Powers of Attorney: Always Read The Fine Print!

Powers of attorneys are a lot like medical insurance. Many people don’t pay very close attention to the written document until we need to use the power of attorney or the insurance. It is when you begin to have to use them that you discover what you don’t have. Then it may be too late.

When a power of attorney is executed, the agent automatically thinks that the agent can handle all affairs under the sun for the principal. This is not always a good assumption to make.

First of all, here are different types of written powers of attorney. There are powers of attorney for making decision over the person such as health care decisions, housing, and therapy decisions. There are other powers of attorney for the agent to make financial decisions regarding the estate. An agent may have a financial power of attorney and not a healthcare power of attorney.

Secondly, powers of attorney should be written very general to include any and all possible decisions. However, many powers of attorney are not general. Some give very limited authority for the agent to act on behalf of the principal. This can be very problematic for an agent to find out that they do not possess the right kind to make certain decisions and not other necessary decisions.

The best time to read the fine print is long before the power of attorney is used so that corrective action can be taken. Otherwise, time, money and effort may be required to file a interdiction legal proceeding to allow the agent to make all decisions.

If you have any questions about powers of attorney, you should contact an experienced estate attorney. Kent S. DeJean

Tax Tips for the Summer

  1. Taxes and Summer Jobs
    • Students working summer jobs may be exempt from withholdings.  If the student didnot owe any tax last year and they do not expect that to change, they should not have any income tax withheld.
    • If the student can be claimed as a dependent on their parents’ return, total income cannot exceed $6,100 and unearned (investment) income cannot exceed $350, if they want to avoid the income tax withholding. If unearned income does exceed $350, then the limit on total income is lowered to $1,000.
    • You are still subject to FICA and FUTA withholdings.  Sorry.
  2. Old W-4s No Longer Valid
    • Regardless of the number of exemptions claimed and the amount of withholdings taken out of your check, your employer needs to renew the W-4 on file.  The W-4s from 2012 are no longer valid, and employers face penalties for not taking out withholdings.
  3. Hiring your Children Can Lower your Tax Bill
    • If you are either a Sole Proprietor or a Husband-and-Wife Partnership, you can hire your children who are under 18 for the summer, and you are not required to withhold FICA taxes.  Also, as long as they are under 21, you do not pay FUTA on their wages, which means more money in your pocket.
    • Additionally, these tactics lower the parent/employer’s income and SECA taxes.
    • These rules also apply to Single-Member LLCs which are disregarded for tax purposes.

Brian J. Munson, J.D., LL.M. Taxation
Attorney at Losavio & DeJean, LLC
Derived from The Kiplinger Tax Letter, Vol.88, No. 10.  May 10, 2013.

Americans in denial about long-term care

It’s not a topic that’s considered even barely enjoyable, but it’s something that must be faced by every American in the age of modern medicine. We’re now living much longer than our ancestors, and we’ll require care for a much longer period of time than our great great grandparents did.

New polls indicate that among people over 40, two-thirds of them have done absolutely nothing to prepare for a transition to comfortable senior living, even though about half of the people surveyed had already served as caregivers for an older relative. For more of the dirty details, head over to this article at NBC News.

The attorneys of Losavio & DeJean possess the expertise and experience to help you plan ahead, making sure that when you’re no longer able to care for yourself, you’ll have the means to get the help you need.  Not only do we help people qualify for Medicaid regardless of the wealth they’ve accumulated over their lifetimes, we can also help solidify decisions that will need to be made in the future by drafting a Will and Powers of Attorney. In addition, we help protect assets during life and after death, and we can help eligible Veterans receive the benefits that they deserve for their service to our country. And it’s all more affordable than you probably think.

Take the first step in planning your future by calling us to set up an appointment.

Tips for Taxpayers Who Missed the Deadline

Brian J. Munson | Attorney at Law | Master of Laws in Taxation

  1. File as soon as possible. If you owe federal income tax, you should file and pay as soon as you can to minimize penalty and interest charges. There is no penalty for filing a late return if you are due a refund.
  2. Penalties and interest may be due. If you missed April 15, you may have to pay penalties and interest both for late filing and for late payment.
    1. The law generally does not allow a waiver of interest charges.
    2. However, the IRS will consider a reduction of these penalties if you can show a reasonable cause for being late.
  3. E-file is your best option. IRS e-file programs are available through Oct. 15.
    1. With e-file, you will receive confirmation that the IRS has received your tax return.
    2. If you e-file and are due a refund, the IRS will normally issue it within 21 days.
  4. Free File is still available. Free File is available only through IRS.gov.
  5. Installment Agreements are available. If you need more time to pay your federal income taxes, you can request a payment agreement with the IRS. Apply online using the IRS Online Payment Agreement Application tool or file Form 9465, Installment Agreement Request.

Adapted from IRS Tax Tip 2013-56

When a creditor keeps calling you AFTER you’ve filed for bankruptcy

by Kent S. DeJean

Once you have filed a Chapter 7 or Chapter 13 bankruptcy, automatic stay orders are issued by the bankruptcy court, prohibiting your creditors from attempting to collect their debts after your bankruptcy is file

Sometimes the attempted collection is an honest mistake. Creditors are often large companies. If you are approached for the first time, tell them you have filed bankruptcy. Often times, the creditor will end the communication immediately if they are reputable and knowledgeable.

If a creditor who you do not wish to re-pay, continues to attempt to communicate with you to collect their debt after you have filed, you should refer them to your attorney and contact your attorney immediately. This is a very serious offense since violating creditors could be subject to fines and imprisonment for being in contempt of the automatic stay orders.

If you have any questions concerning bankruptcy, you should consult with an experienced bankruptcy attorney.

Do You Need More Time To File your Tax Return?

Brian J. Munson | Attorney at Law | Master of Laws in Taxation

The April 15 tax-filing deadline is fast approaching. Some taxpayers may find that they need more time to prepare and file their tax returns.

  1. Automatic Extension. If you need extra time, you can get an automatic six-month extension from the IRS. You may request an extension of time to file your federal tax return to get an extra six months to file, until Oct. 15.
    1. Use Free File to request an extension. Everyone can use IRS Free File to e-file their extension request. Free File is available exclusively through the IRS.gov website. You must e-file the request by midnight on April 15. If you e-file your extension request, the IRS will acknowledge receipt of your request.
      1. Electronic funds withdrawal. If you e-file an extension request, you can also pay any balance due by authorizing an electronic funds withdrawal from a checking or savings account. To do this you will need your bank routing and account numbers.
    2. Use Form 4868 if you file a paper form. You can request an extension of time to file by submitting Form 4868, Application for Automatic Extension of Time to File U.S. Individual Income Tax Return. You must submit this form to the IRS by April 15. Form 4868 is available on IRS.gov.
  2. NOT extra time to Pay. Although an extension will give you an extra six months to get your tax return to the IRS, it does not extend the time you have to pay any tax you owe. You will owe interest on any amount not paid by the April 15 deadline. You may also owe a penalty for failing to pay on time.
  3. File on time EVEN IF YOU CAN’T PAY. If you complete your return but you can’t pay the full amount due, do not request an extension.
    1. File your return on time and pay as much as you can. You should pay the balance as soon as possible to minimize penalty and interest charges.
    2. If you need more time to pay, you can apply for a payment plan using the Online Payment Agreement tool on IRS.gov.
    3. You can also send Form 9465, Installment Agreement Request, with your return.
    4. If you are unable to make payments because of a financial hardship, the IRS will work with you.

Adapted from IRS Tax Tip 2013-52


More audits on the classification of employee vs. independent contractor

Brian J. Munson | Attorney at Law | Master of Laws in Taxation

The US Dept. of Labor wants to survey approximately 10,000 workers in various industries. The point of the survey is to determine the workers’ employment status.

As a result of the survey, tax professionals are predicting new regulations. These would be issued by the Dept. of Labor, not the IRS, and would be included in the “Right to Know” information employers are required to provide. Employers would, therefore, be required not only to inform their workers of their status as either an employee or an independent contractor, but also would be required to tell them why.

Firms who misclassify workers will soon see an end to the currently relaxed rules. In 2012, the IRS began a voluntary compliance program for companies not filing the required 1099s for prior periods. Under the program, companies can fix the errors with modest penalties, and treat the workers as employees for future periods. This program is set to expire June 30. Currently, misclassification of workers costs the Federal Government billions of dollars every year.

5 Tips for the Self-Employed

Brian J. Munson | Attorney at Law | Master of Laws in Taxation

When you are self-employed, it typically means you work for yourself, as an independent contractor, or own your own business.

  1. Self-employment income can include pay that you receive for part-time work you do out of your home. 
    1. This could include income you earn in addition to your regular job.
  2. Self-employed individuals file a Schedule C, Profit or Loss from Business, or Schedule C-EZ, Net Profit from Business, with their Form 1040.
  3. If you are self-employed, you generally have to pay self-employment tax as well as income tax.
    1. Self-employment tax includes Social Security and Medicare taxes.
    2. You figure this tax using Schedule SE, Self-Employment Tax.
  4. If you are self-employed you may have to make estimated tax payments. 
    1. People typically make estimated tax payments to pay taxes on income that is not subject to withholding.
    2. If you do not make estimated tax payments, you may have to pay a penalty when you file your income tax return. 
    1. The underpayment of estimated tax penalty applies if you do not pay enough taxes during the year.
  5. When you file your return, you can deduct some business expenses for the costs to run your trade or business.
    1. You can deduct most business expenses in full, but some costs must be “capitalized,” meaning you can deduct a portion of the expense each year over a period of years.
    2. You may deduct only the costs that are both ordinary and necessary.
      1. An ordinary expense is one that is common and accepted in your industry.
      2. A necessary expense is one that is helpful and appropriate for your trade or business.

Adapted from IRS Tax Tip 2013-46