Those outside of the tax world often assume that the IRS approaches taxpayers fairly and aims to reach equitable outcomes based on a strict reading of the tax code. This often is not the case. The IRS frequently takes an overly adversarial stance leaning in the government’s favor. This can include adopting positions and interpretations……
Category: Tax Law
Using Estimates to Prove Business Expenses
Imagine this common scenario – you own a small business and incur a legitimate expense that you pay and have some record of. Years later the IRS audits and disallows the deduction for lack of receipts or other documentation. The auditor may request bank statements, which you provide, only to be told those are inadequate.……
Blunt Truth: Paying Taxes on Illegal Income
When a taxpayer makes money from something like selling marijuana, they still owe taxes on that income. The law requires the marijuana profits to be reported for income tax purposes. This type of income is usually only reported and tax collected if the IRS catches wind of the illegal activities. This is often limited to……
Court Rejects IRS Claim to Taxpayer’s Property
If a bank loans money to a business to buy equipment when the business owes back taxes, can the bank foreclose on and repossess the equipment? Does the bank or the IRS have a superior interest in the equipment? This gets into questions of state and federal law. Generally, state law defines property rights and……
Family Court Orders are No Excuse for Unpaid Taxes
Financial ups and downs are a normal part of life, and many of us will face a time when our finances take a hit. This can be challenging, especially when we have to juggle different financial needs and demands. Divorce and marital problems often lead to major financial troubles. During a divorce, it’s common for……
Limited Partners May be Subject to Self-Employment Tax
When we think of taxes, we often think of income taxes. But for business owners, they also have to contend with payroll and/or self-employment taxes. These other taxes can be substantial for businesses and their owners. This is why Congres and taxpayers have devised several ways to avoid these taxes. The rules are nuanced enough……
The Limited Augusta Rule for Self-Rentals
While many taxpayers want to pay less in tax and there are legitimate ways to do so, some of the tax planning concepts that are frequently discussed miss the mark. The so-called Augusta rule is often one of them. Tax planners often cite this rule and provide tax savings estimates based on unreasonable assumptions. This……
What is a Partnership: State Law vs. Federal Tax Law
One of the nuances that come up in tax planning involves the interplay of state law and federal tax law. This brings in all of the nuances and challenges under state law to federal tax law. For example, one common nuance in business transactions arises when the parties to a business arrangement do not document……
Taxation of Variable Prepaid Forward Contracts
Do you own a company and want to sell to de-risk your holdings but don’t want to pay tax now? And when you do sell, do you still want lower capital gains rates? That’s the most common goal for those considering tax planning. Capital gains rates are lower than ordinary income rates. Tax planning focuses……