Lending Money to Family Members? Be Mindful of These Common Pitfalls.

loan When one family member lends money to another, both parties often believe that the deal they make is just between the two of them. But in the eyes of legal and tax authorities, the lending business is just that—a business. These seemingly private activities can come with some very business-like strings attached.

Here you’ll learn a few items that you should keep in mind if and when you decide to make a loan to a family member, friend or some other individual in your life.

Think About How the IRS Treats Interest

In a deal between relatives or friends, the “lender” sometimes decides not to charge interest on the loan. Perhaps the loan amount is small, or perhaps there is a feeling of ill will that parties tie to the thought of interest.

But if you do not charge interest, or if you charge a rate lower than something called the Applicable Federal Rate (AFR), be prepared for tax consequences. The IRS will tax the maker of the loan on the amount of interest that the lender should have charged. Continue reading →

Big Mistakes & Broken Cars: How Wisconsin Law Protects Car Buyers

lemonlaw The decision to buy a vehicle is one of the most significant purchase decisions a person makes. For most Wisconsin families, car payments make a big impact on family finances. Add unexpected problems with the car, and costs skyrocket due to repair costs and expenses associated with not having reliable transportation.

Does this sound all too familiar to you? Are you experiencing transportation and financial setbacks due to a troublesome car? Is the stress of this overwhelming you?

If you answered “yes,” you probably want to know if there is anything you can do to recoup all of your losses. Could your broken car, in fact, be a “lemon?” If it is, there is some good news. Wisconsin’s Lemon Laws protect you and others like you who buy or lease new vehicles from dealerships. Continue reading →

Wisconsin Adverse Possession Law: Do Recent Changes Matter?

Fence The legal doctrine of adverse possession allows a person or entity to assume ownership of another’s property if that person or entity adversely possessed the land and certain conditions have been met. One might think that this old common-law doctrine is no longer relevant. Yet, adverse possession claims continue to cause numerous real estate disputes in Wisconsin and elsewhere.

What Is Adverse Possession?

A typical adverse possession case involves a fence. Take this situation as an example: one farmer accidentally builds a fence 12 inches over the property line of his neighbor’s land. After a certain period, usually 20 years, the farmer who built the fence could obtain title to those 12 inches under the law of adverse possession. This 20-year period is shortened to 10 years if the claim is supported by a written instrument that transferred the property to the adverse possessor. It is shortened to 7 years if supported by a written instrument and the adverse possessor had been paying the real estate taxes during that period. Continue reading →

No-Contest Clauses in Wills and Trusts: What You Need to Know

family pic It seems like challenges to wills and trusts have become increasingly common. We often hear news stories about celebrities whose families spend a great deal of time and money fighting high-profile battles over their inheritances.

Many people who contact our law office for estate planning services follow the news. They ask us how to prevent fighting in their own families, ensuring that matters run smoothly as intended. We talk with them about the strategies available to minimize infighting, and the topic of a no-contest clause is often raised.

What Is a No-Contest Clause, Exactly?

A no-contest clause (sometimes called a “penalty clause” or “in terrorem clause” in Latin) is a special provision that can be added to a will or trust. It says that any beneficiary who tries to challenge the document will be eliminated from distribution of assets. In short, if you try to challenge the will, you will be cut out of it. If you try to challenge the trust agreement or the administration of the trust, you won’t receive any funds. Continue reading →

Problem Tenant? New Wisconsin Law May Be Just What You Need.

Tenant If you own or manage rental property in Wisconsin, you should understand the basics of Act 176. Legislators passed this bill into law, which went into effect on March 2, 2016.

The most significant change is an expansion of landlords’ options for evicting tenants engaged in criminal activity. Other revisions alter timing parameters for notices to vacate. The changes also modify landlords’ obligations to trespassers and put new limits on municipal inspections.

Let’s take a closer look at Act 176 and how it may alter your policies and procedures.

Crime-Free Notices Can Streamline Evictions of Lawbreaking Renters

Problem tenants can be an absolute nightmare. When problems involve drug dealing or other serious crimes, landlords must act decisively. Protecting property and guarding against liability become paramount. Wisconsin landlords now have greater power to address these situations. Continue reading →

Employees vs. Independent Contractors: What About Taxes?

employee-contractor If you own and operate a business, you must be mindful of the relationships you have with individuals who perform work for you. For instance, if you choose to hire employees, you take on the responsibility for withholding their taxes. You can avoid that withholding if you choose to instead purchase services from people who work independently.

Federal and state laws distinguishing independent contractors from employees are complex. Are you confident that you are on safe ground with the IRS when it comes to employment classification?

The Financial Pitfalls of Misclassification

Misclassification of an employee or independent contractor can lead to dire financial consequences for your business. For instance:

If you mistakenly categorize employees as independent contractors, you could face serious financial consequences. An audit or complaint may make you responsible for the income tax, Social Security, Medicare and unemployment withholding you did not withhold at the time the services were performed. Penalties may also apply.
Employees who believe they have been misclassified as independent contractors sometimes file lawsuits against their employers. Defending against an employment lawsuit is costly, even if you win.

Continue reading →

Wisconsin’s Primary Election: How it Works and How to Vote

Election photo Wisconsin will hold Democratic and Republican primaries on Tuesday, April 5, 2016, between 7 a.m. to 8 p.m. The process can sound complex, and people are often confused about when, where and how to vote. We hope that this blog post answers some of your questions.

How the Wisconsin Primary Process Works

In both parties, the delegate system helps make sure that the candidate chosen is the most representative and the most likely to be competitive in the general election. The parties hold primaries to choose delegates. Those delegates will then represent their states at their party conventions prior to the presidential election.

For Democrats, 86 pledged delegates are at stake. For Republicans, 42 pledged delegates are at stake. The parties do things a little bit differently:

The Democrats: Delegates will be allocated proportionately. Candidates will each receive a percentage of the pledged delegates, depending on how people vote. There is a threshold, however: A candidate must receive more than 15 percent of the votes cast in order to be allocated pledged delegates.
The Republicans: Delegates are allocated on a winner-take-all basis, so the candidate who receives a relative majority of the votes will be allocated all of the pledged delegates.

Continue reading →

DIY Business Formation: Are You Sure It’s Right for You?

startup-1018514_1920 More Wisconsin-based entrepreneurs are taking the initiative to create their own business entities than ever before. And why shouldn’t they? Starting a business seems as easy as filing a form with Wisconsin’s Department of Financial Institutions (DFI).

The DFI is the filing office for creating Wisconsin corporations, limited liability companies, limited partnerships and other business types. And it’s true: Creating a business entity starts with filing a form there. There are many additional legal matters to consider when forming a business, however. Overlooking these matters can expose you to the risk of litigation, even putting your personal finances at risk.

Items to Consider When Starting a New Business

In addition to filing a form with the DFI, it’s a good idea to:

Properly prepare your operating documents. Depending on the type of business you create, you may be expected to prepare certain operating documents. These can include bylaws, operating agreements, partnership agreements or other important documents. The documents are critical. They define your organization’s operating terms and help protect your legal rights and responsibilities. Continue reading →

Can I See Your IRS Identification Card?

Taxes Pic If you receive a phone call from someone claiming to be an IRS tax collector, you have a right to be suspicious. Since 2013, con artists have stolen tens of millions of dollars from innocent people by claiming to be collecting back taxes. The Treasury Inspector General for Tax Administration has received nearly 900,000 complaints regarding phone scams of this type.

The IRS does use private collectors to gather back taxes owed to them. But this form of fraud is so common that you are safer assuming a caller is not legitimate, particularly if they ask you to make a wire transfer or use a prepaid debit card immediately to avoid penalties.

One hallmark of this tax scam is the aggressive and threatening nature of the calls. Scam artists need to get your money quickly—and without an obvious trail—to avoid landing in jail. They may threaten to have you arrested or deported. They may threaten to seize your bank accounts or repossess your vehicle. They may threaten to have your driver’s license revoked. In short, they will threaten you with anything to get your money. Continue reading →

Kosa Law Office • Estate Planning, Probate, Business Law and Real Estate Law Attorney Hudson, Wisconsin • 715-386-4125