Inside: May 2012 Guest-Editors’ Column

This issue represents a “marriage” of the family law and tax sections. These are the two oldest sections of the bar. There has been a lot of bantering as to who was first. We may need arbitration by the bar. It’s clear that if we are going to settle the dispute by tug of war, the tax section will need a tractor.

Inside, this edition of the Contra Costa Lawyer addresses family law issues that tax practitioners will find interesting and tax issues that family law practitioners will find enlightening.

One article, for instance, addresses tax questions most asked by the family law bar (See Tax Traps That Can Arise During Divorce). This issue also addresses the two most pressing initiatives by the Internal Revenue Service. The IRS, and particularly the EDD, does not believe that there is such a thing as an independent contractor and the penalties are huge if you are wrong (See Independent Contractor or Employee? The Consequences of Getting it Wrong ).

Secondly, the IRS believes that there are billions of dollars to be collected overseas and has made collecting this a priority (see Another Offshore Assets Reporting Requirement). In this regard, last year provided us with a look into IRS philosophy, which seems to be shifting from ensuring that everyone pays his or her fair tax to raising revenue.

When the IRS introduced the 2009 overseas voluntary disclosure initiative, it issued an FAQ. Number 23 said that if your penalties would be lower than the offer, you would be given the lower rate. The rate was then 20% of your overseas assets while the penalties for non-willful failure to file might be $500 or $10,000. Many taxpayers enrolled in the initiative based on this representation. On March 1, 2011, about the time that most of these applications were being processed, the IRS sent out a memorandum to its examiners which either said (depending on who you talk to) do not calculate the alternative or calculate the alternative based upon willful failure to file the treasury report required which carries humongous penalties and shifts the burden of proof to the IRS. The IRS did not change the FAQ and has not to this day. This is bait and switch, pure and simple. We leave you to think about the implications.

From the Family law perspective, this issue also discusses Qualified Domestic Relations Orders and the potential for malpractice law suits hidden within the seemingly innocuous issue of employee benefits in dissolutions (see QDRO: Malpractice Lurking). Finally, we also offer you a step-by step guide on how to obtain information and reports from law enforcement agencies in family law matters (see Getting the 411 from the 911).

We hope you enjoy this joint family law and tax edition!