e- NEWSLETTER

February/March 2008

Jessica M. Kirsch
Editor-in-Chief

jkirsch@lavellelaw.com

General Law

NEW ILLINOIS LAWS FOR 2008

By Cameron R. Monti

    For 2008, there are in excess of 220 new laws that go into effect as of January 1, 2008. Read below to see a sample of some of the more interesting laws in Illinois:

* Statewide ban on smoking in bars, restaurants and other public workplaces.
* Official endorsement of embryonic stem cell research and creation of an institute to award grants.
* Extra hurdles have been adopted for would-be teen drivers, including longer periods of training before getting a license and increasing to 19 the age at which drivers can talk on cell phones.

* New two-day youth-only deer hunting season in September and October.
* Expansion of the crime of unlawful contact with street-gang members to include people who have been ordered by a court or while on parole not to have such contact.
* Broader definition of adult entertainment facilities barred from being within 1,000 feet of places such as schools, day care centers, public parks or churches.
* Many state buildings required to install energy-saving light bulbs.
* All Illinois residents may participate in a program that provides cash awards for suggestions on saving money on state government operations.
* Drivers are required to leave a space of at least three feet when passing a bicyclist or pedestrian traveling in the same direction.
* Child safety restraint systems have been mandated in trucks and tractor-trailers equipped with seat belts.

* Pet dogs are allowed with their owners at outdoor restaurants in Chicago.
* Drivers must yield for pedestrians in crosswalks near schools on school days between 7 a.m. and 4 p.m. or face fines for violations.

    If you have any questions concerning any of the new Illinois laws for 2008, and/or would like to know how these laws may affect you, please contact cmonti@lavellelaw.com.

Home Health

HOME HEALTH AGENCIES MUST EXPAND THEIR BUSINESS

By Theodore M. McGinn

     Traditional home health care agencies provide services to those patients who are too well to be in the hospital, but in need of health care related services. The services are provided pursuant to a plan of care handed down from the patients’ physician. Such home health care related services are ordinarily for a short limited period of time. Under this business model, home health care agencies have proven to be successful.

    In addition to traditional home health care services, agencies may also expand their line of services to include both hospice care and home infusion care. Hospice care is health care services devoted towards the treatment of pain and/or symptoms suffering by the patient. In order to qualify under hospice care, the patient’s physician must certify that the patient has less than six months to live due to a disease or other illness. Large volumes of patients receiving hospice care have been diagnosed with cancer. However, cancer is not a prerequisite in order to qualify under hospice care. The attractiveness of such hospice care is that such care would continue more then the standard plan of care associated with traditional home health care services.

    A new and steadily more popular service is home infusion. These services are related to the administration of medication, either antibiotics or other medication, to patients through intravenous delivery methods. In addition to these services, agencies are also able to recoup cost related to the IV delivery systems. Although not all supplies could be covered, the supplies that are covered are quite costly. In any event, home infusion services are gaining more popularity in the home health arena, and is a line of services that should be considered.

    Home health care businesses like any other business must constantly adapt their business model in order to continue to be successful in the ever evolving business environment. The above are two new exciting lines of businesses that home health care agencies can expand into in order to improve its profitability.

    If you have any questions regarding this article, please contact Theodore M. McGinn at tmcginn@lavellelaw.com.

Lemon Laws

DON’T LET A CAR MANUFACTURER PUT THE SQUEEZE ON YOU:

ILLINOIS LEMON LAW AND THE MAGNUSON-MOSS WARRANTY ACT

By Amil Alkass

    For most of us, purchasing an automobile, SUV, truck, van, or motor-home is the largest transaction most people make in their lifetimes, next to buying a home. Having a safe and reliable vehicle is crucial. It used to be that when a new car buyer was stuck with a lemon, he or she was out of luck and out of thousands of dollars for repairs or a replacement vehicle. With the passage of the Illinois New Vehicle Buyer Protection Act (“Illinois Lemon Law”), the Magnuson-Moss Warranty Act (MMWA), and consumer protection statutes, purchasers of automobiles and other vehicles can obtain relief if their new or used vehicle is defective. Although the Illinois Lemon Law only applies to new consumer vehicles, the MMWA applies to both new and used vehicles and any other consumer products that are accompanied with a written warranty and having a purchase price of more than $25.00 (i.e. computers, televisions, stereos, etc.).
In order to have the protection of the Illinois Lemon Law, a vehicle must:
 

(1) Have a nonconformity that both substantially impairs the use, market value or safety of the vehicle and is not repairable by the dealer or manufacturer in at least four (4) attempts for the same repair OR be out of service for a total of thirty (30) or more business days;

(2) Be a new purchased or leased vehicle from an Illinois dealership;

(3) Vehicle must have been purchased within twelve (12) months of the defects and have less than 12,000 miles listed on its odometer.
 

    In the alternative, the requirements under the MMWA are not as stringent as the Illinois Lemon Law. The MMWA only requires that a defect in a consumer product be repaired within a reasonable time or reasonable number of repair attempts. Whether the defect was repaired within a reasonable time or attempts is a factual question which a trier of fact must decide. For example, a defective car radio will probably will require a larger number of repair attempts to be deemed “unreasonable” whereas a defective transmission will probably only require a couple of repair attempts to be deemed unreasonable. Further, lawsuits brought pursuant to the Illinois law must be filed within 18 months from the date of purchase whereas the MMWA allows consumers four years from the date of purchase to file suit against the manufacturer. Lastly, the MMWA allows a prevailing consumer to recover attorney’s fees and costs from the manufacturer, the Illinois Lemon Law does not.
Under both the Illinois Lemon Law and the MMWA, a consumer may be entitled to either: (a) a full refund of the purchase price, minus an offset for mileage and use of the vehicle; an exact or equivalent replacement vehicle; or a cash settlement in exchange for a release from further claims.

    For more information about the Illinois Lemon Law and the MMWA, or any other consumer protection law, please contact attorney Amil Alkass of Lavelle Law, Ltd. via e-mail at aalkass@lavellelaw.com or via telephone (847) 705-7555.

Tax Law

TAXPAYER ADVOCATE SEES POSSIBLE CONFLICT OF INTEREST IN NEW PREPARER'S PENALTY

By Timothy M. Hughes

    In the recently issued National Taxpayer Advocate’s 2007 Annual Report to Congress the Advocate’s Office expressed concern that the higher standards of conduct under the toughened Internal Revenue Code Section 6694 regarding return preparer's penalty may affect the way tax preparers dispense advice. The Advocate says that the new standard may, in some cases, lead to conflicts of interest between preparers and their clients.

    The changes to the preparer’s Code Sec. 6694 penalty were enacted through the Small Business and Work Opportunity Act of 2007 and generally take effect for original and amended returns and refund claims filed after December 31, 2007.  The key changes are briefly summarized as follows: 1) the Act expands the penalties to all types of tax returns, not just income tax returns, including estate and gift tax, employment tax, and excise tax returns; 2) it establishes a higher standard of conduct for preparers to avoid imposition of penalties when IRS alleges that the preparer knew or reasonably should have known of an unreasonable position. The old standard required the position taken on the return to have a “realistic possibility of being sustained on its merits,” meaning a one in three (approximately 33%) or greater likelihood of being sustained on its merits. The new standard requires “a reasonable belief that the position would more likely than not be sustained on its merits,” which translates to approximately 51% or greater likelihood. This is significantly higher than the substantial authority standard that applies to taxpayers other than preparers; and 3) it raised the penalties imposed on return preparers for understatements due to unreasonable positions from $250 to the greater of $1,000 or 50% of the income derived (or to be derived) by the preparer with respect to the return or claim. It also raised penalties for understatements due to willful or reckless conduct from $1,000 to the greater of $5,000 or 50% of the income derived by the preparer with respect to the return or claim.

    Until revised IRS regulations are issued, interim guidance by the IRS, generally allows a preparer to continue to rely on taxpayer and third party representations in preparing a return, unless he has reason to know they are wrong. 

    The Taxpayer Advocate is particularly concerned that the new penalty rules create a disparity between the standard applicable to preparers and that applicable to taxpayers. The practitioner standard which requires that a position be more likely than not sustained on its merits is considerably stricter than the standard that applies to the taxpayer.  Potentially, this could lead to ethical problems for preparers, which in turn will affect how they advise their clients.

    Do you have questions about this new law or have any collection problem with the IRS?  If so, please do not hesitate to contact me at thughes@lavellelaw.com or visit us at www.lavelletaxadvocates.com.

Tax Law

WHAT'S NEW IN 2008: CHANGES TO THE “KIDDIE TAX”

By Gillian L. Nagler

    The “Kiddie Tax” was originally enacted in 1986 to discourage parents from shifting income to their children to take advantage of a lower tax bracket. Under the Kiddie Tax rules, a child’s investment income is taxed at the child’s rate only up to a specified amount (currently $1,700), and anything in excess is taxed at the parents’ rate.

    In 2006, Congress expanded the reach of the Kiddie Tax from children under age 14 to all children under age 18. The law has been changed once again, and effective January 1, 2008, all children under 19 are subject to the tax, as are students under age 24 who provide less than half their own support from their wages and salaries. One way that this tax burden can be avoided is through contributions to an education savings account such as a Section 529 plan. Parents can save money for the benefit of their children without incurring any Kiddie Tax, and the contributions grow tax-free and are not subject to income tax when used for education expenses.

    For more information please contact me at gnagler@lavellelaw.com.

Income Taxes

WHAT IS NEW ON THE 2007 FORM 1040?

By Kerry M. Lavelle

The changes on the 2007 1040 will reflect many specific law changes that apply for the 2007 tax year. Look out for these key changes:

1)      Wages, Salaries and Tips, Line 7. 

The maximum amount of elective salary deferrals that a taxpayer can defer under all employer plans generally is limited to $15,500 (which is slightly different for SIMPLE and 403 (b) plans).

2)      Pension and Annuities, Line 16. 

For tax years beginning 2007, the non-taxable part of an eligible roll over distribution from a qualified retirement plan can be rolled over to another qualified retirement plan  that is either a qualified employee plan or an IRC § 403 (b) annuity contract.  Previously, this part of the distribution can be rolled over only to another qualified retirement plan that was a defined contribution plan.

3)      Health Saving’s Account Deduction, Line 25. 

Beginning in 2007:

1)      An individual can fund his HSA by making a one time direct transfer from his IRA to his HSA;

2)      Qualifying health flexible savings account or health reimbursement arrangement distributions may be rolled over on a “one time only basis” via direct transfer to the HSA;

3)      The maximum deductable contribution is no longer limited to the annual deductable under the high deductable plan;

4)      For computing the annual HSA contribution, a taxpayer who is an eligible individual in the last month of a tax year is “deemed eligible” during every month of that year;

5)      An individual is allowed a maximum HSA contribution of $2,850.00 for single coverage and $5,650.00 for family coverage.

4)      Moving Expenses, Line 26.

The standard mileage rate for using ones vehicle to move to a new home is 20 cents per mile for 2007.

5)      IRA Deduction, Line 32.

For 2007, the adjusted gross income phase-out ranges for making deductible contributions to regular IRA’s by taxpayers that are active participants in employer sponsored retirement plans are higher.  This is also an opportunity for “catch up contribution” under certain circumstances.

6)      Tuition and Fees Deduction, Line 34.

Use new Form 8917 to deduct qualified education expenses paid to an eligible post secondary education institution in 2007.

7)      Itemize or Standard Deduction, Line 40.

For 2007, the standard deduction is $5,350 for single filers (and for married persons filing separately), $10,700 for joint filers and qualifying widow(er)s, and $7,850 for heads of household. 

8)      Personal Exemption, Line 42.

The exemption for 2007 is $3,400 and starts to phase out if AGI exceeds $156,400 for single filers, $117,300 for married persons filing separately, and $234,600 for joint filers and qualifying widow(er)s, and $195,500 for heads of household.  For 2007, a taxpayer loses only two thirds of the amount he would otherwise lose under the regular phase out computation.

9)      Alternative Minimum Tax, Line 45.

Under current law, for 2007, AMT exemption amounts dropped to the levels that were in effect for tax year 2000.  The total of most non-refundable personal credits generally can not exceed the excess of regular tax liability over the tentative minimum tax.

10)  Education Credits, Line 49.

For 2007, the Hope and Lifetime credits phase out ratably for taxpayers with modified AGI of $47,000 to $57,000 ($94,000 to $114,000 for joint filers).  Use Form 8863.

11)  Self Employment Tax, Line 58.

The maximum amount of self employment income subject to FICA tax is $97,500; there is no ceiling on the Medicare wage base.  Talk to your tax preparer on other credits such as the adoption credit, unused credit carry forward, earned income credit, excess social security and RRTA tax withholdings.

    In addition to the above changes on the 1040, there are multiple changes on the Schedule A itemized deductions including medical and dental expenses, qualified mortgage insurance premiums, and un-reimbursed employee expenses (the standard mileage rate used for computing un-reimbursed auto expense is 48.5 cents per mile in 2007).

    If you have any questions on these or any other income tax related matters, please do not hesitate to contact Kerry Lavelle at klavelle@lavellelaw.com at any time.

For past e-newsletter articles of interest, please visit the Lavelle Law, Ltd. website at:   http://www.lavellelaw.com/newsletters/newsletter.htm.

 

This newsletter is a publication of Lavelle Law, Ltd. We attempt to highlight and discuss areas of general legal interest that may lead to planning opportunities. Nothing contained in this Newsletter should be construed as legal advice or a legal opinion. Consultation with a professional is recommended before implementing any of the ideas discussed herein.