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Taxes

Got Unreported Foreign Assets? Get Out of Jail Free

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The FBAR: Who Should File? Do you have income overseas you forgot to report? Did Grandpa leave you his foreign bank account when he passed away? If you have foreign bank accounts holding more than $10,000 in the aggregate anytime during the year, you are required to file an FBAR (Report of Foreign Bank Accounts) by June 30th of the following year. It doesn’t matter whether the foreign accounts generate income or not; just owning them, or having signature authority, requires you to file.

What’s the Big Deal? Failure to file can result in serious consequences. The sanctions for not completing the FBAR include numerous severe civil penalties and potential prosecution followed by a term in federal prison. [Read more…] about Got Unreported Foreign Assets? Get Out of Jail Free

Alimony Article in NJ Family Lawyer Written by Jeffrey Urbach

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Our litigation support partner Jeffrey Urbach has co-authored a just-released article for the New Jersey Family Lawyer magazine, June 2012 edition. The article, entitled “Alimony and Taxes,” discusses the basic rules governing alimony as well as lesser known fine points. Jeff covers alimony recapture rules, deductibility of attorneys’ fees, using QDROs to enforce alimony, and alimony trusts. [Read more…] about Alimony Article in NJ Family Lawyer Written by Jeffrey Urbach

Want to Share Your Lottery Winnings? It Could Result in Gift Tax

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Most people fantasize about what they would do if they won a multimillion dollar lottery. Hopefully part of that fantasy is to give back to parents or close relatives who have been there for them. What most people don’t realize is that they can get slapped by the IRS with a considerable gift tax as a result of this generous gesture. In a Tax Court case this is precisely what played out. [Read more…] about Want to Share Your Lottery Winnings? It Could Result in Gift Tax

Discharge of Executor IRS Liabilities

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While being the executor or executrix of an estate has its financial advantages, it can carry an enormous liability as well. Suppose Aunt Gertrude dies, leaving behind a $1 million dollar estate. You, the executor, fairly distribute the estate to the beneficiaries. Most people would assume it’s all over at that point. The shocking reality is that if Gertrude had an income or gift tax liability when she died, that liability now rests squarely on your shoulders. As far as the IRS is concerned, the executor or executrix should have kept the funds in the estate until the liabilities were paid off, even if he or she knew nothing about the tax liability at the time of the distribution. The only door they will come knocking on is yours. There is hope however, in the form of three important IRS forms that help alleviate your liability as executor or executrix: [Read more…] about Discharge of Executor IRS Liabilities

More on Retention of Records

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For those who want to be extra cautious about retaining financial records, here are specific reasons why you should keep your actual tax returns even if the statute of limitations has expired. And what exactly are the statutes of limitations which are relevant?

Tax Records

Supporting documents, such as 1099’s, W-2’s, receipts for charitable contributions, etc. should be kept for 3 years after the return was filed or the due date, whichever is later. For example, the documents for your 2011 return filed March 1, 2012 should be retained until April 15, 2015. Note that if your 1099 is attached to a brokerage statement that shows evidence of the purchase cost of a financial asset it’s critical to hold onto the statement until you dispose of that asset.

As for the tax returns themselves, it’s a good idea to save them forever. They may be needed for Medicaid, immigration, pension, divorce and other purposes. They may also contain useful data in filing future returns.  At a minimum we recommend retaining them for 10 years.  Certain items on a tax return affect later years and need to be kept until the statutes of those later years’ tax returns expire. For example: [Read more…] about More on Retention of Records

Gifts in Contemplation of Death: The Burden of Proof is on You

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An important and commonly misunderstood law regarding gift giving prior to one’s death was recently highlighted in a NJ case. As background, when a child inherits from a parent there is no New Jersey inheritance tax, whereas there is a tax if any other relative or friend inherits. As a result, if one gifts an unusually large amount of money within three years of his or her death to someone other than a child, the possibility that the gift   was made to avoid paying state inheritance tax comes into   question. A common misunderstanding is that unless there is reason to assume the giver was aware of his impending death the transfer is not a taxable one.  In fact, the truth is quite to the contrary. [Read more…] about Gifts in Contemplation of Death: The Burden of Proof is on You