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”

The Best Entity for Your Maryland Business: LLC or Corporation?

Choosing an entity for your business can be a difficult decision. There are many types of entities available, and you are not limited to forming an entity in your state. Further, the entity you choose does not necessarily determine how the entity will be taxed. For instance, you may choose to form a Maryland LLC but also choose to have it taxed as an s-corporation. The decision depends upon many factors including: the business purpose, the property to be owned, expectations to terminate or sell the business, the owner’s estate planning concerns, and, of course, taxes. There is no universal “best entity”, and choosing the proper entity requires every business to be individually analyzed.

Most states, including Maryland, provide you with the following popular state entity choices: the sole proprietorship, the general partnership, the limited liability company, and the corporation. Other entities for more specialized purposes also exist, such as the limited partnership and the professional association (a P.A. or P.C.).

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Maryland Sales Tax Audit Defense

With Maryland tax audits increasing, you should ensure your company is prepared. An ongoing, organized approach to preserving necessary documents will streamline a sales tax audit and may even lead to tax refunds. First, beware, a state auditor visiting your office for a sales tax audit isn’t required to keep the focus solely upon sales taxes. A typical audit may cover other area such as your payroll taxes, and information obtained through the audit can lead to income tax adjustments as well. So, while a sales tax deficiency may only cause a minor sales tax adjustment, the revenue and expense information obtained can lead to sizable state income tax adjustments. Further, since states share their income tax adjustments with the IRS, you may trigger a federal income tax audit and adjustment as well. Continue reading “Maryland Sales Tax Audit Defense”

Sales Tax Matrices and Taxability Guides

Your company may need a sales tax matrix or taxability guide to ensure employees know how to fullfill their sales and use tax duties.  Sales and use taxes are inherently complex, in part, because each state’s rules vary.  This leaves many tax departments ill-equipped to adequately maintain every tax and accounting responsibility.  Sales and use tax requirements do not only concern tax departments as accurate reporting can require the efforts of any employee with the ability to pay a bill or issue an invoice. Continue reading “Sales Tax Matrices and Taxability Guides”

Voluntary Disclosure Agreements

Many companies discover they did not file required state tax returns, but they do not know how to address the issue.  States understand that taxpayers often do not uncover income tax or sales tax filing obligations until a potentially large tax bill makes coming forward difficult, if not impossible.  Most states provide voluntary disclosure programs to bring these reluctant, but otherwise law-abiding, taxpayers back into the flock.  The voluntary disclosure programs forgive all but the most recent tax years and reduce or eliminate penalties and interest. Continue reading “Voluntary Disclosure Agreements”

State Tax Nexus Reviews & Studies

Introduction

All states are becoming more aggressive in locating non-filing businesses, particularly those operating largely outside their state. Unfortunately, many businesses first realize their filing obligation to another state when visited by the state’s auditor. An analysis of your company’s connections, or “nexus”, to the states it touches, directly and indirectly, will be beneficial regardless of whether your business is a start-up or established, expanding or contracting.

Each state’s laws for determining whether your company has a filing obligation vary, but all states are limited by the “minimum contacts” standards established under the U.S. Constitution. Adding to many companies’ confusion, there are separate standards applied for sales and use tax nexus and income tax nexus. For instance, a company with a representative in a state may not have an income tax filing obligation but may have a sales tax obligation. Continue reading “State Tax Nexus Reviews & Studies”

Managed Compliance & Effective Tax Rate Agreements

Companies can manage risks, lower use taxes, and reduce tax administrative burdens by using managed compliance and effective tax rate agreements. In an effort to streamline the tax compliance process, most states now allow companies to automate their sales and use tax compliance through tax agreements. These agreements operate on a prospective basis whereby “effective rates” can be assigned to the company’s expense accounts.

The states use numerous names for such agreements, including: managed compliance agreements, formulary sales and use tax agreements, single use tax compliance agreement, negotiated rate agreements, alternative use tax payment methods, simplified procedure agreements, or, as known here in Maryland, effective rate agreements. Regardless of the chosen name, the states use similar processes to form the agreements and the companies often realize fantastic results. Continue reading “Managed Compliance & Effective Tax Rate Agreements”

Find Cash by Recovering Tax Overpayments

In today’s competitive business climate, businesses paying more taxes than necessary do so at their own peril.  But when extra cash is needed, the company can hire tax professionals to recover those overpayments through refunds.

By conducting reverse audits on behalf of companies, I have rarely found a company whose tax department didn’t have some oversights, particularly regarding indirect taxes.  Likely targets for recoverable overpayments include the company’s indirect taxes, such as: sales & use taxes, value-added taxes, and excise taxes.  Certain state-specific taxes are also likely cash sources, such as the Maryland admissions and amusement tax which is levied upon the business not the customer. Continue reading “Find Cash by Recovering Tax Overpayments”

Buying or Selling a Maryland Business – Taxes

The third article in a series on the purchase and sale of a Maryland business. In this article I address basic tax concepts and issues relating to a business sale.

A major consideration when purchasing an existing Maryland business should be minimizing the tax burden.  Certain transactions provide tax benefits to either the purchaser or the seller while providing a tax burden to the other.  Therefore, tax consequences should be considered when determining the appropriate purchase price.  The general rule is that the sale of a business is a taxable event; however, the parties may be able to structure the transaction using a tax-free reorganization.  The IRS provides several forms of tax-free reorganizations, but to qualify the parties must meet numerous requirements.  Since the IRS only allows tax-free reorganizations under limited circumstances, I will first discuss taxable transactions.

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10 Ways to Spot Tax Settlement Scams

Many unscrupulous tax debt settlement companies swindle consumers using the legitimate IRS offer-in-compromise process.  A recent Inc. magazine article lists tax relief services among its “7 Businesses To Watch Out For”.  I do not doubt it!  As a Maryland tax attorney I have received countless calls from taxpayers who previously fell victim to scam tax relief companies that claimed they could resolve any tax problem through the IRS tax debt settlement program, the Offer-In-Compromise.

Conversations with clients previously cheated by these companies provide me the following tell-tale signs of an unethical tax settlement company:

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