Posted on December 18, 2019 in Small Business Taxes

California Assembly Bill 5, also called AB 5, has many business owners wondering how compliance with the new law will affect their business. The bill will significantly limit employers’ ability to classify workers as independent contractors. Many workers will now need to be classified as employees of the company, and they will be entitled to the associated benefits, such as workers’ compensation, minimum wage, overtime, rest breaks and meal periods, protection from anti-discrimination and retaliation laws, and reimbursement for business expenses incurred during the course of their job. Employers will also be required to pay payroll taxes on the workers classified as employees. AB 5 takes effect on January 1, 2020, so employers only have a short period of time to make any changes necessary to stay compliant with the new law.

Continue Reading ››

 Posted on December 11, 2019 in Taxation Law

When a large amount of money is transferred as a gift, there are certain gift taxes that apply. Similarly, funds left to heirs after an individual passes away are subject to estate taxes. Typically, a unified rate schedule is applied to an individual’s cumulative taxable gifts and/or estate in order to reach a net expected tax. The tax owed is determined after a credit contingent on an exclusion amount is applied. The basic exclusion amount (BEA) is first applied to the gift tax. Any remaining credit is then applied to the estate tax. The Tax Cuts and Jobs Act (TCJA) has instituted several major changes to the way gift tax and estate tax are calculated. If you are considering making a large gift in the next several years, read on to learn more about how these changes may affect you.

Continue Reading ››

 Posted on November 25, 2019 in Taxation Law

A C Corporation is a separate legal entity that protects a business owner’s assets from creditor claims. All corporations are C corporations by default until a business owner files for S corporation status. In a C corporation, business income and expenses are taxed to the corporation. When a business owner or owners receive profits from the business as dividends, the owner(s) must also pay income tax on the profits – creating a double taxation situation. On the other hand, S corporations are “flow-through” entities, meaning business income is treated as owner and investor income for tax purposes. This may make it seem as if operating your business as an S corporation is a better choice than operating it as a C corporation. However, major changes to U.S tax law were established by the 2017 Tax Cuts and Jobs Act (TCJA) that may influence your decision regarding corporation status.

Continue Reading ››

 Posted on November 20, 2019 in Taxation Law

In previous blogs, we have discussed the many consequences of not paying your taxes in full. However, sometimes a person has the opposite problem: the overpayment of taxes. If you have inadvertently or mistakenly paid more than your fair share of taxes, you may wonder if there is a way to get that extra money back. Whether or not the IRS will refund your money is based on many factors. Read on to learn about your options if you have overpaid your taxes and how a qualified tax lawyer can help.

Getting a Refund From the IRS

If you have overpaid the Internal Revenue Service (IRS), you may be able to receive a refund. If the IRS is aware that you overpaid, the agency may correct the issue by refunding you the extra balance. For example, if your tax return shows that you owe $2,000, and you send the IRS a check for $3,000, the IRS may refund you the extra $1,000 without issue. However, the situation becomes more complicated when the IRS is not aware of the overpayment. 

Continue Reading ››

 Posted on November 11, 2019 in Taxation Law

Many people have felt the sinking feeling that accompanies receiving a letter from the Internal Revenue Service (IRS). While it may be tempting to simply put the letter in a drawer and forget about it, ignoring the IRS can result in serious consequences. If you are contacted by the IRS and asked to make an office audit appointment, you should be sure to schedule the appointment, contact a tax lawyer for help if you need it, and attend the meeting. If you have already missed an audit meeting, you may wonder about the consequences you may face and what steps you can take to protect yourself.

Voluntary Appointments Versus Required Appointments

When the IRS examines a tax return and decides that the tax filer has misfiled, it may send a letter requesting an appointment. The tax filer may respond to the letter and schedule an appointment, or s/he may choose not to. If you have received a letter and did not schedule the appointment, the IRS has the authority to request a legal summons from a judge and demand that you attend it. If you fail to show up at an appointment that you personally scheduled, you will likely get the chance to reschedule the meeting without any major consequences. However if you were required to be at the appointment because of a legal summons and do not show up, the consequences will be much more serious.

Continue Reading ››

 Posted on October 30, 2019 in Tax Audits

If you are the subject of an Internal Revenue Service (IRS) audit, you likely have many questions about what the auditing process will entail. The IRS may have chosen you for an audit after comparing your tax return against “norms” for comparable returns, or you may have been selected because your tax returns involved transactions with other taxpayers who have been selected for an audit. The IRS manages audits through the mail and/or in-person interviews. As part of the auditing process, the IRS will request access to certain documents and financial information that supports the income and deductions claimed on your tax return.

Common Records Requested by the IRS

The documents and records that the IRS will want to examine during an audit can vary depending on your specific circumstances and the basis for the audit. Commonly, the IRS will request copies of:

Continue Reading ››

 Posted on October 25, 2019 in Taxation Law

Married couples have the option to file a joint tax return instead of separate tax returns. There are often benefits to choosing this filing status, but there can also be drawbacks. Couples who file jointly are “jointly and severally” responsible for any tax liability, interest, or penalties due. The terms “jointly and severally” mean that each spouse is legally responsible for the entire tax debt. When one spouse does not adequately fulfill his or her tax obligations, this can leave the other spouse in serious trouble with the Internal Revenue Service (IRS). Fortunately, there are several ways that a spouse in this situation can be released from tax liability. One of these types of tax relief is called “innocent spouse relief.”

What Is Innocent Spouse Relief?

Imagine this scenario: your wife is a business owner who struggles to keep track of her profits and expenses. When you jointly file your tax returns, the IRS notices that there are inconsistencies with the business income, expenses, and/or deductions. You are audited. As a result, both of you now owe a significant amount of money in back taxes. In situations like this, innocent spouse relief, also called innocent spouse protection, may help a guiltless spouse avoid his or her spouse’s tax liability.

Continue Reading ››

 Posted on October 16, 2019 in Small Business Taxes

Making the decision to purchase an existing business can be an exciting and lucrative endeavor. Owning your own business allows you to have a great deal of independence and direction over how the business is run. Being your own boss and watching a business grow and develop can be especially rewarding. Of course, buying a business is not without risk. One of these risks is successor liability for any debts owed by the business, including tax debts.

Stock Purchase Versus Asset Purchase

When you buy an existing business, you have two options: an asset purchase or a stock purchase agreement. A stock purchase allows you to buy most of the seller’s shares, or in the case of an LLC purchase, the membership units. However, assets such as equipment and inventory are still owned by the entity. If you acquire a business through a stock purchase, you will most likely assume all of that company’s liabilities.

Continue Reading ››

 Posted on September 26, 2019 in Taxation Law

When an individual chooses to move to another country, he or she may relinquish his or her United States citizenship. However, many of these former citizens may not know that they have unfulfilled tax obligations to the United States. Unpaid back taxes can result in additional debt due to accruing interest as well as serious penalties. Fortunately, the Internal Revenue Service (IRS) recently announced the creation of several procedures through which former citizens can be relieved of their U.S. tax responsibilities.

Former Citizens Must Meet Certain Criteria for Tax Relief

If you are an expatriated person who is not currently compliant with U.S. tax laws, you may worry whether or not you can even afford to pay your back taxes. Unfulfilled tax obligations can quickly spiral out of control – especially when a person was not aware that he or she even owed back taxes. In an effort to help former citizens come into compliance with the law, the IRS is allowing qualifying individuals to be relieved of their tax obligations. These individuals must meet certain criteria in order to be eligible for tax relief. The criteria for “Relief Procedures for Certain Former Citizens” include:

Continue Reading ››

 Posted on September 13, 2019 in Tax Appeals

Continue Reading ››