May 30, 2008

Same-sex Domestic Partners Can Marry Without Dissolution

With the recent California Supreme Court decision overturning the ban on gay marriage, California Secretary of State Debra Bowen contacted the Legislative Counsel of California and was told that dissolving a domestic partnership would not be necessary before a same-sex couple can wed. A written opinion is expected to follow next week.

The San Francisco Chronicle ran an interesting news story about this.

May 27, 2008

No Right To A Civil Proceeding Before Bringing A Criminal Trial For Tax Evasion

Defendant-Appellant James Ellett appealed from the judgment of the United States District Court for the Northern District of New York convicting him, after a jury trial, of four counts of income tax evasion and one count of failure to file an income tax return. The United States Court of Appeals for the Second Circuit held on May 23, 2008, that due process did not require that Ellett be given the opportunity to litigate his tax position civilly or administratively before being prosecuted for tax evasion.

To read the case, click here.

May 23, 2008

Innocent Spouse Relief Requires Joint Tax Return

The Ninth Circuit - which has jurisdiction over all of us taxpayers living in California - upheld the Tax Court's holding that innocent spouse relief under Internal Revenue Code §6105 is available only if you have filed a joint return for the year in question. Christensen v. Commissioner, No. 06-71881 (9th Cir. 4/21/08), affirming T.C. Memo. 2005-299:

Christensen argues that Code §6015(f) is available to spouses who face joint liability under community property laws but do not file a joint return. We disagree. In light of the plain language of § 6015 and the context of the statute, we conclude that § 6015(f) is available only to spouses who file a joint return.

Call a qualified California tax lawyer for help seeking innocent spouse relief - call Mitchell A. Port at 310.559.5259.

May 21, 2008

New IRS Publication On Innocent Spouse

Last month, the IRS released a revised Publication 971 for those seeking innocent spouse relief. Other articles in this blog on innocent spouse relief are: "Who Is An Innocent Spouse In California?", "Innocent Spouse Made Easier" and "California Taxpayers: Innocent Spouse Relief".

The revised IRS Publication provides this introduction:

When you file a joint income tax return, the law makes both you and your spouse responsible for the entire tax liability. This is called joint and several liability. Joint and several liability applies not only to the tax liability you show on the return but also to any additional tax liability the IRS determines to be due, even if the additional tax is due to income, deductions, or credits of your spouse or former spouse. You remain jointly and severally liable for the taxes, and the IRS still can collect from you, even if you later divorce and the divorce decree states that your former spouse will be solely responsible for the tax. In some cases, a spouse (or former spouse) will be relieved of the tax, interest, and penalties on a joint tax return.

Three types of relief are available to married persons who filed joint returns.

1. Innocent spouse relief.
2. Separation of liability relief.
3. Equitable relief.

Married persons who did not file joint returns, but who live in community property states [like California], may also qualify for relief. See Community Property Laws, later. This publication explains these types of relief, who may qualify for them, and how to get them. You can also use the Innocent Spouse Tax Relief Eligibility Explorer at www.irs.gov to see if you qualify for innocent spouse relief.

If you have a tax problem and believe that you may be entitled to innocent spouse relief, and wish to have a California tax lawyer represent you please contact Mitchell A. Port.

May 19, 2008

California Supreme Court Overturns Gay Marriage Ban

On Thursday, the California Supreme Court issued its opinion legalizing gay marriage in California. The 4-3 California Supreme Court ruling found the state's ban on same-sex marriage unconstitutional, and declared that gay couples have the same legal right to marry as heterosexual couples.

Here are some excepts from that court opinion:

Although the understanding of marriage as limited to a union of a man and a woman is undeniably the predominant one, if we have learned anything from the significant evolution in the prevailing societal views and official policies toward members of minority races and toward women over the past half-century, it is that even the most familiar and generally accepted of social practices and traditions often mask an unfairness and inequality that frequently is not recognized or appreciated by those not directly harmed by those practices or traditions. It is instructive to recall in this regard that the traditional, well-established legal rules and practices of our not-so-distant past (1) barred interracial marriage, (2) upheld the routine exclusion of women from many occupations and official duties, and (3) considered the relegation of racial minorities to separate and assertedly equivalent public facilities and institutions as constitutionally equal treatment. As the United States Supreme Court observed in its decision in Lawrence v. Texas, supra, 539 U.S. 558, 579, the expansive and protective provisions of our constitutions, such as the due process clause, were drafted with the knowledge that “times can blind us to certain truths and later generations can see that laws once thought necessary and proper in fact serve only to oppress.”

For this reason, the interest in retaining a tradition that excludes an historically disfavored minority group from a status that is extended to all others — even when the tradition is long-standing and widely shared — does not necessarily represent a compelling state interest for purposes of equal protection analysis.

After carefully evaluating the pertinent considerations in the present case, we conclude that the state interest in limiting the designation of marriage exclusively to opposite-sex couples, and in excluding same-sex couples from access to that designation, cannot properly be considered a compelling state interest for equal protection purposes. To begin with, the limitation clearly is not necessary to preserve the rights and benefits of marriage currently enjoyed by opposite-sex couples. Extending access to the designation of marriage to same sex couples will not deprive any opposite-sex couple or their children of any of the rights and benefits conferred by the marriage statutes, but simply will make the benefit of the marriage designation available to same-sex couples and their children. As Chief Judge Kaye of the New York Court of Appeals succinctly observed in her dissenting opinion in Hernandez v. Robles, supra, 855 N.E.2d 1, 30 (dis. opn. of Kaye, C.J.): “There are enough marriage licenses to go around for everyone.”

Further, permitting same-sex couples access to the designation of marriage will not alter the substantive nature of the legal institution of marriage; same-sex couples who choose to enter into the relationship with that designation will be subject to the same duties and obligations to each other, to their children, and to third parties that the law currently imposes upon opposite-sex couples who marry. Finally, affording same-sex couples the opportunity to obtain the designation of marriage will not impinge upon the religious freedom of any religious organization, official, or any other person; no religion will be required to change its religious policies or practices with regard to same-sex couples, and no religious officiant will be required to solemnize a marriage in contravention of his or her religious beliefs. (Cal. Const., art. I, § 4.)

While retention of the limitation of marriage to opposite-sex couples is not needed to preserve the rights and benefits of opposite-sex couples, the exclusion of same-sex couples from the designation of marriage works a real and appreciable harm upon same-sex couples and their children. As discussed above, because of the long and celebrated history of the term “marriage” and the widespread understanding that this word describes a family relationship unreservedly sanctioned by the community, the statutory provisions that continue to limit access to this designation exclusively to opposite-sex couples — while providing only a novel, alternative institution for same-sex couples — likely will be viewed as an official statement that the family relationship of same-sex couples is not of comparable stature or equal dignity to the family relationship of opposite-sex couples. Furthermore, because of the historic disparagement of gay persons, the retention of a distinction in nomenclature by which the term “marriage” is withheld only from the family relationship of same-sex couples is all the more likely to cause the new parallel institution that has been established for same-sex couples to be considered a mark of second-class citizenship. Finally, in addition to the potential harm flowing from the lesser stature that is likely to be afforded to the family relationships of same-sex couples by designating them domestic partnerships, there exists a substantial risk that a judicial decision upholding the differential treatment of opposite-sex and same-sex couples would be understood as validating a more general proposition that our state by now has repudiated: that it is permissible, under the law, for society to treat gay individuals and same-sex couples differently from, and less favorably than, heterosexual individuals and opposite-sex couples.

In light of all of these circumstances, we conclude that retention of the traditional definition of marriage does not constitute a state interest sufficiently compelling, under the strict scrutiny equal protection standard, to justify withholding that status from same-sex couples. Accordingly, insofar as the provisions of sections 300 and 308.5 draw a distinction between opposite-sex couples and same-sex couples and exclude the latter from access to the designation of marriage, we conclude these statutes are unconstitutional.

Having concluded that sections 300 and 308.5 are unconstitutional to the extent each statute reserves the designation of marriage exclusively to opposite sex couples and denies same-sex couples access to that designation, we must determine the proper remedy.

When a statute’s differential treatment of separate categories of individuals is found to violate equal protection principles, a court must determine whether the constitutional violation should be eliminated or cured by extending to the previously excluded class the treatment or benefit that the statute affords to the included class, or alternatively should be remedied by withholding the benefit equally from both the previously included class and the excluded class. A court generally makes that determination by considering whether extending the benefit equally to both classes, or instead withholding it equally, would be most consistent with the likely intent of the Legislature, had that body recognized that unequal treatment was constitutionally impermissible.

In the present case, it is readily apparent that extending the designation of marriage to same-sex couples clearly is more consistent with the probable legislative intent than withholding that designation from both opposite-sex couples and same-sex couples in favor of some other, uniform designation. In view of the lengthy history of the use of the term “marriage” to describe the family relationship here at issue, and the importance that both the supporters of the 1977 amendment to the marriage statutes and the electors who voted in favor of Proposition 22 unquestionably attached to the designation of marriage, there can be no doubt that extending the designation of marriage to same-sex couples, rather than denying it to all couples, is the equal protection remedy that is most consistent with our state’s general legislative policy and preference.

Accordingly, in light of the conclusions we reach concerning the constitutional questions brought to us for resolution, we determine that the language of section 300 limiting the designation of marriage to a union “between a man and a woman” is unconstitutional and must be stricken from the statute, and that the remaining statutory language must be understood as making the designation of marriage available both to opposite-sex and same-sex couples. In addition, because the limitation of marriage to opposite-sex couples imposed by section 308.5 can have no constitutionally permissible effect in light of the constitutional conclusions set forth in this opinion, that provision cannot stand.

May 14, 2008

Most Frequently Asked Questions: Economic Stimulus Payments

California taxpayers waiting and wondering about their tax stimulus payment from the IRS can visit the IRS website for answers to frequently asked questions by clicking here.

Other tax problems related to unpaid payroll taxes, unpaid income taxes or unfiled tax returns, call Los Angeles tax attorney Mitchell A. Port at (310) 559-5259.

May 12, 2008

Where Should I Store My Will And To Whom Should I Give Copies Of My Estate Planning Documents?

David M. Goldman, an estate planning attorney in Florida, has an interesting article worth reading at his blog. Simply substitute "California estate planning" or "California estate planning lawyer" for the reference to "Florida" and you should be able to obtain some valuable information. Or, simply call Mitchell A. Port, a California estate planning attorney, at (310) 559-5259 to discuss your concerns.

May 9, 2008

Is Your Estate Worth $5 Million Or Less?

Jonathan G. Blattmachr and Georgiana J. Slade at Milbank, Tweed, Hadley & McCloy LLP, and Bridget J. Crawford at Pace University - School of Law, have written an article in the March, 2007 edition of "Estate Planning" magazine, addressing estate planning for those of us with estates under five million dollars. I have posted the full article at the same time as this posting.

Here is an abstract for the article:

"Financial concerns may preclude people of modest wealth (defined for purposes of this article as those having a net worth between $1 million and $5 million) from making significant lifetime transfers to achieve estate planning goals. Yet lifetime transfers are among the most effective ways to reduce estate taxes. Individuals of modest wealth may experience a tension between the desire to take advantage of opportunities to reduce taxes and protect assets from other claims which may arise, on the one hand, and the need to preserve an adequate base of wealth to ensure the maintenance of a current standard of living, on the other.

"The advisor to these individuals carefully should consider what estate planning steps are most appropriate and what level of transfers, if any, the individual reasonably can afford to make.

"This article details and evaluates eleven strategies that may apply to clients in the modest wealth category:

"(1) inter vivos transfers of life insurance and other non-income producing assets;

"(2) estate building and income tax sheltering with life insurance;

"(3) qualified personal residence trusts;

"(4) effective use of annual exclusions;

"(5) self-settled trusts;

"(6) potential use of the gift tax exemption and the GST exemption;

"(7) assessing income tax-free states;

"(8) using a charitable remainder trust to build wealth and generate income;

"(9) medical care and tuition payments;

"(10) limited liability entities for asset protection and tax planning; and

"(11) special care in handling interests in qualified plans, IRAs and other IRD."

To speak with an estate planning attorney in Los Angeles, California, call Mitchell A. Port at 310.559.5259.

May 9, 2008

Estate Planning For Persons With Less Than $5 Million

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May 7, 2008

Wesley Snipes Convicted

For his willfully failing to file an income tax return, Wesley Snipes was sentenced to three years in federal prison. He was charged with having failed to pay over $15,000,000 in taxes.

A jury acquitted Wesley Snipes of fraud and conspiracy charges and certain other tax charges even though they convicted him for failure to file his 1999, 2000, and 2001 tax returns.
According to the IRS, tax protestors Eddie Ray Kahn and Douglas P. Rosile (who themselves face 10 and 4-1/2 years' incarceration respectively) met Snipes in 1998 who followed their suggestion to (among other things) stop filing tax returns.

He also filed amended returns requesting payments from the government of millions of dollars in refunds from earlier years' filings.

Allegedly, Snipes doctored tax returns, and sent fake checks to the Treasury to evade paying his tax liabilities.

For what was technically a misdemeanor, Snipes was convicted and sentenced to time in prison.

According to Justice Department prosecutors, this represented a "singular opportunity….to deter tax crime nationwide." And "Snipes's long prison sentence should send a loud and crystal clear message to all tax defiers that if they engage in similar tax defier conduct, they face joining him and his co-defendants . . . as inmates in prison."

May 5, 2008

A Tax Morale Approach To Compliance

In an article this California tax lawyer thinks is worth reading, Marjorie E. Kornhauser (Arizona State) has published A Tax Morale Approach to Compliance: Recommendations for the IRS, 8 Fla. Tax Rev. 599 (2007).

Here is the introduction:

If people hate taxes so much why do they pay them? The common, seemingly obvious, answer—fear of being caught cheating—is only a partial answer. In fact, this “obvious” answer—based on the rational cost/benefit analysis of traditional economic theory— explains so little of tax compliance that the puzzle of tax compliance is why people pay taxes instead of evading them. The key to this puzzle is “tax morale,” the collective name for all the non-rational factors and motivations—such as social norms, personal values and various cognitive processes—that strongly affect an individual’s voluntary compliance with laws. Higher tax morale correlates with higher tax compliance. Although the exact components of tax morale are not yet fully delineated, Congress and the IRS should begin now to shape and administer income tax laws in accordance with tax morale findings. Delay can only increase the chance that voluntary compliance will deteriorate given the interaction of an individual’s tax morale with elements of the external environment, such as other people and institutions. The tax gap, for example, is more than a problem of lost revenue; it is a visible sign of non-compliance that can create a downward spiral. Non-compliance among other taxpayers can decrease an individual’s own tax morale and compliance. Once tax morale dips, it is hard to restore it to prior levels. Ironically, then, the more the tax gap is publicized, the greater this danger becomes. Consequently, Congress and the IRS should act now to narrow the tax gap and to foster compliance generally. This Report offers the IRS several concrete suggestions for improving individual taxpayer compliance based on the tax morale literature.

Part II discusses methodology and the limitations of empirical research.

Part III briefly describes the tax morale literature, focusing on the main findings regarding: 1) cognitive and affective processes; 2) personal and social values/norms, especially procedural justice, legitimacy, reciprocity, and trust; 3) external activation and suppression of tax morale; 4) demographic factors; and 5) a new tax morale model for tax administration.

Part IV contains recommendations for the IRS. It presents three major recommendations and several more specific suggestions for the IRS to improve individual taxpayers’ voluntary compliance. First, the IRS should establish a department devoted solely to exploring tax morale issues and implementing the findings. Second, the IRS should adopt a tax morale approach to tax compliance that incorporates the findings of the research and responds to—and strengthens—taxpayers’ internal motivations to comply. Third, using tax morale research, the IRS should implement ongoing educational (long - and short term) programs and media campaigns. Although sticks as well as carrots are needed to ensure compliance, this Report examines only the carrots.

Part V provides a short conclusion.

Solutions to tax problems and California tax help from a qualified tax attorney is available by calling Mitchell A. Port at (310) 559-5259.

May 2, 2008

California's Collection Procedures Manual

Income tax owed but unpaid in California may be collected by the Franchise Tax Board (FTB) using any number of collection methods described in California's Collection Procedures Manual. The Manual describes the desired culture and philosophy for the Collection Program.

California's Collection Procedures Manual contains the following topics:

Introduction Section

Responsibility Section

Case Administration Section

Case Processing Section

Debtor Asset Location Section

Voluntary Case Resolution Section

Involuntary Case Resolution Section

Case Servicing Section

Special Processes Section

Glossary

If you have an income tax problem in California or with the IRS, call Mitchell A. Port for tax help at (310) 559.5259.