Typically the common definition of terms is used. This helps those who are not lawyers to understand and follow the law. But there are instances where the legal definition of a common term differs from the common understanding of what the term means. The tax law has several of these. When it comes to taxes,…
Category: Tax
Tax
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IRS Collections for Payroll Taxes & Single Member LLC Owners
The IRS has broad collection powers. These powers generally trump state law. This is even true of state Limited Liability Company (“LLC”) rules that prevent parties from suing or reaching the LLC’s assets. There are nuances to these rules when it comes to income and payroll taxes. The payroll tax rules have changed completely. Many…
Tax on Real Estate Purchase Price Reduction
The term “income” is broad. It includes just about any money or gains that a person receives. There are exceptions, however. Take the purchase price reduction. Assume Party A sells a property to Party B for $100. Party A will likely have a gain on the sale. The gain is income and may trigger income…
One Ex-Spouse Void the Other’s Alimony Deduction: Tax on Alimony
Assume that a divorce decree says that a payment is to be made to an ex-spouse. Does that mean that it is alimony the ex-spouse has to report as income for Federal income tax purposes? And if not, can the ex-spouse who receives the payment request a ruling from the IRS to say that the…
Non-Profit No More: The Defunct Non-Profit
People often form non-profit entities with the intent that they will get traction and take off. Not all entities do that. The entity may not be able to raise funds or secure donations, funding may dry up, or the entity may not find the support of those who need to operate or service it. There…
Taxation of Employee Donated Sick Leave
Even simple acts of kindness, such as donating paid sick leave to co-workers in need, can trigger complex tax requirements. The IRS recently released Private Letter Ruling 200720017 that sheds light on the federal tax consequences of such donations, highlighting the importance of following specific requirements such as employer-sponsored medical leave-sharing arrangements or qualified employer-sponsored…
City Collects Church Property For Un-Owed Taxes
I once had a state auditor and state attorney tell me that they had to “shut that down.” They were referring to a taxpayer who took a tax credit that was specifically set out in the state tax code. They went on to express that they did not agree with the state legislature as to…
Aggressive State Tax Collections
If you owe back taxes, the general rule is that you pay the state and then negotiate with the IRS. The reason for this is that the states are particularly aggressive when it comes to collecting back taxes. Some states are more aggressive than others. And their practices vary over time. In the event of…
Prepayment: to Deduct in Year 1 or Year 2?
Say you are an accrual method taxpayer and you hire someone to provide a service to you in year one, the service is to be provided to you over a twelve month period, and you prepay the person for this yet to be provided service. When can you claim a deduction for this prepayment? The…
Bankruptcy Filing Does Not Prevent Innocent Spouse Relief
There are often times when different government agencies with different clients and missions are at odds with one another. This is frequently true when it comes to the IRS and the bankruptcy trustee. The IRS is tasked with protecting the government fisc. The bankruptcy trustee is tasked with protecting the estate for the benefit of…