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ESTATE, TRUST, GUARDIANSHIP

Unfiled tax returns?

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“Better late than never” applies when it comes to filing income tax returns.

Here’s what you should know. 

Maybe you didn‘t get your 1040 done in time in a previous year and figured you couldn’t still file your income taxes. Or you thought you owed money that you didn’t have. The IRS knows that people file late sometimes, and it has systems in place to deal with that.

It’s absolutely critical that you file every year, for a variety of very good reasons. Failure to file means that you might:

  • Incur interest and penalties.
  • Lose a refund (you can claim a refund for up to three years after the return due date).
  • Reduce your Social Security benefits. If you’re self-employed and don’t file, you will not be credited for income that year.
  • May not qualify for credit and lending opportunities.
  • Certain professional licenses (CPA, legal) may be revoked in some states.
  • May be prohibited from serving in public office

Extenuating circumstances? Don’t Panic!

Were you or a family member extremely ill or disabled? Did you suffer severe hardships due to natural disasters? If you didn’t file because of hardships, we at Urbach & Avraham, CPAs can assist you in requesting an abatement from the IRS of penalties imposed due to the late filing.

File It ASAP

As soon as you realize you have a past-due tax return, you should prepare and file it.

If you can’t pay what you owe when you file, you can ask for an additional 60-120 days to fulfill your financial obligation. If that’s not enough time and/or you’re going to need to pay in installments, you can apply for an IRS Payment Plan.

What If You Don’t File?

The IRS may file a substitute return for you. If this happens, you may not get all of the deductions and credits that you should. We advise you to still file a tax return that includes everything, even if the IRS already prepared a substitute return. The IRS usually adjusts the return they created to reflect credits, deductions, and exemptions when they’re made aware of them.

The IRS will notify you if they file a substitute return. If you don’t’ file or submit a petition to Tax Court, the IRS will proceed with its proposed assessment, which will trigger a tax bill. Failure to pay it will result in your account going into the collection process. This can include the filing of a federal tax lien or a levy on your bank account or wages. If you continue to ignore the bill, you may be subject to additional penalties and/or criminal prosecution.

If prior year information is required, we can assist you in obtaining IRS transcripts. These transcripts provide all sources of payors of wages, interest, dividends, pensions and proceeds from sale of securities and real estate.

On Your Mark, Get Set, File!

Any correspondence from the IRS can create anxiety, as can realizing you missed a tax deadline. At Urbach & Avraham, CPAS, we encourage you to contact us if you’re concerned about a return you didn’t file. We can help you understand what your options are and how to proceed. We can assist you in abating penalties and obtaining IRS Transcripts if necessary. We can also help with tax planning throughout the year, so you don’t have to deal with a past-due return again.

 

Tax Tips for Newly Married Couples

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Checklist of tax and financial items for newly married couples:

Withholding – Newly-wed couples should consider changing their withholding. They should give their employers a new Form W-4, Employee’s Withholding Allowance. If both spouses work, they may move into a higher tax bracket or be affected by the Additional Medicare Tax.

They can use the IRS withholding estimator on www.irs.gov to help complete a new Form W-4.

Name and Address Change – When a name changes through marriage, it is important to report that change to the Social Security Administration. The name on your tax return must match what is on file at the SSA. To update information, taxpayers should file Form SS-5, Application for a Social Security Card, available at www.ssa.gov . If marriage includes a change of address, one should inform the IRS by sending Form 8822, Change of Address, available at www.irs.gov.

Filing Status – Married couples can file their federal income taxes jointly or separately each year. Usually, married filing joint is more beneficial, however couples should calculate the tax both ways to see which works best. If a couple is married as of Dec. 31, they are married for the whole year for tax purposes.

Prenuptial Planning – Part of the 2017 massive tax bill was the elimination of taxable and deductible alimony—which was in the tax code since the 1940s! As a result, prenuptials were turned on their heads unless they permitted a change for tax law changes. It is wise today for the pre-nuptial agreement to allow for changes in the tax treatment of alimony. Attorneys and their clients may consider wording which triggers changes automatically in the event of substantive changes in the tax treatment of alimony. Finally, not all states with an income tax follow the federal law. State tax law needs to be considered also. Litigation Support Partner, Jeff Urbach, works closely with divorce attorneys who can assist you with pre-nuptial agreements.

Marriage after Divorce? If a couple divorces and doesn’t change their wills, NJ statute dictates the outcome. Divorce revokes any dispositions of property made between former spouses prior to divorce. Will provisions leaving property to former spouse have no effect and property passes to next beneficiary named in will. After divorce, and especially before remarriage, one should consult with an elder law attorney. We work closely with many competent estate attorneys whom we can recommend.

Retirement Accounts – If a former spouse was named as the beneficiary of a qualified retirement plan, this will remain intact despite a divorce. After divorce, and especially before remarriage, one should review the beneficiary designations of all retirement accounts.

Everyone’s tax and financial situation is different. Please contact a tax professional at Urbach & Avraham, CPAs about your tax options. Look before you leap!

 

Social Security Survivor Benefits

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Various benefits are available under the Social Security Laws to the survivors of a deceased worker who, at death, had enough credits and was fully insured.

 

At what age can a widow or widower collect? Widow’s or widower’s benefits, albeit reduced, are available when the surviving spouse reaches age 60, provided the widow or widower has not remarried before age 60. If the surviving spouse is disabled, benefits are available at age 50. If a widow or widower is receiving benefits based on the Social Security earnings of his or her late spouse, that widow or widower may, at a later date, switch to his or her own retirement benefit as early as age 62. This would make sense if the widow or widower own retirement benefit was of a greater amount than the survivor’s benefit.

Are survivor benefits available to divorced spouses? Survivor benefits are also available to divorced spouses, following a marriage to the now deceased worker that had lasted at least 10 years. Remarriage may disqualify the widow or widower from survivor benefits under certain circumstances. The amount of the benefit is pegged to the deceased worker’s “primary insurance amount” (PIA) rather than the widow’s or widower’s. The PIA is the benefit a person would receive if he/she elects to begin receiving retirement benefits at his/her normal retirement age.

Do the minor children of a deceased employee and dependent parents have benefits? Survivor benefits are also available to minor children of the deceased worker if they are in elementary or high school, but not college. Survivor benefits may be available to elderly (age 62 or older), dependent parents of a deceased worker if they do not have meaningful Social Security Benefits of their own. A family maximum benefit generally applies.

Surviving spouses, children and parents are entitled to various substantial benefits depending upon the specific circumstances. Urbach & Avraham, CPAs’  partner, Aryeh Levy, specializes in maximization of one’s Social Security benefits.  Please contact us for a consultation regarding your situation.

 

Did Grandma Move in with Your Family?

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Grandma is struggling and someone must take her to her many doctor visits, do her shopping and handle all her finances. Grandpa now needs assistance with daily living activities. It is much easier to take care of grandparents if they live closer…so, they move into your home.
As nursing home costs increase, adult children are finding that living together is an excellent arrangement, both financially and emotionally. However, having a parent move in is a huge adjustment and many logistics are involved.
Siblings tend to resent that one child may be enriching himself under the guise of taking care of Mom. They will be very concerned about many issues which can be subject to great controversy including:
• Compensation: Should Grandpa pay rent? How much can or should the parent contribute to the household? Should Grandma compensate the care-giver child? Will the adult child reduce his work hours or take early retirement as a result of the care-giving duties?
• Renovation of Home: Will the house need to be remodeled to accommodate an aging parent? Usually a room must be converted to a bedroom. Bathrooms need to be fitted with equipment for the elderly. Ramps are needed for easy access to the home.

  • Will the parents gift the funds to renovate?
  • Will the parents retain an ownership interest in the house?
  • Will this affect the parent’s eligibility for Medicaid?

• Tax ramifications: Can the adult child take Grandpa as a dependent and qualify as head of household?

  •  Can someone deduct as a medical expense the renovations to the home done to accommodate a disabled person?

• Healthcare: Should Grandma attend an adult day care? Will home-health aides be needed? What level care is needed? How do we properly pay the aides?
• Finances: Should Grandpa execute a Power of Attorney or is a Guardian needed? Will Mom qualify for Medicaid? Should an accounting be provided periodically to address financial concerns on an on-going basis? This may eliminate suspicions and avoid brewing family disputes.
There are many legal, financial and tax issues involved. Even if there are no siblings, all these items should be reviewed with an elder law attorney and a CPA. We work with many competent elder-law attorneys who can establish and document the plan most suitable for your family. We can advise as to the many tax ramifications. A plan well-structured and documented can reduce income taxes, maximize funds for grandparent’s care, enable your parent to qualify for Medicaid and avoid explosive family battles. Call our CPA firm to see how we can assist.

Taking Care of Mom’s Finances? Need an Accounting?

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For several years you’re taking care of Mom, dashing her to many doctors and handling her finances. All this while juggling a full-time job. Suddenly your siblings ask, “What have you done with Mom’s money?” “Please account for Mom’s funds for the years you were in charge.”

As children you fought over the teddy bear. Now you’re fighting over a million dollars or more. Family members tend to accuse the financial in-charge of mismanagement, improper transactions and pocketing funds. The financial in-charge may be a guardian, trustee or executor with control over a trust or estate, or a Power of Attorney in charge of the assets of an aging person.

Family monetary disputes can escalate quickly. Providing an accounting to interested parties can prevent explosive family battles and avoid costly litigation.

An accounting? No problem! After all, you kept all the bank statements and receipts for every expense. However, unfortunately, a formal accounting must be in a specific format strictly mandated by NJ Statutes in the Uniform Principal and Income Act.  The following do not constitute a formal accounting:

  • A stack of all the bank and brokerage statements
  • Boxes, envelopes and binders of all receipts for all expenses paid
  • The check register for the estate checking account
  • The fiduciary income tax returns for the trust or estate (Form 1041) or the individual income tax returns (Form 1040)
  • An Excel summary of all expenses paid
  • A profit and loss summary from Quickbooks
  • Mom’s medical records

Preparing a formal account can be an overwhelming process for a fiduciary.  The starting point is a list of all assets for the first day of the account period. All receipts, disbursements, gains and losses from disposition of assets, transfers and distributions are detailed.

We can relieve your burden, take your crates of documents and convert them into a formal accounting.  If there is a dispute about a specific asset or disbursement, we will add additional documentation to clarify, strengthen and justify our client’s position. Please contact us to see how our CPA firm can assist you.

 

 

 

Executor of Estate? Use our Executor Checklist as your Road Map

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The responsibilities of an Executor aren’t limited to deciding who gets which assets – it also means identifying all the decedent’s assets, and ensuring that the proper paperwork is filed with the

Overwhelmed?

IRS, the State and other agencies.To help you through this overwhelming time, Urbach & Avraham, CPAs has prepared an Executor Checklist that outlines the issues that an executor needs to consider.

Click here to access the:  Executor Checklist

 

 

The checklist is a roadmap of tasks, from probating the will, to filing a final Income Tax return and other required estate filings, to dealing with beneficiaries and distributing the assets. It’s loaded with tips on how to locate all assets, save various taxes and efficiently manage the estate administration.

This handy checklist is packed with reminders about technical questions to ask your CPA, legal or other financial advisor. We work with many qualified estate attorneys to seamlessly coordinate your situation.

Finally, the Urbach & Avraham Executor Checklist highlights the complexities presented when a family owned business is involved. Was there a buy sell agreement? Who is paying the estate tax on the business, and are funds available to pay the tax?

As an executor, you’re already coping with a lot of emotional and other issues. We’re available to help lift the financial burden by assisting you with accounting and tax matters during this difficult time.