Tag Archives: advice

   How Can American Expats Reduce their IRS Taxes?

Americans living abroad are still required to file US taxes. The US is the only country that requires its expats to file. It is because the US taxes based on citizenship rather than on residence.

This leaves the millions of Americans who work abroad at risk of double taxation,  paying taxes in both the country where they live, and to the US, on the same income, as the US requires all its citizens to file and pay US taxes on their worldwide income.

There are however a number of ways that US expats can legally reduce their IRS tax liability, in many cases to zero.

The Foreign Earned Income Exclusion

The Foreign Earned Income Exclusion allows American expats who can prove that they live abroad in one of two ways to exclude the first around $100,000 (the exact figure rises a little every year) of their income from US tax.

Expats can prove that they live abroad either using the Bona Fide Residence Test, which requires them to provide proof of permanent residence in another country, or the Physical Presence Test, which requires them to prove that they spent at least 330 days outside the US in the tax year. The Physical Presence Test is useful for Digital Nomads who may be living abroad but traveling between countries, among others.

Expats can claim the Foreign Earned Income Exclusion by filing form 2555 when they file their federal return.

The Foreign Housing Exclusion

Expats who earn over around $100,000 and rent their accommodation abroad can exclude a proportion of the value of their housing expenses from US tax by claiming the Foreign Housing Exclusion alongside the Foreign Earned Income Exclusion, also using form 2555.

The Foreign Tax Credit
The Foreign Tax Credit gives a $1 US tax credit for every dollar of tax already paid abroad. For expats living and paying taxes abroad at a higher rate than the US tax rate, this allows them to eliminate their US tax liability without claiming the Foreign Earned Income Exclusion, while also (if they’ve paid more tax abroad) getting excess US tax credits they can save for the future.
There is also no upper amount of credits that can be claimed, so it can be claimed whatever your income.

Some expats may benefit from claiming the Foreign Earned Income Exclusion and the Foreign Tax Credit on income over the Foreign Earned Income Exclusion limit.

The Foreign Tax Credit is claimed by attaching form 1116 to your federal return.

Which is most beneficial depends on the expats circumstances (more on this in the ‘Strategy’ section, below).

Use your foreign spouse

This can work in one of two ways. Firstly, if you’re earning a little over the Foreign Earned Income Exclusion but either paying no foreign tax, or less foreign tax than you owe the  IRS (so the Foreign Tax Credit isn’t beneficial), and you own your home (so the Foreign Housing Exclusion can’t be claimed), if your foreign spouse earns less than $100,000, if you bring them into the US tax system and file jointly, you double your standard deduction and get a further personal exemption for spouse.

Conversely, if your spouse earns more than $100,000, it’s normally beneficial to leave them outside the US tax system, instead checking ‘married filing separately’ on your return.

The Streamlined Procedure
The Streamlined Procedure is an IRS amnesty program that allows expats who are behind in their tax or FBAR (foreign bank account reporting) filing to catch up without facing penalties. For expats who weren’t previously aware that they have to file US taxes from overseas, the Streamlined Procedure is a great opportunity to become tax compliant without paying any fines, and so save them potentially a small (or large) fortune.
Renouncing citizenship
This is the nuclear option, and shouldn’t be taken without full consideration of all the consequences, however for some people it can make sense

For example, if you have settled abroad permanently, are also a citizen of another country, and are a high earner who will always owe tax to the US on top of the taxes you pay in your country of residence, in the long terms the cost of renouncing ($2350) may be worthwhile in terms of future tax savings.


While there are many strategies available to expats to reduce their US taxes, half the battle is knowing which one (or ones) to apply. This depends on each expats particular circumstances – how much they earn, which country they live in, whether they’re living abroad temporarily or permanently, whether they’re married (and if so their spouse’s nationality and financial circumstances), among other things. This is where it normally the best tax saving strategy to consult an expert expat tax specialist, who by applying the right strategies given the expat’s circumstances will typically be able to save much more money than they cost.

   How the Sales Tax Holiday Can Boost Your Back-to-School Savings


With several of my family members working in the education field, I know it will be only a matter of time before I’ll get tweets and Facebook shares on the back to school deals they find. Depending on where you live, your state may be offering a huge savings with a sales tax free shopping weekend on specific purchases. With state sales tax ranging 4-7%, that means more money in your pocket.

Dates vary, but this year many states are having it the first full weekend in August (7th-9th). You can check here for more details on which states are offering sales tax holidays.

Why Tax Free is Even Better Than You Think

While not all states participate, you may be able to enjoy tax free shopping for school supplies in several states including Texas, Iowa, and Connecticut. If you have several kids going to school this year, you can boost your savings picking up paper, pens, calculators, and back packs.

Speaking of saving money, you can get even better deals on the bigger ticket items – namely laptops and tablets.

Getting the Bigger Bang for Your Hard Earned Buck with Laptops

You don’t want to buy a laptop because it was on sale only to see it slow or break down in a year. While specs change year to year, here are some guidelines to help you get technology that will last.

What Workload Will It Be Handling?

If your kid needs a computer they can easily tote with them for notes, but not to run highly specialized programs, you may want to get a tablet instead. There are some wonderful bundles that give you a tablet (with warranty) and a case at a great bargain.

They can use the tablet while at school and then do the heavy lifting on the home computer. For those who need more processing power, but still want the portability of a tablet, getting a hybrid like the Surface or Yoga may be the right ticket for you.

High school and college students may need a laptop to keep up with their coursework. New processors come out, but right now you can get incredible performance with some older models. Those who are using programs like Photoshop and Unity will want to make sure that their computer has plenty of memory (at least 8GB RAM).

You also want to check out reviews and make sure you get a laptop with a reputation for good battery life (at least 9 hours).

Thoughts on Back to School Savings

I hope this helps you prepare your shopping list. What supplies do you need to pick up this school year?

   IRS Simplifies Surviving Spouse Portability Election

The Internal Revenue Service has released a revenue procedure that offers an easier way to get an extension of time to file a return to opt for portability of the deceased spousal unused exclusion amount.

Revenue Procedure 2017-34 applies to estates that aren’t typically required to file an estate tax return because the value of the gross estate and adjusted taxable gifts is under the filing threshold. The first $5,490,000 (under the 2017 exemption) is excluded for federal estate tax purposes. This is a cumulative lifetime exemption, so taxable gifts made during a taxpayer’s lifetime use part of the exemption. After a taxpayer’s death, the rest of the exemption amount is applied to the remaining estate.

For federal estate tax purposes, if taxpayers follow the proper compliance procedures, they can “port” the exemption of the first spouse to the second spouse for all deaths after 2010, according to Lisa Rispoli, partner-in-charge of trust and estate services at Grassi & Co., in a note to clients Monday. This provides for the availability of approximately $10,980,000 in assets to be exempt from estate tax. The exemption ported is known as the “deceased spouse unused exemption,” or DSUE.

“This portability election requires the filing of a return for the estate of the first deceased spouse, even if that estate is too small to require filing otherwise,” Grassi & Co. noted. “It must be elected on a timely filed return, including extensions.”

In the earlier years after the DSUE portability provisions were originally enacted, the IRS provided a simplified method for getting a time extension to make the portability election for estates that wouldn’t normally need to file an estate tax return. But that simpler method was only available up until the end of 2014.

After Dec. 31, 2014, the IRS has issued several letter rulings to allow some estates to make a portability election if they missed the deadline for filing and weren’t otherwise required to file. But it involved paying a substantial fee (now as high as $10,000) to the IRS.

The new revenue procedure provides a less expensive and simpler way to make the election. For estates of people who died between Jan. 1, 2011 and Jan. 2, 2016 (and who aren’t otherwise required to file an estate tax return and missed the deadline for timely filing) the election can be made up until Jan. 2, 2018. Estates of people who died after Jan. 2, 2016, can make an election up to two years after the date of death.

For the surviving spouse, the tax savings for making this election is significant, Grassi noted, as much as $2.2 million.


Michael Cohn


Business travel, an expensive and time-consuming activity for both the employer and employee, also can create tax problems for all concerned unless the rules are followed to the letter. If it’s done right, business travel will be fully deductible by the company (but only 50% of travel meals are deductible), tax-free to the employee, and free of FICA and payroll tax withholding. If the rules aren’t followed, the expense will still be deductible by the employer, but it will be taxed to the employee and fully subject to withholding. This Practice Alert reviews the business travel rules that apply in a variety of common situations.

Background. In general, a business may deduct under Code Sec. 162 all ordinary and necessary business expenses paid or incurred during the tax year in carrying on any trade or business, including travel expenses (such as lodging expenses) that aren’t lavish or extravagant while away from home in the pursuit of a trade or business.

Under Reg. § 1.132-5(a), the value of a working condition fringe benefit (WCFB) is not included in an employee’s gross income. A WCFB is any property or service provided to an employee to the extent that, if the employee paid for the property or service, it would be deductible under Code Sec. 162 or Code Sec. 167 (dealing with the depreciation allowance).

Under Reg. § 1.62-2(c)(4), an advance or reimbursement made to an employee under an “accountable plan” is deductible by the employer and is not subject to FICA and income tax withholding. In general, an advance or reimbursement is treated as made under an accountable plan if the employee:

  1. Receives the advance, etc., for a deductible business expense that he or she paid or incurred while performing services as an employee of his or her employer;
  2. Must adequately account to his or her employer for the expense within a reasonable period of time; and
  3. Must return any excess reimbursement or allowance within a reasonable period of time.

By contrast, an advance, etc., made under a “nonaccountable plan” is fully taxable to the employee and subject to FICA and income tax withholding. It will be treated as compensation to the employee and, in general, deducted as such by the employer.

Tax attraction of business travel status. The round-trip cost of traveling on business is deductible whether or not the taxpayer is away from home overnight. For example, if a New York businesswoman takes the shuttle to Washington on business, the airfare is deductible whether she returns home the same day (in which case it’s treated as business transportation) or stays in Washington overnight (in which case it’s treated as business travel). What makes business travel unique from the tax viewpoint is that when a taxpayer is in business travel status, the entire cost of lodging and incidental expenses, and 50% of meal expenses, are deductible by a business that pays the bill and don’t result in any taxable income to employees who are reimbursed under an accountable plan.

Qualifying for business travel status. A business trip has the status of business travel only if:


  1. It involves overnight travel;
  2. The taxpayer travels away from his or her tax home;
  3. The trip is undertaken solely, or primarily, for ordinary and necessary business reasons; and
  4. The trip is “temporary”, i.e., the traveler is temporarily away from home.

Overnight travel status. To deduct the cost of lodging and meals, the taxpayer generally must be away from home overnight. (Correll (S Ct 1967) 20 AFTR 2d 584520 AFTR 2d 5845; Rev Rul 75-432, 1975-2 CB 60) This isn’t a literal test in the sense that the taxpayer must be away from dusk to dawn. Any trip that is of such a length as to require sleep or rest to enable the taxpayer to continue working is considered “overnight”. (Rev Rul 75-170, 1975-1 CB 60)

Noteworthy exception. The regs provide one exception under which local non-lavish expenses for lodging while not away from home overnight on business are deductible, if all the facts and circumstances so indicate. One factor is whether the taxpayer incurs the expense because of a bona fide condition or requirement of employment imposed by his employer. (Reg. § 1.162-32(a))

Under Reg. § 1.162-32(b), local lodging expenses are treated as ordinary and necessary business expenses if all of the following conditions are met:


  1. The lodging is necessary for the individual to participate fully in or be available for a bona fide business meeting, conference, training activity, or other business function.
  2. The lodging is for a period that does not exceed five calendar days and does not recur more frequently than once per calendar quarter.
  3. If the individual is an employee, his or her employer requires him to remain at the activity or function overnight.
  4. The lodging is not lavish or extravagant under the circumstances and does not provide any significant element of personal pleasure, recreation, or benefit.

RIA illustration1 XYZ Corp runs a 3-day business-related training session at a hotel near its main office. It requires all employees attending the training to remain at the hotel overnight for the bona fide purpose of facilitating the training. If XYZ pays the lodging costs directly to the hotel, the stay is a WCFB to all attendees (even to employees who live in the area who are not on travel status), and XYZ may deduct the cost as an ordinary and necessary business expense. If employees pay for the lodging costs and are reimbursed by XYZ, the reimbursement is of the accountable plan variety and is tax-free to the employees and deductible by XYZ as an ordinary and necessary business expense. (Adapted from Reg. § 1.162-32(c), Exs. 1 and 2)

Travel away from tax home. Deductions for meals and lodging on business trips are allowed because expenses for these items are duplicative of costs normally incurred at the taxpayer’s regular home and require the taxpayer to spend more money while traveling. Consequently, the taxpayer can’t claim deductions for meals and lodging unless he or she has a home for tax purposes, and travels away from it overnight. (See, e.g., Correll (S Ct 1967) 20 AFTR 2d 584520 AFTR 2d 5845; Andrews (CA 1 1991) 67 AFTR 2d 91-88167 AFTR 2d 91-881, vacg TC Memo 1990-391TC Memo 1990-391) There are no deductions when, for instance, a business person sleeps at a local hotel because of a late workday in the city, instead of traveling back to his or her nearby suburban home.

A taxpayer’s “tax home”, that is, his or her home for purposes of the business-travel deduction rules, is located at

  1. His or her regular or principal (if more than one regular) place of business, or
  2. If the taxpayer has no regular or principal place of business, his or her regular place of abode in a real and substantial sense. (Rev Rul 73-529, 1973-2 CB 37)

Where a taxpayer has two or more work locations, his or her main place of work is his tax home. In determining which location is the main place of work, the factors to be taken into account include: the total time ordinarily spent in each place; the level of business activity in each place; and whether the income from each place is significant or insignificant. (Markey (CA 6 1974) 33 AFTR 2d 74-59533 AFTR 2d 74-595, revg TC Memo 1972-154TC Memo 1972-154; IRS Publication 463, 2016, pg. 3)

The rules are different where the taxpayer does not maintain a permanent residence. For example, an itinerant salesperson who moves from place to place is “home” wherever he or she stays at each location. Since the taxpayer doesn’t have duplicative expenses, there’s no deduction for meals and lodging. (Rev Rul 73-529, 1973-2 CB 37; Henderson (CA 9 1998) 81 AFTR 2d 98-174881 AFTR 2d 98-1748, affg TC Memo 1995-559TC Memo 1995-559)

When business traveler is “temporarily” away from home. Except for certain federal criminal investigators and prosecutors, a taxpayer won’t be treated as temporarily away from home during any period of employment if such period exceeds one year. (Code Sec. 162(a)) IRS has ruled that if employment away from home in a single location is realistically expected to last (and does in fact last) for one year or less, the employment is “temporary” in the absence of facts and circumstances indicating otherwise. If employment away from home in a single location initially is realistically expected to last for one year or less, but at some later date the employment is realistically expected to exceed one year, the employment will be treated as temporary (in the absence of facts and circumstances indicating otherwise) until the date that the taxpayer’s realistic expectation changes. (Rev Rul 93-86, 1993-2 CB 71)

“Breaks in service” and the 1-year rule. An employee may be asked to work at offsite location 1 for a specified period, then be shifted to offsite location 2 or back to the home office, and then reassigned back to offsite location 1. How long does the “break in service” (i.e., the period at offsite location 2 or back at the home office) have to be for employment at offsite location 1 to be treated as two separate periods of employment for purposes of the 1-year rule for temporary travel away from home?

In Chief Counsel Advice 200026025, IRS dealt with this question in the context of Rev Rul 99-7, 1999-5 CB 361, which provides a 1-year rule for determining whether transportation between an employee’s home and a work location is “temporary” and therefore deductible. The 1-year rule in Rev Rul 99-7 is very similar to the 1-year temporary away-from-home rule in Rev Rul 93-86. The CCA said that, while there’s no general guidance on when a break is significant, a break of three weeks or less isn’t significant and won’t “stop the clock” in applying the 1-year temporary workplace limit. By contrast, a continuous break of at least seven months would be significant. Thus, two offsite work assignments separated by a 7-month continuous break would be treated as two separate periods of employment for purposes of the 1-year temporary workplace limit. The CCA said that this would be the case “regardless of the nature of the employee’s work activities or the nature of the break, and regardless of whether the subsequent employment at the work location was anticipated”.

Illustration2: On Jan. 1, Year 1, employee Jack Blue is told he will work at Client DEF’s office for eight months (Jan. 1—Aug. 31), then work exclusively at Client GHI’s office for three weeks (Sept. 1—Sept. 21), and then work again at DEF’s office for four months (Sept. 22—Jan. 22). Because the 3-week break in service at DEF’s office is inconsequential, on Jan. 1, Year 1, there’s a realistic expectation that Blue will be employed at DEF’s office for a period exceeding one year (Jan. 1, Year 1 through Jan. 22, Year 2). As a result, his employment at DEF’s office is not temporary. (Chief Counsel Advice 200026025, Ex. 1)

Illustration3: The facts are the same as in illustration (2), except that the interim assignment at Client GHI’s office will last for seven months (Sept. 1, Year 1–Mar. 31, Year 2), followed by a 4-month reassignment to DEF’s office (Apr. 1, Year 2–July 31, Year 2). Here, Blue’s employment at DEF’s office is treated as temporary for each of the two periods he’s there. This result wouldn’t change even if Blue had spent some of the interim 7-month period on vacation or at training rather than working at GHI’s office. (Chief Counsel Advice 200026025, Ex. 2)

RIA observation: Although IRS doesn’t say so, its “break in service” guidance for purposes of the 1-year temporary workplace rule also should apply for purposes of the 1-year away from home rule for business travel. Thus, in the last illustration, if Client DEF was located out of town, Blue could be reimbursed tax-free not only for his round-trip travel costs, but also for his lodging and meal expenses while on the out-of-town assignments.

   How to Secure a Valuable Tax Credit for Hiring Designated Workers

Before you interview the next group of job candidates for your small business, whether it’s to fill a full-time position or just for the summer, keep in mind that long-term unemployment recipients and other workers certified by a state agency may qualify for the Work Opportunity Tax Credit (WOTC).

This isn’t just chicken feed: The credit is generally equal to 40 percent of the worker’s first-year wages up to $6,000, for a maximum credit of $2,400 per worker. For disabled veterans, the credit may be available for the first $24,000 of wages, for a maximum credit of $9,600 per worker. And remember that tax credits, as opposed to tax deductions, offset tax liability on a dollar-for-dollar basis.

The WOTC is a long-standing income tax benefit that encourages employers to hire designated categories of workers who face significant barriers to employment.

This credit is usually claimed on Form 5884, Work Opportunity Credit. However, to qualify for the credit, an employer must first request certification by filing Form 8850, Pre-Screening Notice and Certification Request for the Work Opportunity Credit, with the state workforce agency within 28 days after the eligible employee begins work. Other requirements and further details can be found in the instructions to Form 8850.

Currently, there are 10 categories of WOTC-eligible workers. The latest category to be added, effective Jan. 1, 2016, covers long-term unemployment recipients who had been unemployed for a period of at least 27 weeks and have received state or federal unemployment benefits during part or all of that time.

According to the IRS, the other categories include certain veterans and recipients of various kinds of public assistance, among others. The 10 categories are:

  • Qualified IV-A Temporary Assistance for Needy Families recipients
  • Unemployed veterans, including disabled veterans
  • Ex-felons
  • Designated community residents living in empowerment zones or rural renewal counties
  • Vocational rehabilitation referrals
  • Summer youth employees living in empowerment zones
  • Food stamp recipients
  • Supplemental Security Income recipients
  • Long-term family assistance recipients
  • Qualified long-term unemployment recipients

Note that a special summertime credit is available for hiring youths who are 16 or 17 years old and reside in an empowerment zone or enterprise community. This credit equals 40 percent of the first-year wages of $3,000, up to a maximum of $1,200, for a youth working at least 400 hours. But the credit is limited to wages paid for services performed between May 1 and Sept. 15.

Eligible businesses claim the WOTC on their income tax return. First, the credit is calculated on Form 5884, and then it becomes a part of the general business credit claimed on Form 3800.

These rules are complex, so small business owners may require guidance from their professional tax advisor.


Ken Berry

   How to Play All the Right Tax Angles for Hobbies

Millions of people enjoy hobbies that also provide a source of income. From catering to cupcake baking, crafting homemade jewelry to glass blowing – no matter what your passion is, there will likely be tax repercussions.

Some taxpayers are surprised to learn that they must report income earned from hobbies on their tax return. The exact rules for reporting income, as well as deducting expenses, depend on whether the activity is a hobby or a business. In fact, you may bump up against obstacles in this area.

Accordingly, the IRS has focused on the following points for hobby enthusiasts to consider:

Business vs. Hobby
If an activity is a hobby, not a business, your deductions are generally limited to the amount of hobby income. Conversely, a business might be able to claim a loss. The key distinction is often whether you’re engaging in the activity to turn a profit.

Traditionally, the IRS and the courts have relied on nine factors to make this determination:

  1. The manner in which the taxpayer carries on the activity.
  2. The taxpayer’s expertise.
  3. The time and effort expended by the taxpayer in carrying out the activity.
  4. Any expectation that assets used in the activity (e.g., land) may appreciate in value.
  5. The taxpayer’s success in other activities.
  6. The taxpayer’s history of income or losses from the activity.
  7. The relative amounts of the profits and losses.
  8. The taxpayer’s financial status.
  9. Whether the activity provides recreation or involves personal motives.

Don’t discount any of these factors. All nine of them may come into play.

Allowable Hobby Deductions
Within certain limits, taxpayers can usually deduct “ordinary and necessary” hobby expenses to offset hobby income. An ordinary expense is one that is common and accepted for the activity, while a necessary expense is one that is appropriate for the activity. Typically, your deductible expenses might include production and advertising costs.

Limits on Hobby Expenses
Generally, taxpayers can only deduct hobby expenses up to the amount of hobby income. If hobby expenses exceed the income, taxpayers have a loss from the activity. However, a hobby loss can’t be deducted from other income like a business loss can.

Method of Deducting Hobby Expenses
Taxpayers must itemize deductions on their tax return in order to deduct their hobby expenses. Generally, hobby expenses are deducted on Schedule A of Form 1040 as miscellaneous expenses, subject to the usual limits. Thus, if you do not itemize deductions, or if your expenses fall below the threshold for deducting miscellaneous expenses, you may get no tax benefit from your hobby.

Note that the IRS follows a special presumption when determining whether an activity is a business or a hobby. If an activity turns a profit in three of five consecutive years, the activity is presumed to be a business, although this presumption can be rebutted by evidence.

The presumption applies if you show a profit in only two out of seven years for activities related to the breeding, training, showing, or racing of horses.

   Some of the Biggest Estate-Planning Mistakes People Make

Will your legacy be a benefit or a burden to your loved ones? It depends on how well you’ve planned.

There are some things we just don’t like to think about, much less speak about. The universal truth is we are all going to pass away one day. The legacy you leave can either simplify the process of dealing with your personal and financial property, or it can be a worrisome burden for those you leave behind.

Legacy planning is as important as your final wishes. So, as much as you avoid the topic, it can’t be — and shouldn’t be — ignored.

When discussing this subject, I like to point out to people that it is often the smallest things that can come back to bite you. I’m reminded of the proverb that says, “For want of a nail, the kingdom was lost.”

So let’s take a look at what you should discuss with a qualified attorney to help make sure your kingdom — and your legacy — isn’t lost.

There are several common mistakes people can make when planning — or not planning — for what will happen with their estates when they die. A few of those mistakes include:

Lack of a see-through provision on a trust.

This can prove very costly. For example, consider a couple who has a $1 million Individual Retirement Account (“IRA”) and the beneficiary of the IRA is a trust. If there is no see-through provision on the trust, the couple’s estate could potentially owe several hundred thousand dollars in taxes when the IRA is passed to beneficiaries due to the higher tax rates trusts are often subject to. In certain circumstances, a trust may be an appropriate beneficiary for an IRA.

A “see-through trust” refers to a trust that meets specific legal requirements and serves as the named beneficiary of an IRA. In this scenario, The IRS will “see through” the trust and treat the trust’s beneficiaries as if they were the IRA’s direct beneficiaries. The beneficiaries’ life expectancies will then be used to determine the IRA’s required minimum distributions. Additionally, a see-through provision allows these distributions to be taxed at the individual beneficiary’s tax rate rather than at the trust’s tax rate.

Oftentimes, a trust’s tax rate is higher than an individual’s. Therefore, a see-through provision could help prevent a large tax bill when the owner of the IRA dies, depending on the individual beneficiary’s tax situation.

A blank or incomplete Schedule.

Schedules are attachments to the trust document that contain important details concerning the trust (most commonly a Schedule A). For example, most trusts have a schedule that is the inventory sheet of the trust, and it typically details what assets you have transferred into the trust. As such, it’s important to make sure all schedules are complete and accurate — it shouldn’t be blank! It is important to confirm with your attorney that your trust actually owns the assets you intend for it to own.

If it’s not clear what assets the trust owns on the statement, you should be concerned and meet with an attorney who can review your trust to help ensure your wishes are accurately reflected.


POD means “payable on death.” TOD stands for “transfer on death.” These designations allow the beneficiary to receive assets without going through probate. Does every bank account, including all your checking, money market, savings and CD accounts, have POD and TOD instructions on them? Probate can be an expensive process. Laws governing attorney fees for probate are decided by individual states and can vary. For example, consider a savings account with $200,000. In Florida, attorney fees to probate this account could be as high as 3%, or $6,000. Having a POD or TOD on this account could help save on these administrative expenses.

Having too many accounts.

The FDIC places a limit of $250,000 per depositor, per bank on the amount that it will insure. As such, you may consider consolidating some of your bank accounts if you have more than you actually need to ensure you are protected. Otherwise, you might overcomplicate your estate.

Leaving no inventory of assets.

So where is everything? Even if you have been meticulous about having all the right documents, it does no one any good if they can’t find them after you die. So leave your loved ones a checklist to tell them where they can find your birth certificate, Social Security card, marriage license, pre-nuptial agreement, military records, will, burial instructions, cemetery plot deed or cremation agreement, bank and credit documents, mortgage papers, personal financial documents, and safe deposit box and keys.

Your legacy is the last impression you leave behind. The last thing families want to do is leave their children or beneficiaries 1,000 puzzle pieces scattered all over the floor. A legacy is not a 1,000-piece puzzle scattered to the wind but a picture worthy to be framed.


Andrew McNair

   Taxpayer Tips: Best Practices for U. S. Tax Court

Taxpayers contesting IRS assessments of additional taxes, penalties and interest have a number of different options to contest and appeal those assessments. One of those options includes bringing a case to the United States Tax Court (Tax Court). Here are some Tax Court practice tips for taxpayers:

1. Know What Tax Court Is

Congress created the Tax Court as an independent judicial authority for taxpayers disputing certain Internal Revenue Service (IRS) determinations. Tax court is not controlled by or connected to the IRS even though the Tax Court’s authority, or jurisdiction, is limited to resolving taxpayer issues with the IRS. Similar to other Federal courts in the U.S., it is a court of record and records are made of all proceedings.

To initiate a case, a taxpayer files a petition with the Tax Court. Once proceedings begin, the taxpayer is then referred to as the “petitioner” and the Commissioner of the Internal Revenue is referred to as the “respondent.”

2. Understand How the U.S. Tax Court Operates

Tax Court operates on a calendar basis with its 19 presidentially appointed judges traveling the nation to conduct trials in a number of different cities. The judges themselves have expertise in matters of U.S. taxation and are qualified to apply U.S. tax law. There are no juries at these trials and the matter is tried by one judge. After the trial, a report is issued by that judge who sets forth the findings of fact and an opinion. The case is then closed based on the judge’s opinion.

3. Access Helpful Tools Specifically Created for Taxpayers by the Tax Court

The Tax Court website can be very helpful and provides a number of resources.  Recently, the Tax Court created a series of videos to educate taxpayers on Tax Court procedures and rules. The video series covers the following:

  • An overview of the U.S. Tax Court
  • Understanding the Process
  • An Introduction to the Unites States Tax Court
  • Filing the Petition
  • Pretrial Matters
  • Calendar Call and the Trial
  • Post-Trial Proceedings

The Tax Court website also offers a “Taxpayer Information” web page, which is structured into four sections and reads like an extensive frequently asked questions resource. The Taxpayer Information resource contains a glossary and links to Tax Court Rules and is very helpful.

4. Be Aware of Options for Taxpayers with Smaller Amounts in Dispute (under $50,000)

When the amounts are under $50,000 or the tax matter is less complex, taxpayers may consider representing themselves. It may be more cost-efficient and even more time-efficient in some cases.

For cases not in excess of $50,000, the taxpayer also has the option to choose to have the case conducted under the “small tax case” procedures. These procedures are simpler and less formal than those for regular cases. They are typically speedier too. This choice is made when the taxpayer files their petition with the Tax Court. However, and importantly, a small tax case may not be appealed to a Court of Appeals by the IRS or the taxpayer.

Low-income taxpayers should also be aware that low-income tax clinics exist in almost every U.S. state as well as the District of Columbia. These clinics offer free or reduced fee tax and tax representation services to taxpayers with incomes below certain thresholds and based on family size.

5. Representation Considerations When the Amount in Controversy Exceeds $50,000 or the Issue Is Complex

When the amount in controversy before the U.S. Tax Court is large or if the tax matter is complex, taxpayers may wish to seek seasoned representation from a tax professional, such as a tax attorney admitted to practice before the U.S. Tax Court.

While the Tax Court provides many resources for self-representation, the Internal Revenue Code and its accompanying regulations and procedures can be overwhelming. The IRS assigns attorneys from their Office of Chief Counsel to represent them who are well versed in both tax law and the rules and procedures of Tax Court. (Tax Court has just under 350 rules, which are updated and changed on a somewhat frequent basis.)

   IRS and Security Summit Partners Warn of Fake Tax Bills


WASHINGTON — The Internal Revenue Service and its Security Summit partners today issued an alert to taxpayers and tax professionals to be on guard against fake emails purporting to contain an IRS tax bill related to the Affordable Care Act.

The IRS has received numerous reports around the country of scammers sending a fraudulent version of CP2000 notices for tax year 2015. Generally, the scam involves an email that includes the fake CP2000 as an attachment. The issue has been reported to the Treasury Inspector General for Tax Administration for investigation.

The CP2000 is a notice commonly mailed to taxpayers through the United States Postal Service. It is never sent as part of an email to taxpayers. The indicators are:

  • These notices are being sent electronically, even though the IRS does not initiate contact with taxpayers by email or through social media platforms;
  • The CP2000 notices appear to be issued from an Austin, Texas, address;
  • The underreported issue is related to the Affordable Care Act (ACA) requesting information regarding 2014 coverage;
  • The payment voucher lists the letter number as 105C.

The fraudulent CP2000 notice included a payment request that taxpayers mail a check made out to “I.R.S.” to the “Austin Processing Center” at a Post Office Box address. This is in addition to a “payment” link within the email itself.

IRS impersonation scams take many forms: threatening telephone calls, phishing emails and demanding letters. Learn more at Reporting Phishing and Online Scams.

Taxpayers or tax professionals who receive this scam email should forward it to phishing@irs.gov  and then delete it from their email account.

Taxpayers and tax professionals generally can do a keyword search on IRS.gov for any notice they receive. Taxpayers who receive a notice or letter can view explanations and images of common correspondence on IRS.gov at Understanding Your IRS Notice or Letter.

To determine if a CP2000 notice you received in the mail is real, see the Understanding Your CP2000 Notice, which includes an image of a real notice.

A CP2000 is generated by the IRS Automated Underreporter Program when income reported from third-party sources such as an employer does not match the income reported on the tax return. It provides extensive instructions to taxpayers about what to do if they agree or disagree that additional tax is owed.

It also requests that a check be made out to “United States Treasury” if the taxpayer agrees additional tax is owed. Or, if taxpayers are unable to pay, it provides instructions for payment options such as installment payments.

The IRS and its Security Summit partners — the state tax agencies and the private-sector tax industry — are conducting a campaign to raise awareness among taxpayer and tax professionals about increasing their security and becoming familiar with various tax-related scams. Learn more at Taxes. Security. Together. or Protect Your Clients; Protect Yourself.

Taxpayers and tax professional should always beware of any unsolicited email purported to be from the IRS or any unknown source. They should never open an attachment or click on a link within an email sent by sources they do not know.

   Tips for Taxpayers Who Owe Taxes

The IRS offers a variety of payment options where taxpayers can pay immediately or arrange to pay in installments. Those who receive a bill from the IRS should not ignore it. A delay may cost more in the end. As more time passes, the more interest and penalties accumulate.

Here are some ways to make payments using IRS electronic payment options:

  • Direct Pay. Pay tax bills directly from a checking or savings account free with IRS Direct Pay. Taxpayers receive instant confirmation once they’ve made a payment. With Direct Pay, taxpayers can schedule payments up to 30 days in advance. Change or cancel a payment two business days before the scheduled payment date.
  • Credit or Debit Cards. Taxpayers can also pay their taxes by debit or credit card online, by phone or with a mobile device. A payment processor will process payments.  The IRS does not charge a fee but convenience fees apply and vary by processor.Those wishing to use a mobile devise can access the IRS2Go app to pay with either Direct Pay or debit or credit card. IRS2Go is the official mobile app of the IRS. Download IRS2Go from Google Play, the Apple App Store or the Amazon App Store.
  • Installment Agreement. Taxpayers, who are unable to pay their tax debt immediately, may be able to make monthly payments. Before applying for any payment agreement, taxpayers must file all required tax returns. Apply for an installment agreement with the Online Payment Agreement tool.Who’s eligible to apply for a monthly installment agreement online?
    • Individuals who owe $50,000 or less in combined  tax, penalties and interest and have filed all required returns
    • Businesses that owe $25,000 or less in combined tax, penalties and interest for the current year or last year’s liabilities and have filed all required returns

Those who owe taxes are reminded to pay as much as they can as soon as possible to minimize interest and penalties. Visit IRS.gov/payments for all payment options.

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