TaxEsqBlog -by Ronald J. Cappuccio, J.D., LL.M.(Tax)

"Beware the ides of March." That’s the March 15 date from Shakespeare’s Julius Caesar. It's also the tax return due date for corporations and a lesser-known tax deadline for business owners — the cutoff for electing S corporation status for 2005. Background: An S corporation operates as a pass-through entity in much the same manner as a partnership. Items of income and deduction are passed through to the individual shareholders for tax purposes. Thus, the owners receive the protection from personal liability afforded to corporations, but avoid the “double taxation” pitfall of regular C corporations. This has made S corporations a popular entity for many business operations. The election to be treated as an S corporation requires the irrevocable consent of every shareholder. Keep in mind: If a husband and wife have a community interest in the stock, both spouses must consent to the election. Consent of a minor may be given by a legal representative or a ...

The IRS announced today that it is increasing audits. Even though a taxpayer reporting an income of $100,000 or more only has a 2% chance of a full audit, the IRS is agressively using computer record matching to do "mini-audit" type tax adjustment letters. Some of the most common problems that generate letters can be avoided by filing electronically and letting the computer check for valid Social Security numbers and math errors. If you fill out the forms by hand, make sure to double- and triple-check your work. The IRS has no single formula that determines which tax returns will be audited. The agency audits some taxpayers by mail and others in face-to-face meetings, depending on the complexity of the return. Audits can be defended. Please click here for further information.

=========== Question: =========== Category: Tax and Taxation Law Location: KS Subject: Leins I am getting ready to file my 2004 taxes and I want to know if there is a way for me to find out if there are any leins, judgements, etc against me that would prohibit me from receiving the amount of refund on my tax return (federal and state). Please advise. Thanks for your help. =========== Reply: =========== Category: Tax and Taxation Law Location: KS Subject: Re: Leins Yes, you can find out if there are liens and judgments. The easiest way is to call you tax lawyer and have a judgment and tax lien search done. If you know you owe money to the state or IRS, you must assume that your refund will be taken for past due taxes. If the amount of refund is more than $200, you should increase your W-4 exemptions to reduce the amount withheld and increase your weekly take-home pay. If you have more questions about the tax collection process, please see my website at: ...

=========== Question: =========== Category: Tax and Taxation Law Location: IA Subject: Husband caused tax liability I was not aware of on tax returns My husband filed federal and state tax returns that I signed, not knowing that he did not report income from the liquidation of his 401K plan and untaxed money from consulting work (neither of which did I know existed). The IRS and the State of Iowa has named me as equally liable because a joint return was filed. We are now separated but not yet divorced, because I do not have enough money to file for a divorce, and he said he is willing to be soley responsible for the delinquent taxes; however, he is now living out-of-state and is no longer employed. What can I do to avoid liability? He says he has contacted both the State of Iowa and the IRS to take sole responsibility, but I keep getting letters from both places. Help! I already do not have enough money from my own income to even pay for all of my living expenses. I trie...

=========== Question: =========== Category: Tax and Taxation Law Location: IL Subject: Employer not Delivering W2's by Jan. 31st? My employer is not Delivering my W2's by Jan. 31st. Is there any action I can take or any taxpayers rights I have to retaliate against this? =========== Reply: =========== Category: Tax and Taxation Law Location: IL Subject: Re: Employer not Delivering W2's by Jan. 31st? Sometimes, employers cannot provide W-2's by January 31. Most employees are understanding. If you are really in such a rush to prepare your taxes, you can get all of the necessary information from the "Year to Date" section on you last payroll stub for the year. The real issue is usually the employee is expecting a large refund. That is the problem. If your expected refund is more than $200, you should file a new W-4 with your employer increasing your exemptions. This will increase your weekly take home pay and avoid unnecessarily larg...

Hi Ron My husband and I started a small business two years ago, as a partnership, and we would like to change it to an LLC. Could you provide advise as to how to go about doing this. Thanks Answer: Have you filed US Partnership Tax Returns - form 1065, or do you file a Schedule C on your 1040? THe steps would be to: 1. Establish a LLC 2. Use the same EIN as the partnership 3. Transfer the business assets into the LLC. Depending upon filing, there should be no Federal Tax. You may be subject to state and local taxes and registration fees depending upon the assets. I would be happy to help you! Ron Cappuccio

=========== Question: =========== Category: Tax and Taxation Law Location: MO Subject: Spousal Defenses What are the different types of spousal defenses? In my divorce decree it states that my exhusband is responsible for all of the tax debt on the joint account we had. The IRS says that they will take all of my income tax return even though it was court ordered for him to pay everything. =========== Reply: =========== Category: Tax and Taxation Law Location: MO Subject: Re: Spousal Defenses Unfortunately, regardless of the divorce order, you are personally responsible for all of the taxes in a jointly filed income tax return. Many Family Court Judges are ill-informed and believe the IRS must abide by their order allocating tax responsibility. The IRS can collect the balance from either you or your former spouse. You should immediately contact a tax lawyer to determine your collection defenses and whether you might qualify as an "innocent spouse....