If you have assets you anticipate will increase in value, you can “freeze” the value of those assets for estate tax purposes with an Intentionally Defective Grantor Trust, an “IDGT”. Most wonder why they would want an “intentionally defective” anything, but it references the fact your estate attorney will purposefully insert language making the transfer of assets to the trust an incomplete gift for income tax purposes but a complete gift for estate tax purposes. Therefore, immediately following the transfer to the IDGT, the IRS considers the trust’s assets to be owned by your heirs for estate tax purposes but still considered owned by you for income tax purposes. These differing classifications can be very beneficial for those with estate tax concerns, rather than a need for a step-up in basis at death.Continue reading “Intentionally Defective Grantor Trusts”
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 younger, may have potential marital issues, or has difficultly managing money. Continue reading “Forming An Irrevocable Life Insurance Trust (ILIT)”
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”
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”
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.
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”
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”
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”
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”
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.).