Financial abuse of the elderly is a huge and growing problem. A recent MetLife study pegged the annual cost at nearly $3 billion, a 12% increase from 2008. Many financial experts predict the toll will continue to rise as baby boomers age and their cognitive abilities decline.
From http://www.witness.org and http://www.ncoa.org/ An Age for Justice; Elder Abuse in America, a video produced by the Elder Justice Now campaign, shows the families and individuals whose lives have been turned upside down by elder abuse. The video provides stark proof of the financial, emotional, and phsycial and psychological impact of the violence and abuse that an estimated five million Americans face every day. We hear from Vicki Bastion, 92, who installed a security gate inside her home to protect herself and what valuables she had left from her grandson and his gang‐related friends; Betty Beckles talks about her daughter beating her; Bob Lee tells us about his father, who was victimized by a paid caregiver causes depression that contributed to his death; and Pat Smith tells us about her husband, who has Alzheimers disease and was victimized financially by a young woman in Las Vegas who walked with $750,000. The video was produced by the National Council on Aging and WITNESS, to shine the light on what one interviewee called a dark mark on our humanity.
Cynthia Healy strongly recommends watching this video. Financial abuse of seniors is a rapidly growing problem, often being called the “Crime of the 21st Century.” Seniors are targets for corrupt telemarketers, lotto scammers, con-artists and even friends, family members or caregivers. Financial abuse can happen to anyone and the results can be devastating.This video has been uploaded by California Office of the Attorney General.http://video.google.com/videoplay?docid=5891979494411941260#
Cynthia Healy, President and Founder of Security Financial Advisors Inc. in Monterey. speaks to seniors about the acronym, SCAM: S — Surround yourself with family and friends. Do not isolate yourself. C — Caregivers. Do your own checks of caregivers even if they come from an agency. A — Ask for assistance from professionals such as accountants, attorneys, etc. Build a team so there are checks and balances. M — Maintain security over your personal information. There was no shortage of horror stories at the Elder Financial Protection Network’s 6th Annual Call to Action event in San Francisco: A young man sells a 75-year-old woman an expensive vacuum cleaner and comes back weeks later and asks to use the phone. He ties her up with duct tape, stuffs her in her own car, beats her repeatedly, makes charges on her credit card during her 26 hours in the trunk and has plans to kill her. She is found when an alert sheriff’s deputy follows the car and stops it for running a red light. A Las Vegas waitress befriends an elderly customer and then tells him the sad tale of her life. The customer gives her a $500 check. In conversation, she also gets his date of birth and his Social Security number. Eventually, she gets $750,000 through use of the identifying information she has coaxed out of him. A caregiver starts out working at a house a couple of hours a day and then says he could give better care by moving in. He gains the homeowner’s trust by cooking, cleaning, taking care of whatever needs doing. Eventually — in this case, it was several years — he controls the finances, takes title to the house and cleans out the bank accounts. To see the complete article in the California Bar Journal go to our links page and click on The State Bar of California link.
This interview provides helpful information about dealing with Elder Care issues. Mark of KABL Clear Channel radio does an excellent job of getting the most out of his time with Cynthia Healy, President of Security Financial Advisors, Inc.
M:Cindy, what exactly does Security Financial Advisors do? C:Mark, we work to provide a safe environment for families to deal with financial matters as family members become older or disabled. M:What kind of financial matters? C:Our services include bill paying, retirement planning, and trustee and conservatorship services. Most seniors do not want to become a burden to their children. They want to be independent for as long as possible. We help them accomplish this by working with the family to see what is needed now and what may be needed in the future. M.Isn’t is hard for people to involve non-family members in their money matters? C:I get that question a lot. It is a matter of trust and experience. Do you think it is hard to involve non-family members with health care? When you look for a doctor, don’t you look for a physician who specializes in the area you need help with? It is no different with financial matters. Families should look for a licensed professional who specializes in senior issues and is knowledgeable in trustee and conservatorship matters. M:I guess you’re right. I never thought about that. C:Many families try to deal with aging parents the best way they can. The burden of raising your own kids and handling your parents’ finances can be overwhelming. Our job is to educate people that there are honest answers available to them. You don’t have to be a super hero and try to do it all by yourself. M:If someone calls Security Financial Advisors and says they need help with an aging parent. How does it work? What do you do? C:The first thing we do is sit down with the family members that are involved. Some professionals want to isolate the senior and work only with them. I believe this is wrong. Family awareness and communication are the best way to understand the concerns and come up with the solutions. I feel so strongly about this that we offer a one-half hour consultation at no charge. Every family has different needs. People need time to explain their situation and learn what services we offer to help them. M: Once the half an hour is over, what does it cost? C:Depending on the service provided, our rates range from $35 to $150 per hour. It may sound like a lot of money, but just as you would pay for a doctor’s visit to diagnose what is wrong, some families need a diagnosis of what needs to be done to help the senior put their financial matters in order. M:What does the client need to bring to the consultation? C:They just need to bring their questions and concerns about how to handle what is happening with their parent. We will help them identify areas of concern and possible solutions. M:Do you prepare wills and trust documents? C:No, we are financial advisors not attorneys. We encourage clients to bring their wills and trusts. We will review them and make recommendations accordingly. We also encourage clients to complete an advance health care directive. M:What is that? C:An advance health care directive is the legal document used to specify a person’s wishes should they become ill and not be able to speak for themselves. Sadly the Terri Schiavo story is a case in point for the need to have this legal document. It specifies how you would like to have your healthcare handled in the event you are not capable of making the choices yourself. Every adult family member should have one. M:You are absolutely right. What about elder abuse? We see and hear more and more about it. C:I actually do a fair amount of public speaking on financial elder abuse. Financial elder abuse often happens when a senior is isolated or alone. It can also happen if there are not independent professionals involved to make sure that family members are not making bad choices with a senior’s assets. I regularly speak to seniors on ‘How to Avoid Fraud’ and ‘When Do You Need Help With Financial Matters’. I also speak to groups on Financial Elder Abuse Awareness and Prevention. My hope is to educate as many people about this as possible. If we can protect just one person from abuse or fraud, it is worth it. M:Is there a charge for groups to have you come and speak to them. C:No, this is our way to give back to the community and hopefully protect our seniors. M:Well Cindy, it sounds like Security Financial Advisors is a good resource for our listeners.
According to the 2000 census, one out of every seven Americans is over age 60. The 1998 National Elder Abuse Incidence Study reports that, in 1996, more than 550,000 adults age 60 and over suffered some type of abuse or neglect (including self neglect). Furthermore, although those 60 and over account for 15 percent of the population, a full 30 percent of all cases of fraud are committed against them.
Many CPAs are finding that their client base is aging, just as the population as a whole is growing older. The ability to identify the types and symptoms of abuse and fraud perpetrated on older adults puts the CPA in a position to provide assistance to victims.
Knowledge of the types and symptoms of abuse and fraud will become an integral part of the practice of the CPA who provides PrimePlus/ElderCare services, especially when dealing with older adults who are dependent, financially or otherwise, on others.
Victims of fraud and abuse have been shown to have a shorter life expectancy than the nonabused. In addition to shorter life spans, victims suffer from the loss of their dignity, independence, homes, life savings, health, and security.
Types of Abuse and Neglect
The six main types of elder abuse are:
1. Physical abuse 2. Sexual abuse 3. Domestic violence 4. Psychological abuse 5. Financial abuse 6. Neglect and self-neglect
The indicators of these types of abuse are recognizable.
Physical Abuse
Any physical pain or injury willfully inflicted upon an elder by a person who has care or custody of, or who stands in a position of trust with, that elder constitutes physical abuse. This includes, but is not limited to, direct beatings, sexual assault, unreasonable physical restraint, and prolonged deprivation of food or water. Warning signs include bruises, cuts, broken bones, and frequent visits to the doctor.
Sexual Abuse
Another form of physical abuse is sexual abuse or any nonconsensual sexual contact with an elder adult. This includes sexual contact with an adult who is incapable of giving consent. Indicators of this type of abuse include genital bruising and the constant effort of the older adult to maintain physical space between himself or herself and the suspected abuser.
Domestic Violence
Domestic violence is the abuse, usually physical, of one spouse by another. It is predominantly the abuse of the wife by the husband. It may result from a change in lifestyle brought on by a spouse’s illness or retirement.
Psychological Abuse
The willful infliction of mental suffering by a person in a position of trust with an older adult constitutes psychological abuse. Psychological abuse includes verbal assaults, threats, instilling fear, humiliation, intimidation, or isolation.
Financial Abuse
Any theft or misuse of an elder’s money or property by a person in a position of trust with an elder constitutes financial abuse. There are many examples, from simple theft to the forging of wills and powers of attorneys.
Third-party (that is, noncaregiver) abuse is also much too common. Scams include providing unnecessary or substandard home repairs, selling inappropriate financial products, and identity theft (see www.consumer.gov/idtheft). Warren, 68, for example, received a call from a woman identifying herself as being “from the bank.” She explained that there was a computer error at the bank and she wanted to verify Warren’s personal information. Warren gave the caller his date of birth, Social Security number, and bank account numbers. Within days, his accounts were emptied.
Neglect and Self-Neglect
The failure of any person having the care or custody of an elder to provide that degree of care which a reasonable person in a like position would provide constitutes neglect. Neglect includes the failure of a caregiver to provide for the safety of an older adult by, for instance, removing the handrails in a bathtub.
Self-neglect is the failure to provide for oneself through inattention or dissipation, for example, refusing necessary medication. Consider the case of Elaine, 89, who awoke in an ambulance. The last thing she remembered was getting ready to eat dinner. The paperboy had called the police when Elaine’s papers began to pile up for three days. Elaine became disoriented and lost consciousness when she did not take her medicine. Her medications cost $440 a month, and Social Security is only $510. Sure, Elaine has some savings, but she felt that she may need that money some day.
Profile of an Elder Abuser
Not surprisingly, there is no surefire way to determine whether someone is an abuser. Nevertheless, there are certain warning signs, such as the following:
•Caregivers (including family members) with financial problems •Caregivers (including family members) with alcohol or substance abuse problems •An older adult’s “new best friend” •Inappropriate displays of affection by the caregiver •Unusual concern voiced by the caregiver about the older adult’s spending patterns •A caregiver’s refusal to permit friends and relatives of the older adult to visit
Dealing With Suspected Abuse
If you suspect that an adult is being abused, call Adult Protective Services, located in the local Department of Human Services. If the abuse is occurring in an institutional setting, such as a nursing home, call the Long Term Care Ombudsman (http://www.Itcombudsman.org/static_pages/help.cfm). You can also get the phone number of the Adult Protective Services and your area Long Term Care Ombudsman from your local Area Agency on Aging. You will find that agency listed in the yellow pages of your telephone directory under the classification “Senior Citizens’ Services & Organizations.”
If you believe the older person is in immediate danger, or you’re not sure who to call, call your police or sheriff’s office or 911.
By Michael David Schulman CPA/PFS
ONE IN EIGHT Americans are at least 65. Nearly 5 million are 85 or older. And many of them are sitting ducks
My father was one of them.
Pop was 80 when Mom died, after a long and debilitating illness. He was sad and lonely, since I and my two brothers, Jim and Don, lived in different parts of the country. To fill the void, Pop began spending a lot of time with a woman 29 years younger, someone who managed to convince him that only she, not his three children, cared about his will-being. As his once-quick mind slipped into dementia, we believe Pop succumbed to what the experts call a sweetheart scam.
FINANCIAL ABUSE of vulnerable older people is widespread. Although these crimes are hard to measure, 45,000 cases annually are logged across the country by Adult Protective Services. Lori Stiegel, associate staff director of the American Bar Association's Commission on Law and Aging, says that only one in five cases of elder financial abuse get reported, suggesting that there may be as many as 225,000 cases a year. Other experts say the underreporting may be as high as one in 20. Why? Many people are reluctant or embarrassed to report a case, because the abuser is often a member of the immediate family.
"Financial elder abuse is being called the crime of the 21st century," says Mary Twomey, director of elder abuse prevention for the Institute on Aging in San Francisco. While the crime can be perpetrated by career con artists (including home-and auto-repair scammers and one-time opportunists), hired caretakers and "new best friends," it's most commonly committed by relatives or by other known and trusted individuals. The sweetheart scam-an exploitation through romantic or emotional attachment-is one example.
ALTHOUGH financial protections can be put into place in advance, too many vulnerable and aged people aren't abuse-proof. It's never too early to take precautions for your own protection or to help your parents or other family members. What the experts advise:
* There's a lot of paperwork involved in aging: wills, power-of-attorney documents, living wills and/or health care powers of attorney, perhaps a trust. Getting good legal advice, from someone with your parents' best interests at heart and who is familiar with elder law, is essential. Go to the National Academy of Elder Law Attorneys website (www.naela.org) to locate an elder-law attorney in your area.
* Sit down with your parents and have the tough conversation on everything from funeral choices to money management. Get their wish lists: where and how they want to live (at home, with children, in an assisted-living or nursing home). Determine whom they want to make major financial and medical decisions if they are unable to.
* Make certain that your parents designate a responsible person to be given power of attorney-either general or limited-should they become incapacitated. Remember that if a power of attorney is abused, it can be financially devastating.
* Know how to locate all pertinent documents that are related to your parents' assets, such as bank statements, deeds, insurance policies, outstanding loans and stock certificates.
* If you suspect your parents are being abused financially or in any other way, call Adult Protective Services.
* It's not too late for people newly diagnosed with dementia or Alzheimer's to legally protect their financial assets. Contact an elder-law attorney for help.
* Do your research. The National Center on Elder Abuse website (elderabusecenter.org) offers helpful information on a number of topics.
2004 By Gail Bensinger, Adapted From San Francisco Chronicle (March 7, '04), 901 Mission St., San Francisco, CA 94103 (this version taken from Reader's Digest November 2004)
Financial abuse can happen to anyone. The following red flags should alert you to a potentially abusive situation. To report elder abuse, read the contact information at the end of this article...
CHANGES IN ESTABLISHED PATTERNS: * No longer attending church. * Shopping habits change/curtailed. * New contacts who appear to have influence regarding sale of home, wills and banking. *Elder is seen less around the home, or there may be a succession of new faces in and around the home, perhaps isolating the elder from neighbors, friends and family. * Garden / yard unkempt. CHANGES IN BANKING: * Changes in long-standing banking habits. * New person accompanying elder to bank. * Maximum ATM withdrawls and missing checks. * Transferring title of a home. * Giving or changing power of attorney. * Spending above income. * Unauthorized use of an elder's credit cards, or ordering of new credit cards in elder's name. * Unpaid bills, utilities shut off. CHANGES IN HOUSING: * New faces staying or moving in with elder. * Unnecessary, unplanned or extensive construction on an elder's home. * Unexpected "For Sale" sign in front yard. * TO REPORT ELDER ABUSE, CALL ADULT PROTECTIVE SERVICES IN YOUR AREA OR THE LOCAL POLICE OR SHERIFF'S DEPARTMENT. ADULT PROTECTIVE SERVICES: FOR MONTEREY COUNTY 831-755-3403 FOR SANTA CRUZ COUNTY 831-454-4101
Predators target the elderly, bilking them out of their life savings. Too often the crime goes unreported, but now local law enforcement is turning up the heat.
Seven types of elder abuse are recognized by law: physical, sexual and emotional abuse, neglect, abandonment, self-neglect and financial exploitation. Financial abuse is generally defined as illegal or improper use of an elderly person's funds, property or assets. Financial elder abuse can take on many forms: Fraud, theft and embezzlement are all considered elder abuse. The elderly make easy pickings for scammers and swindlers because of their physical, mental and emotional vulnerabilities. Often living alone and isolated from the community, with family living elsewhere, they can fall prey to a sweet-talking new "friend," handyman or caregiver. Seniors also tend to have money-investments and savings squirreled away for retirement and long-term care, or hefty equities in their homes. A senior does not have to be rich to be victimized. According to the NCEA, nearly half of financial-abuse victims have an income of less than $10,000 a year. Predatory family members make up about half of likely abusers, especially after an elder relative has moved into a nursing home. Linda Robinson, program coordinator for the Ombudsman Advocates, Inc., a long-term care facility watchdog, says she has seen cases where family members collect their elderly relative's social security checks after the elder goes into a long-term care facility. The check is supposed to pay for the elder's room, board and care. "There have been many cases where elders have received eviction notices." *Source: "Good Times", Santa Cruz County's News & Entertainment Weekly. August 12-18, 2004. Laurel Chesky-News editor ,Greg Archer-Editor.
Communicating is often the best tool you have in business but is often the last resource to be used. Call today and talk to your family advisor regarding the following list of items:
* Addition of a partner or shareholder * Brokerage or investment issues * Estate planning issues or inheritance events * Family member births and deaths * Insurance issues * Involvement in lawsuits or other legal affairs, even if not business related * Major health issues of family members, especially those involved in the business * Pending ownership transitions * Personal or business property purchase or sale * Potential change in business participation by a family member * Potential change of marital status of family members * Purchase or sale of substantial business assets * Substantial income changes * Source: "Family Business Perspectives" Summer 2004
The IRS has released much-anticipated temporary and proposed regulations on the capitalization of costs incurred for tangible property. They impact how virtually any business writes off costs that repair, maintain, improve or replace any tangible property used in the business, from office furniture to roof repairs to photocopy maintenance and everything in between. They apply immediately, to tax years beginning on or after January 1, 2012.
The IRS has released much-anticipated temporary and proposed regulations on the capitalization of costs incurred for tangible property. They impact how virtually any business writes off costs that repair, maintain, improve or replace any tangible property used in the business, from office furniture to roof repairs to photocopy maintenance and everything in between. They apply immediately, to tax years beginning on or after January 1, 2012. These so-called “repair regulations” are broad and comprehensive. They apply not only to repairs, but to the capitalization of amounts paid to acquire, produce or improve tangible property. They are intended to clarify and expand existing regulations, set out some bright-line tests, and provide some safe harbors for deducting payments. The regulations are an ambitious effort to address capitalization of specific expenses associated with tangible property. The regulations affect manufacturers, wholesalers, distributors, and retailers—everyone who uses tangible property, whether the property is owned or leased. The rules provide a more defined framework for determining capital expenditures. Most taxpayers will have to make changes to their method of accounting to comply with the temporary regulations and will need to file Form 3115. Taxpayers who filed for a change of accounting method following the issuance of the 2008 proposed regulations will probably have to change their accounting method again. The IRS has promised to issue two revenue procedures that will provide transition rules for taxpayers changing their method of accounting, including the granting of automatic consent to make the change. The regulations require taxpayers to make a Code Sec. 481(a) adjustment; this means that taxpayers will have to apply the regulations to costs incurred both prior to and after the effective date of the regulations. The new regulations provide rules for materials and supplies that can be deducted, rather than capitalized. The rules provide several methods of accounting for rotable and temporary spare parts, and allow taxpayers to apply a de minimis rule so that they can deduct materials and supplies when they are purchased, not when they are consumed. Costs to acquire, produce or improve tangible property must be capitalized. The regulations address moving and reinstallation costs, work performed prior to placing property into service, and transaction costs. Generally, costs of simply removing property can be deducted, but costs of moving and then reinstalling property may have to be capitalized. To determine whether a cost incurred for property is an improvement, it is necessary to determine the unit of property. Generally, the larger the unit of property, the easier it is to deduct expenses, rather than have to capitalize them. The regulations provide detailed rules for determining the unit of property for buildings and for non-building tangible property. For buildings, the IRS identified eight component systems as separate units of property, requiring more costs to be capitalized. However, the new rules also provide for deducting the costs of property taken out of service, by treating the retirement as a disposition. The new regulations require virtually every business to review how repairs, maintenance, improvements and replacements are handled for tax purposes, with both mandatory and optional adjustments made to past treatment as appropriate. Please feel free to call this office for a more targeted explanation of how these new regulations impact your business operations.
If and only to the extent that this publication contains contributions from tax professionals who are subject to the rules of professional conduct set forth in Circular 230, as promulgated by the United States Department of the Treasury, the publisher, on behalf of those contributors, hereby states that any U.S. federal tax advice that is contained in such contributions was not intended or written to be used by any taxpayer for the purpose of avoiding penalties that may be imposed on the taxpayer by the Internal Revenue Service, and it cannot be used by any taxpayer for such purpose.
The fate of the employee-side payroll tax cut along with a host of tax extenders and other expired provisions could be decided in coming weeks. A conference committee of House and Senate members is negotiating a full-year extension of the payroll tax cut and could add some or all of the tax extenders to a final package. Lawmakers also could extend the payroll tax cut without acting on any tax incentives.
The fate of the employee-side payroll tax cut along with a host of tax extenders and other expired provisions could be decided in coming weeks. A conference committee of House and Senate members is negotiating a full-year extension of the payroll tax cut and could add some or all of the tax extenders to a final package. Lawmakers also could extend the payroll tax cut without acting on any tax incentives. Payroll tax cut The Temporary Payroll Tax Cut Continuation Act of 2011 extended the employee-side OASDI tax cut through the end of February 2012. The employee-share of OASDI taxes is 4.2 percent for the two-month period, rather than 6.2 percent. The employer-share of OASDI taxes remains at 6.2 percent for the two month period. Self-employed individuals also benefit from a two percentage point reduction in OASDI taxes. Unless extended, the employee-share of OASDI taxes is scheduled to revert to 6.2 percent after February 29, 2012. The White House and the leaders of the two parties in Congress agree that the payroll tax cut should be extended a full-year. They disagree, however, how to pay for the extension; even if it should be paid for at all. Congress could extend the two-month payroll tax cut through the end of 2012 without paying for it. The 2011 payroll tax cut was unfunded. Congress appropriated to the Social Security trust funds amounts equal to the reduction in payroll tax revenues. The 2011 payroll tax cut was estimated by the Congressional Budget Office cost approximately $111 billion. Extending it through the end of 2012 is estimated to cost just as much if not more. House Republicans reportedly have proposed a number of revenue raisers to offset the cost of extending the payroll tax cut through the end of 2012. One GOP proposal would extend the current pay freeze for employees of the federal government. Another GOP proposal would require higher-income individuals to pay increased Medicare premiums. One possible revenue raiser, increasingly under discussion by Democrats, is a change in the taxation of so-called carried interest. Current law generally taxes carried interest as capital gains and not as ordinary income. Past efforts to change the tax treatment of carried interest have failed to pass Congress. Extenders The so-called tax extenders, popular but temporary tax provisions, expired at the end of 2011. Many taxpayers are surprised to learn that their particular tax break, whether it be the state or local sales tax deduction, the teachers’ classroom expense deduction, or the research tax credit, are temporary. The extenders have been routinely revived many times in the past. This year, however, could be different. Faced with record federal budget deficits, lawmakers may decide to extend only some of the expired provisions. President Obama’s FY 2013 proposals President Obama is expected to release his fiscal year (FY) 2013 federal budget proposals in early February, which will reignite debate over the Bush-era tax cuts. President Obama is expected to urge Congress to allow the Bush-era tax cuts to expire after 2012 for higher-income taxpayers, which President Obama defines as individuals earning more than $200,000 or families earning more than $250,000. In recent weeks, there has been speculation that President Obama may revisit those definitions in his FY 2013 budget, possibly raising the amounts. Few Capitol Hill observers expect Congress to take any action on the Bush-era tax cuts before the November elections. Instead, Congress may take up some of President Obama’s other proposals. As in past budgets, President Obama will likely propose to extend some energy tax breaks for individuals and businesses, extend tax incentives for education and provide some targeted-tax breaks to businesses. President Obama has also promised to introduce proposals to encourage U.S. companies to “insource” jobs at home. On some issues, such as energy and education, lawmakers may find common ground but negotiations are likely to go down to the wire. Our office will keep you posted of developments. If you have any questions about the payroll tax cut, tax extenders or the various tax proposals under discussion, please contact our office.
If and only to the extent that this publication contains contributions from tax professionals who are subject to the rules of professional conduct set forth in Circular 230, as promulgated by the United States Department of the Treasury, the publisher, on behalf of those contributors, hereby states that any U.S. federal tax advice that is contained in such contributions was not intended or written to be used by any taxpayer for the purpose of avoiding penalties that may be imposed on the taxpayer by the Internal Revenue Service, and it cannot be used by any taxpayer for such purpose.
The IRS reopened its offshore voluntary disclosure program in early 2012 in response to what the government described as strong interest among taxpayers. The reopened program, the third of its type in recent years, encourages taxpayers with unreported foreign accounts to make full disclosures in exchange for a reduced penalty framework. Like its predecessors, the terms and conditions of the reopened program are very complex. The IRS has promised to provide more details. In the meantime, the prior offshore disclosure programs are guides to how the IRS intends to implement the third, reopened program.
The IRS reopened its offshore voluntary disclosure program in early 2012 in response to what the government described as strong interest among taxpayers. The reopened program, the third of its type in recent years, encourages taxpayers with unreported foreign accounts to make full disclosures in exchange for a reduced penalty framework. Like its predecessors, the terms and conditions of the reopened program are very complex. The IRS has promised to provide more details. In the meantime, the prior offshore disclosure programs are guides to how the IRS intends to implement the third, reopened program. Previous disclosure programs The IRS launched two previous offshore disclosure initiatives: one in 2009 and another in 2011. Both programs offered reduced penalties in exchange for full disclosure. In early 2012, the IRS reported it received 33,000 voluntary disclosures from the 2009 and 2011 offshore initiatives. The government has collected over $4.4 billion from the 2009 and 2011 programs. The IRS predicted it will collect more revenue as it continues to work cases. Reopened program The reopened program operates very similarly to the 2009 and 2011 programs but with some key differences. The previous programs were temporary. The 2011 program ended in mid-September 2011. The reopened program has no set end date. The IRS cautioned, however, that it could close the program at some future date. The decision to end the program is solely at the discretion of the IRS. The reopened program requires taxpayers to file all original and amended tax returns and include payment for back-taxes and interest for up to eight years as well as pay accuracy-related and/or delinquency penalties. Additionally, taxpayers must 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. In comparison, the highest penalty in the 2011 program was 25 percent. IRS officials have said that the penalty was increased because the agency does not want to reward taxpayers who did not participate in the 2009 or 2011 disclosure programs because they anticipated that a future penalty would be lower. In limited circumstances, taxpayers may qualify for a 12.5 percent penalty or a five percent penalty. Generally, taxpayers whose offshore accounts or assets did not surpass $75,000 in any calendar year may qualify for the 12.5 percent penalty. The requirements for the five percent penalty are very narrow. The IRS has explained that taxpayers must meet four conditions: (1) The taxpayer did not open or cause the account to be opened; (2) the taxpayer exercised minimal, infrequent contact with the account, for example, to request the account balance, or update account holder information such as a change in address, contact person, or email address; (3) except for a withdrawal closing the account and transferring the funds to an account in the United States, the taxpayer did not withdraw more than $1,000 from the account in any year for which the taxpayer was non-compliant; and (4) the taxpayer can show that all applicable U.S. taxes have been paid on funds deposited to the account (only account earnings have escaped U.S. taxation). The penalty amounts in the reopened program are not set in stone, the IRS cautioned. It may eventually increase penalties in the program for all or some taxpayers or defined classes of taxpayers. Quiet disclosures One goal of the three programs is to caution taxpayers against so-called “quiet disclosures.” A quiet disclosure occurs when a taxpayer files an amended return and pays any tax delinquency without making a formal voluntary disclosure. The IRS warned taxpayers making quiet disclosures that they risked being sanctioned to the fullest extent allowed by law. Critics The offshore disclosure programs were not without their critics. The National Taxpayer Advocate recently told Congress that the IRS should streamline what is a very complicated process. The National Taxpayer Advocate also reported that IRS examiners were assuming that all violations were willful unless a taxpayer presented evidence to the contrary. It is possible that the IRS may revisit some of the terms and conditions of the reopened program in light of the National Taxpayer Advocate’s report. If you have any questions about the reopened offshore voluntary disclosure program, please contact our office.
If and only to the extent that this publication contains contributions from tax professionals who are subject to the rules of professional conduct set forth in Circular 230, as promulgated by the United States Department of the Treasury, the publisher, on behalf of those contributors, hereby states that any U.S. federal tax advice that is contained in such contributions was not intended or written to be used by any taxpayer for the purpose of avoiding penalties that may be imposed on the taxpayer by the Internal Revenue Service, and it cannot be used by any taxpayer for such purpose.
Taxpayers with children should be aware of the numerous tax breaks for which they may qualify. Among them are: the dependency exemption, child tax credit, child care credit, and adoption credit. As they get older, education tax credits for higher education may be available; as is a new tax code requirement for employer-sponsored health care to cover young adults up to age 26. Employers of parents with young children may also qualify for the child care assistance credit.
Taxpayers with children should be aware of the numerous tax breaks for which they may qualify. Among them are: the dependency exemption, child tax credit, child care credit, and adoption credit. As they get older, education tax credits for higher education may be available; as is a new tax code requirement for employer-sponsored health care to cover young adults up to age 26. Employers of parents with young children may also qualify for the child care assistance credit. Dependency Exemption In addition to the personal exemption an individual taxpayer may take for him or herself to reduce taxable income (Line 42 on Form 1040), that taxpayer may also take an exemption for each qualifying dependent who has lived with the taxpayer for more than half of the tax year. A dependent may be a natural child, step-child, step-sibling, half-sibling, adopted child, eligible foster child, or grandchild, and generally must be under age 19, a full-time student under age 24, or have special needs. The amount of the exemption is the same as the taxpayer’s personal exemption, $3,700 for the 2011 tax year and $3,800 for the 2012 tax year. Child Tax Credit Parents of children who are under age 17 at the end of the tax year may qualify for a refundable $1,000 tax credit. The credit is a dollar-for-dollar reduction of tax liability, and may be listed on Line 51 of Form 1040. For every $1,000 of adjusted gross income above the threshold limit ($110,000 for married joint filers; $75,000 for single filers), the amount of the credit decreases by $50. Child and Dependent Care Credit If a taxpayer must pay for childcare for a child under age 13 in order to pursue or maintain gainful employment, he or she may claim up to $3,000 of his or her eligible expenses for dependent care. If one parent stays home full-time, however, no child care costs are eligible for the credit. Adoption Credit Taxpayers who have incurred qualified adoption expenses in 2011 may claim either a $13,360 credit against tax owed or a $13,360 income exclusion if the taxpayer has received payments or reimbursements from his or her employer for adoption expenses. For 2012, the amount of the credit will decrease to $12,650, and in 2013 to $5,000. Higher Education Credits There are two education-related credits available for 2012: the American Opportunity credit and the lifetime learning credit. The American Opportunity credit amount is the sum of 100 percent of the first $2,000 of qualified tuition and related expenses plus 25 percent of the next $2,000 of qualified tuition and related expenses, for a total maximum credit of $2,500 per eligible student per year. The credit is available for the first four years of a student's post-secondary education. The credit amount phases out ratably for taxpayers with modified AGI between $80,000 and $90,000 ($160,000 and $180,000 for joint filers). The lifetime learning credit is equal to 20 percent of the amount of qualified tuition expenses paid on the first $10,000 of tuition per family. The phaseout for 2012 ranges from $52,000 to $62,000 ($104,000 to $124,000 for joint filers). Parents also find tax relief in saving for college though Coverdell accounts, section 529 plans and specified U.S.. savings bonds. Extended Health Care Coverage Effective since September 23, 2010, the new health care law requires plans to provide coverage for children until they attain age 26. Further, effective on or after March 30, 2010, children under the age of 27 are considered dependents of a taxpayer for purposes of the general exclusion from income for reimbursements for medical care expenses of an employee, spouse, and dependents under an employer-provided accident or health plan. Therefore, a plan must provide coverage to a child who is still a dependent up to age 26; but can do so up to age 27 without income tax consequences. A child includes a son, daughter, stepson, or stepdaughter of the taxpayer; a foster child placed with the taxpayer by an authorized placement agency or by judgment, decree, or other order of any court of competent jurisdiction; and a legally adopted child of the taxpayer or a child who has been lawfully placed with the taxpayer for legal adoption. Child Care Assistance Credit (for businesses) Employers may take up to $150,000 of the eligible costs of providing employees with child care assistance as tax credit. These costs may include a portion of the costs of acquiring, constructing, improving, and operating a child care facility. If you have any questions about these provisions and how they may benefit you, please contact our office.
If and only to the extent that this publication contains contributions from tax professionals who are subject to the rules of professional conduct set forth in Circular 230, as promulgated by the United States Department of the Treasury, the publisher, on behalf of those contributors, hereby states that any U.S. federal tax advice that is contained in such contributions was not intended or written to be used by any taxpayer for the purpose of avoiding penalties that may be imposed on the taxpayer by the Internal Revenue Service, and it cannot be used by any taxpayer for such purpose.
The Treasury Department is authorized to offset a taxpayer’s tax refund to satisfy certain debts. A spouse who believes that his or her portion of the refund should not be used to offset the debt that the other spouse owes may request a refund from the IRS.
The Treasury Department is authorized to offset a taxpayer’s tax refund to satisfy certain debts. A spouse who believes that his or her portion of the refund should not be used to offset the debt that the other spouse owes may request a refund from the IRS. Offset If an individual owes money to the federal government because of a delinquent debt, the Treasury Department’s Financial Management Service (FMS) can offset that individual's tax refund (and certain other federal payments) to satisfy the debt. The debtor will be notified in advance of the offset. A taxpayer’s refund may be reduced by FMS and offset to pay: - Past-due child support
- Federal agency non-tax debts
- State income tax obligations, or
- Certain unemployment compensation debts owed a state.
FMS advises taxpayers by written notice of an offset. FMS has explained that the notice will reflect the original refund amount, the taxpayer’s offset amount, the agency receiving the payment, and the address and telephone number of the agency. FMS will notify the IRS of the amount taken from your refund. Form 8379 If a taxpayer filed a joint return and is not responsible for the debt of his or her spouse, the taxpayer may request his or her portion of the refund by filing Form 8379, Injured Spouse Allocation, with the IRS. Form 8379 may be filed with the original return or by itself after the taxpayer is aware of the offset. The IRS has instructed taxpayers filing Form 8379 by itself to attach a copy of all Forms W-2 and W-2G for both spouses, and any Forms 1099 showing federal income tax withholding to Form 8379. Failure to attach these items may result in a delay in processing by the IRS. The IRS has reported on its website that it generally processes Forms 8379 that are filed after a joint return has been filed in approximately eight weeks. The timeframe for processing a Form 8379 that is attached to a joint return is approximately 11 weeks (14 weeks if the joint return is filed on paper).
If and only to the extent that this publication contains contributions from tax professionals who are subject to the rules of professional conduct set forth in Circular 230, as promulgated by the United States Department of the Treasury, the publisher, on behalf of those contributors, hereby states that any U.S. federal tax advice that is contained in such contributions was not intended or written to be used by any taxpayer for the purpose of avoiding penalties that may be imposed on the taxpayer by the Internal Revenue Service, and it cannot be used by any taxpayer for such purpose.
As an individual or business, it is your responsibility to be aware of and to meet your tax filing/reporting deadlines. This calendar summarizes important tax reporting and filing data for individuals, businesses and other taxpayers for the month of February 2012.
As an individual or business, it is your responsibility to be aware of and to meet your tax filing/reporting deadlines. This calendar summarizes important tax reporting and filing data for individuals, businesses and other taxpayers for the month of February 2012. February 1 Employers. Semi-weekly depositors must deposit employment taxes for payroll dates January 25–27. February 3 Employers. Semi-weekly depositors must deposit employment taxes for payroll dates January 28–31. February 8 Employers. Semi-weekly depositors must deposit employment taxes for payroll dates February 1–3. February 10 Employees who work for tips. Employees who received $20 or more in tips during November must report them to their employer using Form 4070. Employers. Semi-weekly depositors must deposit employment taxes for payroll dates February 4–7. February 15 Employers. Semi-weekly depositors must deposit employment taxes for payroll dates February 8–10. Monthly depositors. Monthly depositors must deposit employment taxes for payments in January. February 17 Employers. Semi-weekly depositors must deposit employment taxes for payroll dates February 11–14. February 23 Employers. Semi-weekly depositors must deposit employment taxes for payroll dates February 15–17. February 24 Employers. Semi-weekly depositors must deposit employment taxes for payroll dates February 18–21. February 29 Employers. Semi-weekly depositors must deposit employment taxes for payroll dates February 22–24. March 2 Employers. Semi-weekly depositors must deposit employment taxes for payroll dates February 25–28. March 7 Employers. Semi-weekly depositors must deposit employment taxes for payroll dates February 29–March 2.
If and only to the extent that this publication contains contributions from tax professionals who are subject to the rules of professional conduct set forth in Circular 230, as promulgated by the United States Department of the Treasury, the publisher, on behalf of those contributors, hereby states that any U.S. federal tax advice that is contained in such contributions was not intended or written to be used by any taxpayer for the purpose of avoiding penalties that may be imposed on the taxpayer by the Internal Revenue Service, and it cannot be used by any taxpayer for such purpose.
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