Checklist of What Must be Done After Your Loved One Dies

Clipboard with checklist

  1. Locate original will, trust, insurance policies and deeds.
  2. Contact both the funeral home and church to make arrangements and publish obituary notice.
  3. Obtain 10 Certified Death Certificates from the Undertaker.
  4. Contact Social Security, the Veterans Administration, and any other payers of pensions to stop direct deposits.
  5. Contact life insurance company to determine death benefits.
  6. Contact utility companies, cable TV, cell phone, pest control and lawn care to cancel service or change billing status.
  7. Contact homeowners, auto and health insurance to cancel coverage or change policy.
  8. Remove your loved one’s name from the car registration if held jointly.
  9. Contact all three credit reporting agencies (Transunion, Experian and Equifax) and cancel all the credit cards in your loved one’s name.
  10. Cancel or change all memberships and magazine or newspaper subscriptions.
  11. Contact an attorney to see if probating the estate is necessary and bring a list of all the assets.
  12. Have the mail forwarded to the executor if needed.
  13. If probating the estate is not necessary, transfer title on all the jointly owned assets such as bank and brokerage accounts to the surviving owner and remove your loved one’s name and social security number. You may leave one joint account open for 8 months after the date of death in case you need to deposit a check in their name.
  14. Update your life insurance policy and retirement accounts to remove your loved one as beneficiary.
  15. If your spouse and yourself own any real property jointly you do not need to change the deeds but you will need their death certificate when the property is sold.

Feel free to contact Gregory J. Spadea, Esquire of Spadea & Associates, LLC online or at 610-521-0604 to help you probate your loved one’s estate.

What You Need to Know About IRS Late Filing and Late Paying Penalties

Late taxes legal action notice

April 15 was the tax day deadline for most people. If you are due a refund there is no penalty if you file a late tax return. But if you owe tax, and you failed to file and pay on time, you will owe interest and penalties on the tax you pay late. You should file your tax return and pay the tax as soon as possible to stop them. Here are eight facts that you should know about these penalties.

  1. Two penalties may apply. If you file your federal income tax return late and owe tax with the return, two penalties may apply. The first is a failure-to-file penalty for late filing. The second is a failure-to-pay penalty for paying late.
  2. Penalty for late filing. The failure-to-file penalty is normally 5 percent of the unpaid taxes for each month or part of a month that a tax return is late. It will not exceed 25 percent of your unpaid taxes. However if you requested a six month extension by filing form 4868 by April 15, and filed the return by October 15, you will not be penalized for late filing.
  3. Minimum late filing penalty. If you file your return more than 60 days after the due date or extended due date, the minimum penalty for late filing is the smaller of $135 or 100 percent of the unpaid tax.
  4. Penalty for late payment. The failure-to-pay penalty is generally 0.5 percent per month of your unpaid taxes. It applies for each month or part of a month your taxes remain unpaid and starts accruing the day after taxes are due. It can build up to as much as 25 percent of your unpaid taxes.
  5. Combined penalty per month. If the failure-to-file penalty and the failure-to-pay penalty both apply in any month, the maximum amount charged for those two penalties that month is 5 percent.
  6. File even if you can’t pay. In most cases, the failure-to-file penalty is 10 times more than the failure-to-pay penalty. So if you can’t pay in full, you should file your tax return and pay as much as you can. Use IRS Direct Pay to pay your tax directly from your checking or savings account. Most people can set up an installment agreement with the IRS using the Online Payment Agreement tool on IRS.gov or calling 1-800-829-1040 or filing form 9465.
  7. Late payment penalty may not apply if you filed an extension. If you requested a six month extension of time to file your federal income tax return by April 15 and paid at least 90 percent of the taxes you owe, you will not face a failure-to-pay penalty. However, you must pay the remaining balance by the October 15. You will owe interest on any taxes you pay after the April 15 due date.
  8. No penalty if reasonable cause. You will not have to pay a failure-to-file or failure-to-pay penalty if you can show reasonable cause for not filing or paying on time. There is also penalty relief available for repayment of excess advance payments of the premium tax credit for 2014. If you have any questions please contact Spadea & Associates, LLC online or at 610-521-0604.

Courtroom Appearance Really Matters

Man wearing suit

Clients often ask how they should act and what they should wear when appearing in court. As a general rule your overall appearance and that of your defense counsel should always try to convey trustworthiness and credibility.

With regards to your actions in the courtroom, you should be prepared to testify and understand what the prosecution is going to question you about and what he must prove to meet his burden of proof. In addition to the obvious content of your testimony, you should understand that it is not only what you say but how you say it, including the tone of your voice, how quickly you speak and always maintaining eye contact. It is also a good idea to be aware of your conduct when sitting next to your attorney. Understand that someone will always be watching you therefore wild outbursts, eye rolling and hand gestures are not unacceptable. Instead practice sitting calmly with a pad of paper and a pen and focus on listening. Your attorney also needs to listen to be effective so do not interrupt him. Interrupting him during opposing counsel’s direct examination or cross examination could cause him to lose his focus and miss a critical response. You should remain silent while writing down your questions and inconsistencies in the witness testimony and wait until the other attorney is finished questioning the witness before you speak to your attorney.

With regard to courtroom dress, I always wear a suit so I recommend a suit for men and a suit or a longer skirt for women. At the very least men should wear a collared shirt, a sports coat, and slacks. Women should avoid wearing anything too provocative. Neither men nor women should ever wear t-shirts, hoodies, sneakers, sandals, flip flops, or jeans. Men and women should wear conservative dress shoes and women should avoid open toe foot wear. Men should be clean shaven and well groomed. While a professional appearance will not necessarily make a bad case good, a poor appearance will just give the judge or jury one more reason not to believe or respect you. Do not underestimate the power of nonverbal communication. Your appearance and that of your witnesses creates a positive or negative impression. Appearance must reinforce your attorney’s arguments. In most cases your attorney may present a mistaken identity theory (it wasn’t my client) and so your appearance should reinforce the argument that you couldn’t have committed this type of crime because you don’t fit the part. Proper appearance can reinforce good character but it can also imply good character when your attorney can’t talk about it. The law understands that appearance and nonverbal communication matter. In their final instructions to a jury prior to their deliberations, judges tell jurors that they are permitted to use a person’s nonverbal responses and cues to determine credibility.

The bottom line is that appearance matters and preparation is critical, so be prepared and give the judge and jury every reason to like you. If you are charged with a crime contact Gregory J. Spadea online or at 610-621-0604 of Spadea & Associates, LLC in Ridley Park, Pennsylvania.

Making Federal Estimated Tax Payments

A picture of a tax return form

I often get phone calls from clients asking how to calculate estimated federal and state income tax payments. The payment for the first quarter estimate is due on April 15th.
In general, estimated taxes must be paid on any income which is not subject to withholding, including taxable income from self-employment, interest, dividends, alimony, gambling winnings, unemployment compensation, social security, rent, and gains from the sale of assets. You may also have to pay estimated tax if the amount of income tax being withheld from your salary, social security, pension or other income is not enough to cover your tax due. Estimated tax is used to pay income tax and self-employment tax, as well as other taxes reported on your personal income tax return. If you do not pay enough tax, either through withholding or estimated tax, or a combination of both, you may have to pay a penalty. You may be charged a penalty even if you are due a refund when you file your return. Estimated tax payments are made in four quarterly installments and can be based on a regular tax method or an annualized income installment method.

If you choose not to use the “Regular installment method”, the annualized installment method allows you to compute your estimated tax based on actual income earned in each of four specific periods. As a result, tax on income which is seasonally earned will not be paid until the period in which it is earned. For example, if a significant percentage of your income is earned in the last quarter of the year, then utilizing the annualized income installment method will allow you to defer the payment of tax on this income to the final quarter as opposed to paying the tax on this amount in equal installments throughout the year.

In general, under the regular installment method, the required annual payment which is paid quarterly through estimated taxes (if no tax is withheld) is the smaller of 1) 90% of the current year’s total expected tax or 2) 100% of the tax shown on the prior year return. Note that if your last year’s Adjusted Gross Income was over $150,000 ($75,000 for married filing separately); the safe harbor is 110%. Adjusted Gross Income refers to all taxable income less certain deductions such as your SEP/IRA/Other Retirement Plan contributions, alimony payments, deductible health insurance premiums paid for self-employed individuals, moving expense deductions, deductible tuition, student loan interest and fees and self-employment tax deductions.

Timing of Payments, Penalty for Underpayment

The year is divided into four payment periods for estimated tax purposes. Each period has a specific payment due date. Note that if you do not pay enough tax by the due date for each period, you may be charged a penalty through the date any underpayment remains outstanding even if you are due a refund upon filing your income tax return. The penalty is equal to the interest rate charged on tax deficiencies (3% per year as of January 20, 2015) on the amount of the installment underpayment from the date the installment is due until the earlier of the date the underpayment is made up for April 15th of the next year. Thus, generally the penalty for underpayment of an estimate is equivalent to paying the IRS non-deductible interest.

The specific due dates for estimated tax payments are as follows:

Period Due Date
January 1 – March 31 April 15
April 1 – May 31 June 15
June 1 – August 31 September 15
September 1 – December 31 January 15 of following year

Here are tips worth considering about estimated taxes and how to pay them.

  1. As a general rule, you must pay estimated taxes in 2015 if both of these statements apply: 1) You expect to owe at least $1,000 in tax after subtracting your tax withholding and tax credits, and 2) You expect your withholding and credits to be less than the smaller of 90% of your 2015 taxes or 100% of the tax on your 2014 return. There are special rules for farmers, fishermen, certain household employers and certain higher income taxpayers.
  2. For Sole Proprietors, LLC Members, Partners and S Corporation shareholders, you generally have to make estimated tax payments if you expect to owe $1,000 or more in tax when you file your return.
  3. To figure your estimated tax, include your expected gross income, taxable income, taxes, deductions and credits for the year. You can use the worksheet in Form 1040ES, Estimated Tax for Individuals for this, or just email me your year to date Profit and Loss and I will help you.

The easiest way to pay estimated taxes is electronically through the Electronic Federal Tax Payment System or EFTPS. You can also pay estimated taxes by check or money order using 1040ES – Estimated Tax Payment Voucher or by credit or debit card, but I do not advise using your credit card due to the expensive service charge. If you have any questions please email or call Gregory J. Spadea at 610-521-0604 of Spadea & Associates, LLC in Ridley park, Pennsylvania

Achieving a Better Life Experience Act (ABLE) for 2015

Close up of female accountant making calculations

The Tax Increase Prevention Act of 2014 includes the new “Achieving a Better Life Experience Act (ABLE).” ABLE establishes a new type of tax-advantaged account for disabled individuals, allowing them to save money for future needs while remaining eligible for government benefit programs like Medicaid. Here is a quick summary of the most important tax changes-starting with those that affect individuals.

Beginning in 2015, the Act allows states to establish tax-exempt Achieving a Better Life Experience (ABLE) accounts to assist persons with disabilities in building an account to pay for qualified disability expenses. An ABLE account can be set up for an individual (1) who is entitled to benefits under the Social Security disability insurance program or the Supplemental Security Income (SSI) program due to blindness or disability occurring before the individual reached age 26 or (2) for whom an annual disability certification has been filed with IRS for the tax year.

Annual contributions are limited to the annual gift tax exclusion amount for that tax year which is $14,000 for 2015. Distributions are tax-free to the extent they don’t exceed the beneficiary’s qualified disability expenses for the year. Qualified disability expenses include housing, transportation, education, job training, health, financial management and legal fees.

Distributions that exceed qualified disability expenses are included in taxable income and are subject to a 10% penalty tax. However, distributions can be rolled over tax-free within 60 days to another ABLE account for the benefit of the beneficiary or an eligible family member. Similarly, an ABLE account’s beneficiary can be changed, as long as the new beneficiary is an eligible family member.

Except for Supplemental Security Income (SSI), ABLE accounts are disregarded for federal means-tested programs.

If you have any questions or would like help setting up an ABLE account feel free to contact Gregory J. Spadea online or at 610-521-0604, of Spadea & Associates, LLC in Ridley Park, Pennsylvania.

2015 Retirement Plan Contribution Limits

Jar with label Retirement Plan

The Internal Revenue Service announced cost of living adjustments affecting dollar limitations for pension plans and other retirement-related items for Tax Year 2015. In general, many of the pension plan limitations will change for 2015 because the increase in the cost-of-living index met the statutory thresholds that trigger their adjustment. Here are the highlights:

  • The elective deferral (contribution) limit for employees who participate in 401(k), 403(b), most 457 plans, and the federal government’s Thrift Savings Plan is increased from $17,500 to $18,000.
  • The catch-up contribution limit for employees age 50 and over who participate in 401(k), 403(b), most 457 plans, and the federal government’s Thrift Savings Plan is increased from $5,500 to $6,000.
  • The limit on annual contributions to an Individual Retirement Arrangement (IRA) remains unchanged at $5,500. The additional catch-up contribution limit amount for individuals aged 50 and over is not subject to an annual cost-of-living adjustment and remains $1,000.
  • Contribution limits for SIMPLE retirement accounts is increased from $12,000 to $12,500. The additional catch-up contribution limit amount for individuals aged 50 and over is increased from $2,500 to $3,000.
  • The deduction for taxpayers making contributions to a traditional IRA is phased out for singles and heads of household who are covered by a workplace retirement plan and have modified adjusted gross incomes (AGI) between $61,000 and $71,000, up from $60,000 and $70,000 in 2014. For married couples filing jointly, in which the spouse who makes the IRA contribution is covered by a workplace retirement plan, the income phase-out range is $98,000 to $118,000, up from $96,000 to $116,000 in 2014. For an IRA contributor who is not covered by a workplace retirement plan and is married to someone who is covered, the deduction is phased out if the couple’s income is between $183,000 and $193,000, up from $181,000 and $191,000 in 2014. For a married individual filing a separate return who is covered by a workplace retirement plan, the phase-out range is not subject to an annual cost-of-living adjustment and remains $0 to $10,000. Keep in mind there is no income limit for taxpayers who are not covered by a qualified retirement plan.
  • The AGI phase-out range for taxpayers making contributions to a Roth IRA is $183,000 to $193,000 for married couples filing jointly, up from $181,000 to $191,000 in 2014. For singles and heads of household, the income phase-out range is $116,000 to $131,000, up from $114,000 to $129,000. For a married individual filing a separate return, the phase-out range is not subject to an annual cost-of-living adjustment and remains $0 to $10,000.
  • The deductible contribution for Simplified Employee Pension Plans (SEPs) is $53,000, up from $52,000 in 2014.
  • The AGI limit for the saver’s credit, which also known as the retirement savings contribution credit, is $61,000 for married couples filing jointly, up from $60,000 in 2014; $45,750 for heads of household, up from $45,000 in 2014; and $30,500 for married individuals filing separately and for singles, up from $30,000 in 2014.

Spadea & Associates, LLC

Contact us online or at (610) 521-0604 to schedule a free consulation. At the law offices of Spadea & Associates, LLC, in Ridley Park, Pennsylvania, we represent individuals and businesses throughout southeastern Pennsylvania, including Delaware County, Montgomery County and Camden County. We also work with clients in Philadelphia and Burlington Counties.

IRS Clarifies One-Per-Year Limit on IRA Rollovers in 2015

Retirement plan documents and pen

The Internal Revenue Service recently issued guidance clarifying the impact a 2014 individual retirement arrangement (IRA) rollover has on the one-per-year limit imposed by the Internal Revenue Code on tax-free rollovers between IRAs.

The clarification relates to a change in the way the statutory one-per-year limit applies to rollovers between IRAs. The change in the application of the one-per-year limit reflects an interpretation by the U.S. Tax Court in a January 2014 decision applying the limit to preclude an individual from making more than one tax-free rollover in any one-year period, even if the rollovers involve different IRAs.

Before 2015, the one-per-year limit applies only on an IRA-by-IRA basis (that is, only to rollovers involving the same IRAs). Beginning in 2015, the limit will apply by aggregating all an individual’s IRAs, effectively treating them as if they were one IRA for purposes of applying the limit.

To allow transition time, the IRS made it clear that the new interpretation will apply beginning Jan. 1, 2015. A distribution from an IRA received during 2014 and properly rolled over within 60 days to another IRA, will have no impact on any distributions and rollovers during 2015 involving any other IRAs owned by the same individual. In other words, IRA owners will be able to make a fresh start in 2015 when applying the one-per-year rollover limit to multiple IRAs.

Although an eligible IRA distribution received on or after Jan. 1, 2015 and properly rolled over to another IRA will still get tax-free treatment, subsequent distributions from any of the individual’s IRAs (including traditional and Roth IRAs) received within one year after that distribution will not get tax-free rollover treatment. As the guidance makes clear, a rollover between an individual’s Roth IRAs will preclude a separate tax-free rollover within the 1-year period between the individual’s traditional IRAs, and vice versa.

Keep in mind Roth conversions which are rollovers from traditional IRAs to Roth IRAs, rollovers between qualified plans and IRAs, and trustee-to-trustee transfers which are direct transfers of assets from one IRA trustee to another are not subject to the one-per-year limit and are disregarded in applying the limit to other rollovers.

Therefore IRA owners should request trustee to trustee direct transfers or request a check made payable to the receiving IRA trustee and deliver it to the receiving trustee themselves within 60 days of the check date.

If you have any questions, please contact Gregory J. Spadea of Spadea & Associates, LLC at 610-521-0604.

Understanding Pennsylvania Commercial Real Estate Tax Appeals

Upscale Shopping Center

If your Pennsylvania commercial property was built in the last 15 years in Montgomery, Chester or Delaware counties, there is a good chance the value of your property is over-assessed. Before deciding whether to do a real estate tax appeal, you should first speak with a commercial appraiser to do a preliminary analysis using one or more of the three valuation methods.

  1. The Income Approach to value is a method of converting your anticipated monthly rental income into present value by capitalizing net operating income by a market derived capitalization rate. Essentially, a capitalization rate is a rate of return on investment. Capitalization rates are taken from sales of similar investment properties and applied to the net income of the property to determine the market value of your property.

    There are several ways to estimate value using capitalization. The method used depends upon several factors such as the timing and regularity of the cash flows, period of time the investment is held, whether or not long term leases are involved. Direct capitalization is the most widely used and simplest approach to apply because it does not require explicit projections of income and assumes that expectations for future income are similar for all the properties compared. It is used when income is not expected to vary significantly over time. Direct capitalization typically involves an average of several years’ income. The net operating income is then capitalized by an overall capitalization rate to arrive at market value.

  2. The Sales Comparison Approach to value looks at comparable commercial properties that have similar use and square footage that were sold in the area in the last year. This is the same method used in residential tax appeals.
  3. The Cost Approach is typically used for vacant land or property that does not generate income. The cost approach is performed by valuing the land at its highest and best use. The fundamental premise of the cost approach is that a potential user of the property would not pay more for the property than it would cost to build an equivalent property. The value of the land plus the depreciated cost of the improvements should equal the total market value estimate.

    The appraiser would take an average of all methods that apply to arrive at the fair market value and multiply it by the common level ratio to arrive at the correct assessed value. If that correct assessed value is less than the actual assessed value of your property you should contact Gregory J. Spadea at 610-521-0604 or online of Spadea & Associates, LLC. The deadline to file an annual real estate tax appeal is August 1. Keep in mind the appraiser may need four to six weeks to complete an appraisal so you need to contact the appraiser in May or June to meet the August 1, filing deadline.

Understanding the Difference Between Robbery and Theft

Man Mugging Woman In Street

Robbery is a theft of money or personal property committed by force or threat of force. The key difference between robbery and theft is the use of some kind of force or the cause of some serious harm in taking the property from someone. The degree of force will determine the severity of the charge. Generally, the crime of robbery constitutes a third degree felony. However, if during the commission of the crime, the accused causes bodily injury to another person, the charge will be a second degree felony. If the accused seriously injures another person or puts them in fear of serious bodily injury, the crime constitutes a first degree felony. Also, if the accused commits a robbery of a motor vehicle while another person was in lawful possession of the vehicle, this is also a first degree felony.

Theft and Robbery are separate offenses and are normally charged together. Theft is taking the property of another without force. Theft from a store such as shoplifting is also called Retail Theft. Both Retail Theft and Theft are graded based on the value of the property stolen and whether the accused has any prior theft convictions. Theft offenses are graded as follows: If the value of the property is $500,000.00 or more, the charge is a first degree felony. If the value of the property is at least $100,000.00 but less than $500,000.00, the charge is a second degree felony. If the value of the property exceeds $2,000.00 but less than $100,000.00, then the theft charge is graded as a third degree felony. If the value of the property was at least $200.00 but equal to or less than $2,000.00, then the theft charge is graded as a first degree misdemeanor. If the value of the property was at least $50.00 but less than $200.00, then the theft charge is a second degree misdemeanor. If the value of the property was less than $50.00, then the theft charge is a third degree misdemeanor. The reason the grading is important is because it determines the number of years of incarceration the accused will serve if found guilty. The maximum penalty for a felony, misdemeanor and summary offenses are as follows:

Felony 1st Degree 20 years in prison
Felony 2nd Degree 10 years in prison
Felony 3rd Degree 7 years in prison
Misdemeanor 1st Degree 5 years in prison
Misdemeanor 2nd Degree 2 years in prison
Misdemeanor 3rd Degree 1 year in prison
Summary Offense 90 days in county jail

There are several defenses to Robbery such as:

  1. No theft was committed. Since robbery is a theft by force, if there is no theft committed, there is no robbery. Examples of actions that may be confused with theft include reclaiming property you own, or taking property that you believed to be your own.
  2. No injury occurred or the victim was not placed in fear of injury. However, in most cases, merely being in fear of injury is sufficient for the prosecution to prove the element of force in a robbery charge.
  3. Intoxication, Entrapment, Duress. These three defenses can be used in many different criminal actions including robbery and theft. All three defenses try to show that a defendant is not guilty, even though the crime was committed.

If you are charged with Robbery or Theft contact Gregory J. Spadea at 610-521-0604, of Spadea & Associates, LLC in Ridley Park, Pennsylvania.

12 Tips to Help Landords Audit Proof Their Tax Return

Tax return paper

The IRS does not audit too many returns due to inadequate staffing and poor management. However, to truly audit proof your return, I would advise you and all my landlord clients to:

  1. Make the election under Treasury Regulation 1.469-9(g) to aggregate all real estate activities as one activity for passive loss rules if you have more than one rental property. This makes meeting the 750 hour rule for all you rental properties much easier than having to meet it for each individual rental property.
  2. Keep a log on Microsoft Outlook or Google Calendars of the work you do as a Landlord to meet the 750 hour test such as:
    1. working or improving the property;
    2. researching and bidding on properties;
    3. finding and screening tenants;
    4. collecting rent;
    5. performing maintenance.
  3. Never use round numbers on your return because it looks like you are estimating your expenses.
  4. If you pay a contractor or any unincorporated person more than $600 during the year you must issue them a 1099. Therefore you should have them fill in a W-9, before you pay them so you will have their information and can prepare a 1099.
  5. Reconcile the mortgage interest and real estate taxes reported on your 1098 to the amount deducted on your return to ensure the numbers match.
  6. Do not deduct capital improvements under repairs but instead depreciate them or use Internal Revenue Code Section 179 to expense them in the tax year they are placed in service.
  7. Use Quickbooks if you have multiple properties to track rental income and expenses for each property. Deposit all your rental income into a separate bank account.
  8. Never deposit rental income into your personal account and never pay personal expenses from your rental account. Transfer money from your rental account to your personal account and then pay personal expenses from your personal account.
  9. Have a separate credit card that you use only for your rental properties and pay the monthly bill from your rental bank account. At the end of the year the credit card company will give you a summary of all your expenses making your record keeping that much easier.
  10. Make sure all your deposits into your rental bank accounts reconcile to the amount of rental income reported on your tax return.
  11. Keep your leases current and make sure the monthly rent that you deposit is the amount listed on the lease.
  12. Keep security deposits in a separate trust account and only disburse those funds when the tenant moves out.

If you have any questions about audit proofing your return or need help preparing your tax return call Gregory J. Spadea at 610-521-0604 or contact him online, of Spadea & Associates, LLC in Ridley Park, Pennsylvania.

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