Showing posts from 2004

Internet Business Taxation

QUESTION:I am trying to start up an internet business. I have recently formed an LLC in New Jersey which will own the site and receive all payments. Will I need to qualify to do business in every other state (and other countries presumably) because I may be receiving business from customers all over the world?
REPLY: You may be subject to tax in other states depending upon your type of business and contacts within the state. Even if you do not maintain an office in a site, if you sell enough merchandise in a particular state, that state may try to tax you. Because the states are hungry for revenue, you must anticipate attempts at taxing and auditing your business. You should immediately contact a tax and business attorney to help you establish your business right.Please tak a look at my web site

Husband's Past Due Tax Returns

===========Question: Category: Tax and Taxation Law Subject: Liability for spouses past due income taxMy husband did not file a tax return for several years. The IRS has contacted him regarding his failure to file in 1996, 1997, and 1998. They have put a lean against his property in the amout of $110,000. We were married in August of 1998. We have never filed a joint return. During the years where i earned income, I filed seperatly. He has no reportable income at present, but I do. Furthermore, he told the IRS agent where I work. Will they (or can they) attach my wages? Am I responsible for any portion of his debt? What if we were to divorce? Please advise. Thank you.===========Reply: Tax and Taxation LawLocation: PASubject: Re: Liability for spouses past due income taxYou are not liable for your husband's taxes prior to your marriage. Your husband should immediately contact a tax lawyer and fil…

Donate Your Car Now!

Until January 1, 2005, any car worth less than $5000 donated to a charitable organization can be deducted based on the reasonable "blue book" value. The new tax law, effective Jan. 1, 2005, limits your deduction for donations greater than $500 to the gross proceeds received by the charity from the sale of the car, rv, etc.

Tax Court May Be Forced to make Opinions Public

The US Supreme Court heard arguments today concerning the US Tax Court's failure to disclose opinions in large cases. The Tax court stopped publishing these opinions, even refusing to reveal them to taxpayers, since 1983. If the case is successful, taxpayers will now see the reasons behind the Tax Court decisions. See Full Article

IRS Liens & Gifts to Children

Category: Tax and Taxation Law
Location: FL
Subject: IRS Liens & Gifts to Children

My father is old, sick, under med care, no longer working, has no assets, no real estate but owes the IRS approximately $30k due mistakes his accountant made in 95, 96, 97 & 98. Dad has been paying off this debt for years in installments. He can no longer pay. I want to put the debt into ''non-collectible status''. He has some money in a savings account due to the money my sister and I have been giving him over the years and some of which he saved on his own. I don't want the IRS to attach my dad's savings. As my sister and I will need it to take care of him further. Can he gift some money to me and some to my sister so the IRS will not seize it? It's really our money for taking care of him financially for so many years.

Thank you.

Category: Tax and Taxation Law
Location: FL
Subject: Re: IRS Liens & Gifts to Children


Marrying a person Owing Back Taxes

Category: Tax and Taxation Law
Location: VA
Subject: Tax law if married a man who owes taxes

I want to marry a man who owes back taxes.i am not sure if i do, will i be held for his back tax debt to i irs since i married him?
if you has outstanding debts, will i have to pay any of that either?

Category: Tax and Taxation Law
Location: VA
Subject: Re: Tax law if married a man who owes taxes

You will not be liable for the taxes owed by your future husband. Nevertheless, when you get married, if you file a Joint Income Tax Return, the IRS may keep any potential refund that you would otherwise have coming to you. This can be disputed, but takes time and effort. I suggest that you and your fiancee consult a tax attorney prior to your marriage. If you have further tax questions, see my web site at
Should an Extension be Given to the IRS to continue an Audit?

Category: Tax and Taxation Law
Location: MA
Subject: Audit Extension

The IRS has been auditing my 2001 Federal return since April, 2003. After no communication since May, 2003, I received a letter last week requesting an extension through December, 2005. The 3-year limit ends in April, 2005. Should I give the IRS the extension?

Category: Tax and Taxation Law
Location: MA
Subject: Re: Audit Extension

You should definitely discuss this matter with a tax attorney prior to signing the extension. It all depends on the type of audit. For example, if the IRS is reviewing every document for a Taxpayer Compliance Audit, an extension would probably be inadvisable. The tax attorney could review the documents and determine the risk. Usually, the denial of the exten…
IRS can accept Installment Agreements to pay PArt of Tax Due.

New Internal Revenue Code Sec. 6603 provides for the Partial Payment of Tax Liability in Installment Agreements This new section clarifies the IRS authorization to enter into installment agreements with taxpayers for less than full payment of the tax liability over the life of the agreement. Such a partial payment Installment Agreement requires IRS review at least every two years to determine whether the changed financial condition of the taxpayer warrants an increase in the value of the taxpayer's payments.
New Mileage Rates for 2005

WASHINGTON — The Internal Revenue Service today released the optionalstandard mileage rates to use for 2005 in computing the deductible costs ofoperating an automobile for business, charitable, medical or moving expensepurposes.Beginning Jan. 1, 2005, the standard mileage rates for the use of a car(including vans, pickups or panel trucks) will be:• 40.5 cents a mile for all business miles driven, up from 37.5 centsa mile in 2004;• 15 cents a mile when computing deductible medical or movingexpenses, up from 14 cents a mile in 2004; and• 14 cents a mile when giving services to a charitable organization.The three-cent increase in the business mileage rate was the largest one-year rise ever. The primary reasons were higher prices for vehicles andfuel during the year ending in September. The charitable standard mileagerate is set by law.

Check for the 2 new tax laws in our newsletters section
Earned Income Credit worth up to $4204

People who earned under $34,692 in 2003 might qualify for the Earned Income Credit (EIC). Refundable tax credits like this one usually mean more money in your pocket because they either reduce the amount of tax you owe or they increase your refund.

Although you must meet several rules to claim the EIC, it may be well worth your while to find out if you qualify; the amount of credit can be as much as $4,204 this year!

In what some analysts characterize as an attempted end run
around court decisions that cut in the opposite direction,
the Internal Revenue Service issues a proposed rule under
which most medical residents and their employers would not
be excepted from paying employment taxes under the Federal
Insurance Contributions Act. The IRS also suspends a safe
harbor that institutions have used in applying the FICA

The Internal Revenue Code generally extends the FICA
exception to services performed in the employ of a school,
college, or university by an enrolled student. The IRS's
proposal would narrow the current regulatory definition of
"school, college, or university" to only those employers
whose primary function is education, thus excluding
hospitals. The proposal would also prohibit institutions
from applying the exception to employees who work more than
40 pe…
Pa. Court OKs Class Suit Against H&R Block for E-Filing Fee

Suits filed against H&R Block alleging unnecessary fees for electronically filing clients' tax returns may be tried as a class action and need not be arbitrated individually, the Pennsylvania Superior Court has ruled. H&R Block had asserted that all claims against it must be settled in arbitration because the plaintiffs had entered into a contract with a separate entity in connection with H&R Block's e-filing services.
Click Here for Full Article
Help for Child Tax Credit Available on

The Internal Revenue Service reminds practitioners that taxpayers claiming
the Child Tax Credit cannot claim the full $1,000 per child if they
received an advance payment check last year. When figuring the credit,
they must subtract the amount they got in advance. Failure to do so will
reduce and could delay the tax refund claimed.
Taxpayers can get the amount of their advance Child Tax Credit payment by
visiting Information is available by clicking on 1040 Central or
Your 2003 Advance Child Tax Credit. Click here
Senators Push to Tax VoIP after 2 years
Sens. Thomas Carper and Lamar Alexander revived the debate over taxing Internet access with the introduction of a bill that would reinstate for two-years the now-expired ban on state and local taxation of Internet access services. The senators oppose a competing bill that would make the Internet tax moratorium permanent and extend the exemption from taxation to all forms of technology used to provide
Internet access, maintaining that the other bill would be too costly to already cash-strapped states.

Essentially, after 2 years, the Senators want states to be able to tax internet services, especially the expanding broadband services and the use of the internet for telephone services, VoIP.
Taxation of Lottery Winnings

A lump sum payment for the right to receive future
installments on a winning lottery ticket is taxable as
ordinary income, not capital gain, the Ninth Circuit holds.
Not Filing Tax Returns Costs Billions in Lost Refunds
Nearly 2 million students, retirees and other taxpayers stand to lose $2.5 billion in refunds if they don't act quickly to claim the money.

The Internal Revenue Service said Monday that anyone who should have gotten a refund for taxes paid in 2000 but didn't file a return must file and claim the money by April 15.

Half of those taxpayers could claim refunds of $529 or more, the IRS estimated. That calculation does not include the earned income tax, which could make the refund even larger for some low-wage workers.

Don't wait until it's too late!
IRS to Audit More Small Businesses

A restructuring announced by the Internal Revenue Service recently could mean that more small businesses see audits of their income tax returns.
The IRS said it would be adding 2,200 new positions to its enforcement, or audit, operations in 2005, having consolidated or cut back in other divisions. The agency noted that between 1996 and 2002, its enforcement personnel declined by more than a quarter.

Expect more audits of small companies and their owners in 2005 for the 2002 and 2003 tax years. Although the staff won't be full increased until next year, agents can still look back at prior-year returns.
IRS Audits its Own!

The IRS recently targeted 800 of its employees for audit in an effort to ensure that IRS employees are meeting tax filing and payment requirements.

Last year, IRS staff first discovered a pattern of business loss deductions on their coworkers' returns. The Treasury Inspector General was notified of these suspicious Schedules C, "Profit or Loss from Business, resulting in audits of 25 employees. Half of the 25 employees improperly reported items on Schedule C. This year, a wider net is being cast, starting with the 800 employees identified for immediate audit.
Florida Republicans Hike Taxes
Although Rebublicans have cut taxes in Florida for the past 5 years, Gov.Jeb Bush and Republican lawmakers are now quietly presiding over Florida's biggest tax increase in more than a decade.
The $133 million automatic tax increase is required by state law to replenish benefits that have been all but wiped out by record-high jobless claims in recent years.

The tax increase nearly triples the amount of state unemployment taxes that thousands of businesses across Florida must pay starting in April.
Bush Attacking Medical Malpractice Victims
In a typical pandering to the medical profession's attempt to protect physicians who carelessly harm patients, President Bush is campaigning to stop malpractice victims from recovering for their full losses. Mr. Bush is attempting to limit damages to $250k. If a physician negligently removed a limb, or blinded you, is that fair compensation?
IRS Computer Error Rejects Tax Returns

Thousands of electronically filed tax returns were initially rejected in the past few days because of a computer glitch.

The problem began January 16, 2004 when the Internal Revenue Service officially opened the channels for electronic filing used by many professional tax preparers and individual taxpayers filing from their home computers. An error buried in 55 million lines of code, which had been updated to reflect new tax laws, caused the problem, which was corrected by Wednesday, January 21.
Revised Form 8332 permits never-married parents to waive child exemption

IRS has revised Form 8332 (Release of Claim to Exemption for Child of Divorced or Separated Parents) and IRS Pub No. 504 p. 8 (Divorced or Separated Individuals) to permit a never-married noncustodial parent to claim a dependency exemption where the custodial parent has waived this exemption. These changes show that IRS now agrees with the Tax Court's holding in King, (2003) 121 T.C. No. 12, that the noncustodial parent was entitled to a dependency exemption because the custodial parent signed Form 8332 waiving the exemption.

Background of child dependency exemption. A dependency exemption generally is allowed for parents who provide over half of a child's support during the calendar year. (Code Sec. 152(a)) Under a special support test, the parent with "custody" for a greater portion of the year is treated as providing more than one-half of a child's support where the child receives more t…
Pres. Bush's State of The Union Address Advocates Making Tax Cuts Permanent

President Bush state that tax cuts had invigorated the economy, and he wants Congress to make permanent the temporary tax reductions passed in 2001 and 2003.

Those tax cuts include an expansion of the bottom, 10 percent tax bracket that lowered taxes for virtually every wage earner. It includes changes that eliminated some of the so-called marriage penalty, which causes some couples to pay more than they would as two single individuals. It also includes the child tax credit, just increased to $1,000 per child, which would drop back to $700 at the end of the year.

Renewal of the No Child Left Behind education law might also offer an opportunity to make some education and retirement saving incentives permanent.

A bigger question surrounds a law, designed as an economic stimulus, that allows businesses to immediately write off half of their investments this year. Left unchanged, the law will evaporate at t…
IRS Continues to Reject Formula Gifts

In TAM 200337012 (September 12, 2003), the IRS has specifically rejected the effectiveness for gift tax purposes of a clause attempting to make a gift of whatever percentage of interest in a family limited partnership equal to a stated dollar amount.

The IRS states that the formula gift clause was ineffective for gift tax purposes because it violates public policy and that it is actually a gift of the specified percentage of the family limited partnership, without regard to value. The IRS refused to distinguish a formula which seeks to transfer a specific dollar value of an asset from a clause that rescinds any portion of the gift that exceeds a specified amount, stating, "[a] different label does not nullify the effect Paragraph B [the formula clause] would have on the gift." The IRS noted that the formula clause had the same effect as the revaluation clause and that it violated the same public policies.

Analysis of the decision indic…