California taxpayers waiting and wondering about their tax stimulus payment from the IRS can visit the IRS website for answers to frequently asked questions by clicking here.

Other tax problems related to unpaid payroll taxes, unpaid income taxes or unfiled tax returns, call Los Angeles tax attorney Mitchell A. Port at (310) 559-5259.

David M. Goldman, an estate planning attorney in Florida, has an interesting article worth reading at his blog. Simply substitute "California estate planning" or "California estate planning lawyer" for the reference to "Florida" and you should be able to obtain some valuable information. Or, simply call Mitchell A. Port, a California estate planning attorney, at (310) 559-5259 to discuss your concerns.

Jonathan G. Blattmachr and Georgiana J. Slade at Milbank, Tweed, Hadley & McCloy LLP, and Bridget J. Crawford at Pace University - School of Law, have written an article in the March, 2007 edition of "Estate Planning" magazine, addressing estate planning for those of us with estates under five million dollars. I have posted the full article at the same time as this posting.

Here is an abstract for the article:

"Financial concerns may preclude people of modest wealth (defined for purposes of this article as those having a net worth between $1 million and $5 million) from making significant lifetime transfers to achieve estate planning goals. Yet lifetime transfers are among the most effective ways to reduce estate taxes. Individuals of modest wealth may experience a tension between the desire to take advantage of opportunities to reduce taxes and protect assets from other claims which may arise, on the one hand, and the need to preserve an adequate base of wealth to ensure the maintenance of a current standard of living, on the other.

"The advisor to these individuals carefully should consider what estate planning steps are most appropriate and what level of transfers, if any, the individual reasonably can afford to make.

"This article details and evaluates eleven strategies that may apply to clients in the modest wealth category:

"(1) inter vivos transfers of life insurance and other non-income producing assets;

"(2) estate building and income tax sheltering with life insurance;

"(3) qualified personal residence trusts;

"(4) effective use of annual exclusions;

"(5) self-settled trusts;

"(6) potential use of the gift tax exemption and the GST exemption;

"(7) assessing income tax-free states;

"(8) using a charitable remainder trust to build wealth and generate income;

"(9) medical care and tuition payments;

"(10) limited liability entities for asset protection and tax planning; and

"(11) special care in handling interests in qualified plans, IRAs and other IRD."

To speak with an estate planning attorney in Los Angeles, California, call Mitchell A. Port at 310.559.5259.

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For his willfully failing to file an income tax return, Wesley Snipes was sentenced to three years in federal prison. He was charged with having failed to pay over $15,000,000 in taxes.

A jury acquitted Wesley Snipes of fraud and conspiracy charges and certain other tax charges even though they convicted him for failure to file his 1999, 2000, and 2001 tax returns.
According to the IRS, tax protestors Eddie Ray Kahn and Douglas P. Rosile (who themselves face 10 and 4-1/2 years' incarceration respectively) met Snipes in 1998 who followed their suggestion to (among other things) stop filing tax returns.

He also filed amended returns requesting payments from the government of millions of dollars in refunds from earlier years' filings.

Allegedly, Snipes doctored tax returns, and sent fake checks to the Treasury to evade paying his tax liabilities.

For what was technically a misdemeanor, Snipes was convicted and sentenced to time in prison.

According to Justice Department prosecutors, this represented a "singular opportunity….to deter tax crime nationwide." And "Snipes's long prison sentence should send a loud and crystal clear message to all tax defiers that if they engage in similar tax defier conduct, they face joining him and his co-defendants . . . as inmates in prison."

In an article this California tax lawyer thinks is worth reading, Marjorie E. Kornhauser (Arizona State) has published A Tax Morale Approach to Compliance: Recommendations for the IRS, 8 Fla. Tax Rev. 599 (2007).

Here is the introduction:

If people hate taxes so much why do they pay them? The common, seemingly obvious, answer—fear of being caught cheating—is only a partial answer. In fact, this “obvious” answer—based on the rational cost/benefit analysis of traditional economic theory— explains so little of tax compliance that the puzzle of tax compliance is why people pay taxes instead of evading them. The key to this puzzle is “tax morale,” the collective name for all the non-rational factors and motivations—such as social norms, personal values and various cognitive processes—that strongly affect an individual’s voluntary compliance with laws. Higher tax morale correlates with higher tax compliance. Although the exact components of tax morale are not yet fully delineated, Congress and the IRS should begin now to shape and administer income tax laws in accordance with tax morale findings. Delay can only increase the chance that voluntary compliance will deteriorate given the interaction of an individual’s tax morale with elements of the external environment, such as other people and institutions. The tax gap, for example, is more than a problem of lost revenue; it is a visible sign of non-compliance that can create a downward spiral. Non-compliance among other taxpayers can decrease an individual’s own tax morale and compliance. Once tax morale dips, it is hard to restore it to prior levels. Ironically, then, the more the tax gap is publicized, the greater this danger becomes. Consequently, Congress and the IRS should act now to narrow the tax gap and to foster compliance generally. This Report offers the IRS several concrete suggestions for improving individual taxpayer compliance based on the tax morale literature.

Part II discusses methodology and the limitations of empirical research.

Part III briefly describes the tax morale literature, focusing on the main findings regarding: 1) cognitive and affective processes; 2) personal and social values/norms, especially procedural justice, legitimacy, reciprocity, and trust; 3) external activation and suppression of tax morale; 4) demographic factors; and 5) a new tax morale model for tax administration.

Part IV contains recommendations for the IRS. It presents three major recommendations and several more specific suggestions for the IRS to improve individual taxpayers’ voluntary compliance. First, the IRS should establish a department devoted solely to exploring tax morale issues and implementing the findings. Second, the IRS should adopt a tax morale approach to tax compliance that incorporates the findings of the research and responds to—and strengthens—taxpayers’ internal motivations to comply. Third, using tax morale research, the IRS should implement ongoing educational (long - and short term) programs and media campaigns. Although sticks as well as carrots are needed to ensure compliance, this Report examines only the carrots.

Part V provides a short conclusion.

Solutions to tax problems and California tax help from a qualified tax attorney is available by calling Mitchell A. Port at (310) 559-5259.

Income tax owed but unpaid in California may be collected by the Franchise Tax Board (FTB) using any number of collection methods described in California's Collection Procedures Manual. The Manual describes the desired culture and philosophy for the Collection Program.

California's Collection Procedures Manual contains the following topics:

Introduction Section

Responsibility Section

Case Administration Section

Case Processing Section

Debtor Asset Location Section

Voluntary Case Resolution Section

Involuntary Case Resolution Section

Case Servicing Section

Special Processes Section

Glossary

If you have an income tax problem in California or with the IRS, call Mitchell A. Port for tax help at (310) 559.5259.

Want to dissolve, surrender or cancel your California-based business whether you operate as a domestic corporation, foreign corporation, limited liability company or partnership? The California Franchise Tax Board has a helpful brochure to tell you how. Click here.

Winding-down your Los Angeles County, Orange County, Ventura County or Santa Barbara County business can be done with the help of a qualified attorney. Call Mitchell A. Port at (310) 559-5259 if you would like assistance.

The California legislature is considering a bill that would allow the Franchise Tax Board (the FTB) to suspend occupational and professional licenses because of unpaid income tax liabilities and notify the applicable licensing agency of the suspension.

The bill would allow the FTB to suspend an individual’s occupational or professional license because of unpaid income tax liabilities. The FTB would suspend a license only after the following have been provided to the debtor:

Notice of State Income Tax Due,

Final Notice Before Levy,

Order To Withhold (OTW) is issued (if debtor’s bank information is available to the FTB),

Notice of State Tax Lien (issued when a state tax lien is recorded),

60-day preliminary suspension notice.

The FTB would be allowed The FTB to disclose to the licensing boards the reason for the suspension – unpaid taxes.

The FTB staff would provide a hearing, upon request, for license holders who would experience a financial hardship as a result of the suspension.

This bill would define the following:

“Hardship” means financial hardship, as determined by the FTB, where the licensee is financially unable to pay any part of their taxes including penalties, interest, and applicable fees and is unable to qualify for an installment payment arrangement pursuant to Section 19008 of the Revenue and Taxation Code.

“License” includes certificate, registration, or any other authorization to engage in a business or profession issued by a state governmental licensing entity.

“Licensee” means any individual authorized by a license, certificate, registration, or other authorization to engage in a business or profession issued by a state governmental licensing entity.

The bill would allow the Contractors State License Board and the FTB to have concurrent authority to suspend a contractor’s license.

This bill requires licensing boards to provide the FTB information at a time requested by the FTB.

This bill would allow a limited hearing for license holders with outstanding tax liabilities as of the date of enactment to substantiate that the license holder has paid the tax liability reflected in the notice of state tax lien.

ECONOMIC IMPACT

The revenue impact of this bill would depend on the number of delinquent taxpayers that possess an occupational or professional license. This estimate was calculated using the actual account balances of the department’s accounts receivables for the affected taxpayers, excluding accounts in bankruptcy and installment agreements. Taxpayers subject to this proposal are those with an outstanding liability of $1,000 or more and have owed that debt for one year or more.

It is estimated that 17,200 taxpayers with occupational and professional licenses will enter the collection process annually. Of the 17,200 taxpayers, it is estimated 38%, or 6,600, are expected to pay their delinquent debts upon notice from the FTB. Current departmental data indicates the average payment amount for compliant taxpayers would be approximately $2,000, resulting in an annual revenue increase of approximately $13 million (6,600 x $2,000 = $13.2 million). The average payment amount was calculated by the amount of payments made in response to filing enforcement notices.

Current departmental data also indicates unresolved cases of approximately 25,000 delinquent taxpayers with occupational and professional licenses in the collection process. Based on the 25,000 taxpayers, it is estimated that nearly 9,500 taxpayers would comply upon notice from the FTB resulting in a revenue increase of $19 million in the first year ($2,000 x 9,500 = $19 million). The revenue for fiscal year ending 2009-10 is estimated to total $32 million ($19 million + $13 million).

It is assumed that 50 percent of the $32 million would be collected in fiscal year 2009-2010, reducing revenue to $16 million. The remaining $16 million from fiscal year 2009-10 would be collected in 2010-11, in addition to the $13 million that is assessed annually, for a revenue impact of $29 million ($16 million + $13 million = $29 million) in 2010-11. Thereafter, the annual fiscal impact of $13 million would be collected. Because the revenue from this bill would be from tax liabilities from prior years, the estimates in the table are all accrued back one year.

If you are having an income tax collection problem with the FTB, call a tax attorney: call Mitchell A. Port at (310) 559-5259 for help.

The American Bar Association published an interesting article in its "Probate & Property" online magazine written by attorney Karen S. Gerstner of Houston, Texas entitled "A Message to Clients . . . Avoiding Probate Court Litigation". The material Ms. Gerstner discusses applies to probates in California as well.

Here is an excerpt of her article:

"How to Avoid Probate Litigation

"Don’t do things that could cause serious legal consequences without first discussing them with legal or other advisors. Come in for a “check up” on a regular basis and be prepared to discuss every issue and concern. Follow through on necessary “homework” such as account titling and beneficiary designation matters (see above). Plan ahead for possible mental incapacity by having the appropriate documents in place. Make sure the persons appointed to fiduciary positions are completely trustworthy and responsible.

"If a nonstandard estate plan is being implemented, use stronger techniques (such as a funded living trust) and additional provisions (such as a “no contest” clause). Consider creating a “will wall”: a series of wills executed over a lengthy period of time, designed to make it undesirable for a relative who the client wishes to “cut out” (or treat less favorably) to contest the will, so that if the last will is successfully contested, the contestant will still have to contest the prior will, which, through advance planning, would have been prepared to provide even less generous gifts to the contestant than the last will (and so on).

"In discussions with family members, the client should explain the reasons for the plan being implemented, although the client will need to be careful to state the reasons in a way that is calm and rational (“incendiary” statements will only add fuel to the fire and could be detrimental in a will contest).

"Not all probate litigation can be prevented, of course, but a large portion of probate litigation can be prevented by good planning. Good planning is what estate planning is all about."

If you have probate litigation questions, please call attorney Mitchell A. Port for probate help.

Most would rather not think about it but if your child is 18 or older then it is appropriate for him or her to have an advance health care directive. All the same reasons that apply for older adults to have the directive also apply to a younger adult. While you're at it, perhaps a will, living trust and durable power of attorney for property management may also be a good thing.

Speak with a Los Angeles attorney to help decide what makes sense. Call Mitchell A. Port at 310.559.5259.

Like the IRS, California's Franchise Tax Board has its own taxpayer advocate. (See my earlier posting on August 27, 2007 entitled "What Has The IRS' Taxpayer Advocate Done Lately?"). It claims that "The Taxpayer Advocate's office is available to provide an independent review of your unresolved tax problems."

Your rights as a California taxpayer are described on the Franchise Tax Board's Advocate's website in English, Spanish, Chinese, Korean and Vietnamese.

There is also a comparison of California law with federal law concerning the taxpayers' bill of rights.

Common California Advocate Responsibilities Include:

Resolve problems when normal channels don’t work

Protect taxpayers’ rights

Determine whether to suspend collections while case is in review

Ensure courteous treatment of the public

Maintain independent status

Identify inequities

Provide independent review

Adhere to agency tax laws

Identify trends and issues

Encourage public suggestions

Propose changes

Promote understandable and simple:

Tax laws

Regulations

Policies

Procedures

Publications

Finally, there is a link to a list of taxpayer advocates in the California Board of Equalization (BOE), Employment Development Department (EDD), Franchise Tax Board (FTB) and the Internal Revenue Service (IRS).

If you continue to have tax problems even when dealing with the taxpayer advocate, call tax attorney Mitchell A. Port for tax help at 310.559.5259.

Attention California business owners: here is a list of some useful sites and links to provide you with solutions to some of your questions about operating your business in the California counties of Los Angeles, Santa Barbara, Orange and Ventura.

U.S. Customs and Border Protection
U.S. Customs and Border Protection is the unified border agency within the Department of Homeland Security.

Environmental Protection Agency
The mission of the U.S. Environmental Protection Agency is to protect human health and to safeguard the natural environment--air, water and land--upon which life depends.

U.S. Tax Court
Congress created the Tax Court to provide a judicial forum in which affected persons could dispute tax deficiencies determined by the commissioner of Internal Revenue prior to payment of the disputed amounts.

Small Business Administration
The mission of the SBA is to maintain and to strengthen the nation’s economy by enabling the establishment and viability of small businesses and by assisting in the economic recovery of communities after disasters.

Business.gov
Business.gov guides you through the maze of government rules and regulations and provides access to services and resources to help you start, grow, and succeed in business.

USA.gov
The U.S. government's official Web portal.

Department of the Treasury
The mission of the Department of the Treasury is to promote the conditions for prosperity and stability in the United States and encourage prosperity and stability in the rest of the world.

Department of Commerce
The Commerce Department’s mission is to create the conditions for economic growth and opportunity by promoting innovation, entrepreneurship, competitiveness and stewardship.

Social Security Administration
The Social Security Administration is the nation's primary income security agency. It pays retirement, disability and survivors benefits to workers and their families, administers the Supplemental Security Income program, and issues Social Security numbers.

Department of Agriculture - Office of Small and Disadvantaged Business Utilization (OSDBU)
The mission of the OSDBU is to provide maximum opportunities for small businesses to participate in USDA contracting activities by establishing and attaining small disadvantaged business program goals.

Department of Labor: Occupational Safety & Health Administration (OSHA)
OSHA's mission is to assure the safety and health of America's workers by setting and enforcing standards; providing training, outreach, and education; establishing partnerships; and encouraging continual improvement in workplace safety and health.

Court Rulings
This page provides links to various federal, state and private sites that provide legal information for the small business owner.

Department of Education
The Education Department’s mission is to ensure equal access to education and to promote educational excellence throughout the nation.

State Links
A collection of links to State government Web sites with useful information for businesses. Whether you're already in business, just starting or expanding to a new state - there's something here for you!

State and Local Contacts
The State and Local Government on the Net directory provides convenient one-stop access to the Web sites of thousands of state agencies and city and county governments.

U.S. Census Bureau
The Census Bureau serves as the leading source of quality data about the nation’s people and economy.

U.S. Department of Labor
The department administers a variety of federal labor laws including those that guarantee workers’ rights to safe and healthful working conditions, a minimum hourly wage and overtime pay, freedom from employment discrimination, unemployment insurance and other income support.

U.S. Equal Employment Opportunity Commission
The mission of the EEOC is to eradicate employment discrimination at the workplace.

SBTV.com
SBTV.com is a television network on the Web devoted exclusively to providing engaging streaming video content to small businesses. It provides technical information on how to run your business, inspirational stories from entrepreneurs across the country, information about small business conferences and events, and resources to help solve day-to-day business challenges.

GobiernoUSA.gov
El portal oficial en español del Gobierno de los EE. UU (The U.S. government's official Spanish-language Web portal)

For tax and business help for your California based enterprise, call Mitchell A. Port at (310) 559.5259.

In this past Sunday's edition of the Los Angeles Times, David Colker wrote an interesting article about setting up a trust for your pet as provided under California law. This article is along the lines of my earlier blog entry entitled "No Kidding - A California Trust For Your Pet" written on December 17, 2007. Here is what David Colker wrote:

Leona Helmsley was a nice mom -- to her dog.

Just look at her will. The multimillionaire hotel owner, whose nickname was the Queen of Mean, left nothing to her late son's children when she died last year.

But her beloved Maltese named Trouble got $12 million to keep him in the manner to which he was accustomed.

It became a national joke, but it also put a spotlight on a serious concern.

"It raised awareness about what happens to pets if they outlive us," said Michael Markarian, executive vice president of the Humane Society of the United States.

"We think of pets as having a short life span so we assume it won't happen. But just in case, we should ensure they go to a loving home."

Without a trust fund or some other way to provide for care, a long-adored pet could end up in a shelter.

"It's not uncommon," said Ryan Drabek, spokesman for Orange County Animal Care Services. "We get calls from the coroner to come pick up a pet if there are no family members who will do it."

Pet trusts have the force of law in 39 states, including California. In general, the money is turned over to a designated caregiver -- often a family member or friend -- who takes the pet in.

But the California law, which went into effect in 1991, is considered weak compared with most of the others. It states that the wishes expressed "may be performed by the trustee for the life of the animal."

The problem is the word "may."

"It makes the law unenforceable," said Adam Keigwin, spokesman for state Sen. Leland Yee (D-San Francisco), who has introduced legislation to make pet trusts more bulletproof.

The revised law says instructions in a pet trust should not be considered a "mere request." The bill was approved by unanimous vote in the Senate in January and is awaiting action in the Assembly.

In case of a challenge, the proposal directs that courts "carry out the general intent of the trust."

Great care should be taken in planning a pet trust, Markarian said. It's important to have a detailed discussion with the designated caregiver.

"It's not something to spring on someone by surprise after you die," he said. "Suddenly, they find out they are taking care of Fido or Fluffy."

Markarian also suggested naming at least one backup in case the primary designee can't take the pet when you die.

The people you name can't be forced to take care of the animal. If you don't plan well, the pet could still end up in a shelter until a new home for it is found, if ever.

To determine the amount of money that should be set aside, a pet owner should figure out how much will be spent for food and regular medical care for the estimated life of the animal and then add a substantial amount in case of major medical problems.

Still, the funds could get depleted. At that point, all you can hope is that affection will take over.

"If you pick the right person," Markarian said, "that pet is not going to be abandoned when the money runs out."

On March 20, 2008, the Internal Revenue Service issued a release which advises U.S. military taxpayers, serving in a designated combat zone, that their nontaxable combat duty pay will qualify as income for purposes of eligibility for the tax rebate payable under the Economic Stimulus Act of 2008. The tax rebate is available in either 2008 or 2009.

Service members who would not otherwise file a federal income return, as a result of their nontaxable combat zone income, must now file Form 1040A, U.S. Individual Income Tax Return, with the IRS by October 15 in order to receive the economic stimulus payment in 2008.

To receive the rebate, the service member must:

(i) show at least $3,000 in qualifying income (earned income, combat zone pay, Social Security benefits or Veterans Affairs benefits) on their tax return;

(ii) file their 2007 federal income tax return on or before Oct. 15, 2008 (a service members federal income tax filing deadline is extended by 180 days after leaving a combat zone) to receive the tax rebate in 2008; and

(iii) file Form 1040A with the IRS (report the nontaxable combat duty pay on Line 40b of Form 1040A).