IRS Form W-4 is the form you file with your employer the helps determine the amount to be withheld from your paycheck for taxes.  Ideally, your elections on the W-4 should put you in the position where you neither owe money to the IRS or receive money from the IRS at the end of the year.

The basics of theW-4 allow employees to show:

• Whether  you are married or single
• How many withholding allowances you should claim. The more allowances you claim, the less tax is withheld.
• Whether you want an additional amount withheld

Your W-4 should be reviewed annually and amended for any changes in life circumstances (new child, marriage, loss of spouse, etc.)

In 2011, each allowance you claim reduces your taxable income by $3,700. Please be sure to be careful, claiming allowances you are not entitled to (you can’t claim your dog – REMEMBER the IRS requires social security numbers for your children too) will cause the IRS to penalize you.

HELPFUL HINT: If you received a large refund last in previous years (remember this is just the IRS returning YOUR money back to you that was not earning interest), you should consider increasing the number of allowances you claim so less tax is withheld. If you paid the IRS a large sum when you filed your return, you should decrease the number of allowances you claim.

Working Couples and Withholding

Married spouses who both work: the W-4 has a special worksheet for you to determine the number of allowances you each should be taking.  It’s based on your income and the number of your dependents.  In essence you will figure the total allowances you’re both entitled to and divide those total allowances between you and your spouse..

After claiming the allowances for yourself and your dependents, you should add extra allowances if:

• You’re single and have only 1 job.
• You’re married, have only 1 job, and your spouse doesn’t work.
• Your wages from a second job or your spouse’s wages are $1,000 or less.
• You have at least $1,500 of child- or dependent-care expenses and will claim a tax credit for these costs.
• You’ll file your return as a head of household.
• You’ll claim child credits – which are worth $1,000 for each eligible child. The number of allowances you claim depends upon the number of eligible children and your income.

Other life changes that might determine your Form W-4 allowances include:

• Marriage or divorce
• Birth or adoption of a child
• Purchase of a new home
• Retirement
• New job or second job
• Increase in interest, dividend, or self-employment income
• Increase in your itemized deductions

Exemption From Withholding

There is a spot on the W-4 to write “Exempt”.  You are not eligible for “Exempt” Status and you must have withholding if any of these apply:

• Your income for 2010 is more than $950.
• Another person can claim you as a dependent on his or her return.
• You have more than $300 of unearned income. Unearned income includes interest on savings accounts, mutual fund dividends and other investment income.

If you can’t be claimed as a dependent, you can make much more and still be exempt from withholding.

If you owed no federal tax last year and expect to owe none in the current year, you might be exempt from withholding. For 2011, the minimum filing requirements are as follows:

Single $ 9,500

Married Filing Jointly $19,000

Married Filing Separately $ 3,700

Head of Household $12,200

Qualifying Widow(er) $15,300

If you are self-employed you must file if you earned $400 or more

Withholding and Retirement Income

You can choose to have federal income taxes withheld from your:

• Pension
• Annuity
• Traditional IRA withdrawals
• Social Security benefits

With other retirement plans, you might need to file a form with the payer to stop required withholding. If you don’t complete withholding forms for pension benefits, taxes will be withheld as though you were married and claiming 3 exemptions. So, taxes will only be withheld if your pension is at least $2,080) per month.

You should re-evaluate each year to see if you want to have taxes withheld. Use Form W-4P to have taxes withheld from your pension, annuities, and IRAs. Use Form W-4V:

Voluntary Withholding Request to have taxes withheld from Social Security. Choose 1 of these rates for Social-Security withholding:

• 7%
• 10%
• 15%
• 25%

See IRS Publication 505 to learn more.

Lump-Sum Pension Payout

If you receive a lump-sum payment from your retirement plan, you will be taxed 10% and your plan administrator will withhold this.

Rolling over the IRA or other pension is not recommended for the following reasons: the tax withholding requirement is 20%. This applies even if you retire, quit, or are laid off. If 20% is withheld, you’d be prepaying tax you might not owe – especially if you roll over the distribution within 60 days.

So, if you handle the rollover yourself by taking the check and depositing it in a rollover IRA within 60 days:

• Your plan administrator will withhold 20% of your distribution.
• Unless you include the amount equal to the 20% withholding from another source, you won’t have enough to put the full payment into an IRA.
• The IRS will tax and possibly penalize any part of the gross distribution that’s not rolled into an IRA within 60 days.

TAX FREE SOLUTION: To avoid having 20% withheld from your distribution, you should do a direct rollover. To do a direct rollover:

1. Tell your employer you want to roll the funds over directly to another plan or IRA.
2. Provide your employer with the information about the account that’s to receive the rollover funds.
3. Your employer will transfer the funds directly to the other account without withholding any taxes.

Tips and Withholding

All tips you receive are taxable income subject to withholding under the Internal Revenue Code. So if you receive $20 or more per month in tips, you should report that income to your employer.

Tip income you report will show up on Form W-2, box 7 (Social Security tips) and box 1 (Wages). This will be used by your tax preparer at the end of the year to determine your tax liability.

Many people are facing suits from creditors.  A successful credit can obtain a judgment against you that may last for up to 20 years in Florida.  Many times creditors will then try to garnish your wages by issuing a writ of garnishment to your employer.  The creditor  by federal law (U.S.C sectubi 1673: Restriction on Garnishment) cannot garnish in excess of 25% of your wages, but this can be a lot – especially for those living paycheck to paycheck.  There are ways to prevent a creditor from taking anything.  Time and time again I have seen this lead to repossessions, foreclosures and evictions.  The writ of garnishment will start off looking like this:

HERE’S HOW TO PROTECT YOURSELF:

Those people eligible for Head of Household Status may claim exemption from garnishment, but you must act affirmatively in executing the section of the paperwork included with the garnishment order or you will lose out.  There are some important things YOU MUST DO.

Some people are even well advised to contact their creditor before they seek a writ of garnishment to prove that they are indeed head of household.  Many times creditors will not pursue garnishment activities if they know they will be unsuccessful.

Some attorneys will tell you that you cannot discharge IRS taxes in bankruptcy. That’s not entirely true – SOME TAXES CAN BE DISCHARGED. READ ON —>

One of my clients called me today to share his good news: a statement from the Federal Government’s own Internal Revenue Service (IRS) confirming that his tax liabilities were discharged. He now does not owe the IRS $70,000. Do you owe the IRS money for back taxes? Contact us today to see if your back tax debts qualify for discharge.

Bankruptcy can clear some types of tax debt. It can clear federal, state and local income taxes.   It will not clear a federal tax lien that has attached to your assets.  So long as a federal tax lien has not been filed and as long as your tax debts meet some specific requirements, your tax debts may be discharged in a Chapter 7 or Chapter 13 proceeding.

Timing is an important issue in clearing a tax debt and there are some other basic steps that must be followed.  To discharge income tax debt, the following rules apply:

1. Your tax returns must have been due three years or more before the  petition was filed;
2. Your tax returns have to have been filed more than two years before the petition;
3. The tax you owe must have been assessed against you by the government for at least 240 days before the case is filed;
4. Your tax returns must have been truthful and not fraudulent; and,
5. You must not have been intentionally attempting to evade or defeat the tax when you failed to pay.

There are some technical rules that can complicate a discharge of tax, but in most cases the tax will be discharged if the above requirements are met.

If a notice of federal tax lien has been filed by the IRS, the tax debt that covered the lien attaches to any assets you own at the time it is filed.  It also attaches to anything new you get so long as the lien is in effect.  This applies as long as you owe the tax.  Until the collection time limit expires or the tax debt is cleared the lien remains in place.

Concurrent with the stoppage of foreclosures because of processing problems, bankruptcy attorneys in St. Petersburg and Tampa have felt a dip in filings. This is largely due to problems associated with some large law firms that were experiencing procedural errors in filing foreclosures. David Stern’s office recently shut down in the face of such issues, which has caused a stalling of many foreclosures. Because many people fear deficiency judgments post-foreclosure or short sale, many homeowner’s turn to their experienced Tampa and Saint Petersburg Bankruptcy attorneys to get rid of their debts, IRS issues and their Deficiencies. In a recent Saint Petersburg Times article by Jeff Harrington and dated February 25, 2011, the author noted that “The number of Tampa cases filed in the U.S. Bankruptcy Court’s Middle District of Florida fell 10 percent in December and was down 21 percent in January compared with year-earlier numbers.” The article further points out the MIddle District of Florida which includes Tampa, Saint Petersburg, Orlando and Jacksonville is the second highest in volume for filing bankruptcies.

Source: The St. Petersburg Times “Bankruptcy filings, like foreclosures, expected to pick up again” by Jeff Harrington, February 25, 2011

While most tax debts cannot be discharged in either a Chapter 7 or a Chapter 13 bankruptcy, it is possible to discharge some IRS tax debts. We offer our clients a Tax Dischargeability Analysis, in which we can look at the specifics of your case to determine whether or not your debts do qualify to be discharged.

Since the BAPCPA in 2005 some clients have difficulty qualifying for a chapter 7 and being able to avail themselves of completely eliminating their debt, but even in a Chapter13 debtors can eliminate a large portion of the qualified IRS debt because it will not be a considered a Priority Debt (Priority Debts must be paid back at 100%)

There are several rules with tax dischargeabaility:
(1) 3 year rule: the tax return must have been originally due at least 3 years before filing Extensions and Amendments change this time frame.
(2) 240 day rule: Also, tax debts cannot be discharged if they’ve been assessed within 240 days of filing for bankruptcy. The 240 day period is extended in several circumstances.
(3) 2 year rule: The tax returns must have also been filed on time or at least 2 years before the bankruptcy has been filed.
(4) No Fraud or evasion rule: There must also not have been any willful attempt to evade or defraud in payment of taxes.

* While the underlying federal tax debt may be discharged, any federal tax liens cannot be discharged.

Even if you don’t live in the Tampa Bay Are the Fair Credit Reporting Act (FCRA) provides consumers with legal protections. Specifically, the FCRA protects all consumers, not just those in Hillsborough County, from being denied credit on falsely reported information.

Credit reporting agencies receive their information directly from your creditors. Their reports consist of historical as well as ongoing information. A bankruptcy stays on your credit record for up to 10 years, but you can minimize its effect thereby increasing your credit score in a relatively short period of time if you follow some simple steps. Following bankruptcy or another dramatic hit to your credit report such as foreclosure your objective should be to responsibly create new credit history, while allowing time to elapse for these events to disappear into your past.

After your bankruptcy, you need to notify the credit bureaus in writing.  You need to notify them that they need to update their records and -O- out your balances after bankruptcy.  You should include a copy of your “Discharge” and “Schedule of Creditors”.  If you don’t have these documents, make sure to ask your Tampa Bankruptcy Attorney You should mail this to each of the 3 reporting agencies by certified mail.  Remember that these agencies are not your creditors, but they are reporting information from your creditors.  Because you have sucessfully been discharged in bankruptcy, your balances have been erased from your creditors, thus relieving them from updating the reporting agencies of your new balances.  All debts discharged in bankruptcy are to be reported as -O-.

If you believe that information on your credit report is inaccurate, the credit bureau must investigate the item within a “reasonable time”, generally 30 days, and remove the item if it is inaccurate or cannot be verified as accurate. 

A local Florida Business Attorney alerts EVERYONE owning a Florida Corporation, Florida LLC, Florida S Corporation or other company registered to do business in Florida that NOW is the BEST time to file their 2010 Annual Reports or Amended Reports.

Now is also the perfect time to amend your Florida articles of incorporation, Florida LLC business agreement, or Florida Partnership Agreements. Now would also be the perfect time to change your Florida Registered Agent or the Principal Place of Business for your Florida Corporation or Company. If you need to start your business please have a look here: and then Contact an experienced Florida Business Attorney.

If you fail to file these documents you may lose your “Active Status”. Failing to pay by May 1, 2010 will cause you to pay a late fee of about $400. There are some very narrow exceptions that can prevent you from losing this status and having to pay the late fee. If you do fail to file before May 1st, please Contact an experienced Florida Business Attorney.

Also, starting July 1, 2009 you can now renew Fictitious Names online, however there was a new law that was passed requiring Fictitious Names to be advertised in the local newspaper of the county in which you plan to do business.

A Power of Attorney is a legal document delegating legal powers of the Principal to an Agent (aka Attorney in Fact) act on behalf of the Principal. The Agent may be granted authority to make decisions regarding financial matters, legal issues and real estate.

Powers of Attorney can be broad or defined in scope as to specific acts that may be undertaken by your Agent. They may also be created to carry out specific acts. People taking extended trips would benefit from granting Powers of Attorney to an Agent to handle their affairs, but also to limit the scope in which they may act. It is important to have a qualified Attorney draft these documents so that you are not granting too much authority to your Agent.

Non Durable Powers of Attorney take effect immediately and remain in effect until the Principal either revokes the powers or becomes mentally incapacitated or incompetent. Powers of Attorney may also be crafted to be Durable and/or Springing.

DURABLE POWERS OF ATTORNEY

Durable Powers of Attorney also go into effect immediately (unless they are Springing – see below) but, unlike non Durable Powers of Attorney, remain in effect even after the Principal becomes mentally incapacitated or incompetent.

Without the Durable Power of Attorney, probate proceedings will be initiated if you become incapacitated or incompetent to determine a personal representative for you. Having Durable Powers of Attorney in effect before your incapacitation or incompetency, will allow you to avoid probate and have the person(s) you name to be your Agent act according to the powers you grant to them.

SPRINGING POWERS – THE BAND-AID TO DURABLE POWERS OF ATTORNEY

Because Durable Powers sometimes need a band-aid, the question is begged, “What needs to be fixed”? Granting durable powers during someone’s lifetimes is a double edged sword in that the Agent has, immediately upon granting the powers, the power to exhaust all of your assets and create liabilities in your name. Your only recourse would be to sue them after the fact for breach of their fiduciary duty. It is therefore, very important to consult with an Attorney before purchasing your Powers of Attorney in a box from your local office supply store or other “professional”.

Here’s what the competent advisor does: many attorneys will either create Springing Powers (which necessitates additional language causing the powers to only “spring” into effect upon some conditions such as the confirmation by 2 or 3 doctors certifying that you are unable to care for yourself. Alternatively, attorneys will hold the powers in escrow in the attorney’s office so that they can only be delivered to your Agent upon incapacity or disability.

One safeguard some advisors recommend to avoid your Agent or Attorney in Fact making the wrong decisions is naming more than one attorney in fact, but this necessitates two signatures on every transaction.

Don’t leave your durable powers of attorney in a safe deposit box. If your attorney in fact has no access to the document, it will be useless. Either give them to your Agent if they are Springing or leave them in Escrow with your Attorney.

Important Lesson: Consult with an attorney to avoid costly probate procedures and to granting powers before necessary.

Recently, I have been inspired to write an article entitled “Important Lessons in Estate Planning”. This article will focus on some common risks associated with the loss of loved ones, friends and other family members who may not fit into either category. (See, even some lawyers have a sense of humor)

The following are the first 3 of many “Important Lessons”. Stay tuned for more to follow!

Important Lesson #1: Have A Will Or Some Other Directive. Without a will or another directive indicating to whom your assets and other property shall descend, your property faces the wrath of intestate succession. Intestate succession is regulated by law, in Florida by the Florida Probate Code and more specifically pursuant to Florida Statutes, Chapter 732

1. John lives in Florida and has a brother Tom.
2. John’s parents are both deceased, he has never been married, never had any children and has no other brothers and sisters.
3. John and Jane become close companions in 1983 and remain life partners, even living with each other until Johns death in 1998.
4. In 1990 John told Jane he wanted Jane to have all of his life possessions when he died (even his white 1969 Camaro SS with orange racing stripes that Tom loved so much).
5. John never made a will.
6. John died the next day.
7. Jane will need strong proof to invalidate the intestate succession in Florida that would have all of John’s property passing to his brother Tom.
8. Tom drives his new white 1969 Camaro SS with orange racing stripes every Sunday because Jane had no standing to object to succession of property other than the statement that John desired Jane to have everything.

Important Lesson #2: Keep A Will In A Safe Place Where It Will Not Be Destroyed Or Land Into The Wrong Hands. This law firm recommends keeping your original will and any other separate writings with us for safe keeping. A safe deposit boxes is not the best choice as it opens up the theory that additional people may have access. See example for “Important Lesson #3”

Important Lesson #3: Properly Destroy Old Wills. Simply drawing “X’s” on the paper or writing void may not be sufficient. Where 2 versions of a will exist and the second, but more recent version is destroyed or “lost” by a disgruntled family member or other party, proof (which is very had to offer) is necessary to validate the claim that the previous version is not the intention of the decedent. Here’s an example:

1. John made a will in 1980 leaving everything to his brother, Tom.
2. John places his will in his safe deposit box, believing it to be safe
3. In 1990 John made a second will, leaving everything to Jane, his life partner since 1983 (even his white 1969 Camaro SS with orange racing stripes that Tom loved so much), but never destroyed the first (it’s still in Tom’s safe).
4. On Sunday afternoon, John sealed the will, which revoked all previous wills, in an envelope and being too sick to physically put the will in his safety deposit box, asked Tom who was visiting John for the day, to put the new will in John’s safe deposit box.
5. Tom planned on putting the will in the safe deposit box first thing Monday morning.
6. John died Sunday night.
7. Tom opened up the envelope and became angry learning that Jane was to inherit everything (even the Camaro!). Tom lit a fire in his fireplace using the 2nd will as kindling.
8. Jane will need overwhelming proof that the 2nd will existed. She will most likely need to present eyewitness testimony testifying that they saw Tom light the will on fire
9. Tom drives his new white 1969 Camaro SS with orange racing stripes every Sunday because Jane had no standing to object to the old will other than the statement that John made a new will