April 26, 2010

Family Fights $61 Million IRS Tax Bill

First the family of Norman F. Levy, the late New York City real estate tycoon, was swindled out of hundreds of millions of dollars by close friend Bernard L. Madoff, forcing the closing of two Levy charities. Then Levy heirs coughed up $220 million to the Madoff bankruptcy trustee to repay personal withdrawals made before Madoff's Ponzi fraud collapsed in 2008.

Now, adding insult to injury, the unlucky clan is fighting a $61 million estate tax bill from the Internal Revenue Service.

The whole story is reported in Forbes.com in an article published April 21, 2010

April 23, 2010

"Geithner Defense" Rejected By Tax Court

This past Monday, the Tax Court held that blaming TurboTax for errors on a return did not excuse the taxpayer from penalties. Lam v. Commissioner, T.C. Memo. 2010-82 (Apr. 19, 2010).

Misuse of TurboTax, even if unintentional or accidental, is not a defense to the Internal Revenue Service imposing penalties. You must still show a reasonable cause for the underpayment of taxes to avoid penalties.

Need help with finding an accountant to prepare your tax return so you can avoid penalties if you are nervous about using software to prepare taxes, call Mitchell A. Port at 310.559.5259 for a referral. If you want your tax problem fixed, call Mitchell A. Port.

April 16, 2010

Even The Rich And Famous Can Have Tax Trouble

The Detroit News online at detnews.com under it's "Tax Watchdog" headline posts story after story about celebrity tax troubles. Those with tax problems - according to the article - include Corey Feldman, Faith Evans, Mel Blount, Emanuel Steward, Jesse James, Anjelica Huston, Ving Rhames and Dwight Yoakam.

Don't ignore your tax problems. Speak with an experienced tax attorney about a solution. Call Mitchell A. Port at (310) 559-5259.

April 14, 2010

Internal Revenue Code At Your Fingertips

A new app is available for your iPhone which provides access to the Internal Revenue Code and Federal Regulations.

Here is what LawToGo says about its app:

Updated periodically.

Searchable: You can search using keywords or terms plus you can create boolean expressions using "AND" or "OR". You can even specify a "hit" only if a word or term is within x number of words of another word or term. See the help screen in the search tab.

Comprehensive: Always and instantly have a law book at your finger tips.

Fast: Uses a fast and easy navigation format that allows users to go from general to specific in seconds.

Light: Stop lugging around books to meetings.

Reliable: No internet connection needed. The apps work in a concrete basement as well as in a 40th floor conference room because the data is stored right in your iPhone.

Landscape mode: Tilt your iPhone to adjust your view to see a law section in an easy to read landscape format.

Disclaimer: my blog does not endorse this or any other product but merely presents it for informational purposes only.

April 8, 2010

What The IRS Won't Seize Or Sell

Internal Revenue Code § 6334 discusses property exempt from an IRS levy. Here's a list:

There shall be exempt from levy—

(1) Wearing apparel and school books
Such items of wearing apparel and such school books as are necessary for the taxpayer or for members of his family;

(2) Fuel, provisions, furniture, and personal effects
So much of the fuel, provisions, furniture, and personal effects in the taxpayer’s household, and of the arms for personal use, livestock, and poultry of the taxpayer, as does not exceed $6,250 in value;

(3) Books and tools of a trade, business, or profession
So many of the books and tools necessary for the trade, business, or profession of the taxpayer as do not exceed in the aggregate $3,125 in value.

(4) Unemployment benefits
Any amount payable to an individual with respect to his unemployment (including any portion thereof payable with respect to dependents) under an unemployment compensation law of the United States, of any State, or of the District of Columbia or of the Commonwealth of Puerto Rico.

(5) Undelivered mail
Mail, addressed to any person, which has not been delivered to the addressee.

(6) Certain annuity and pension payments
Annuity or pension payments under the Railroad Retirement Act, benefits under the Railroad Unemployment Insurance Act, special pension payments received by a person whose name has been entered on the Army, Navy, Air Force, and Coast Guard Medal of Honor roll (38 U.S.C. 1562), and annuities based on retired or retainer pay under chapter 73 of title 10 of the United States Code.

(7) Workmen’s compensation
Any amount payable to an individual as workmen’s compensation (including any portion thereof payable with respect to dependents) under a workmen’s compensation law of the United States, any State, the District of Columbia, or the Commonwealth of Puerto Rico.

(8) Judgments for support of minor children
If the taxpayer is required by judgment of a court of competent jurisdiction, entered prior to the date of levy, to contribute to the support of his minor children, so much of his salary, wages, or other income as is necessary to comply with such judgment.

(9) Minimum exemption for wages, salary, and other income
Any amount payable to or received by an individual as wages or salary for personal services, or as income derived from other sources, during any period, to the extent that the total of such amounts payable to or received by him during such period does not exceed the applicable exempt amount determined under subsection (d).

(10) Certain service-connected disability payments
Any amount payable to an individual as a service-connected (within the meaning of section 101 (16) of title 38, United States Code) disability benefit under—
(A) subchapter II, III, IV, V,,[1] or VI of chapter 11 of such title 38, or
(B) chapter 13, 21, 23, 31, 32, 34, 35, 37, or 39 of such title 38.

(11) Certain public assistance payments
Any amount payable to an individual as a recipient of public assistance under—
(A) title IV or title XVI (relating to supplemental security income for the aged, blind, and disabled) of the Social Security Act, or
(B) State or local government public assistance or public welfare programs for which eligibility is determined by a needs or income test.

(12) Assistance under Job Training Partnership Act
Any amount payable to a participant under the Job Training Partnership Act (29 U.S.C. 1501 et seq.) from funds appropriated pursuant to such Act.

(13) Residences exempt in small deficiency cases and principal residences and certain business assets exempt in absence of certain approval or jeopardy
(A) Residences in small deficiency cases
If the amount of the levy does not exceed $5,000—
(i) any real property used as a residence by the taxpayer; or
(ii) any real property of the taxpayer (other than real property which is rented) used by any other individual as a residence.

(B) Principal residences and certain business assets
Except to the extent provided in subsection (e)—
(i) the principal residence of the taxpayer (within the meaning of section 121); and
(ii) tangible personal property or real property (other than real property which is rented) used in the trade or business of an individual taxpayer.

(b) Appraisal
The officer seizing property of the type described in subsection (a) shall appraise and set aside to the owner the amount of such property declared to be exempt. If the taxpayer objects at the time of the seizure to the valuation fixed by the officer making the seizure, the Secretary shall summon three disinterested individuals who shall make the valuation.

(c) No other property exempt
Notwithstanding any other law of the United States (including section 207 of the Social Security Act), no property or rights to property shall be exempt from levy other than the property specifically made exempt by subsection (a).

(d) Exempt amount of wages, salary, or other income

(1) Individuals on weekly basis
In the case of an individual who is paid or receives all of his wages, salary, and other income on a weekly basis, the amount of the wages, salary, and other income payable to or received by him during any week which is exempt from levy under subsection (a)(9) shall be the exempt amount.

(2) Exempt amount
For purposes of paragraph (1), the term “exempt amount” means an amount equal to—
(A) the sum of—
(i) the standard deduction, and
(ii) the aggregate amount of the deductions for personal exemptions allowed the taxpayer under section 151 in the taxable year in which such levy occurs, divided by
(B) 52.

Unless the taxpayer submits to the Secretary a written and properly verified statement specifying the facts necessary to determine the proper amount under subparagraph (A), subparagraph (A) shall be applied as if the taxpayer were a married individual filing a separate return with only 1 personal exemption.

(3) Individuals on basis other than weekly
In the case of any individual not described in paragraph (1), the amount of the wages, salary, and other income payable to or received by him during any applicable pay period or other fiscal period (as determined under regulations prescribed by the Secretary) which is exempt from levy under subsection (a)(9) shall be an amount (determined under such regulations) which as nearly as possible will result in the same total exemption from levy for such individual over a period of time as he would have under paragraph (1) if (during such period of time) he were paid or received such wages, salary, and other income on a regular weekly basis.

(e) Levy allowed on principal residences and certain business assets in certain circumstances
(1) Principal residences

(A) Approval required
A principal residence shall not be exempt from levy if a judge or magistrate of a district court of the United States approves (in writing) the levy of such residence.

(B) Jurisdiction
The district courts of the United States shall have exclusive jurisdiction to approve a levy under subparagraph (A).

(2) Certain business assets
Property (other than a principal residence) described in subsection (a)(13)(B) shall not be exempt from levy if—

(A) a district director or assistant district director of the Internal Revenue Service personally approves (in writing) the levy of such property; or

(B) the Secretary finds that the collection of tax is in jeopardy.
An official may not approve a levy under subparagraph (A) unless the official determines that the taxpayer’s other assets subject to collection are insufficient to pay the amount due, together with expenses of the proceedings.

Consult with a tax attorney immediately. Call Mitchell A. Port and get help with your tax problem.

April 6, 2010

Checklist For Closing A Business

When closing a California business, you must file the final employment tax returns in addition to making final federal tax deposits of these taxes if you have employees. You must also file an annual tax return for the year you go out of business and attach a statement to your return showing the name of the person keeping the payroll records and the address where those records will be kept.

The annual tax return for an S corporation, corporation, partnership, limited liability company or trust includes check boxes near the top front page just below the entity information. For the tax year in which your business no longer exists, check the box that indicates this tax return is a final return. If there are Schedule K-1s, repeat the same procedure on the Schedule K-1.

You will also need to file returns reporting the exchange of like-kind property, reporting the disposition of business property and/or changing the form of your business.

Depending on your type of business structure you have, below is a list of common actions to take when closing your business:


• Issue payment information to sub-contractors.
• Report information from 1099s issued.
• Report the sale or exchange of property used in your trade or business.
• File final employee pension/benefit plan.
• Issue final wage and withholding information to employees
• Report information from W-2s issued.
• File final tip income and allocated tips information return.
• Report capital gains or losses.
• Report partner's/shareholder's shares.
• Consider allowing S corporation election to terminate.
• Report business asset sales.
• Make final federal tax deposits
• File final quarterly or annual employment tax form.
• Report corporate dissolution or liquidation.

References/Related Topics

Closing a Business
Canceling an EIN – Closing Your Account
• Contact state and local agencies because there may be requirements relating to state and local governments as well.
• The SBA also provides advice on closing a business.

April 1, 2010

Employment Taxes

The obligation for a California business to pay taxes is fully clarified and easily understood on the IRS website. Steering clear of tax problems is a little easier when paying taxes is explained. However, sometimes tax controversies still happen after falling behind and the IRS wants all the back taxes paid.

Business tax topics are at the IRS website and cover the following:

Federal Income Tax and Social Security and Medicare Taxes

Independent Contractor (Self-Employed) or Employee?

Depositing Employment Taxes

Preparing and Filing Form W-2

Federal Unemployment (FUTA) Tax

Self-Employment Tax

Reporting Employment Taxes

Correcting/Adjusting Employment Taxes

e-file for Business and Self-Employed Taxpayers

Outsourcing Payroll Duties

Certain Taxpayers May Now File Their Employment Taxes Annually

Combined Annual Wage Reporting (CAWR)

References/Related Topics

• Businesses with Employees
• Employment Tax Forms
• Employment Tax Publications
• Obtaining Blank Federal Tax Deposit Coupons
• Virtual Small Business Tax Workshop, Lesson 9 - What you need to know about Federal Unemployment Taxes (FUTA)
• SSN Verification
• Tax Calendar for Small Businesses and Self-Employed
• Unemployment Insurance (UI) Taxes
• W-2 Online. Create, save, print, and submit Forms W-2 and W-2c online.
• Wage Reporting

Call Mitchell A. Port at (310) 559-5259 to help fix your tax problems.