How Long Should You Keep Tax Records?

A popular client question has always been, “How long should I keep my tax returns?”  My answer is something many neither expect nor want to hear. Many tax professionals, and even the IRS, suggest discarding tax documents after a certain period of time: 3 years, 6 years, etc. after filed.  My answer is usually, “Never.”

Those saying a certain number of years usually base it upon a particular IRS statute of limitations deadline.  IRS can audit a return after it’s been filed for 3 years under normal circumstances, for 6 years if there is a “substantial understatement”, and forever if there’s fraud.  Therefore, since you’re confident you’re not committing fraud, you should be safe at least after six (6) years, right? No.

Continue Reading

Forming An Irrevocable Life Insurance Trust (ILIT)

An Irrevocable Life Insurance Trust, or ILIT, should be of interest to any person buying life insurance. The ILIT is not just for people with estate tax issues. The ILIT can allow you to control how and when insurance proceeds are distributed to beneficiaries. Rather than going straight to the beneficiary, the insurance company pays the proceeds into a trust that then pays the amounts to the beneficiary as quickly or as slowly as you decide. Such a trust can be particularly beneficial when the potential beneficiary is either younger or may have potential marital issues or difficultly managing money. Continue reading “Forming An Irrevocable Life Insurance Trust (ILIT)”

Didn’t File Tax Returns? The IRS Offers Solutions for Nonfilers

Whether on purpose or by mistake, taxpayers sometimes find themselves years behind on filing their tax returns.  Sometimes people are lucky and decide on their own to file past due tax returns and move on with their life.  Others have the decision made for them when an IRS agent knocks on their door.  Regardless, when you are significantly behind on your tax return filings, you should seek professional help to ensure you can minimize penalties and, hopefully, reduce the taxes you need to pay. Continue reading “Didn’t File Tax Returns? The IRS Offers Solutions for Nonfilers”

Family Business Succession Planning

Small businesses comprise a significant portion of our economy. Unfortunately, most small businesses do not survive into the next generation of owners. The hard work and legacy of the current and prior generations can be wasted without proper planning.

Small business owners often feel they have sufficient time to begin making the transition and will delay the necessary steps until some fateful event forces them into acting. This leaves little or no time to prepare the business and the family for the burdens, both financial and managerial, that can be caused by a sudden and unplanned transfer. Continue reading “Family Business Succession Planning”

Taxes and Bankruptcy in Maryland

Despite common belief, taxes can be discharged sometimes through either a Chapter 7 or Chapter 13 bankruptcy.  In fact, bankruptcy is often the best option for many with tax debts.  A tax attorney will typically be familiar with both the tax law and non-tax law options available to you and should be able to point you toward the best solution. Continue reading “Taxes and Bankruptcy in Maryland”

Buy-Sell Agreements

Persons holding equity interests in a business can use a buy-sell agreement to ensure the continuity of the business and to solidify their expectations regarding the taxes, rights, and obligations of each party.  The buy-sell agreement can dictate the method by which a person’s equity interest will be purchased.  Buy-sell agreements can be used by nearly any type of entity, regardless of whether the entity is a corporation, LLC, or partnership.

Continue reading “Buy-Sell Agreements”

Maryland Divorce & Tax Issues

A divorce comes with many difficult challenges, but those involved also need to consider the tax consequences of the divorce.  Tax issues can result from a number of areas.  Of course, the parties will no longer be able to use their married status for their tax returns, but the divorce property settlement itself can cause problems if the tax consequences of the settlement are ignored. Continue reading “Maryland Divorce & Tax Issues”

Personal Liability for Maryland Business Taxes

Unlike most business debts, employees and owners of a Maryland business can have personal liability for the company’s tax debts. Similar to how the IRS pursues responsible persons and owners for payroll taxes, states, including Maryland, also pursue responsible persons and owners for certain state taxes. A person that normally would be protected from business liabilities by a personal liability shield, such as the corporate or LLC entity, will not be able to similarly avoid these tax liabilities.

The state of Maryland will pursue employees, managers, officers, and owners for unpaid taxes. The person does not need to Continue reading “Personal Liability for Maryland Business Taxes”

Tax Installment Agreements – Payment Plans

If you are unable to pay the Internal Revenue Service for taxes you owe, you may be able to qualify for a tax payment plan.  The IRS calls such payment plans an Installment Agreement.   Your state, including Maryland, also may offer similar tax payment plans.

While most would prefer to obtain an offer in compromise, which reduces the total tax debt, many will not qualify because either their income is too high (by IRS standards) or the taxpayer has too many assets, which includes home equity.  Thus, that taxpayer’s only option may only be to request a payment plan. Continue reading “Tax Installment Agreements – Payment Plans”

Form a Maryland LLC for Real Estate Investments

When purchasing real estate for investment, you should be concerned about the liability your investment property can create.  Often, your biggest worry will be paying the mortgage, but don’t think that’s the extent of your possible liability.  A personal injury attorney could turn your retirement investment into a wealth destroying nightmare unless you protect your assets.

The most common way to minimize your potential liabilities would be to have your properties held by and managed by a separate entity with limited liability.  While you may consider the property to be separate from your personal assets, unless you proactively create that separation, an attorney will pursue your personal assets in addition to the value of the property itself… Continue reading “Form a Maryland LLC for Real Estate Investments”