related proceedings. In a typical proceeding, a PVP attorney is appointed to represent the interests of the potential conservatee or ward.

Here’s what the California Superior Court, County of Los Angeles, says in the probate section of its Court Rules, Chapter 10:

Continue reading "California Conservatorships And Guardianships " »

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The online Wall Street Journal said in an article posted on October 15th that estates, including those in California that may or may not go through probate, may benefit by a "portable" estate tax shelter regardless of which presidential candidate is elected.

The article says: "This issue is known as portability because the exemption per person -- $2 million this year and $3.5 million next year -- would become transferable from one spouse to the other, in effect doubling the surviving spouse's exemption. In essence, that means that spouses would be able to use each other's estate-tax exemption without first having to set up complex and costly trusts and take other steps that many people now feel obliged to do."

For us in California, the article goes on to say: "...such a change could greatly simplify estate planning and lead to fewer hassles for many married couples and their heirs." Living trusts in California may no longer be necessary to capture both spouses federal tax shelter. Nonetheless, a living trust will continue to be useful as a technique to avoid probate.

Probate in California continues to be a good reason to create a living trust. If someone you know died and did not have a living trust, call Mitchell A. Port to discuss probate.

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Why are California probate attorneys and probate lawyers so busy? Over half (55%) of all adult Americans do not have a will, a new survey shows, a figure that has remained pretty much unchanged over the past three years.

The survey on estate planning was conducted by Harris Interactive for Martindale-Hubbell, lawyers.com, one of the most comprehensive online resource for finding lawyers.

The survey asked 1,018 adults and found that more than half of them did not have a will. Only one in four Hispanic Americans (26%) had a will. Only one in three African American adults (32%) had a will.

At a minimum, get a California will if that's where you live. Better yet, avoid probate in California and get a living trust too.

Call Mitchell A. Port about your California living trust, will and other estate planning documents. Call 310.559.5259.

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The financial bailout plan recently signed into law benefits Californians because bank accounts owned by living trusts can get more FDIC insurance than accounts owned by individuals. Trust accounts get the maximum FDIC insurance for every qualified beneficiary.

Until December 31, 2009, when the financial bail-out package expires, the FDIC now insures “qualifying beneficiaries” in California for $250,000 each. A qualifying beneficiary is a spouse, child, grandchild, parent, or sibling of the account owner. The account must be owned by the living trust.

This is how it works:

A single mom in Los Angeles County, Ventura County, Santa Barbara County or Orange County California sets up a living trust naming her two children as the beneficiaries after she dies, the bank account owned by the trust is insured up to $500,000: 2 beneficiaries at $250,000 each.

If my wife and I set up a living trust and all three of our children are the beneficiaries after we both die, the trust account is ensured for up to $1,500,000: $250,000 for each beneficiary and for each owner, or 6 x $250,000.

These FDIC limits are per bank not per account. If a California living trust owner has more than one account at the same bank, these limits apply to all their accounts there.

Be sure and confirm this with your banker in writing and avoid relying on any other informal sources.

To discuss your living trust, Will, durable power of attorney and advance health care, please call Mitchell A. Port at (310) 559-5259.

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The California Department of Motor Vehicles has a clear explanation about a transfer of a car and other vehicles without probate at its website. The decedent's heir may transfer title or interest of the vehicle if the estate is not going through probate or awaiting probate of a will.

The California form entitled "Affidavit for Transfer Without Probate" may be completed without Testamentary Letters or Letters of Administration. Transfers without probate may be done only for vehicles registered in California.

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