So, you get a bill from the IRS and the IRS is demanding payment from you. You don’t understand the bill, what is your next step? (1) Call IRS and ask for them to send or fax to you a copy of their calculation so that you can compare that to your records. There is an anecdotal story (which is legendary and may not be true) about a person who worked at one of the Service Centers and decided that if people received a small bill from the IRS, they’d just pay it and this would help balance the budget. A number of these bills by legend went out and were paid, but one citizen called and asked for a calculation. After much frustration, the discovery was that there no calculation and the bill was rescinded. The story goes that no one knows how many of those fake bills really went out. So, if you don’t understand a bill from the IRS call them and get a description of the reason for the bill. 9 out of 10 times it is correct. So, after you get the bill, and determine if its correct, what should you do. If they sent you a bill because you did not file a return, prepare a return and file it with correct information. Then wait tor the revised bill. Either way, if a bill comes, DON’T IGNORE IT. The IRS will not go away simply because you put your head in the sand, they will continue to seek payment. Your first option is to start making monthly payments to them voluntarily without a plan. Many times collections will not attempt sterner actions if they see a steady payment coming in. Another is to set up a payment plan with them. If you do that, you’ll find that they will actually leave you alone for a couple of years. If you are cash strapped and can’t even afford a payment plan, then you can ask them to put you in the currently non-collectible category. Normally this is not granted unless you are retired or living on a fixed income and your expenses reasonable and your assets near zero. Lastly, you can make an Offer in Compromise. They are difficult to get approved. We’ll talk about those.
Category Archives: Uncategorized
Trust Distributions of Partnership Interest
So, you have a Trust which is a member of an LLC and holds interests in real property. Does a distribution of trust LLC interests terminate the LLC and trigger a deemed sale capital gain. If the Trust has a fractional share formula clauses (equal distributions), there is no capital gain on the distributions even if one person gets land and another gets the partnership interest. So, if you are a Trustee wrapping up a trust and run into this situation, you may be able to make people happy and not trigger bad tax results.
Save Taxes on Exporting
Let’s say you buy or manufacture stuff made in the old US of A and you sell it overseas to folks who will pay an arm and a leg for U.S. made stuff. If you took your plain old business and sold the stuff overseas, you’d pay taxes at your tax rate. If you’re an LLC, it would not only be taxable business income but also self-employment income taxable at a combine rate of 35% up to 50%. Well Uncle Sam wants to even out trade, and there is an entity known as an Interest Charge DISC. It sits between your business and your customer and gets a commission on sales equal to get this THE GREATER OF 4% of gross export sales or 50% of the net taxable export income. This is taxed at the qualified dividend rate of 20%. So, you save 4% to 15% on your taxes. What is even better is you can defer recognizing the income by merely paying interest on the taxes you would have paid at Treasury rates (currently about 1.5%). There are some limitations on these benefits, but for a small exporter, it might be worth the expense. But hold on before you go charging off to set one up there are expenses. Lawyers will have to draw up the documents needed to put the regime in place, that’s about $3,000-10,000 depending on business structures used and lawyers used. You’re going to need to hire accountants, because this is not something you want to try on your tax software. That will cost you as well. So assume that if you have export sales in the $200,000 and up range you will justify the costs of setting it up and the costs of compliance.
For a smaller business, this is a cheap way to save taxes on your export sales. Otherwise, you get into overseas corporations and non-domesticated income which doesn’t put money actually in your pocket and as a small or medium sized business, you want to put money actually into your pocket.
The Passing of the Dean of the Alexandria Tax Bar
My partner, John Braswell, passed away last week. He had been practicing tax, real estate and estate planning law in Alexandria for 30 years. His conservative tax strategies coupled with his creative abilities served his clients well. He was a great friend to me and a great sounding board when there was a particularly tough tax issue facing me. My prayers go out to his wife and daughter.
IRS Leaks Social Security Numbers
You may be at risk if you donated to a 527 Organization. For example a PAC which can make independent expenditures in Federal Elections. The most famous one was the Swift Boat Veterans. Another may be some Tea Party Groups. If you donated to a political organization (other than a candidates campaign or a National political party) you should check with the IRS to see if your social security number was leaked.