California Tax Attorney Blog

If you live in California, you should have a will. This is true whether you have young children, are single, married, or own even a nominal amount of personal assets or property.

You should have a will in order to control the disposition of your property.

Even if you have a living trust you should also have a will because without a will, any property not named in the living trust will pass according to California probate law rather that according to your wishes. Moreover, when you die without a will, the state will distribute your property according to a preset formula, excluding charities and relatives, unmarried partners and friends.

To create your will you only need to be "of age" and of "sound mind".

If a will is valid in the state where it was created, California probate courts will almost always consider it valid. The only requirement in California for a will to be valid is that it must be signed by the person making the will and at least two disinterested witnesses. To make it easy to make a will, California has created a form called a statutory will in which you fill in the blanks. California also recognizes holographic wills which is a will entirely in your own writing and signed by you without a witness. California does not require that wills be notarized.

For a free consultation, call a California probate law attorney. Call Mitchell A. Port at (310) 559-5259.

For 2012, no late filing penalties apply when missing the April 15 tax filing deadline. That's because for this year, the federal tax filing deadline is April 17. Since April 15 falls on a Sunday, the deadline is moved to the following Monday; but because Monday is Emancipation Day in Washington, D.C., the filing deadline is moved to the following Tuesday, April 17. Here's an explanation from the IRS in one of it's "tax tips".

Help from a tax litigation attorney is at hand. Call Mitchell A. Port at (310) 559-5259.

Right after the New Year, the Internal Revenue Service released new proposed guidelines designed to provide relief to more innocent spouses requesting equitable relief from income tax liability. In an earlier blog post, other rule changes were discussed.

A Notice proposing a new revenue procedure revises the threshold requirements for requesting equitable relief and revises the factors used by the IRS in evaluating these requests. The factors have been revised to ensure that requests for innocent spouse relief are granted under section 6015(f) when the facts and circumstances warrant and that, when appropriate, requests are granted in the initial stage of the administrative process. The new guidelines are available immediately and will remain available until the finalized revenue procedure is published. The IRS will immediately begin using these new guidelines when evaluating equitable relief requests.

"The IRS is significantly changing the way we determine innocent spouse relief," said IRS Commissioner Doug Shulman. "These improvements should dramatically enhance our process to make it fairer for victimized taxpayers facing difficult situations.”

This is the second major change made to the innocent spouse program. In July, the IRS extended help to more innocent spouses by eliminating the two-year time limit that previously applied to requests seeking equitable relief.

Need help? Call a qualified tax litigation attorney at (310) 559-5259.

Q: Where is the list for probate properties that are for sale in Los Angeles?

A: There is no list. However, posting for upcoming petitions in the Central District can be found on the 1st Floor of the Stanley Mosk Courthouse. Each Courthouse has a posting area of their upcoming petitions as well.

Q: Does the Court provide a list of probated property?

A: The Court does not provide such a list.

JK Harris & Co. - "the nation's largest tax representation firm" - is in bankruptcy. It may stop trying to restructure its business to liquidating its business instead.

This case shows how hard it can be to settle tax disputes for “pennies on the dollar”. JK Harris advertised that it could resolve people's tax debts for "pennies on the dollar." It appears that it had its own problems: the cost of large settlements related to multiple claims that it misled consumers. In many cases, attorneys general complained that the company told consumers it could resolve their tax problems, and took their payments, when no such relief was possible for those particular clients.

Its own employees have now become creditors for unpaid wages. No doubt it has payroll tax problems with the Internal Revenue Service because if it didn’t pay wages, it probably didn’t pay payroll taxes. It probably won’t qualify for a settlement involving pennies on the dollar.

Company founder and Chief Executive Officer John K. Harris will likely be assessed by the IRS for all the unpaid trust fund taxes owed to the government if any are due and he's found to be both willful and responsible for nonpayment. His personal assets will probably be subject to tax claims made by the Internal Revenue Service.

Work with a reliable attorney to resolve your tax problems. Call Mitchell A. Port at (310) 559-5259.

As of this past Monday, the Internal Revenue Service reopened the offshore voluntary disclosure program to help people hiding offshore accounts get current with their taxes and announced the collection of more than $4.4 billion so far from the two previous international programs.

The IRS reopened the Offshore Voluntary Disclosure Program (OVDP) following continued strong interest from taxpayers and tax practitioners after the closure of the 2011 and 2009 programs. The third offshore program comes as the IRS continues working on a wide range of international tax issues and follows ongoing efforts with the Justice Department to pursue criminal prosecution of international tax evasion. This program will be open for an indefinite period until otherwise announced.

“Our focus on offshore tax evasion continues to produce strong, substantial results for the nation’s taxpayers,” said IRS Commissioner Doug Shulman. “We have billions of dollars in hand from our previous efforts, and we have more people wanting to come in and get right with the government. This new program makes good sense for taxpayers still hiding assets overseas and for the nation’s tax system.”

The program is similar to the 2011 program in many ways, but with a few key differences. Unlike last year, there is no set deadline for people to apply. However, the terms of the program could change at any time going forward. For example, the IRS may increase penalties in the program for all or some taxpayers or defined classes of taxpayers – or decide to end the program entirely at any point.

“As we’ve said all along, people need to come in and get right with us before we find you,” Shulman said. “We are following more leads and the risk for people who do not come in continues to increase.”

The third offshore effort comes as Shulman also announced today the IRS has collected $3.4 billion so far from people who participated in the 2009 offshore program, reflecting closures of about 95 percent of the cases from the 2009 program. On top of that, the IRS has collected an additional $1 billion from up front payments required under the 2011 program. That number will grow as the IRS processes the 2011 cases.

In all, the IRS has seen 33,000 voluntary disclosures from the 2009 and 2011 offshore initiatives. Since the 2011 program closed last September, hundreds of taxpayers have come forward to make voluntary disclosures. Those who have come in since the 2011 program closed last year will be able to be treated under the provisions of the new OVDP program.

The overall penalty structure for the new program is the same for 2011, except for taxpayers in the highest penalty category.

For the new program, the penalty framework requires individuals to pay a penalty of 27.5 percent of the highest aggregate balance in foreign bank accounts/entities or value of foreign assets during the eight full tax years prior to the disclosure. That is up from 25 percent in the 2011 program. Some taxpayers will be eligible for 5 or 12.5 percent penalties; these remain the same in the new program as in 2011.

Participants must file all original and amended tax returns and include payment for back-taxes and interest for up to eight years as well as paying accuracy-related and/or delinquency penalties.

Participants face a 27.5 percent penalty, but taxpayers in limited situations can qualify for a 5 percent penalty. Smaller offshore accounts will face a 12.5 percent penalty. People whose offshore accounts or assets did not surpass $75,000 in any calendar year covered by the new OVDP will qualify for this lower rate. As under the prior programs, taxpayers who feel that the penalty is disproportionate may opt instead to be examined.

The IRS recognizes that its success in offshore enforcement and in the disclosure programs has raised awareness related to tax filing obligations. This includes awareness by dual citizens and others who may be delinquent in filing, but owe no U.S. tax. The IRS is currently developing procedures by which these taxpayers may come into compliance with U.S. tax law. The IRS is also committed to educating all taxpayers so that they understand their U.S. tax responsibilities.

More details will be available within the next month on IRS.gov. In addition, the IRS will be updating key Frequently Asked Questions and providing additional specifics on the offshore program.

California became the seventh state to adopt two new subtypes of stock corporations — a “flexible purpose corporation” and a “benefit corporation" as of January 1, 2012. Now, investors and entrepreneurs can pursue both social and economic objectives allowed by the new corporation subtypes. These two types of new entities may sound like marketing hype but they help shield them against lawsuits brought by shareholders who say that company do-gooding has diluted the value of their stock.

The new stock corporation subtypes differ from traditional for profit corporations that are organized to pursue profit and nonprofit corporations that must be used solely to promote social benefits.

Entrepreneurs who wanted to incorporate social causes or green initiatives often had to become non-profits which limited their ability to raise venture capital.

Approval from 2/3 of a company’s outstanding shareholders is needed to become a benefit corporation. A similar vote is needed to return to the traditional type of corporation.

The Articles of Incorporation for a benefit corporation must include the following additional statement: “This corporation is a benefit corporation.” The Articles of Incorporation for a benefit corporation may identify one or more specific public benefits that shall be the purpose or purposes of the benefit corporation. For complete legal authority, look at California Corporations Code sections 14600-14631.

For a flexible purpose corporation, the Articles of Incorporation must include one of the purpose statements required by California Corporations Code section 2602(b)(1), as well as a statement that a purpose of the flexible purpose corporation is to engage in one or more of the specific purposes provided in California Corporation Code section 2602(b)(2). For complete legal authority, look at California Corporations Code sections 2500-3503.

To help form one of these two new corporations, call business attorney Mitchell A. Port at (310) 559-5259.

You may be familiar with the so-called "national standards" used by the Internal Revenue Service in calculating repayment of delinquent taxes. As of October 3, 2011, new "standards" were issued. Those standards are used so that all taxpayers located in a particular locale are treated the same as every other taxpayer in the same locale; no longer does the Service retain the same degree of discretion it used to have when evaluating one's ability to pay those taxes.

For instance, for Los Angeles County, the national standards for a family of 5 or more for housing and utilities is $2958 per month.

The maximum allowed for food, clothing and miscellaneous for a family of 5 is $1639 per month.

The maximum amount for vehicle ownership costs for 2 cars is $992 per month while the maximum operating costs for 2 cars is $590.

Separate from health insurance costs, the maximum allowed for out of pocket health care costs for those over age 65 is $144 per month and for those under age 65 is $60 per month.

To the extent the information on the form 433-A "Collection Information Statement" exceeds the maximum national standards for a category of expenditure, the Internal Revenue Service often simply treats the excess expenditure as if it was not incurred and thus the excess amount is counted as "available" to pay delinquent taxes. For example, $2958 is the maximum allowed for housing and utilities but you may actually spend $8389. The extra $5431 will likely be counted as "available" to pay taxes.

When the amount claimed on the form 433-A is more than the total allowed by the national standards, you must provide documentation to substantiate those expenses are necessary living expenses. The IRS won't simply allow a large mortgage obligation to be sufficient to demonstrate that the expense is "necessary" since that might allow an unlimited amount to be spent on a mortgage and leave nothing left with which to pay delinquent taxes. The IRS will not subsidize your standard of living by allowing a large mortgage while taxes remain unpaid.

I hope this casts the proper light on what lies ahead when negotiating an installment agreement.

For tax help, call a qualified tax attorney. Call Mitchell A. Port at (310) 559-5259.

Sometimes probate attorneys in California will provide free forms just for the asking. One free form is the California Advance Health Care Directive found in the Probate Code under Sections 4700-4701. The Advance Health Care Directive used to be known as a living will, a pull-the-plug form, a right-to-die form, DNR, and the end of life form.

The form is free at this link.

Other articles in this blog have dealt with related issues such as the use of the Directive for Older Adults With Diminished Capacity, estate planning through the use of Wills, Living Trusts, Powers Of Attorney, Health Care Directives, Revocation Of California's Advance Health Care Directive, and finally the oft asked-about topic concerning Advance Health Care Directive For Your Child.

This and other estate planning topics ought to be discussed with your California estate planning attorney.

There is a variety of petitions I may file in a California probate Court related to trusts. Here is a list of some of them:

Spousal Property Petition (discussed in more detail below)

Petition to Establish Creditors Claim Rrights

Petition to demand a copy of the trust

Petition to demand an accounting

Petition to confirm assets into trust

Petition for Breach of trust

Petition for heirship

Petition for appointment of trustee

Petition for removal of trustee

Petition to Determine Validity of Trust Amendment

Petition for instructions

A Spousal Petition is often the most economical way to transfer property to the surviving spouse. California Probate Code Section 13500 refers to property passing to the surviving spouse without administration. It specifically provides for distribution to the surviving spouse by will or by intestate succession “and no administration is necessary.” It is true that administration is not necessary if the property is personal or jointly titled. However, if the asset is only in the decedent’s name or is real property held in community property without also providing “with right of survivorship”, then a spousal property petition, pursuant to California Probate Code Section 13650, is likely going to be required to clear title to the assets.

Call a California probate attorney for help. Call Mitchell A. Port at 310.559.5259.

The California Probate Code contains a lot of rules applicable to the one who serves as the trustee of a trust. Starting with Code section 16000, California's laws delineate the conduct of trustees ranging from activities the exercise of discretionary power to the content of reports prepared for the benefit of beneficiaries.

Selecting a trustee to run your estate in your place at the time you die ought to be done carefully and with a clear understanding of what the job requires. Once you've made up your mind about who to name as trustee in your trust, it is prudent to get that person's consent to serve as your trustee. It is also important that the trustee understand the principles and duties governing his or her conduct vis-a-vis the trust. Here are a few things to know:

Accounts and accounting, beneficiaries

Actions and proceedings, defense and prosecution

Beneficiaries, reporting of information and accounts

Charitable trusts

Claims, enforcement

Cotrustees

Delegation of duties, restriction

Discretionary powers, reasonable standards of care

Financial institutions, compensation for provision of services

Impartial treatment of beneficiaries

Notice to creditors

Preservation of trust property

Private foundations

Productivity of trust property

Reports, beneficiaries, when not required

Separation from property not subject to the trust

Skills, duty to apply fully

Split interest trusts

Violation of duties

For a free telephone consultation about your probate, call Los Angeles attorney Mitchell A. Port at (310) 559-5259.

On November 21, 2011, the IRS released its most recent publication on the topic of federal estate and gift taxes. The pub can be accessed at this link by clicking here. This updates the version released on December 14, 2009.

Most gifts are not subject to tax. Likewise, most estates are not subject to estate tax.

If you die during 2011, you can pass estate tax free up to $5,000,000. For those dying in 2012, add another $120,000. Gifts in amounts up to those figures may also be made tax free.

An extra tax free gift is permitted during any given year of up to $13,000.

Related articles on this topic include:

New Tax Law Changes The Estate And Gift Tax Rules

Estate Planning In View Of Possible Tax Law Changes