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.

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Income and Salary to an S-Corp Owner

The owner of an s-corporation is quickly introduced to some very complicated tax issues.  The s-corporation has “flow-through taxation”.  This means the s-corporation itself generally pays no income taxes.  The s-corporation files its own tax return, but its shareholder owners report and pay the taxes on the owners’ personal tax returns.  But these shareholders may also be required to pay themselves a salary if they are also employees or otherwise perform services for the corporation.  Continue reading “Income and Salary to an S-Corp Owner”

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”

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.

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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”

Pennsylvania Tax Amnesty 2010 Summary

The 2010 Pennsylvania Tax Amnesty officially ended June 18, 2010. If you missed the deadline you may still be able to negotiate payments and reduce your penalties for past due taxes.   For instance, you may be able to use a Voluntary Disclosure Agreement. Please contact my office for more information.

Pennsylvania has joined the parade of states that decided to use a tax amnesty for an immediate boost to their state’s revenue.  The Pennsylvania tax amnesty begins on April 26, 2010 and ends June 18, 2010.  Included in the taxes eligible for amnesty are the corporate income tax, the individual income tax, and the sales and use taxes.  This can be an excellent opportunity for businesses and individuals located outside the state to become compliant with Pennsylvania.

The Pennsylvania tax amnesty relieves the taxpayer of all penalties and half the interest due…  Continue reading “Pennsylvania Tax Amnesty 2010 Summary”

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”

Where Should You Form Your Entity?

When forming a new LLC or corporation many contemplate whether it’s better to form their entity in their home state or in another, such as Delaware or Nevada.  For most small businesses, the best state for formation is its home state.

Many believe their businesses will receive tax or legal benefits for forming in an alternative state, and legal document mills often perpetuate these beliefs to sell incorporation packages… Continue reading “Where Should You Form Your Entity?”