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How Your Tax Debt May Impact Your Passport

By Amanda L. Richter, CPA

Before you renew your passport and leave the Country, you will want to make sure that you are not seriously delinquent on your tax debt. IRC § 7345 authorizes the State Department to deny a passport application or renewal for any individual that is deemed to be seriously delinquent on their tax debt to the Internal Revenue Service.

Before denying your passport application, the State Department will hold your application for 90 days. This is to provide you with enough time to resolve any erroneous certification issues, pay the tax debt in full or make an arrangement to pay the IRS.

Under IRC 7345(b), the IRS defines seriously delinquent as an unpaid, legally enforceable Federal tax liability of an individual which has been assessed, is greater than $52,000 (for 2019 the threshold is $52,000 and is indexed for inflation) and a notice of federal tax lien has been filed and all administrative remedies under IRC § 6320 have lapsed or been exhausted or a levy has been issued for the debt.

There are some types of tax debts that are not included in determining seriously delinquent tax debt. Excluded categories of tax debt include:

  1. Debt that is determined to be currently not collectible due to hardship.
  2. Debt that resulted from identity theft.
  3. Taxpayers in a Disaster Zone.
  4. Debt of a taxpayer in bankruptcy
  5. Debt of a deceased taxpayer.
  6. Debt that is pending an Offer in Compromise.
  7. Debt that is included in a pending Installment Agreement
  8. Pending claims that will result in no balance due.

You will be notified in writing via Notice CP 508C once the IRS certifies the tax debt to the State Department. It is important to keep your address up-to-date with the IRS, because the notice will be sent by regular mail to your last known address. Reversal of the certification is not a quick process, so you will want to make sure you do not wait until the last minute to get ahead of your tax debt.  Once you have resolved your tax debt or made appropriate arrangements, you will receive Notice CP 508R within 30 days.

Ask Kit Kat: Animal Crossing over the Freeway

Hook Law Center: Kit Kat, what can you tell us about the new bridge in California that will be finished by 2023 that allows many types of animals to cross over a busy road unbothered by cars or humans?

Kit Kat: Well, this sounds like a truly great solution to a problem that has vexed conservationists for some time. In the busy area of southern California around Los Angeles, wildlife was being trapped on one side of US 101 or the other. There was concern in particular for a certain mountain lion named P-22. He wears a tracking collar, so he has been observed many times. According to Beth Pratt of the National Wildlife Federation, “When the freeway went in, it cut off an ecosystem. We’re just now seeing impacts of that.” Mountain lions like P-22 are being confined to the west of the roadway in the Santa Monica Mountains, all the way up the coast to Los Angeles. Other mountain lions remain on the east side of the road, and it makes mating and rearing young difficult. This has led to inbreeding, and conservationists fear it could lead to eventual extinction within a span of 15 years, if something isn’t done to reverse the situation.

It’s not only mountain lions which are affected, though they, with symbolic leaders like P-22, have become the face of the crusade. Pratt even likened P-22 to being ‘the Brad Pitt of the cougar world.’ Nevertheless, coyotes, deer, lizards, and snakes will benefit also. The bridge, exclusively for animal use, will span 10 lanes of traffic 35 miles northwest of Los Angeles. It will be the second animal overpass in California, though tunnels for animal use are more common. 80% of the funding for the project will come from private sources, while 20% will come from state funds which were allocated for conservation purposes.

Great care is being taken in the design of the bridge. “Ideally the animals will never know they’re on a bridge. It’s landscape flowing over a freeway. It’s putting back a piece of the ecosystem that was lost,” says architect Clark Stevens. Berms and hollows will exist alongside of high walls which will help to minimize sound and light from the busy roadway below. The public support for the project is huge. Of 9,000 comments the planning agency received during the comment period, only 15 were negative. It’s a wonderful undertaking that can’t come soon enough! (Associated Press, “California Reportedly Plans to Build Bridge Over Major Freeway to Give Wildlife Room to Roam,” Huffington Post, August 20, 2019)

Posted on Thursday, August 29th, 2019. Filed under Senior Law News.

Changes Coming to TSP Withdrawal Options on Sept. 15, 2019

By Jennifer Rossettini, CFP®

The Thrift Savings Plan (“TSP”) is a 401(k)-style retirement savings plan for federal employees and military personnel.  When these employees no longer work for the government, they have the option of leaving their accounts in place, but many decide to transfer the money to an outside IRA, citing limited withdrawal options as a main reason for doing so.  Currently, participants have three basic withdrawal options: (1) lump-sum withdrawal or transfer to another account; (2) purchase an annuity; or (3) withdraw in equal monthly payments.  If participants do not take the lump-sum withdrawal, the other two options prevent the account’s balance from growing any further.  Further, once a monthly payment amount is chosen, participants cannot take intermittent lump sum withdrawals to pay for things like a new car, vacation or unexpected healthcare expenses. With the passage of the TSP Modernization Act, comes more options regarding withdrawals.  The following is a summary of some of the important changes taking effect on September 15, 2019:

Partial Withdrawals

Before the effective date of the Act, TSP participants are limited to one partial withdrawal from their account during their lifetime.  These partial withdrawals are either age-based, in-service withdrawals at 59 ½ or older, or post-separation withdrawals.  After the effective date of the act, (1) participants will be able to take up to four age-based, in-service withdrawals per calendar year; (2) there will be no limit to the number of partial withdrawals participants can take after separating from service; (3) participants will be able to take partial withdrawals while they are receiving post-separation installment payments; and (4) having taken age-based, in-service withdrawals will not prevent participants from taking post-separation partial withdrawals.

Withdrawing from Roth/Traditional Balances

As a reminder, the funds comprising the Roth balance of a participant’s TSP were contributed after taxes and are, therefore, generally income tax free when withdrawn.  On the other hand, the funds comprising the Traditional balance of a participant’s TSP were contributed before taxes and are therefore taxed as ordinary income when withdrawn.  Before the effective date of the Act, participants are required to take their withdrawals on a pro rata basis from both their Roth balances and their Traditional balances.  This means that if 75% of your account is traditional and 25% is Roth, any withdrawal will have to come 75% from traditional and 25% from Roth.  After the effective date of the Act, participants can choose which balance to withdraw from based on their personal financial needs and income tax situation.

Withdrawal Deadline

Prior to the effective date of the Act, participants are required to make a full withdrawal election once they turn 70 ½ and are separated from federal service, or else the governments begins an account “abandonment” process.  After the effective date of the Act, participants will no longer be required to make a full withdrawal election, and if a participant’s account has already been abandoned, they will be able to restore their balance without making a full withdrawal election.  The only withdrawal that a participant will be required to make going forward will be an amount equal to the Required Minimum Distribution under IRS rules.

Installment Payments

There are several things changing with regard to installment payments: (1) instead of having to receive installment payments on a monthly basis, participants can now receive payments quarterly or annually; (2) instead of being limited to the open season between October 1 and December 15 of each year to change the amount of the monthly payment, participants will now be able to change the amount and frequency of installment payments at any time during the year; (3) instead of being forced to take a final withdrawal if they want to stop their monthly payments, participants will now be able to start and stop payments at any time.

While these changes are positive, there are still some drawbacks to TSP’s, including the limited investment options available and the inability of a beneficiary of a TSP account to stretch payments over a longer time period than one year.  Fortunately, with the ability to take more withdrawals from the TSP, participants have more opportunities to move assets from the TSP toward more retirement-appropriate accounts with fewer limitations.  It also allows more opportunity to be able to pay for things outside of one’s monthly budget.

As with any major financial decision, TSP participants should seek the advice of a financial advisor before taking advantage of these expanded withdrawal opportunities.

Ask Kit Kat: Goat Brush Cutters

Hook Law Center: Kit Kat, what can you tell us about how Portugal is using goats to manage underbrush, and thus help reduce fires in rural regions?

Kit Kat: Well, this story really caught my eye! Apparently, Portugal is more prone to fire in rural areas, because they are suffering from extreme drought—more than most areas in Europe. As rural areas have become less populated, there are no longer enough people to prune steep, hilly areas as there was in the past. The few people they do have are elderly, and they are no longer able to do the task. Using tractors isn’t feasible, because the land is too hilly. Thus, enter the goatherd and goats! Portugal is actually is paying a few hearty souls to pilot a program in which a goatherd manages the job machinery cannot. In the village of Vermelhos in southern Portugal, Leonel Martins Pereira, 49, manages a herd of 150 Algarve goats who are keeping the area free of brush, and thus safe from fire.

The Algarve is a breed native to the area which has dark spots on a white coat. So far, they are doing a super job! They really love to munch, and their favorite target is the strawberry tree, which is actually a bush. It has a sticky coating which can be set on fire very quickly. The pilot program has 40-50 goatherds across the country who tend to approximately 10,800 goats across an area of about 6,700 acres. According to Nuno Sequeira, a board member for the forestry department, the problem in this plan was not funding, but finding enough goatherds. “It just became very hard to find people willing to do this hard work and live in such areas.”

Some of these areas are significantly declining in population. Vermelhos, the town in which Mr. Pereira operates from, is down to 25 residents from a high of 100 in the 1980s. The  primary school is closed. In his youth, the town had about 10 shepherds. The pay for such work is meager. He earns about the equivalent of $3.35 per day, and it is a 7-day per week job. Mr. Pereira admits his work is a vocation, but that may not be enough to sustain him in the long term. The government’s position is that this is a pilot program, and that changes will eventually be made if overall they find it is worth the investment. Stay tuned to see how this program develops. (Raphael Minder, “Scorched Portugal Turns to the Goat as a Low-Cost Firefighter,” The New York Times (Europe), August 17, 2019)

Posted on Thursday, August 22nd, 2019. Filed under Senior Law News.

Parents May Use FMLA to Attend an IEP Meeting

By Shannon Laymon-Pecoraro, CELA

On August 8, 2019, the U.S. Department of Labor (DOL) issued opinion letter FMLA2019-2-A which set forth that employees may take leave under the Family and Medical Leave Act (FMLA) to attend a meeting to discuss the Individualized Education Program (IEP) for a child.

The Individuals with Disabilities Education Act (IDEA) required public schools to develop an IEP for students that receive especial education and related services. In developing the IEP, the school is to receive input from the child and the child’s parents, teachers, administrators, and related service personnel. Related Services, under IDEA, includes various services such as counseling services, medical services, physical therapy, and speech therapy.

In reaching its opinion that attendance at an IEP is “care for a family member…with a serious health condition” under FMLA, the DOL relied upon the following facts:

  • Child had qualifying serious health conditions.
  • The parent already received a certification from the child’s doctor to support intermittent leave to care for children, which was approved by the employer.
  • Child receives prescribed occupational, speech, and physical therapy provided by the school district.
  • Schools hold IEP meetings four times a year to review educational and medical needs, and that therapists, teachers, and administrators participate in the IEP meeting.
  • Meetings set forth student progress and areas of concern, review doctor recommendations and new test results, and that recommendations for additional therapies may be discussed.

Ask Kit Kat: Giant Parrots of the Past

Hook Law Center: Kit Kat, what can you tell us about giant parrots of the past which once roamed New Zealand?

Kit Kat: Well, this is another interesting story. Apparently, New Zealand, somewhat like its neighbor Australia, is home to some unique species. Today, New Zealand has some unusual parrots which are much larger than the varieties in the Americas. The Kakapo is so large that it cannot fly. Keas, who have extremely sharp beaks, are quite strong and can, if they have a mind to, attack sheep and pull rubber parts off cars. However, now scientists have discovered an even larger, prehistoric parrot, which they think may have been close to 3 feet tall and weighing close to 15.4 pounds. That’s as heavy as some bowling balls are! Researchers named the new species Heracles inexpectatus: Heracles to connote strength, and inexpectatus, because they were completely surprised by the discovery. It was found near St. Bathans on New Zealand’s South Island. They officially announced the find on August 6, 2019 through publication in Biology Letters.  This particular spot is rich in previously unknown species. A large burrowing bat had also been discovered in the vicinity.

Actually, the bird’s size misled the scientists initially. The bones were found in 2008. At first, it was thought it belonged to the eagle family. Then in early 2019, Ellen Mather, a graduate student at Flinders University in Adelaide, Australia realized the bones had been misidentified. On re-examination, Ms. Mather and Dr.Trevor Worthy, her mentor and professor, realized the two leg bones had characteristics found only in parrots. Because of the location of where the bones were discovered, they think the parrot dates to the early Miocene period, a period which ranged from 16-19 million years ago. Because the bones were quite “solid and heavy,” Dr. Worthy hypothesizes that the Heracles was flightless and had a diet of seeds and fruit. The research team plans to visit St. Bathans later this year to determine whether there are any more fossils related to this particular species of parrot. (Cara Giaimo, “These Giant Parrots Once Roamed New Zealand,” The New York Times (Trilobites) , August 6, 2019)

Posted on Monday, August 19th, 2019. Filed under Senior Law News.

Estate Planning for Unmarried Couples

By Emily Martin, Esq.

In recent years, the percentage of couples getting married has declined, and those who do get married, are getting married later. In fact, according to the Current Population Survey from the Pew Research Center in 2017, the median age at first marriage reached its highest point on record at 30 years for men and 28 years for women. Additionally, it has become more and more common for couples to live together before getting married – or to live together without getting married at all. In 2016, 18 million adults were living with an unmarried partner – a 29 percent increase from 2007. With the marriage rate declining, it has become more important for unmarried couples to plan for the future. Who will receive your assets after you pass away? And perhaps even more importantly, who will have the right to make decisions for you if you cannot make them on your own? All unmarried couples in a long-term relationship should address these difficult issues.

The first issue to consider is how your assets will pass after you pass away, and who will have the responsibility of managing your affairs after your death. If you do not have a will, then the laws of intestate succession for your state will determine who receives your assets upon your death. In Virginia, if you are unmarried, the default law states that children receive your assets first. If you do not have any children or grandchildren, then your parents (if they are living) will inherit everything, followed down the line by siblings, nieces and nephews.

If you are in a long-term relationship, chances are you would like for your partner to receive some or all of your assets upon your death. A will or a trust is one way to ensure that your assets pass the way you want them to. In these documents, you can designate that your partner receive a portion of your assets (or all of them, if you prefer). You can also name your partner as your executor or trustee, which gives them the authority to pay your debts, collect your assets, and manage your affairs after you die.

Another way to make sure that the right people receive your assets after your death is through beneficiary designations and “transfer on death” designations. If you have retirement accounts, annuities, or life insurance policies, it is important to keep the beneficiary designations on these accounts updated. These types of accounts typically allow you to name one or more primary beneficiaries as well as contingent beneficiaries who would only receive the assets if the primary beneficiaries were deceased. Because assets with beneficiary designations typically pass outside of probate, adding these designations to your accounts is one important way to avoid your estate having to go through the probate process after your death. Additionally, you can add “payable on death” or “transfer on death” designations to your bank accounts. Some states, including Virginia, even allow you to complete a “transfer on death” deed for your real property. This deed, which takes effect only after you die, allows you to designate one or more people who will receive your real property upon your death.

While many people are focused on what will happen after they die, they often forget to focus on what will happen if they don’t die, but instead become incapacitated and cannot manage their own affairs. A well-rounded, comprehensive estate plan answers both questions. It is important to make sure that your wishes regarding what will happen if you become incapacitated are well-documented. If you do not complete a financial or healthcare power of attorney, your partner could be forced to file for guardianship and conservatorship to be granted the authority to manage your affairs. This is a costly court process that often involves conflict between family members and other loved ones. If you wish for your partner to be able to make financial and medical decisions for you upon your incapacity, you need to sign a financial power of attorney as well as a healthcare power of attorney. Having these documents in place can help save a great deal of heartache and money if you become unable to manage your own affairs.

Although it is not a pleasant topic, estate planning is a very important one. It is a good idea to review your plan frequently (every three to five years, or more often if you have had a change in circumstances) and adjust it accordingly. If you and your partner part ways, if you have children, or if you find yourself in a new relationship, your documents may need to be updated to reflect that change. As always, having an open and honest dialogue with your partner about your wishes and letting them know that you have named them in your estate planning documents is crucial.

Although unmarried couples can face unique struggles when it comes to planning for incapacity and death, a little advance planning can allow you to make your wishes known while giving your partner the authority they need to handle your affairs if you are unable to do so.

Ask Kit Kat: Dog-Cat Stories

Hook Law Center: Kit Kat, do you have some feel-good animal stories for us?

Kit Kat: Yes, I do! One is about a dog, and one is about a cat. First, let me tell you about Kylie, the German shepherd, who is a trained cadaver dog. Kylie works with the District of Columbia’s fire department, and she is one of 4 such dogs which work with that fire department. She was severely injured in July when she stepped on a hidden fence along the Arlington-Alexandria (Virginia) border. She actually became impaled on the fence, causing her to bleed profusely. She was then taken by medevac helicopter to an animal hospital in Northwest Washington for treatment. She needed several surgeries in order to recover. But recover she did. The bones she helped uncover that day (July 19) are still under investigation. The five-year old shepherd is a marvel and essential member of that cadaver team!

Now let’s switch to our cat story. Tissy, is a Maine Coon cat, orange in color. Their hair is longer than the typical domestic shorthair cat. Maine Coon cats are also quite large and can weigh between 8-11 lbs. for a female and 13-18 lbs for a male. Tissy is unusual, though not really unique, because she loves water. She was adopted by a family in western Pennsylvania, who found her as a kitten, in a parking lot near the county fair. When Tissy was about a year old, her family discovered she loves to swim. So Tissy now wears a floatie around her middle, which lengthens the time she can stay in the water. The family also reports she loves bubble baths, so her swimming is not limited to summertime only. Who would have ever thought a cat would actually enjoy swimming? Wonders never cease. (Dana Hedgpeth & Associated Press, “D.C. cadaver dog impaled on the job returns to work; Pennsylvania cat dives in summer with love of swimming,” The Virginian-Pilot, August 3, 2019, p. 11)

Posted on Thursday, August 8th, 2019. Filed under Senior Law News.

Is Diet the Fountain of Youth?

By Letha Sgritta McDowell, CELA

Did you know that diet may be the best way to fight aging? The benefits of diet and exercise have long been touted as beneficial, and we hear about obesity leading to chronic conditions such as heart disease and diabetes which ultimately leads to an early death. However, beyond simply improving looks and living longer, studies are now showing that a healthy diet may be the secret to anti-aging.

As we age our bodies change. Not simply in looks but in function as well. For example, thirst sensation decreases with age which means a person feels less thirsty. The result may be a failure to drink enough water. It also takes longer to digest a meal as a person ages and the ability to taste can be reduced which may lead to being disinterested in eating. Because our bodies change as we age, our diet needs to adapt as well. The diet we had in our 20s and 30s may simply not work anymore.

One key to a healthy diet (at any age) is water, but it becomes more important as an individual ages and in improving the aging process. As mentioned above, the sensation of being thirsty reduces as a person ages so older adults are more likely to be dehydrated. Not only does that affect organ function but our looks as well. Being dehydrated can exacerbate the appearance of fine lines and wrinkles.

Blueberries are extremely high in anti-oxidants, not to mention low in calories. Anti-oxidants are important, because they neutralize free radicals which exist in our bodies. Free radicals are unstable molecules that can attack cells, and they have been linked to diseases such as cancer. Recently, research has shown that an appropriate diet can help slow cognitive impairment that comes with dementia, and it is believed that blueberries and other foods high in anti-oxidants play a significant part in that.

Walnuts are high in phytochemicals such as polyunsaturated fatty acids which reduce pressure on the brain. Studies are also showing that consuming walnuts helps increase brain activity and slows cognitive decline, making walnuts a true brain food.

Believe it or not, watercress is an excellent food to add to a diet to reduce the signs of aging. Watercress contains potassium, calcium, manganese, phosphorus and a host of vitamins. Included in these are anti-oxidants which are discussed above, as well as compounds which increase circulation, improve the delivery of minerals to cells, and reduce basal DNA damage. Therefore, watercress may help prevent cancer and helps reduce the appearance of fine lines and wrinkles.

Papaya has a number of important vitamins and eating papaya has been shown to improve skin elasticity. It also contains an enzyme called papain which is a known anti-inflammatory and exfoliant. So, eating papaya can help shed dead cells and leave you with glowing skin.

This is a short list of foods which are beneficial to our bodies at any age but which can provide even more pronounced benefits as we age. There are many other foods which could be listed that can reduce cell damage, prevent heart disease, slow memory loss, and help us look younger. Many of us are unaware of how our bodies change as we age and that modifications to our diet can aid us in looking and feeling great well into old age.

Ask Kit Kat: NC Animal Shelters Well-Prepared

Hook Law Center: Kit Kat, what can you tell us about how the animal shelters in North Carolina are some of the best prepared in the country for emergencies like flooding or hurricanes?

Kit Kat: Well, yes, North Carolina does seem to have developed a great system for the organization and storage of supplies to keep pets and humans together during storms which result in large evacuations or sheltering. In fact, according to Wendy Pulley, interim human services branch manager of the NC Division of Emergency Management, “North Carolina has become the gold standard for pet shelters.” What is unique to North Carolina is that people and pets can stay together in the same shelters in the majority of cases. North Carolina, in essence, has pre-prepared trailers of pet supplies which can be unpacked should the situation require it. In the trailers are animal crates in folded condition, large rolls of plastic sheeting which can wrap an entire room or hallway to maintain sanitary conditions, leashes, food, etc. Very quickly a shelter can be established, and cleanup is a snap.

North Carolina, after Hurricane Katrina, took seriously the law enacted by Congress, that all states have evacuation plans for animals. In North Carolina, that meant mandating that every county have a plan for the evacuation of animals. About half of North Carolina’s 100 counties have purchased the trailers with animal supplies. Trailers with equipment-only cost $16,000. Those with air conditioning and which are self-contained units cost $35,000.  In some cases, other systems were already in place which met the law’s requirements. For example, counties on the coast like Dare and Currituck, have vehicles to move the animals inland to areas/shelters not so vulnerable to flooding. Pets are checked in by trained volunteers, and each pets gets an ID attached to its collar or crate. The goal is to eliminate the need for people to make a choice between evacuating and leaving their pets behind to fend for themselves. North Carolina has done a wonderful job in helping both people and their pets. (Jeff Hampton, “N.C. Shelters come with everything needed to save animals during storms,” The Virginian-Pilot, July 27, 2019, p. 3)

Posted on Monday, August 5th, 2019. Filed under Senior Law News.
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