TallyTaxMan : Tallahassee Income Tax Service

Businesses Responsible For IRS Levies of Employees

admin — Thu, 02 Feb 2012 12:30:03 +0000

A corporation that failed to obey an IRS wage levy on one of its employees was liable for the employee’s delinquent taxes and for a penalty under Code Sec. 6332(c)(2) (United States v. Heli USA Airways, Inc., DC Nev., 2011-2 ustc ¶50,728). The corporation’s argument that it’s Chief Financial Officer, who was responsible for responding to the notices, suffered from mental health breakdown and that it was unaware that he ignored the notices, was not reasonable cause for failure to honor the levy. Code Sec. 6332.
Freezing the unemployment tax rate isn’t without precedent. At the beginning of 2010 legislative session lawmakers rushed through a bill that postponed an unemployment tax increase for one year.

Get Shareaholic

Distribution Was Income to S Corporation Shareholder

admin — Tue, 31 Jan 2012 12:30:24 +0000

The Tax Court has found that a payment from an S corporation to its sole shareholder was not a transfer of funds to be held in a fiduciary capacity (Rogers v. Commissioner, Dec. 58,819(M), TC Memo. 2011-277). The court found it was a distribution to be included in the shareholder’s gross income.
The taxpayer managed several business entities, including an S corporation and a limited liability company (LLC). The taxpayer deposited half of a payment due to the LLC in the S corporation’s bank account. The S corporation subsequently paid the taxpayer a distribution of $732,000, and deducted $513,500 as the cost of legal and professional fees due to the taxpayer. Meanwhile the taxpayer reported the $513,500 on his and his wife’s joint return, but not the remaining $218,500, which the taxpayer claimed to be a distribution to a fiduciary to be held in trust.
The Tax Court held that the unreported amount distributed to the taxpayer was taxable and not a distribution to a fiduciary. The court rejected the taxpayer’s argument state law required the taxpayer to hold funds as trustee, stating that the S corporation was not subject to the state law. Furthermore, the taxpayer held and used the funds without restriction.

Get Shareaholic

IRS Has $153 Million In Undelivered Refunds

admin — Thu, 26 Jan 2012 12:30:52 +0000

The IRS has announced it holds $153 million in undelivered refund checks owed to nearly 100,000 taxpayers, representing an average of $1,547 per taxpayer (IRS News Release IR-2011-113). The IRS has been unable to deliver the refunds due to mailing address errors.
Taxpayers who wish to check the status of their refund and/or resolve an incorrect or outdated mailing address may use the IRS online tool “Where’s My Refund?” Taxpayers may also contact the IRS at (800)-829-1954.
The IRS does not notify taxpayers by e-mail of pending refunds and cautioned taxpayers who receive purported emails from the agency to report these scams.
To prevent refunds from returning undelivered to taxpayers, the IRS recommended that taxpayers file their tax returns electronically, which reduces errors and also speeds the delivery of refunds. Additionally, taxpayers can reduce mailing errors by taking advantage of the direct deposit option for refunds.

Get Shareaholic

What Is The Economic Substance Doctrine?

admin — Tue, 24 Jan 2012 12:30:07 +0000

The Court of Federal Claims has upheld the IRS’s determination that a taxpayer’s Son-of-BOSS transaction lacked economic substance. The court found that potential for profit does not in and of itself establish economic substance, especially where the profit potential is dwarfed by tax benefits.
The new codified standard requires a two-part analysis. First, consideration is given to the objective effects of the transaction on the taxpayer’s economic position. Second, the taxpayer’s subjective motives for engaging in the transaction are considered. In this case, the taxpayer had entered into the disputed transaction before March 30, 2010, which is the effective date of the act.
Case law set forth five principles incorporated in the economic substance doctrine:
The transaction to be analyzed is the one that gave rise to the alleged tax benefit;
The transaction cannot lack economic reality;
The taxpayer bears the burden of proving that the transaction has economic substance by a preponderance of the evidence;
The economic substance of a transaction must be viewed objectively;
Arrangements with subsidiaries that do not affect the economic interests of independent third parties deserve particularly close scrutiny.
Here, the court found that the transaction lacked economic substance. The taxpayer could not show by a preponderance of the evidence that the partnership was formed as a legitimate investment vehicle. Moreover, the transactions did not reflect economic reality as the taxpayer experienced merely fictional tax losses, the court found.

Get Shareaholic

The Sick Truth About 401ks Finally Sinks In

admin — Thu, 19 Jan 2012 12:30:17 +0000

This is a blog post by Ann Barnhardt dated December 12, AD 2011, and it’s well worth the read:
Possession is nine-tenths of the law. Judging from my email inbox, many of you are realizing EXACTLY what that old adage means right about now. Many of you have requested to liquidate your 401k accounts, and your employers won’t let you do it. I had no problem doing it because I am self-employed and thus I was my own “plan administrator”.
So, this nasty business brings us around to an inevitable question. Was that money ever yours, or has the entire 401k fiasco been nothing more than an underhanded confiscatory tax for the vast majority of folks who have participated in it over the years? I’d have to say, “affirmative” to the latter. If you are denied access to “your money”, then honey, it ain’t “your money” and never was.
If you’re wondering to yourself who EXACTLY is going to “bail out Europe”, or at least make a pathetic attempt at the mathematically impossible so that your friendly neighborhood American oligarchs have enough time to get themselves pre-positioned for the collapse, YOU ARE, MY LITTLE CHICKADEES.
If you are one of the many, many people, or as TPTB call you, “bourgeois, bitterly clinging trash”, stuck in this con, the only things you can do are:
A.) CEASE ALL NEW CONTRIBUTIONS IMMEDIATELY.
B.) If there is a loan option attached to your 401k program, take out the maximum possible loan and set up the SLOWEST possible repayment schedule.
C.) Never again enter into an arrangement wherein “your money” is unavailable to you and is anything less than completely liquid.
Possession truly is nine-tenths of the law, and under a lawless Marxist-Communist-Fascist government where the rule of law no longer exists (such as we are in now), possession is closer to ten-tenths of the law.

Get Shareaholic

Last Chance to Claim Home Energy Credits Expiring in 2011

admin — Tue, 17 Jan 2012 12:30:36 +0000

The nonbusiness energy property credit is scheduled to expire at the end of 2011 so taxpayers only have a short time to take advantage of this credit. The 2011 credit is more limited than in past years but is still available for qualifying improvements placed in service for the taxpayer’s principal residence located in the United States before January 1, 2012.
Principal residence. The taxpayer must own the home and use it as a principal residence.
Credit. The nonbusiness energy property credit is a credit for making qualifying energy
efficient home improvements. The tax credit is 10% of the cost (up to $500), or a specific
amount, for qualified energy efficient improvements. It must be an existing home and the
taxpayer’s principal residence. New construction and rentals do not qualify.
Eligible items include:

Item Credit Amount
Biomass stoves $300

Heating, ventilating, air conditioning (HVAC) Varies from $50 – $300

Insulation 10% of the cost, up to $500 (does not include
installation costs)

Roof (metal and asphalt) 10% of the cost, up to $500 (does not include
installation costs)

Water heaters (non-solar) $300

Windows and doors 10% of the cost, up to $500, but windows are
capped at $200 (does not include installation costs)—must be ENERGY STAR qualified

Energy Star. For 2011, an Energy Star label is generally sufficient proof that property is
qualifying property for the nonbusiness energy property credit.

Lifetime maximum credit. The lifetime credit for all types of property is $500. Therefore,
a taxpayer is not eligible to claim a 2011 credit if they claimed energy credits in previous
years that exceed $500. Additionally, the credit is nonrefundable and may not be carried
forward.

Get Shareaholic

IRS Having Trouble Keeping Taxpayer Files Secure, Watchdog Says

admin — Thu, 12 Jan 2012 12:30:21 +0000

According to an AP article published November 12, 2011, the IRS is having problems securing personal taxpayer data and is not doing enough to prevent “unauthorized users” from accessing that information, according to a new report.
The Government Accountability Office this past week warned that the IRS continues to suffer from a “material weakness” in information security. While the report praised the IRS for encrypting more files and taking other steps to address the problem, the GAO said the agency is still at “increased risk of compromising confidential IRS and taxpayer information.”
Specifically, the report said testing showed IRS systems “did not effectively prevent access from unauthorized users or excessive levels of access for authorized users.” One of the challenges cited was the fact that the IRS still receives many “hard copy” tax returns every year, despite an increase in electronic filings. With the heap of hard-copy returns comes the risk that documents could be lost or inappropriately disclosed.
The report said some sensitive data is also still not encrypted.

Get Shareaholic

Update on Estate Taxes

admin — Tue, 29 Nov 2011 12:30:20 +0000

There is a new estate tax law that affects tax years 2010 thru 2012. For 2010, the estate can elect whether to opt out of estate taxes. Depending on the circumstances, you might want to opt out of estate taxes and instead carry a cost basis over to the beneficiaries.

For tax years 2011 and 2012, there is an estate and gift tax exemption of $5M. The tax rate above the $5M is 35%……That’s a pretty stiff penalty for dying, if you ask me. The estate tax exemption is portable but only if the first spouse dies after 12-31-10. The election should be made on the first spouse’s estate return, but there should not be a return filed…Huh?

This gets a bit confusing. You need to consult a tax professional if you are faced with filing an estate return for a loved one.

Get Shareaholic

Secret Service, IRS Investigate Atlanta Megachurch

admin — Thu, 24 Nov 2011 12:30:32 +0000

From Foxnews: Lithonia, GA. — Federal officials say they’re investigating issues surrounding investment seminars hosted by a metro Atlanta megachurch after some former members say they lost their retirement savings.

U.S. Secret Service spokesman Mark Ritchie said agents have seized laptops from employ-ees at New Birth Missionary Baptist Church in Lithonia. WSB-TV first reported details of the federal probe.

Ritchie says the IRS is the primary federal agency involved, and the Secret Service is assist-ing the IRS and DeKalb County police. DeKalb police Lt. Pam Kuntz said the department forwarded its information to the Securities and Exchange Commission.

Ten former church members are suing New Birth and Bishop Eddie Long, saying they con-spired with others to defraud them through “wealth-building” seminars and sermons. New Birth spokesman Art Franklin declined to comment on the lawsuit.

Get Shareaholic

Louisiana Passes Bill To Outlaw Some Cash Transactions

admin — Tue, 22 Nov 2011 12:30:40 +0000

This summer, the State Legislature and Governor of Louisiana passed a law that bans individuals and businesses from transacting in cash if they are considered a “secondhand deal-er”.

House Bill 195 of the 2011 Regular Session (Act 389) broadly defines a secondhand dealer to include “… Anyone, other than a non-profit entity, who buys, sells, trades in or otherwise acquires or disposes of junk or used or secondhand property more frequently than once per month from any other person, other than a non-profit entity, shall be deemed as being in the business of a secondhand dealer. ”

The law then states that “A secondhand dealer shall not enter into any cash transactions in payment for the purchase of junk or used or secondhand property. Payment shall be made in the form of check, electronic transfers, or money order issued to the seller of the junk or used or secondhand property…”

The broad scope of this definition can essentially encompass everyone; from your local flea market vendors and buyers to a housewife purchasing goods on ebay or craigslist, to a group of guys trading baseball cards, they could all be considered secondhand dealers. Lawmakers in Louisiana have effectively banned its citizens from freely using United States legal tender.

Full story here.

Get Shareaholic