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Hiding Money From Your Spouse? It’s Not as Easy as it Used to be

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Troubled couples often try to hide money from each other, whether to spend it on extramarital mischief or keep from sharing it in a divorce. They will often open up secret on-line brokerage accounts or hide cash in a safety deposit box. Whatever the method, the hiding spouse is forewarned:  Electronic discovery has made it much easier to track your covert activity.

There are many ways a spouse can uncover secret financial dealings. A suspicious spouse might go through their partner’s web surfing history and social networks to uncover traces of hidden bank accounts and business deals. Some may even install software that records every keystroke their spouses make. Among the wackier tactics include replacing spouse’s GPS with a nearly identical one, allowing tracking of the vehicle’s location and even pictures of who’s sitting in the front seat. Smartphones, as well, are playing an increasingly large role in discovering hidden assets. Mr. Lewis, a data forensic expert in New York, says he recently worked on a case where the spouse enabled the “find my phone” software on all of her family’s smartphones, and quickly learned of her husband’s frequent trips to an ATM, where he withdrew cash she didn’t know about. [Read more…] about Hiding Money From Your Spouse? It’s Not as Easy as it Used to be

Employee Vs. Independent Contractor Status is Focus of New IRS Template

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Should you be classified as an employee or independent contractor? This is an issue that has drawn a lot of attention from the IRS lately, as more employers have been trying to cut costs and classify employees as independent contractors thereby avoiding thepayroll taxes. To clarify how one determines his or her status the IRS has released Publication 1779, which looks at three areas: behavioral control, financial control, and the relationship of the parties to determine worker classification.

To view the template, click here: Employee Vs Independent Contractor Status

 

 

More on Retention of Records

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For those who want to be extra cautious about retaining financial records, here are specific reasons why you should keep your actual tax returns even if the statute of limitations has expired. And what exactly are the statutes of limitations which are relevant?

Tax Records

Supporting documents, such as 1099’s, W-2’s, receipts for charitable contributions, etc. should be kept for 3 years after the return was filed or the due date, whichever is later. For example, the documents for your 2011 return filed March 1, 2012 should be retained until April 15, 2015. Note that if your 1099 is attached to a brokerage statement that shows evidence of the purchase cost of a financial asset it’s critical to hold onto the statement until you dispose of that asset.

As for the tax returns themselves, it’s a good idea to save them forever. They may be needed for Medicaid, immigration, pension, divorce and other purposes. They may also contain useful data in filing future returns.  At a minimum we recommend retaining them for 10 years.  Certain items on a tax return affect later years and need to be kept until the statutes of those later years’ tax returns expire. For example: [Read more…] about More on Retention of Records

Gifts in Contemplation of Death: The Burden of Proof is on You

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An important and commonly misunderstood law regarding gift giving prior to one’s death was recently highlighted in a NJ case. As background, when a child inherits from a parent there is no New Jersey inheritance tax, whereas there is a tax if any other relative or friend inherits. As a result, if one gifts an unusually large amount of money within three years of his or her death to someone other than a child, the possibility that the gift   was made to avoid paying state inheritance tax comes into   question. A common misunderstanding is that unless there is reason to assume the giver was aware of his impending death the transfer is not a taxable one.  In fact, the truth is quite to the contrary. [Read more…] about Gifts in Contemplation of Death: The Burden of Proof is on You

Cancellation of Debt Income- Adding Insult to Injury

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Your rental property went down in value so much that it was worth less than your $500,000 mortgage, so you walked away from the property. Let the bank enjoy it!

You pat yourself on the back for your clever move until the following January. January is 1099 time and you get a 1099-C from the bank stating you have $500,000 of cancellation of debt (COD) income

Your cronies at the club tell you that you have to pay US and NJ income tax on the $500,000 at ordinary income tax rates, not the favorable capital gains rates. You calculate that your brilliant move will cost you $200,000.

HELP! [Read more…] about Cancellation of Debt Income- Adding Insult to Injury

Supporting a Relative? You May be Entitled to Tax Breaks

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Supporting your financially distressed relative is a commendable act that can also result in significant tax savings. If the recipient meets all of the criteria required to be deemed a “qualified relative”, you can benefit in several ways. First of all, the qualified relative can be claimed as a dependent and you can therefore take his personal exemption ($3,750 in 2011) on your return. Another benefit is that you can add his medical expenses to yours for the medical expense itemized deduction. This is especially important for those whose medical expenses do not exceed the 7.5% of AGI (Adjusted Gross Income) minimum threshold to deduct medical expenses. Even if you don’t itemize, you can still benefit by filing as head of household instead of as single, resulting in a much greater standard deduction (in 2011 the standard deduction was $5,800 for single and $8,500 for head of household). The criteria to be a “qualified relative” are as follows: [Read more…] about Supporting a Relative? You May be Entitled to Tax Breaks