Articles

Medical Wishes

With regard to wills and trusts, lawyers, CPAs, insurance advisors, and, of course, you put a considerable effort into the language and the protection of beneficiaries. Too often, what goes under reviewed are end-of-life documents, namely, the Living Will, the Health Care Power of Attorney, and Authorization for Disclosure of Health Information. A medical directive and proxy relies on several considerations: The appropriate agent: An agent who knows and clearly understands your goals and wishes. That leads to discussions with your agent whenever you create the document and thereafter. Many individuals select their spouse and a child, while others select a committee. But many individuals fail to understand the implications. For example, suppose you state within your document, “I do not want antibiotics or transfusions.” Is that enough? No. What happens if an antibiotic or transfusion would save your life? Should your agent supersede your directive? Black and white medical decisions are not what is needed. Then should you look for a medical advisor or someone in the family that has the appropriate medical credentials. Again, the answer is no – rather consider lengthy discussions with your agent. Now that you have an appropriate agent, you need a backup. Why? What happens if your agent is out of town, or otherwise unavailable? Then your physician will need to turn to your backup. And it goes without saying, but you should list the contact information in the document. If time is of the essence, then the physician or hospital will need the telephone and cell numbers of your agent. Simple? Yes, but many individuals overlook this step. You should keep the document up to date. And if you give it to your medical professional, make sure that you keep it up to date. And, by the way, a committee is probably not the best alternative. Individuals have varying opinions, and that leads to confusion. If you would like more information about Pennsylvania Elder Law, Business Law or Tax Law, please contact an experienced Pennsylvania Attorney is who is also a Certified Public Accountant (CPA) via email or phone us at (724) 216.6551 at our Greensburg, Pennsylvania office. The Iezzi Law Office serves clients in southwestern Pennsylvania, including Greensburg, Pittsburgh, Delmont, Monroeville, Murrysville, Latrobe, Irwin, Uniontown, Connellsville, Indiana, Somerset, and other towns located in Westmoreland County, Allegheny County, Fayette County, Indiana County, and Somerset County. Evening and weekend appointments available. MasterCard, Visa, and Discover are accepted. IRS CIRCULAR 230 DISCLOSURE: To ensure compliance with requirements imposed by the IRS, we inform you that any U.S. tax advice contained in this communication (including any attachments) is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending to another party any transaction or matter addressed herein.

Business Use of Vehicle

Adequate recordkeeping is necessary to prove business expenses in the event of an audit. This pertains to all business expenses, but it has been an ongoing problem in the area of business use of vehicles. Not only do you need to have adequate recordkeeping for automobiles, trucks, and SUVs, but you also need to have the same type of recordkeeping for other vehicles that you might use in your business. It is not enough to estimate a percentage of business use or to say that a particular vehicle is used 100% for business. You must be able to prove the business use, and to do this, you must have adequate recordkeeping in conjunction with documentary evidence. Adequate recordkeeping means keeping the written proof you need in a diary, statement of expense, or similar record along with documentary evidence that will support each element of the expense. Documentary evidence can be a receipt, a bill with a canceled check, etc. It must show the amount, date, place, and basic reason for the expense. Written proof must be recorded in a timely fashion in an account book, diary, statement of expense or computer generated log. A “timely fashion” is considered to be at or near the time of the expense. In general, not only should you have the date you started using a vehicle in your business, but you must have the original cost of the vehicle, any improvements made, the mileage for each business use, and the total miles for the year. For all business use, you should have, at the minimum, a written record of the date of each use, the mileage for the use, the business destination, and the business purpose for the use. Proper recordkeeping is crucial in the event of an IRS challenge. Without the proper documentation, your business use of vehicle may be disallowed. If you would like more information about Pennsylvania Elder Law, Business Law or Tax Law, please contact an experienced Pennsylvania Attorney who is also a Certified Public Accountant (CPA) via email or phone us at (724) 216.6551 at our Greensburg, Pennsylvania office. The Iezzi Law Office serves clients in southwestern Pennsylvania, including Greensburg, Pittsburgh, Delmont, Monroeville, Murrysville, Latrobe, Irwin, Uniontown, Connellsville, Indiana, Somerset, and other towns located in Westmoreland County, Allegheny County, Fayette County, Indiana County, and Somerset County. Evening and weekend appointments available. MasterCard, Visa, and Discover are accepted. IRS CIRCULAR 230 DISCLOSURE: To ensure compliance with requirements imposed by the IRS, we inform you that any U.S. tax advice contained in this communication (including any attachments) is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending to another party any transaction or matter addressed herein.

Business Meals & Entertainment

In light of recent activity by the Internal Revenue Service examining more closely certain business expenses, namely, meals, entertainment, and business use of vehicles, it seems appropriate to review the requirements that must be met for deductibility of business meals and entertainment in the event of an IRS audit. First and foremost, the business meals and entertainment expenses must be “ordinary and necessary.” Basically, if it is reasonable in your business to entertain clients or other business people, you should be able to pass this test. Secondly, the expenses must be “directly related to” or “associated with” the business. “Directly related to” means a specific, concrete business benefit is expected as a result. The principal reason for the event must be business, and you, or an employee, must have engaged in the event actively. “Associated with” could be equated to “goodwill.” Meaning, meals, shows, sporting events, nightclubs, etc. may qualify if they precede or follow a substantial and legitimate business discussion. To be “associated with,” an expense does not need to derive an immediate result. If the primary purpose of the event is to get new business or encourage the continuation of a current business relationship, the expense should pass the “associated with” test. As with the “directly related to requirements,” you, or an employee, must be present for meals to be deductible. And, you must meet the substantiation requirements. You must be able to prove that the expense qualifies. Reasonable estimates are not sufficient to stand up to IRS audit. Finally, there are deduction limitations. The expenses cannot be extravagant or lavish. If they are determined to be, they will be disallowed. If you would like more information about Pennsylvania Elder Law, Business Law or Tax Law, please contact an experienced Pennsylvania Attorney who is also a Certified Public Accountant (CPA) via email or phone us at (724) 216.6551 at our Greensburg, Pennsylvania office. The Iezzi Law Office serves clients in southwestern Pennsylvania, including Greensburg, Pittsburgh, Delmont, Monroeville, Murrysville, Latrobe, Irwin, Uniontown, Connellsville, Indiana, Somerset, and other towns located in Westmoreland County, Allegheny County, Fayette County, Indiana County, and Somerset County. Evening and weekend appointments available. MasterCard, Visa, and Discover are accepted. IRS CIRCULAR 230 DISCLOSURE: To ensure compliance with requirements imposed by the IRS, we inform you that any U.S. tax advice contained in this communication (including any attachments) is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending to another party any transaction or matter addressed herein.

Business Valuation

Now that you have a closely-held corporation, all the work and brainstorming with your accountant, attorney, financial analyst, marketing consultant, and IT webmaster has paid off. Never did you suspect the business would shift into high gear so quickly. You’re about to take a rest and enjoy what you’ve accomplished over the last three years, when you suddenly realize the Buy and Sale Agreement you put into effect has a problem, a major problem. Yes, you have covered death and disability, but how you valued the company has become a problem. You and your two partner/shareholders had invested a tidy sum of money for furniture and fixtures, computers, and machinery, and all you and your partners expected when you left the company was a return of your initial investment. But things have changed. The company is no longer small. In the last several years, the company purchased real property, hired more employees, and of course, the profits increased. Thoughts ruminate in your mind that the company is worth more than the initial investment. Immediately, you’re driven to business valuation. That’s it, I think we should have the business valued. Then you learn that business valuation is not as simple as adding up the tangible assets: there’s goodwill, customer list, the patent, the experience and know how, the workforce, and … Well, you realize the buy and sell agreement does not take into consideration the fair market value of the shares of stock. Business valuation is more than adding goodwill to the tangible value of assets as most agreements may address. The intangible assets may exceed the value of the tangible value of assets. Should the agreement be totally revamped to avoid the dreaded battle of appraisers? At this point you understand that the simple business that dictated a simple business agreement no longer fits. The business valuation, key to the receipt of fair market value, opens other avenues that you need to explore. For example, if a shareholder/partner is disabled, does that automatically trigger a sale of stock or a partner’s share? Does the business have sufficient funds to pay out the shareholder/partner? Do you need life insurance? What about key man insurance? What if I want to gift my shares to my children? Should we have a non-compete agreement? As a result of your self-analysis, you now decide that no longer should the three shareholder/partners meet over lunch to discuss the business. Formal meetings are required and one of the items at the top of the list should be the Buy and Sale Agreement, which should be reviewed annually, and what exactly is the fair market value of the business? In the end, you convince your shareholder/partners to obtain a business valuation before you run into problems down the road. Contact an experienced Greensburg Attorney Today If you would like more information about Pennsylvania Elder Law, Business Law or Tax Law, please contact an experienced Pennsylvania Attorney who is also a Certified Public Accountant (CPA) via email or phone us at (724) 216.6551 at our Greensburg, Pennsylvania office. The Iezzi Law Office serves clients in southwestern Pennsylvania, including Greensburg, Pittsburgh, Delmont, Monroeville, Murrysville, Latrobe, […]

Healthcare Planning and Review

Health care is a hot topic throughout the country right now. With health care costs constantly increasing, and considering the many recent advances in medicine, you should consider reviewing your living will and/or medical power of attorney at least every two years. If you are a Pennsylvania resident, did you sign a living will or medical power of attorney prior to 2007? If so, a change in the law occurred that makes it more important that you review your documents as soon as possible even if there have been no changes to your health or marital status. Some things to consider: Living Will or Health Care Directive Has your marital status changed? Is your appointed representative still available, willing, and able to perform the appointed duties? Does your representative or agent know what you want if you are confronted with a life threatening situation? Do you have an alternate agent? Is your alternate still available, capable, and willing to make your medical decisions in the event that your primary agent cannot? Has your health deteriorated since the directive was written? Medical power of attorney Has your marital status changed? A medical power of attorney goes into effect immediately after it is executed and delivered to your agent, but your agent only makes decisions if you are not capable of communicating your wishes. How much power did you give your agent? Did you want to grant your agent the power to override your health care directive? Do you have an alternate agent? Is your alternate still available, capable, and willing to make your medical decisions in the event that your primary agent cannot? If you do not have a health care directive or a medical power of attorney, now is the time to have them prepared.

Protecting Your Valuables

With a long history of Mother Nature wreaking havoc, it is important to make sure that you protect your records. The IRS just released suggestions on how to do that. Most of it is common sense, but it is worth repeating. First, if you don’t already, you should create a complete backup set of records electronically, on a CD or a “thumb drive,” and store it away from the originals. This should include bank statements, financial statements, tax returns, insurance policies, etc. Don’t forget to include photocopies of the front and back of all credit cards, driver’s licenses, passports, wills, birth certificates, and any other valuable documents. Second, you should document all the valuables in your home and business. The easiest method for doing this is to take pictures or videos of the contents. This will help prove the market value for claims. Make sure to keep them with a relative or close friend who does not live in the area. Finally, if you don’t have an emergency plan, MAKE ONE! Review your plan every year. If you would like more information about Pennsylvania Estate Planning, Business Law or Tax Law, please contact an experienced Pennsylvania Attorney who is also a Certified Public Accountant (CPA) via email or phone us at (724) 216.6551 at our Greensburg, Pennsylvania office. The Iezzi Law Office serves clients in southwestern Pennsylvania, including Greensburg, Pittsburgh, Delmont, Monroeville, Murrysville, Latrobe, Irwin, Uniontown, Connellsville, Indiana, Somerset, and other towns located in Westmoreland County, Allegheny County, Fayette County, Indiana County, and Somerset County. IRS CIRCULAR 230 DISCLOSURE: To ensure compliance with requirements imposed by the IRS, we inform you that any U.S. tax advice contained in this communication (including any attachments) is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending to another party any transaction or matter addressed herein.

Estate Planning Questionnaire

Business Incorporation

There are many things to consider regarding whether or not you should incorporate your sole proprietorship or general partnership. Incorporation means that you are creating a separate company, a separate legal entity from which you are transacting your business. Incorporation can provide tax flexibility and tax benefits, as well as allow more deductible business expenses. But perhaps most importantly, incorporation can protect your personal assets because it allows you to separate your business assets from your personal assets. If you own a small business and are sued, you could lose everything that you had worked so hard for. Some other benefits of incorporation: •· Corporate tax rates are often lower than individual tax rates •· Possible lower self-employment taxes •· Possible additional tax benefits and deductions •· Chance to increase your business growth since your company may be seen as more professional and credible in the eyes of potential clients or customers •· Name protection and name recognition •· Ability to issue stock options for increased capital Incorporation can take the form of a corporation or a limited liability company (LLC), and there are tax differences between them. Further, under an LLC there are also differences in the tax elections (sole proprietorship, partnership, C Corporation or S Corporation). You should consult a legal/tax professional for information on how to get started. He or she can guide you on what option is best for your situation.

New IRS Ruling on IRA Rollovers

The IRS has recently agreed with a tax court ruling, and beginning January 1, 2014, a taxpayer may make only one non-taxable rollover contribution within a calendar year (any 12-month time period). Prior to this ruling, and according to existing IRS guidelines as explained in Publication 590, people with multiple IRA accounts could make a 60-day tax-free rollover per IRA. The IRS has changed this to only allow one IRA rollover per year, regardless of how many IRA accounts you own. IRA rollovers where you can move money from one IRA to another, tax deferred, can be interpreted as a short-term no interest loan. Since you cannot borrow from an IRA, the tax court has ruled that you can only make one IRA rollover per year. The IRS is changing the tax code to agree with the court’s ruling. Multiple rollovers are considered loans and the amount withdrawn is treated as taxable income. If you are younger than 59 ½, you could also owe a 10% early-withdrawal penalty on the funds. Even if you only rollover funds one time, if you do not deposit them within the 60 day time period, it is considered taxable income. You will still be able to transfer funds from one IRA trustee directly to another since automatic direct transfers of IRA funds from one provider to another do not allow you access to the money and transfers are not rollovers (a transfer is a non-taxable event since you have never actually taken receipt of the funds; a rollover could involve taxes since you actually have taken receipt of the funds). Also, rolling over a distribution from a qualified retirement plan [a 401(k) plan for example] into an IRA does not count since the funds are not coming from an existing IRA. You should always work with a qualified tax specialist who understands the 60 day rules, who understands the differences between a rollover and a transfer, and who understands how the tax law applies to your IRAs and other investments.

Special Needs Trusts

To qualify for Medicaid, an applicant must be determined to be “needy”, i.e. be at least 65 or older, or be permanently disabled or blind and show that Medicaid is medically necessary. For 2014, the applicant cannot have income in excess of three times the maximum SSI poverty rate, or $2,163 per month. Certain assets are exempt: The home with an equity value of not more than $543,000 (as long as the individual has an “intent to return” or if the spouse or dependent relative lives there.)Household belongings.Burial account (up to $1,500).Burial plots.Pre-paid, non-cancelable burial contracts.Cash value of life insurance that does not exceed $1,500 face value.Term-life insurance.One motor vehicle.Inaccessible assets.Pension funds until they are accessible to the applicant.Certain income-producing property essential to a person’s self-support.Up to $6,000 of the equity value of nonbusiness property used to produce goods and services essential to the individual’s self-support. Proper planning can include changing non-exempt assets into exempt assets and allow you to give substantial assets to someone who is disabled and still allow that person to qualify for Medicaid coverage of medical care and long-term nursing home care. One way is a Special Needs Trust also called a Supplemental Needs Trust or a Medicaid Trust. These trusts can be used to fund the supplemental needs of a disabled individual while maintaining that individual’s eligibility for government benefits. Special Needs Trusts are an exception to the rules that normally apply to trusts and the money put into the trust can only be spent for the care of the trust beneficiary. These trusts can be funded with a disabled individual’s own funds (as governed by the Omnibus Budget Reconciliation Act of 1993 [OBRA ’93]), but may also be funded with assets from a third party (e.g., a parent or grandparent). Federal and state benefits are generally available to qualifying children and adults who have special needs. If your child qualifies for government benefits, one of your goals may be to ensure that his or her eligibility continues into the future. There are also some types of special needs trusts that can be established for a parent or other individual over 65 who wants to preserve eligibility for nursing home benefits under Medicaid. A special needs trust restricts the beneficiary’s own direct access to the assets in the trust to such an extent that the assets are not considered legally available to the beneficiary, thereby making the person eligible for Medicaid benefits because the assets in the trust are uncountable, or exempt. Normally, a trust will be considered an available asset whenever someone applies for a means tested public assistance program such as SSI or Medicaid. Unlike a traditional trust, a properly structured and administered special needs trust will not be counted as an available asset by Medicaid or Supplemental Security Income (SSI) when determining the beneficiary’s eligibility; and trust disbursements will not be counted as income under the rules that apply to SSI and Medicaid. If you’re thinking about setting up a special needs trust, there are a few other points you should consider including carefully choosing the trustee; providing a letter of intent to describe […]