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Posted on in Tax Appeals

If the IRS has surprised you with a significant tax bill, and if either your true liability for the tax or your ability to pay it are in question, you may be able to make an offer in compromise.

An offer in compromise is essentially what it sounds like: you make the IRS an offer to pay an amount (presumably, less than the full amount) in compromise. You agree that you will pay the agreed-upon amount instead of continuing to fight the matter, and the IRS in turn agrees to accept the amount rather than pushing for you to pay the debt in full.

When you inform the IRS of your intent to utilize the offer in compromise process, the IRS will typically halt collection activity on your account in order to provide you with the time to gather supporting documents and assemble your offer. After you turn in your offer, the IRS will evaluate it, and will either accept it, reject it outright, or make a counter-offer.

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Four words that strike fear into the hearts of individuals and businesses alike are: "You are being audited." The thought of an audit raises images of being grilled by the auditor like a witness being cross-examined.

However, an audit doesn't have to be like that, and if you are prepared for it, you can help ensure that the process is completed with a minimum amount of time and trouble. Here are some tips to assist you in the event that the IRS or a state revenue agency selects you for an audit.

1. Keep good records.

Many people-and even many small businesses-tend to get so caught up in the hustle and bustle of everyday life that they neglect to maintain solid records showing legitimate business expenses. The idea of managing and filing mountains of receipts, invoices, and other similar documents can be daunting, but if you start today and keep on top of this regularly you can avoid the hassle of going through shoeboxes of receipts trying to show the auditor what is-and is not-relevant to your bottom line .

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Tagged in: Tax Laws

As part of a trillion-dollar spending package enacted in the eleventh hour last December, averting yet another threatened government shutdown, the Congress made permanent dozens of expired or expiring tax incentives.

Among these was the so-called charitable IRA "rollover."

First enacted in 2006 as a temporary measure, this incentive had been repeatedly allowed to expire and then extended retroactively, impairing its effectiveness as a fundraising tool for charities. It is now a permanent feature of the tax Code.

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Tagged in: Tax Filing Tax Laws

If you are considering a 1031 exchange of real estate, it is important to understand what a 1031 exchange is and isn't, and to be aware of potential issues that could result in favorable tax treatment being denied. Real estate law is complex by itself; add in the element of tax law that comes with section 1031 exchanges and an unrepresented client could easily find themselves out of compliance with the strict requirements of the tax code.

Section 1031 exchanges are named for section 1031 of the tax code which, boiled down to its simplest, allows for property sellers to rollover gains into a new property, postponing the tax bill. There is no limit to the number of times a seller can rollover gains as long as the requirements of the law are met . Those requirements are:

  1. Like-kind property. The property being sold and the property being purchased must be used for the same purpose; that is to say that they either both have to be investment properties used in a trade or business. Property held strictly for resale will not qualify for section 1031 tax treatment; neither will primary residences qualify either.
  2. Identification period. The tax law specifies that the new property must be identified no later than 45 calendar days after the closing of the sale for the property that was sold .
  3. Purchase period. The purchase and closing of the new property must be completed within 180 calendar days from the closing of the property sold.
  4. Qualified intermediary. The proceeds from the sale of the property sold may not be touched or used by the seller in the period between the sale closing and purchase closing, and the law dictates specific requirements for who can be the qualified intermediary to hold the funds and prepare the required documents.
  5. Title requirements. The law is very specific about the fact that owner(s) of the purchased property must be the same as the owner(s) of the property sold.
  6. Equal or greater amount. The investment into the new property must be equal to, or greater, than the profit from the property sold.

Each of these requirements has its own nuances, so it is important to engage an attorney with experience in both tax and real estate matters when considering the sale and purchase of like-kind property. Contact us for more information about section 1031 exchanges.

Tagged in: Real Estate Tax Laws

As a small business owner, you are required to understand and adhere to the myriad of laws that affect your business, including both federal and state tax laws.

Even when you are confident that you are in compliance with all applicable regulations and requirements, finding out that your business is being audited is unnerving. Know that the fact your business was selected for an audit does not necessarily mean your filings have been flagged by the IRS, state or local tax authorities; you may have just won the tax audit random selection lottery (which is, unfortunately, not nearly as fun as winning the powerball.)

If you are selected for an audit, know that you have a number of rights during the audit process, including the right to professional and courteous treatment, the right to privacy and confidentiality, the right to know why certain information is requested, the right to appeal, and the right to representation.

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