Legal Articles

Arbitration agreement enforceable against spouse

If you’ve ever signed up for a credit card, a gym membership, cell phone service or any other number of services, you’ve probably signed an arbitration agreement without even realizing it. These are provisions buried deep within consumer contracts, loans and even employment agreements under which by signing the contract you’re agreeing not to take the company to court over any disagreement that may arise. Instead, you agree to have your case decided by an “arbitrator” — a supposedly neutral third party who’s chosen and paid by the company. This means you’re giving up important rights, such as the right to have a jury hear your case, the right to have the other side disclose evidence that could help you win and the right to appeal an unfair decision. [Read more…]

Valuation date is critical in property division

Sometimes a division of property in divorce is quite simple. The value of assets is very straightforward and splitting them is easy. But some assets can be much tougher to value and the issue can become quite contentious. This is particularly true when dealing with spouses’ interests in a business. That’s when the importance of the valuation date comes into play, as a recent Florida case indicates.

In that case, a couple with two children was divorcing. The husband had ownership interests in three companies that operated a number of restaurants across the state. At one point during the proceeding, a trial judge assessed the value of the couple’s marital estate as of the date the divorce petition was filed. But when the court issued its judgment, it used a later date to value the couples’ business interests. This difference mattered because the business earned significant profits between the two dates. [Read more…]

Wife’s claims from first divorce can’t be revived after failed reconciliation

When a couple takes the dramatic step of divorcing, they’re generally doing so for good reason. That’s why most couples who get divorced stay divorced. Still, some couples may decide that the divorce was a mistake and give marriage a second chance. Sometimes it works out, and sometimes it doesn’t. But as a recent case from North Carolina indicates, the award that a spouse received or was likely to receive the first time around will not dictate the award the second time around.

The couple in the case, Beverly and Peter Farquhar, divorced in 2004 after 10 years of marriage. A year later they decided to remarry. At the time, they still had pending claims from their divorce and they voluntarily agreed to dismiss these claims. [Read more…]

Woman who got $2M in divorce still gets support

For anyone who thinks alimony and support is just for those spouses who otherwise might not be able to support themselves, a recent Virginia decision says otherwise.

In that case, a woman whose husband was the primary breadwinner during their 27-year marriage got half of their $4.5 million marital estate in the divorce. This means she was awarded more than $2 million for her share.

Considering the modest lifestyle that the comparatively wealthy couple had maintained, a lot of people would say her share of the estate would have generated plenty of income for her to live on. [Read more…]

Can a court make you maintain life insurance for your ex-spouse?

In many divorces, one spouse is ordered to make monthly payments for “alimony” or “maintenance” to the other spouse to help that spouse support him/herself. Usually, the spouse receiving the payments is entitled to keep receiving them unless he or she remarries or starts “cohabiting” or living with someone else as a partner.

But what if the spouse who’s paying the support passes away sooner than expected, leaving the other spouse without any means of support? [Read more…]

Audit rates decline for 6th year in a row

IRS audit rates declined last year for the sixth year in a row and are at their lowest level since 2002, the agency reported. That’s good news for people who don’t like to be audited (which is everybody)!

Low statistics for audit examinations obscure the reality that you may still have to deal with issues caught by the IRS’s automated computer systems. These could be math errors, typos or missing forms. While not as daunting as a full audit, you need to keep your records handy to address any problems. [Read more…]

How to handle a gap in health care coverage

Health care coverage gaps happen. Whether because of job loss or an extended sabbatical between gigs, you may find yourself without health care for a period. Here are some tax consequences you should know about, as well as tips to fix a coverage gap.

Coverage gap tax issues

You will have to pay a penalty in 2018 if you don’t have health care coverage for three consecutive months or more. Last year the annual penalty was equal to 2.5 percent of your household income, or $695 per adult (and $347.50 per child), whichever was higher. The 2018 amounts will be slightly higher to adjust for inflation. [Read more…]

Update on the Tax Cuts and Jobs Act (TCJA)

The Tax Cuts and Jobs Act (TCJA) was passed by Congress in a hurry late last year, and the IRS and tax preparers have been working to digest some of the more thorny issues created by the tax overhaul. Here are the latest answers to some of the most common questions:

1. Is home equity interest still deductible?

The short answer is: Not unless you’ve used the money to buy, build or substantially improve your home. [Read more…]

Home sellers relinquish control after a sale

If you sell your home, the new owners can paint the house pink, tear out the stone wall your grandfather built, and cut down the maple tree you carved your initials in. Once you sell your home, there’s pretty much nothing you can do to prevent the new owners from making changes.

Even if you try to stipulate certain provisions prior to a sale, such conditions aren’t usually enforceable in a court of law. That said, neighborhood associations can pass certain covenants and restrictions that limit changes such as house color, additions and landscaping. These conditions typically do hold up under legal scrutiny.

If you want to place a condition on the sale of your home or work around a neighborhood covenant on a house you own, consult a real estate attorney.

Zoning laws challenge tiny-home owners

Tiny-home building shows may be all the rage on TV, but these programs rarely explore one big hurdle that comes with tiny-home ownership: Where on earth should you put it?

In many areas, zoning regulations prohibit temporary accommodations such as RVs, mobile homes, and their new close cousins, tiny houses. Zoning laws may require minimum square footage for homes, may prohibit portable structures, or may limit what’s known as “accessory dwelling units,” such as small houses placed in the backyard of an existing home.

In other cases, tiny house owners may find themselves simply priced out of a home site due to zoning laws that require minimum lot sizes beyond their financial reach. [Read more…]

Landlords bound by lease agreements, too

While it’s common knowledge that a tenant must pay rent on time, keep utilities the running, and adhere to various other lease provisions (e.g. routine maintenance, limits on pets and guests), it’s also true that landlords must abide by lease agreements.

Some landlords may attempt to violate a lease agreement by asking tenants to leave prior to the contracted lease period, failing to make certain repairs, violating health and safety conditions, or otherwise making the property inhabitable.

If a landlord fails to live up to a lease agreement and provide a habitable space, tenants may find recourse by reporting violations to local housing authorities, the city building inspector, or a statewide tenant resource center. Try an online search for “tenant rights” in your state to locate possible resources.

Tenants should communicate with their landlord in writing and keep records of all violations and communication. Seek help from a lawyer before attempting any other steps, such as rent deductions, rent withholding or abandonment.

Tips for choosing your next mortgage lender

Home buyers today have a variety of options when it comes to finding a mortgage lender. They can choose a traditional face-to-face relationship with a lender at their local bank, opt for a mortgage broker who will shop the best deals for them, or go it online with a range of non-bank lenders, such as Quicken Loans, Rocket Mortgage, or Lenda.

Be aware, however, that more than a quarter of first-time home buyers regret their choice. According to a mortgage satisfaction study by J.D. Power, 27 percent of first-time buyers and 21 percent of all home buyers wish they had chosen an alternate lender.

Customers reported dissatisfaction with communication, unmet promises, and feeling pressured to choose a particular lending product.  [Read more…]

Contingencies create a way out of real estate contracts

You’ve signed the contract and transferred the earnest money, but just how binding is your real estate contract? That depends on the nature of any contingencies built into the agreement. For buyers, such contingencies provide an exit strategy if the house doesn’t live up to initial impressions.

Here are some common contingencies that could allow a buyer out of a real estate contract: 

* Financing. The buyer may be unable to get financing from his or her lender, or unable to get financing within defined terms. [Read more…]

Your mortgage is my mortgage: How parents are financing a child’s home

With all-cash offers dominating the housing market in some highly competitive cities, first-time homebuyers are finding themselves shut out of negotiations, particularly for the more affordable and in-demand starter homes.

Saving enough for a down payment and closing costs has always been a challenge for young home buyers. But in tight real estate markets, the old standby of 20 percent down with a traditional mortgage loan isn’t enough to win a home.

These kids might once have looked to mom or dad for help with a down payment, but now they’re approaching their parents with a much bigger request: enough funds to make a full cash offer. [Read more…]

Proving the hardship exception to the Medicaid penalty period

If you transfer assets within five years of applying for Medicaid, you will likely be subject to a period of ineligibility. There is an exception, however, if enforcing the penalty period would cause the applicant an “undue hardship.” This exception is difficult to prove and rarely granted, but it may be available in certain circumstances.

Under federal Medicaid law, the state Medicaid agency must determine whether an applicant transferred any assets for less than fair market value within the past five years. If there are any transfers, the state imposes a penalty period, which is a period of time in which the applicant will be ineligible for Medicaid benefits. The length of the penalty period is calculated by dividing the amount transferred by what Medicaid determines to be the average private pay cost of a nursing home in the state.

A Medicaid applicant can fight the penalty period by arguing that enforcing it will cause an undue hardship. Federal law provides that an undue hardship exists if the penalty period would deprive the applicant of: (1) medical care necessary to maintain the applicant’s health or life; or (2) food, clothing, shelter, or necessities of life. The burden is on the applicant to prove that hardship exists. A nursing home can pursue a hardship waiver on behalf of a resident. [Read more…]

Family dispute illustrates need for long-term care plan

A recent New Jersey court case demonstrates how important it is for families to come up with a long-term care plan before an emergency strikes.

The case involved two brothers who got into a fight over whether to place their mother in a nursing home. R.G. was the primary caregiver for his parents, as well as their agent under powers of attorney. After R.G.’s mother fell ill, R.G. wanted to place her in a nursing home. R.G.’s brother objected, but R.G. went ahead and had his mother admitted to a nursing home without his brother’s consent. R.G.’s brother sent angry and threatening texts and emails to R.G. as well as emails expressing his desire to find a way to care for their parents in their home. Eventually the men got into a physical altercation in which R.G.’s brother shoved R.G.

R.G. went to court to get a restraining order against his brother under New Jersey’s Prevention of Domestic Violence Act. A trial judge ruled that R.G. had been harassed and assaulted and issued the order. But a New Jersey appeals court reversed the trial court, ruling that R.G.’s brother’s actions did not amount to domestic violence. According to the court, there was insufficient evidence that R.G.’s brother purposely acted to harass R.G. [Read more…]

Use your will to dictate how to pay your debts

The main purpose of a will is to direct where your assets will go after you die, but it can also be used to instruct your heirs on how to pay your debts. While generally heirs cannot inherit debt, an estate’s debt can reduce what they receive. Spelling out how debt should be paid can help your heirs.

If someone dies with outstanding debt, the executor is responsible for making sure those debts are paid. This may require selling assets that you would have preferred to leave to specific heirs. There are two types of debts you might leave behind:

  • Secured debt is debt that is attached to a piece of property or an asset, such as a car loan or a mortgage.
  • Unsecured debt is any debt that isn’t backed by an underlying asset, such as credit card debt or medical bills.

[Read more…]

How Medicare and employer coverage coordinate

Medicare benefits start at age 65, but many people continue working past that age. That makes it important to understand how Medicare and employer coverage fit together.

Depending on your circumstances, Medicare is either the primary or the secondary insurer. The primary insurer pays any medical bills first, up to the limits of its coverage. The secondary insurer covers costs the primary insurer doesn’t cover (although it may not cover all costs). Knowing whether Medicare is primary or secondary to your current coverage is crucial because it determines whether you need to sign up for Medicare Part B when you first become eligible. If Medicare is the primary insurer and you fail to sign up for Part B, your eventual Medicare Part B premium could start going up 10 percent for each 12-month period that you could have had Medicare Part B but did not take it.

Here are the rules governing whether Medicare coverage will be primary or secondary: [Read more…]

Four provisions people forget to include in their estate plan

Even if you’ve created an estate plan, are you sure you have included everything you need to? There are certain provisions that people frequently forget to put in in a will or estate plan that can have a big impact on their heirs.

  1. Alternate beneficiaries

One of the most important things an estate plan should include is at least one alternative beneficiary in case the named beneficiary does not outlive you or is unable to claim under the will. If a will names a beneficiary who isn’t able to take possession of the property, your assets may pass as though you didn’t have a will at all. This means that state law will determine who gets your property, not you. By providing an alternate beneficiary, you can make sure that the property goes where you want it to go.

  1. Personal possessions and family heirlooms

Not all heirlooms are worth a lot of money, but they may have sentimental value. It is a good idea to be clear about which family members should get which items. You can write a list directly into your will, but this makes it difficult if you want to add or remove items. A personal property memorandum is a separate document that details which friends and family members get which personal property. In some states, if the document is referenced in the will it is legally binding. Even if the document is not legally binding, it is helpful to leave instructions for your heirs to avoid confusion and bickering. [Read more…]

Stay prepared to sell your business

If you enjoy running your own business, selling it may be the furthest thing from your mind. But the reality is that eventually an opportunity to sell will come, whether due to your own life changes or a perfect buyer walking in the door. Planning, often years in advance of the sale date, is necessary to get the most value for the love, sweat and tears you’ve invested. Here are some tips to stay prepared:

  • Assemble a great team. Selling a business is a complex process, especially as you grow larger. You’re likely to need three kinds of professionals to help: an accountant, to help review and produce clean and easy-to-understand financial statements; a lawyer, to create the necessary legal documents and help you negotiate terms; and a trusted business broker, to evaluate the worth of your business and find buyers.
  • Develop your exit strategy. With the help of your advisory team, create a clear picture of what selling your business might look like. Outline the risks and opportunities that could affect the valuation of your business. Planning out an ideal scenario as well as a plan B will help you avoid getting backed into a corner and selling at a discount. [Read more…]

Great uses for your tax refund

Most Americans get a refund every year, with the average check weighing in at $2,895 last year. Even though it’s really money that they earned, many people are tempted to treat it like a windfall and splurge. If you can resist that temptation, here are some of the best ways to put your refund to good use:

  • Pay off debt. If you have debt, part of your refund could be used to reduce or eliminate it. Paying off high-interest credit card or auto loan debt means freeing up the money you had been paying in interest for other uses. And making extra payments on your mortgage can put more money in your pocket over the long haul.
  • Save for retirement. Saving for retirement allows the power of compound interest to work for you. Consider depositing some of your refund check into a traditional or Roth IRA. You can contribute a total of $5,500 every year, plus an extra $1,000 if you are at least 50 years old. [Read more…]

When an extension makes sense

While most people should file a tax return by April 17, you have the option of delaying your filing date until Oct. 15 with a tax extension.

When to file an extension

  • Missing or incorrect information. If one of the forms you need to file your return has an error on it, it is often better to receive a corrected form before filing.
  • Recharacterizing Roth IRA rollover amounts. If you’ve rolled funds from a traditional IRA into a Roth IRA, you may want to reverse it later if the investments lose value. This so-called recharacterization process can be done up to the extended tax-filing date of Oct. 15, and in many cases it makes sense to wait until then. Note that 2017 is the last tax year you can use the recharacterization process, which was eliminated for future years by the Tax Cuts and Jobs Act. [Read more…]

Tax filing reminders

April 17 –

  • Individual income tax returns for 2017 are due.
  • 2017 calendar-year C corporation income tax returns are due.
  • 2017 annual gift tax returns are due.
  • Deadline for making 2017 IRA contributions.
  • First installment of 2018 individual estimated tax is due.

Tax reform may impact charitable giving

As the tax reform measures were unveiled, members of the charitable community expressed alarm that the new rules could create a disincentive to donate.

With the larger standard income tax deduction ($12,000 for an individual filer and $24,000 for a married couple), fewer people will realize the benefits of itemizing.

Some charities fear that, absent the tax write-off, fewer people will give. Yet others argue a household’s higher net income will be a boon to non-profits. [Read more…]

Evaluating generation-skipping tax transfers

Your current financial plan may include wealth transfers to grandchildren, great-grandchildren or other descendants, and these gifts may be subject to a generation-skipping tax (GST). The GST was created to prevent families from essentially “skipping” a generation’s worth of estate taxes as wealth is passed down.

In 2017, the GST exemption (the amount that can be transferred to grandchildren without incurring a federal GST tax) was $5.45 million adjusted for inflation. Now, under the new tax reform law, the GST exemption is doubled to roughly $11.2 million. In 2026, however, the exemptions revert back to pre-2018 levels.

Doubling the exemption presents an opportunity for families to increase wealth transfer plans without incurring taxes. Individuals may want to take advantage of the increased GST exemption to create GST-exempt trusts. Meanwhile, those with existing trusts subject to the GST tax may want to consider early distributions to take advantage of the higher exemption. [Read more…]

‘Clawback’ concerns linger under new tax law

The new tax reform package increases an individual’s lifetime exemption from roughly $5.5 million to $11.2 million, with an expiration date of December 31, 2025.

For individuals who don’t expect to die in the next eight years, your gift strategy could include protecting assets from future estate taxes while still maintaining adequate resources for your lifetime. You may, for example, choose to max out your lifetime exemption now, while you are still alive, to minimize the tax burden on your heirs when you die.

Let’s assume you are a high-net worth individual with no surviving spouse. If you give your kids $11.2 million now, they receive those funds completely tax free. If you give them $5.5 million now, and they receive another $5.7 million when you die in 2026, your heirs would have to pay a 40% estate tax on that $5.7 million. [Read more…]

Estate planning still essential, despite increased exemptions

The Tax Cuts and Jobs Act (TCJA) reduces individual and corporate tax rates, eliminates a bevy of deductions and makes a host of changes to how Americans can preserve their wealth. Although the act falls short of repealing the death tax, it doubles the amount an individual may transfer tax free, either in his or her lifetime or at death.

Effective January 1, 2018 (and expiring December 31, 2025), the combined gift and estate tax exemption and the generation-skipping transfer (GST) tax exemption amounts double from an inflation-adjusted $5 million to $10 million.

Taking into account inflationary adjustments, the actual amount for these exemptions is expected to be $11.2 million for an individual or $22.4 million for a married couple in 2018. Both exemptions will continue to increase with inflation. Both will also revert back to their current levels at the start of 2026. (Congress could also lower the exemptions before then.) [Read more…]

OSHA delaying employer filing deadline

There’s good news for employers required to electronically file injury and illness data with OSHA: You had until Dec. 1, 2017, to comply.

The rule became effective Jan. 1, 2017, with an initial requirement that employers electronically file the information by July 1, 2017. However, given the agency’s inability as of May 2017 to accept electronic submissions of injury and illness logs, OSHA has now formally proposed extending the filing deadline until Dec. 1. It also appears that OSHA is reconsidering the entire rule, which it may even modify or revoke prior to the proposed Dec. 1 filing date.

Disclosing sponsorships now easier on Instagram

Whether you accept or give sponsorships tied to Instagram posts, Instagram is making an effort to make the disclosure process easier.

The social media network is now testing and considering for widespread use allowing users to tag a brand within posts. If the brand confirms the relationship, the post will then be marked as an ad with a “paid partnership with [brand name]” tag at the top.

The Federal Trade Commission recently called out Instagram in particular in a flurry of letters reiterating that influencers and marketers must clearly disclose their relationships to comply with the agency’s Endorsement Guides. The agency noted that endorsements need to be disclosed near the top of posts so that consumers who view posts in their streams or on mobile devices will see the disclosure without having to click “more.” [Read more…]

What to avoid when signing an office lease

Unforeseen costs can crush a business that opts to sign an office lease without legal counsel. From initial construction costs to later capital improvements, the list of potential hidden costs is long and adds up quickly.

To avoid the possibility of paying several large bills down the line, ask your lawyer to help you negotiate a fair lease up front that covers the following, as necessary: a landlord-performed buildout, a tenant-performed buildout, operating expenses and end-of-lease condition.

Landlord-performed buildout

If the landlord is performing demolition and/or construction at the space you are planning to lease, crucial details need to be ironed out in advance and put in writing, including the nature and scope of the construction, a procedure for preparing and approving plans and specifications, the construction schedule and the approval of contractors. [Read more…]

Must websites accommodate blind users?

Just because the Department of Justice does not yet have new website accessibility rules for places of public accommodation doesn’t mean businesses hosting websites aren’t already at risk.

Blind or visually impaired plaintiffs have been filing federal lawsuits against companies over the accessibility of their websites, although they’re meeting with different results.

A federal judge in Florida recently handed down a verdict in the case of Gil v. Winn-Dixie Stores, Inc., finding that Winn-Dixie had violated Title III of the Americans with Disabilities Act by having a website that could not be used by the blind plaintiff. [Read more…]

Beware pitfalls of cloud contracts

Think it’s just your business’ data being stored in the cloud these days? Think again. Some (or all) of the provisions of your contract with your cloud provider also may be “floating,” and can thus be changed at any time, often without notice to you.

How is this possible? Part of the blame rests with the modern-day trend of simplified contracts that include some brief general terms and conditions hyperlinked to online terms that can change at any time.

Typically, these contracts are presented on an as-is basis, and built-in protections, including service levels, generally provide only basic protection. Businesses then have little to no ability to terminate the agreement, even if key terms — including support obligations, service levels, service descriptions and performance standards — change to their disadvantage. Such key terms can change at any time, generally without notice. [Read more…]

Employer couldn’t force religious worker to use hand scanner

Title VII of the federal Civil Rights Act requires employers to make “reasonable accommodations” for their workers’ religious beliefs. Employers who disregard this, even when the religious beliefs seem bizarre, run the risk of liability, as a mining company in West Virginia recently learned.

In that case, a coal miner refused to use a new biometric scanner that the employer had installed as an identification device. The miner apparently feared that use of the scanner would give him the “Mark of the Beast,” which according to the Book of Revelations would then brand him a follower of the Antichrist. He requested an alternative identification measure as a form of religious accommodation.

The employer denied the request. The employee resigned and sued for religious discrimination under Title VII. A jury found in his favor and a federal appeals court affirmed, rejecting the employer’s argument that the scanner neither left any kind of mark nor legitimately conflicted with the employee’s religious beliefs. [Read more…]

Supervisor can be sued individually for violating the FMLA

The Family and Medical Leave Act entitles employees who’ve been employed for at least 12 months by a company with at least 50 or more employees within a 75-mile radius to take up to three months of unpaid leave during any 12-month period in order to deal with a medical problem, care for a new child or care for a close relative with a health condition. Employers who fail to abide by the FMLA’s requirements or who retaliate against a worker for taking FMLA leave risk serious legal liability.

Further, according to a recent case out of Massachusetts any supervisor or manager who violates the FMLA can be sued individually too.

In that case, employee Elliott Eichenholz was on disability leave from security services giant Brinks, Inc., when his supervisor Gordon Campbell issued him a performance improvement plan (“PIP”) letter containing a bunch of demands he’d have to meet in the next 90 days to keep his job. [Read more…]

Illinois case highlights importance of taking harassment complaints seriously

A recent case from Illinois demonstrates just how critical it is for employers to conduct a legitimate investigation of all complaints of sexual harassment in the workplace.

In that case, Maria Gracia, a female assembly line supervisor at electronics manufacturing services provider Sigma Tron, complained to human resources that her manager had been sending her graphic email photos, calling her late at night, repeatedly asking her on dates and sending her unwanted text messages. She repeatedly turned him down, but one day, after receiving yet another “No,” the manager allegedly suspended her for two days, claiming it was for excessive tardiness.

The HR rep brought Gracia to meet with a company vice president, who, instead of ordering a thorough investigation of the complaints, invited the alleged harasser and retaliator into the meeting to help “sort things out.” After hearing both “sides of the story,” the HR rep and the VP told Gracia to shake hands with the manager and “work together” with him to “solve their disputes.” [Read more…]

Non-disabled worker can bring action under ADA

An employer can land in hot water under the Americans with Disabilities Act (ADA) if it discriminates against a worker based on that worker’s disability. In other words, an employee can’t be fired, denied a promotion or treated negatively because of his or her disability. But did you know that an employer also violates the ADA by mistreating a non-disabled employee whom it thinks is disabled?

Take a recent case out of Virginia involving Joseph Cash, who worked as a service director for a car dealership in the town of Lexington.  He had worked for the dealership for three years when he took another job in 2013. He returned in 2015, but soon after had to take time off to deal with a bleeding ulcer and chronic anemia. While he was out, he and his wife stayed in touch with a supervisor. When Cash got back, he presented a doctor’s note requesting that he be able to work at the dealer’s location in Roanoke, which was closer to his home, or to work half days until he was better.

In response, his supervisor immediately replaced him at the Lexington location and cut his salary by a third. The supervisor also complained about Cash’s absence several years earlier for hip replacement surgery — an absence that had been covered by the Family and Medical Leave Act. [Read more…]

Mishandling terminations can lead to headaches, so consider the human factor

If you’re an employer and you’re reading this, chances are you’ve had to fire an employee for one reason or another. It could have been for cause or for economic reasons. Maybe the worker was simply not a good fit. In most situations, the employee probably left peacefully, although perhaps a bit angry or hurt.

But some workers don’t leave quietly and instead come back at their employers with lawsuits, even if there were legally valid reasons for the firing. In those cases, it’s often how the employer fired the worker and not the job loss itself that triggered the employee’s response. However, a little bit of smart strategy can defuse some of the tension in an emotionally fraught situation and potentially head off a lawsuit that could be costly, distracting and stressful, even if you win.

So how do you keep a legally justifiable termination from backfiring? By handling the termination in a manner that doesn’t come across as callous and disrespectful. [Read more…]

Tax checklist for business startups

Starting your own business can be equal parts thrilling and intimidating. Complying with regulations and tax requirements definitely falls into the latter category. But, with some professional help, it doesn’t have to be that way. You can get started with this checklist of things you’ll need to consider.

  • Are you a hobby or a business? This may seem basic to some people, but the first thing you’ll have to consider when starting out is whether you really are operating a business, or pursuing a hobby. A hobby can look like a business, but essentially it’s something you do for its own sake that may or may not turn a profit. A true business is generally run for the purpose of making money and has a reasonable expectation of turning a profit. The benefit of operating as a business is that you have more tax tools available to you, such as being able to deduct your losses.
  • Pick your business structure. If you operate as a business, you’ll have to choose whether it will be taxed as a sole proprietorship, partnership, S corporation or C corporation. All entities except C corporations “pass through” their business income onto your personal tax return. The decision gets more complicated if you legally organize your business as a limited liability corporation (LLC). In this case you will need to choose your tax status as either a partnership or an S corporation. Each tax structure has its benefits and downsides – it’s best to discuss what is best for you. [Read more…]

Answers to commonly asked tax questions

With all of the headlines about the changes to tax law, you probably have lots of questions. Here are answers to some of the most common questions taxpayers have this year.

Q. I’m hearing about a lot of changes to 2018 taxes. What should I do?

A. You’re right, there are a lot of changes in 2018 due to the passage of the Tax Cuts and Jobs Act (TCJA), including to the income tax brackets. The simple answer to the question, “What should I do?” is to not make any major changes until you finish filing your 2017 taxes. Once you understand your 2017 tax obligation, you are in a better position to plan for 2018.

However, there are a few things you can start thinking about now. Depending on where you fall in the new income tax brackets, you may want to consider ways to lower your taxable income. This could include increasing your contributions to 401(k) retirement accounts or health savings accounts (HSAs). You’ll also want to make sure your employer has adjusted your federal tax withholding so that you don’t have to wait to receive a large refund (or tax bill) next year. You can review the IRS withholding calculator using your latest pay stub data to make sure the changes are accurate. [Read more…]

Alert: Expired home and education tax breaks revived

Congress passed a federal budget bill in early February that revived dozens of expired tax breaks for the 2017 tax year. They include a deduction for education expenses as well as several tax breaks for homeowners.

If you have not yet filed your 2017 tax return, please be aware these late changes are retroactive to the beginning of 2017. Check out this list of the most useful tax breaks to see if they apply to your situation:

Tuition and fees deduction. If you paid qualified tuition and related higher education expenses, you may be able to deduct as much as $4,000 of those costs. This can be done on a regular return (without itemizing). The deduction is capped at $4,000 for single filers with adjusted gross income (AGI) of $65,000 or less ($130,000 joint) and at $2,000 for single filers with AGI of $80,000 or less ($160,000 joint). [Read more…]

Tax filing reminders

March 1 – Farmers and fishermen who did not make 2017 estimated tax payments must file 2017 tax returns and pay taxes in full.

March 2 – Automatic extension deadline for employers and health care providers to provide Forms 1095-B and 1095-C to individuals.

March 15

  • 2017 calendar-year S corporation income tax returns are due.
  • 2017 partnership returns are due.
  • Deadline for calendar-year corporations to elect S corporation status for 2018.

Law revoking beneficiary status didn’t apply retroactively

A new decision from a federal appeals court should give every divorced person incentive to look over his or her insurance policies and other financial documents to make sure beneficiaries have been changed. This holds true even in states with laws that automatically revoke a now-ex-spouse’s beneficiary status upon divorce.

The federal appeals court case concerned Minnesota couple Mark Sveen and Kay Melin, who got married in 1997. Mark had two children from a prior marriage and these kids were the primary beneficiaries on a life insurance policy that he had in place. But once he got married, Mark made Kay his primary beneficiary, with his kids as beneficiaries of a different policy.

The couple divorced after 10 years. Mark never removed Kay as the beneficiary after the divorce, although Kay claims that Mark agreed to keep her as the beneficiary in exchange for giving him a better property settlement. [Read more…]

Spat between parents may constitute ‘change in circumstances’

It’s never easy for a kid to be shuttled back and forth between two divorced parents who cannot communicate constructively. But it can get even worse for a child as he or she gets older and becomes more aware of the hostility between his or her parents. If a recent decision out of North Carolina is any indication, this growing awareness of the parents’ hatred toward one another may even be grounds for modifying a custody order.

In that case, a couple divorced in 2012 and a judge awarded the father primary physical care and custody of the couple’s young daughter “Reagan.” The judge apparently made this decision based on the couple’s “utter inability” to work together for their daughter’s benefit as well as the mother’s repeated, unsubstantiated allegations that the father was abusing Reagan.

Two years later the mother asked the court to modify the custody order, claiming that the father’s new girlfriend was acting as Reagan’s primary caregiver. A trial judge granted the motion, citing “changed circumstances” and giving the mother primary custody.  Specifically, the judge found that the parents still couldn’t communicate effectively and that Reagan, who was getting older and becoming more aware of the situation, was experiencing increasingly higher anxiety as a result. He also noted that the father and his girlfriend were keeping Reagan away from other family members and that the mother was no longer making false abuse allegations. [Read more…]

Husband held in contempt for non-payment despite waiver

A husband could be cited for contempt of court for failing to make agreed-upon payments to his ex-wife even though she had waived the right to “spousal support” in their divorce decree, the Virginia Court of Appeals recently decided.

In that case, as part of the property settlement the husband agreed to make a $40,000 lump-sum payment, to be satisfied in 16 equal monthly installments.

The divorce agreement contained a section entitled “alimony” in which both parties stated that they were waiving any right to receive alimony or “spousal support” payments in the future. The husband also agreed to pay for his wife’s health insurance for the next year and a half. The final decree created some confusion by stating that the amount of “periodic support” was expressed in fixed sums (presumably meaning the $40,000 lump sum) and set out a schedule for payment of “periodic spousal support” (presumably meaning the 16 installments). [Read more…]

Adult child’s ‘failure to launch’ doesn’t justify child support

In most states, the obligation to pay child support ends when the child turns 18. In some states it may end when the child graduates from high school, if that comes first. Minor children also generally can become “emancipated” through a court proceeding if they can support themselves, if they join the military, or if they get married. At that point, the obligation to pay child support ends. But the obligation to pay support can continue past age 18 if the money is used to pay for the adult child’s education or if the adult child is disabled.

What about an adult child who’s still living with one of the parents and just hasn’t figured out a way to support himself? Is the other parent required to pay support in that case?

A recent decision from an appeals court in New Jersey indicates that the answer is “No.” [Read more…]

Will you get credit in property division for footing household bills during divorce?

An issue that frequently arises when a marriage breaks up is who pays the household bills while the divorce is pending. A lot of times the spouse who paid the bills during the marriage will continue to pay utility bills and homeowner’s association or condo fees while making mortgage payments on the marital home. If you’re the one making those payments, you’re probably wondering whether a divorce judge will give you some sort of credit for it when dividing up the marital property. In other words, will you get a bigger share of the remaining property in consideration for the bills you’ve paid or be saddled with a smaller share of marital debt?

The answer is that it depends on the situation and the laws where you live.

Take, for example, a recent case from North Carolina, where it all came down to the concept of “active” versus “passive” decreases to marital debt. [Read more…]

Taxes and virtual currencies: What you need to know

Virtual currencies are all the rage lately. Here are some tax consequences you must know if you decide to dip your toe into that world.

The IRS is paying close attention
The first thing to know is that the IRS is scrutinizing virtual currency transactions, so if you live in the U.S. you’ll have to report your transactions in Bitcoins and the like to the IRS. Despite some early misconceptions, virtual currency transactions can be traced back to their owners by governments and other cyber sleuths.

If you decide to use or hold virtual currencies, carefully report and pay tax on your transactions. Act as if you are going to be audited, because if you don’t, you just might be! [Read more…]

Tips for when your employees are family members

Working with family can be a pleasure. It can also be a pain, especially if you have to terminate a family member’s employment. Here are tips to help you ease the strain of mixing your family and employee relationships.

Hire for the right reasons. Make your hiring and firing decisions based on the skill sets needed to keep your business operating effectively. Hiring your son because he’s struggling to find a job is not a good business reason for bringing staff on board.

Set clear expectations. Communicate the job’s performance requirements to your family member right from the start. Clearly define company policies for promotion, compensation and termination. Make it plain that unethical conduct will not be tolerated. [Read more…]

New 2018 capital expense rules

There are many provisions in the tax reform bill passed in late 2017 designed to benefit small business owners. There are also a variety of new tax tools affecting how small businesses account for deducting the cost of capital purchases under the new tax law. Here’s what you need to know:

Tool #1: Section 179 deduction
The new law increases the amount of business property purchases that you can expense each year under Section 179 to $1 million (from $500,000 previously). Normally, spending on business property (machines, computers, vehicles, software, office equipment, etc.) is capitalized and depreciated so that the tax benefit is spread out slowly over several years. Section 179 allows you to get the tax break immediately in the year the property is placed into service.

Tips:

  • There is an eligibility phaseout for Section 179 that ensures it’s only used by small businesses, but that was also raised to $2.5 million (from $2 million) by the new law. If you spend more than $2.5 million on business property in total during the year, your ability to use the $1 million Section 179 deduction is reduced dollar-for-dollar above that amount. [Read more…]

Tax filing reminders

February 28 – Payers must file most other Forms 1099 (except certain Forms 1099-MISC due Jan. 31) with the IRS. (April 2 if filing electronically.)

March 1 – Farmers and fishermen who did not make 2017 estimated tax payments must file 2017 tax returns and pay taxes in full.

March 2 – Automatic extension deadline for employers and health care providers to provide Forms 1095-B and 1095-C to individuals. [Read more…]