January

Employers must provide employees with a W-2 by Jan. 31.

Businesses that hire independent contractors will have to give them their 1099-MISC by that date.

Retirees should also pay attention to their mailboxes in January. That’s when the Social Security Administration sends beneficiaries an SSA-1099, which will detail what they received during the previous year.

If you blink, you may miss your 1099-R, a document filers get when they’ve taken a distribution from a retirement plan or from an IRA. Expect your brokerage firm to send this out to you by the end of January.

February and March

You may have heard about the triple tax benefits of a health savings account: You can make tax-deductible or pretax contributions to it. Also, your money will grow free of taxes and you can use the cash tax-free for qualified medical expenses.

Further, if you had health insurance coverage last year, whether you bought it through a state or federal marketplace or you had it at work, you’ll get a Form 1095-A, -B or -C by early March.

Mid-February – Owners of taxable investment accounts should be on the lookout around for a slew of 1099s from their brokerage firms.

These forms report dividends and interest of more than $10, as well as capital gains and stock sales.

If you own a home, watch out for Form 1098, which you’ll need to deduct mortgage interest.

You can also deduct tuition and education costs and student loan interest.

Chase these forms down

Investors in partnerships, and recipients of a trust or estate, may have to sit tight all spring while waiting for their Schedule K-1, which reports income, losses and dividends.

These individuals may have to estimate their income and taxes, and then request an extension with the IRS.

Shareholders in S-Corps who need a K-1 to file their taxes can’t get this document until the corporation has completed its return.

You may need to do a little legwork to get other forms. For instance, you’ll need to ask your child care provider for additional documents if you’d like to claim the child and dependent care credit.

Always talk to your tax professional if you are confused or have questions.  Call our office to make an appointment or speak to someone today 818.887.9401.

In November California voted on Proposition 19.  It may have been a bit confusing but we wanted to address how it impacts Estate Planning.

Proposition 19 ends or significantly limits the exclusion from property tax reassessment for transfers between a parent and a child in three material ways.

1.  The exemption from reassessment for up to $1 million of assessed value of property other than a principal residence is gone.
2. The transfer of a personal residence from a parent to a child will result in reassessment of the property unless the child occupies the property as the child’s own principal residence within 12 months of the transfer date.
3. The child must file a Homeowners Exemption in order prove they are residing in the home.
4. Even if the child occupies the property, the property tax reassessment exclusion is limited. If the property’s fair market value at the time of transfer is less than $1 million greater than its assessed value, the property will retain its original assessed value. If the property is worth more than $1 million over the assessed value, only $1 million is excluded from property tax reassessment.

For example, under Proposition 19, if a property passes from a parent to a child with an assessed value of $500,000 and a fair market value of $2,000,000, then the new reassessed value for the child will be $1,000,000 which would raise the property tax from roughly $3,500 to $10,000 based on county averages.

The new limited parent-child exclusion rules from property tax reassessment under Proposition 19 becomes effective on February 16, 2021. If you are contemplating a transfer of your real estate to the next generation, the time to plan is now. Do not wait. If you transfer real estate prior to February 16, 2021, you can lock-in the current parent-child exclusions from property tax reassessment. That said, there are a number of things to consider before making such transfers.  Most importantly, the loss of a stepped-up cost basis at death for income tax purposes will occur if you transfer the real estate without retaining certain “strings” to cause the property to be included in your estate for estate tax purposes.

Current law provides generous exclusions from property tax reassessment for transfer of a personal residence and other real estate between a parent and a child under current California law, certain transfers of real estate between a parent and a child are not subject to property tax reassessment; namely, during lifetime or at death, a parent may (i) transfer a personal residence of unlimited value to a child without property tax reassessment, and (ii) transfer an additional $1 million of assessed value of other real estate to a child without property tax reassessment. Since the assessed value of real estate – the value shown on the property tax bill – is often significantly less than the fair market value, this exemption from reassessment is a powerful tool for parents to pass personal residences and other real estate with low assessed values to their children with no property tax reassessment.

We understand this is extremely confusing and there are many rules and restrictions.  Our current law is changing drastically.  New information comes to light almost daily.  Please give our office a call 818.887.9401

Leaving a Child Out of Your Estate Plan? David Cassidy Did it.

In the fall of 2017 we lost some familiar faces.  David Cassidy passed away.  After he passed there was a lot of coverage regarding his estate.  It made headlines due to the fact that he left out one of his children.  David Cassidy had two children, a son Beau Cassidy and a daughter Katie Cassidy.

Katie Cassidy was his biological daughter, but he left her out of his will.  This was interesting from an estate planning perspective.

Many times we talk to couples that are working on their estate plan and they want to leave a child out.  Let’s be honest, there are some families who want to disinherit a particular family member.  There are many reasons for this.  We are going to look at one reason.  One reason is not malice but because one child is much more successful or financially better off then another. 

There are viable options for executing these wishes.  Many people do it.  We like to give the example of George Clooney.

George Clooney’s parents may leave him out of their will or the distribution of their trust, because well, he’s George Clooney.  Clooney is an Oscar winner and probably very financially well off.   George Clooney doesn’t need to inherit his parent’s home or their bank accounts.  Mr. and Mrs. Clooney would not include him in their estate plans, but that would mean they leave everything to George’s siblings.  Let’s says he has a sister.  She may need more financial support, so it stands to reason that inheriting her parent’s estate makes more sense then sharing it between herself and her brother George.

This sort of situation could easily be the case with Mr. Cassidy.  He had two children and he left everything to his son.  If you do a quick search of his daughter Katie, she is an actress, has appeared in movies and popular TV shows, and will probably continue to have a long and healthy career.  She is the “George Clooney” in this situation. 

Her brother, on the other hand, doesn’t have the financial stability she may have.  This could be why Mr. Cassidy, not without love and affection, left her out. 

There are many reasons families leave a child out of their will.  If you are interested in discussing these options or changing your Will or Trust to omit a child, please give our office a call.  818.887.9401.

Hugh Hefner’s Trust Requires his Beneficiaries to Stay Sober.

Hugh Hefner passed away in September 2017, he was 91.  It recently came to light that in his Trust he requires beneficiaries to stay away from any unprescribed drugs.  They also must not become dependent on alcohol. 

We all remember Hugh Hefner as the founder of Playboy Inc.  His magazines are famous, but did you know he was also a big supporter of the civil rights movements. He has quite a legacy.  He leaves behind an empire to his 31-year old widow Crystal Harris and four children between the ages of 65 and 26. Some of those children even work for the company he founded.

Hefner has a clause in his Trust that requires his loved ones to stay sober or risk loosing out on the money he left for them.  He did provide a chance to get back on good terms.  If a beneficiary stays sober for one full year they have the opportunity to reclaim their portion of the family’s fortune. But it does allow for the Trustee to drug test beneficiaries at any time if they believe they are violating the agreement. 

Putting in these sorts of clauses was actually quite common in the 1980s during the drug epidemic that Reagan fought as president.  It died off a little as time wore on.  It looks like Mr. Hefner knows what happens at his infamous Playboy parties and wants to make sure his beneficiaries are staying clean.

If you think you need this in your trust, it is easy to include.  Make sure your estate plan fits your desires and protects your family the way you want to.  Give our office a call if you need to up date your plans or need to get a start on your estate plans 818. 887.9401.

Many of our clients are older adults.  They have lived long lives and are now retired.  As we grow in life our method of communication changes.  The way a mother communicates with her young child is very different then the way a father communicates with his teenage son.  Those methods of communication are different then a parent talking to an adult child about marriage or having children.   Effective communicators know that they need to change their method in order to communicate effectively with different audiences.   Since our industry focuses on older adults we are going to discuss communication methods with elderly loved ones.

Communication needs change as we grow up.  Young children need to be spoken to differently then adults.  Communication needs for elderly adults changes over time as well.  Sometimes we don’t even notice that we must begin changing our way of communicating with elderly loved ones.  The reasons we need to change is because our elderly loved ones now suffer from memory loss, slower comprehension time, psychological and aging factors.   They may also suffer from medical conditions like Alzheimer’s or dementia.  These issues can quickly create communication barriers between an adult child and their elder parent.   An adult may continue to communicate with their aging parent the same way they used to without realizing the need for change.

Communicating with an elder loved one can be frustrating if you do not change your strategy.  They may feel as though you are not listening to them, or talking to them like they were a child.  This is condescending and can escalate to a person shouting in order to get their message across.  When tempers flare this could potentially lead to elder abuse depending on what happens.  On the opposite end, communication can completely stop as the divide increases.

There are some ways to avoid these situations.  Here are some useful tips to use when communicating with an elderly loved one.

• Lower background noise, or move to a quieter location. Distractions can make communication harder.
• Ease into conversations.  Talk about casual topics before more serious ones, think of it as a “warm up period.”
• Discuss topics that are familiar. This way the elder loved one can participate and become engaged.
• Stay focused. Avoid jumping around from topic to topic.  It can be confusing.
• Avoid being verbose.  Use short sentences and ask short questions.
• Allow time to respond and have patience when they reminisce.
• Offer choices rather then opened questions when decisions need to be made.
• Listen actively.  If something is unclear ask for clarification.

Communicating with an elderly loved one does not need be frustrating. These tips can help and extra patience goes a long way.  If you have any questions or want to talk to an attorney give our office a call 818.887.9401.

We at Hornstein Law Offices want to help our clients, friends, and family in this stressful and very uncertain time. We understand some people will be getting their stimulus checks from the government via direct deposit. Those of you who have had direct deposit for your tax refunds in the past are already set up. But for those of you who are not set up for direct deposit but want to be, the IRS has released a website you can visit and safely enter your information.

Just a little information regarding these check for those who may have forgotten or were unclear.

CHANGED DATES FOR TAX RETURNS AND PAYMENTS

“CORRECTED” CHANGED DATES FOR TAX RETURNS AND PAYMENTS

Please note this correction to a prior announcement regarding changed dates for tax returns and payments.  Tax filings, extensions, 2019 tax payments, and first quarter 2020 estimated tax payments that had been due on April 15, have all been delayed to July 15 for both federal and California.  While California changed to July 15 the due dates for both the first and second quarter estimated tax payments for 2020, the IRS changed the date to July 15 only for the first quarter estimated payment for 2020.  The 2020 federal second quarter estimated payment remains due on June 15.  Indeed, for 2020 federal estimated tax payments, the 2^nd quarter payment (due June 15) is now due before the 1^st quarter payment (due July 15)! 

The link to the California due dates can be found here: https://www.ftb.ca.gov/about-ftb/newsroom/news-releases/2020-3-state-postpones-tax-deadlines-until-july-15-due-to-the-covid-19-pandemic.html

The link to the federal due dates can be found here: https://www.irs.gov/faqs/estimated-tax/individuals/individuals-2

To confirm, the changed date to July 15 applies to

1) 2019 federal and California tax return filing

2) 2019 federal and California extension filing

3) payment of 2019 federal and California taxes

4) estimated payments for 2020 taxes for the first quarter only for federal, and for the first and second quarters for California.  

Note again that the federal due date for the second quarter estimated payment for 2020 taxes remains June 15. 

Tax filings, extensions, and payments that had been due on April 15, and even estimated payments that had been due on April 15 or June 15 have all been delayed to July 15 for both fed and Cal.  

To confirm, the changed date to July 15 applies to 1) tax return filing, 2) extension filing, 3) payment of 2019 taxes, and also 4) estimated payments for 2020 taxes.  For all those filings and payments to the IRS or the Franchise Tax Board that were due April 15 and June 15, they have all been extended to July 15.  

I have been asked if the extension also applies to payroll deposits to the Employment Development (EDD), and sales tax filings and payments to the California Department of Tax and Fee Administration (CDTFA).  The California Employment Development Department (EDD) has announced that employers statewide directly affected by COVID-19 may request up to a 60-day extension of time from the EDD to file their state payroll reports and/or deposit payroll taxes without penalty or interest. A written request for an extension must be received within 60 days from the original delinquent date of the payment or return. ( Emergency and Disaster Assistance for Employers, Statewide – March 2020, California Employment Development Department, 03/01/2020 .)

As for the CDTFA, the CDTFA has posted on its website an alert in which it advises that it has been able to make it easier for such taxpayers and feepayers to request relief from the imposition of interest and penalties. They can go through the CDTFA’s normal online process for requesting relief, they can send a letter (a link to the CDTFA’s office locations and addresses is provided), or they can call the CDTFA’s call center at 1 (800) 400-7115. ( Alert, California Department of Tax and Fee Administration, 03/12/2020 .)

Things have been changing rapidly, so if there is anything that may apply to you, please check the websites of the various governmental agencies or contact our office. 

OFFICE IS WORKING REMOTELY

Due to the Coronavirus outbreak, most of my office is working remotely.  We are taking precautions to keep our clients and our office safe during this unusual time.  My office has been handling office meetings via phone and Zoom video conference.  We are able to accommodate clients with urgent matters who must come to our office by having our clients in a separate conference room that is isolated from the rest of the office.  My office can communicate with our clients through the window to the conference room and via video conference from another office at our location.  The entrance to my office is Suite 203.  The entrance to the separate room is Suite 205.  The conference room has a separate entrance to accommodate urgent meetings that cannot be handled remotely.  The room, including door handles, chairs, etc… are cleaned after a clients leave the room. 

If you have any questions, please do not hesitate to contact my office.  If our office phone number is not answered, the call will be forwarded to another number that can be answered remotely.  If the forwarded call is not answered, please leave a message and your call will be forwarded to the appropriate staff member to return your call.