Taxes Attorneys

Tax attorneys may be well-versed on tax law, and here is an opportunity for you to know more about capital gains taxes.  Not that this information will make you feel any better about paying them (!), but knowledge is power and it is key to know what you are paying in taxes and why.

The History Of Capital Gains Taxes In The United States

What are Capital Gains Taxes:

The money you made from the time of acquisition or purchase to the time of sale of a valuable asset is known as your capital gains. This profit has a tax levied on it, which is called a capital gain tax. Some common examples of capital include large investments such as real estate, stocks, bonds, or mutual funds. The capital gains tax rates strongly affect the economy. Any increase could negatively affect millions, including middle class families with some stock or entrepreneurs trying to open their own small business.

The Beginning:

Capital gains always remained below 7% from 1913 to 1921. It was not until the Revenue Act of 1921 when the tax made its first upward climb to 12.5%. The tax then waxed and waned, hiking up with the 1969 and 1976 tax reform acts, only to be reduced in 1978 by congress. More recently, the Taxpayer Relief Act of 1997 again, lowered the capital gains rate. Currently, the rate for most taxpayers is 15% on long-term capital gains (i.e. property held for longer than 12 months) and ranging from 10% to 35% on short-term capital gains (i.e. property held for less than 12 months). Individuals in the 10% and 15% tax brackets pay 0% on long-term capital gains.

 The Rise and Fall:

The opposition to cutting capital gains taxes is usually rooted in the belief that the tax cuts benefit only the wealthy. However, this is only partly true. While most wealthy people own stocks and other capital, there are plenty of struggling businesses and middle class families depending on capital just as much. In reality, the cutting of capital gains taxes has proven to benefit the economy when tried in the past on multiple occasions. Historically, when capital gains taxes were raised it tended to harm the US economy more than help it.

Election ‘08 and Capital Gain Taxes:

Controversy looms over the 2008 Presidential election with capital gains taxes in the spotlight. Sen. Barack Obama revealed his plan to raise capital gains taxes in order to make the distribution of wealth fairer. He cited 50 individuals benefiting from the tax sharing a $29 billion income between them. However, many experts strongly oppose Obama’s plan saying an increase will hurt the economy possibly knocking off almost 2% of Gross Domestic Product.

Unfair Tax:

When it comes to the legitimacy of capital gains taxes and increases, there are solid arguments from both sides. Those who support low capital gains tax rates claim that any increase would discourage investing and hurt the economy. However, groups that support an increase are quick to deem low rates as unfair. They claim that by taxing capital gains at a lower rate then income taxes is essential a tax benefit for just the wealthy. ‘Some people who are richer than Croesus are paying 15 cents in federal income taxes on the marginal dollar, while you may be paying 25 or 35 cents,’ claims economist Alan Blinder says on his blog, EconomistsView.

By: roni deutch

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Tax attorneys can tell you that all too many otherwise honest tax payers underreport income as they are simply not sure what may or may not qualify as “income”.  If you profit from selling on Ebay, or other sites such as Etsy, you do indeed need to report that income to the IRS.  Ask a tax attorney for more information, and eliminate the risk of a costly IRS tax audit.

Income Tax On Ebay Profits

Several folks argued that just because their little eBay hobby generated a little cash, that didn’t make it a full blown business. It seems they consider the income from their little hobby to be financial manna from Heaven and thereby not taxable by earthly tax collectors. I’ve always been amused by folks who try to impress me with talk about their ‘little side business’ but when the subject turns to taxes they suddenly refer to it as ‘my little hobby.’

All arguments aside, the conclusion that I came to after reading each of the emails was always the same: while you may think selling on eBay is just a fun pastime and the money you’re making is not reportable as income, depending on the circumstances, the IRS would probably disagree with you.

 It seems that everyone likes making money, but hates carving off a piece for good old Uncle Sam. Welcome to free enterprise, folks. If you’re going to come to the dance you have to pay the fiddler.

The IRS rules are clear: you must pay taxes on all personal and business income and that includes money you make selling on Ebay.

In its most basic sense, the IRS rules can be interpreted to mean that if you buy an old vase at a garage sale for $10 and sell it on eBay (or elsewhere) for $20 you made a $10 profit and therefore must report it as income and pay Uncle Sam his fair share.

In reality, if you are a casual seller who only sells a few items on eBay every now and then it’s doubtful the IRS is going to let loose an army of agents to collect taxes on the few bucks you make. However, if you consistently sell on eBay the IRS may deem your activities to be business oriented and you will be required to file a Schedule C and claim the income.

The IRS uses a number of factors to determine if an eBay hobby that generates sales revenue is actually a business. These factors include:

Do you carry on the hobby in a business-like manner?

Do you spend considerable time working on the hobby?

Do you depend on income from your hobby for your livelihood?

If the answer to any or all of these question is yes, you’re running a business, not carrying on a hobby, and you are responsible for paying taxes on your income.

What’s eBay’s take on all this? Naturally eBay is vehemently opposed to anything that might rock the eBay boat. eBay does not issue 1099 tax forms to sellers, nor does it report seller’s sales figures to the IRS.

Ebay considers itself merely to be a facilitator, meaning that they provide a marketplace in which buyers and sellers come together to do business.

Furthermore, under its current system it would be impossible for eBay to issue accurate 1099s to sellers. eBay does not track if a seller actually gets paid by the buyer, so eBay has no idea how much money - if any - actually changes hands at the end of each transaction.

On the bright side, if you do sell on eBay as a business you can deduct a number of business expenses, including the cost of inventory, listing fees, shipping, envelopes, packing materials, etc.

You might also be able to deduct things like the purchase of a computer for business use, office space (even if it’s a home office), office supplies, and more.

Talk to your accountant if there’s any doubt as to whether you should or should not be paying taxes on your eBay earnings.

By: mannchauhan

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If you have overlooked any of these sources of taxable income, you may want to consult with a tax attorney to resolve your tax situation.  In overlooking these sources, and not reporting them,or underreporting them, you do run the risk of a costly IRS tax audit.  Work with a tax attorney to understand your income, ALL sources, to make sure that you are not underreporting and risking longterm issues with the IRS.

7 Most Commonly Overlooked Sources Of Taxable Income

1. Social Security Income

Social Security benefits may be non-taxable, or partially taxable. It depends on your total income from other sources. If your sole source of income during the tax year was Social Security, your benefits are probably not taxable. But, if you have other forms of income, including tax-exempt income, it could make your Social Security benefits taxable. If you add half the amount of your Social Security Benefits to all other forms of income, and the total exceeds a ‘base’ amount, then a portion of your benefits will be taxable. In 2008, the base amount is $25,000 if single, married filing single, or head of household, and $32,000 if married filing jointly.

2. Unemployment Compensation

People are always surprised that unemployment compensation is taxable income. This includes any amounts you received under federal or state unemployment compensation laws, state unemployment insurance paid by a state (or District of Columbia) from the Federal Unemployment Trust Fund. If you received unemployment compensation during the year, you should receive IRS Form 1099-G, showing the amount you were paid, and if any taxes were already withheld. If your unemployment benefit payments were made from a private, non-union fund to which you voluntarily contribute are only taxable if you received more money than you put into the fund.

 Please note that as a result of passing the American Recovery and Reinvestment Act (ARRA), starting in 2009, the first $2,400 earned in unemployment compensation is excludable as taxable income.

3. Gambling Winnings

Gambling winnings are fully taxable and must be reported on your tax return. Gambling winnings include any winnings from lotteries, raffles, horse races, or casinos. Both cash winnings and the fair market value of prizes such as cars and trips are counted as taxable income. If you win a prize in a lucky number drawing, television or radio quiz program, beauty contest, or other event, you must also include it in your income. A payer (such as the casino or track, etc.) is required to issue you an IRS Form W-2G if you receive certain gambling winnings or if your gambling winnings are subject to Federal income tax withholding. All gambling winnings must be reported no matter if any portion is subject to withholding or not.

Please note that you may deduct gambling losses only if you itemize deductions. You may claim your gambling losses as a miscellaneous deduction, however, the amount of losses you deduct may not be more than the amount of gambling income you have reported on your return.

4. Bonuses

Bonuses or awards from your employer based on work performance are included as taxable income. Money, gift cards, property, or prizes such as a vacation trip all count as ‘bonuses’. If the award you receive is a good or service, then you need to include the fair market value in your income. Even holiday bonuses count if your employer gives you cash, a gift certificate, or a similar item that you easily can exchange for cash.

Please note that if you receive personal property (e.g. something other than cash, gift card, or its equivalent) as an award for length of service exceeding five years, the fair market value of the award is less than $1,600, and the award is presented as part of a meaningful presentation, it can generally be excluded as income.

5. Punitive Damages

If you were awarded damages for actual monetary losses (due to property damage or medical care for injuries) the funds are generally not taxable. However, if any damages were awarded beyond compensating you for monetary losses, like punitive damages, (usually to punish or make an example of a defendant based on outrageous conduct), interest, emotional distress, injury to reputation etc these are all taxable income.

6. Reimbursed Business Expenses

Reimbursed business expenses may be considered taxable income, depending upon whether your employer meets the requirements for an Accountable Plan. To be considered an Accountable Plan, your employer’s reimbursement or allowance arrangement must meet all of the following rules:

Employee paid or incurred expenses that are deductible while performing services as an employee.

Employee adequately accounts for these expenses to employer within a reasonable time period.

Employee returns any excess reimbursement or allowance within a reasonable time period.

If your employer’s reimbursement arrangement does not meet all three requirements, the reimbursements you receive for business expenses should be shown on your W-2, and the payments should be reported as income. You can get this income back by itemizing your deductions and completing IRS Form 2106 with your return.

7. Severance Pay

Any type of severance pay or payment on the cancellation of your employment contract is taxable income. This includes a lump-sum payment for accrued vacation or leave time, or back pay awards as the result of a judgment or settlement. If you choose a reduced severance payment in exchanged for your former employer paying for an outplacement service or employment agency, you must include the unreduced severance pay as income.

By: roni deutch

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A tax attorney can assist you in dealing with an IRS bank levy.  Contact a tax debt attorney before it gets too late, you should not take on the IRS alone.

Tax Debt Help Needed - How Can I Stop An IRS Bank Levy?

The IRS does give you ample warning that they intend to levy your bank account. You undoubtedly received the notice and demand for payment from the IRS which included the amount you owed in back taxes. You probably did not contact the IRS at that time, and that was very important. The next communication you received was called the ‘Final Notice’ which did express their Intent to Levy and also included a notice of your right to a hearing after the levy has been placed. That final notice arrives 30 days before the IRS actually talks with your bank and proceeds with freezing your accounts. It comes in the form of a certified letter directly from the IRS. If you are now facing the impending crisis of the IRS bank levy, then you have obviously procrastinated the handling of your IRS past due tax problem (probably because you did not have the money to pay the back taxes). All is not lost and it is still possible to stop the IRS levy. However, the time to act is right now. You need fast, professional tax debt help and you have just 21 days to get this handled, and the clock is counting down each day!

An IRS levy is clearly one of the most powerful collection tools in the IRS arsenal and the IRS bank levy can be incredibly frightening when the freeze is actually implemented. Once the IRS freezes your bank account, you have no access to your funds. They are waiting for the ‘21 days to expire’ before they withdraw these funds to pay your delinquent tax debt bill. Any personal bills that you have that need to be paid in this timeframe will not get paid. In fact, you will probably be hit with insufficient funds fees and the refusal of any preset automated debits you have set up on your account to pay for goods/services. Even the newly deposited funds that come in as paycheck direct deposits will be frozen once they are received by your bank! The IRS intends to be paid the back tax money that you owe, one way or the other. Keep in mind that your bank is required by law to comply with the IRS bank levy and hold all funds that have been deposited into your bank accounts. They will not be able to provide you with any tax debt help in this matter.

During the 21 day period, it is now prudent to seek expert IRS tax debt help so that a tax attorney or tax specialist is able to negotiate with the IRS to release the funds. Unless an IRS bank levy release is obtained, once the 21 day period has expired, the bank sends the money to the IRS and you will never get it back. You may also consider contacting the Taxpayers Advocate in your area. This would require you to complete paperwork to prove economic hardship in hopes of having the IRS bank levy ‘lifted’ or released. Time is of the essence and your financial future does hang in the balance.

Other Important Things You Need to Know About an IRS Levy:

How does the IRS know where I bank? The IRS knows your banks accounts from the 1099’s that are filed every year with your tax returns. Even if your tax returns are unfiled, they have still received those 1099’s from the financial institutions themselves.

What other accounts might be affected? Certificates of Deposit and any account where you have your name and social security number listed. Keep in mind that if you have joint accounts for whatever reason, with family members or even friends, those will be subject to the IRS bank levy also.

What types of accounts are excluded from an IRS Levy? Life Insurance, Worker’s Compensation, Benefits received from the Department of Veteran’s Affairs, and Scholarships or Grants.

Will the IRS levy both my bank account and my wages too? The IRS does not typically levy both your bank accounts and your wages. They intend to be paid for your delinquent taxes, but they must leave you just enough to live on, and while they ‘can’ enforce an IRS levy on your wages and your bank accounts, they don’t tend to collect past due taxes in this manner.

By: mansi gupta

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Tax attorneys can assist you in looking over your business tax situation, ensuring that you are taking the proper deductions that you can and should, and are paying the correct amount of taxes with regard to your business situation.  While the economy is in a tough situation, it will be business owners that take the time to re-evaluate their business from top to bottom that will find new ways to be more profitable, to cut some “fat” they did not know existed and create a stronger business to weather this current economic storm.

Take Some Time To Give Your Business A Good “Once Over”

Productivity and sales may be slow at the moment but that does not necessarily mean that you should hit the breaks on everything in relation to your business. The fact that things are a little slow from a day-to-day workload perspective means that you have more time to step back and take stock of all those things you always mean to do, but never seem to get to.

Taking the time to review and make changes to the way your business functions could prove to be beneficial both now and more importantly in the long term, as the economy picks up again.

 There are numerous facets of the business that can be addressed from financial considerations to trading terms and operations/procedures. Following are some helpful questions you may like to consider to prepare your business for the tough year ahead and put it in an optimal position for when the tides turn and business is on the up!

Ask yourself the following questions. Once you have ascertained the specific areas of your business that require attention, ensure that you speak to the relevant professional in order to get the best advice on how to improve your current situation.

Banking

* Do you have a positive working relationship with your banking manager?
* Do you regularly touch base with them to provide updates on the financial status of your business and to seek any necessary advice?
* Do you have strategies in place in the unfortunate event that something should go wrong with the business financially?
* Are your business assets correctly valued in order to support any business loans that you may have?

Accounting

* Do you have a positive working relationship with your accountant?
* Is your business structured in such a way that your personal assets are protected?
* Do you have private assets held separately from the assets of your business?
* Are business owned assets held in the correct way, under the correct structure for your situation? For example, sole trader vs. partnership vs. company vs. trusts.

Operations and Trading Terms

* Are your contracts with customers and/or suppliers correctly structured and legally compliant?
* If you are supplying materials in the course of your business, does your contract allow for the retrieval of unpaid goods?
* Do your current contracts and trading terms processes include provisions to facilitate the prompt recovery of debt owed to you?
* Are there areas of your business that could be cut down or made more cost effective but will not affect the operations and daily functioning of the business?

Protecting your business

* Do you have a compliant and up-to-date shareholder’s agreement?
* Do you have clearly defined corporate governance practices in place?
* Does your current insurance policy adequately cover your business structure and assets?
* Is any intellectual property sufficiently protected and/or legally registered? For example business names and logos, personally developed products, methods or innovations.
* Do you require confidentiality, non-disclosure or restraint of trade agreements with suppliers or current or previous employees?

Protecting you, the owner

* Do you have an up-to-date and valid Will?
* Do you require an enduring power of attorney?

Of course these are just a few areas that you can look to in order to start strengthening your business. Other areas you may wish to consider include Marketing practices, Staffing and Human Resources and Management processes.

By: Michael Quinn

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A tax attorney can help explain to you the new tax laws for 2009, as well as the myriad of other tax laws that may apply to your particular situation when dealing with income, property or other taxes. 

New Tax Laws For 2009

Even though they are being levied by all forms of government since many centuries, taxes have hardly been popular. The very idea of taking a portion of something you legitimately earn or own may make you rebellious. However, all of us know that we have to pay taxes in order to have the infrastructures built, which are so necessary for our livelihood. Also, governments need money for a lot of other investments into areas such as scientific researches, defense, old age pension and care for the poor and disabled.

However, while everybody ought to pay their taxes, it is foolish not to explore legitimate ways to save taxes, which the government itself offers to the all citizens. There are a number of ways you can save your taxes. The most important thing is to have a thorough knowledge of the tax laws of your country. Tax planning, tax filing, bookkeeping, auditing, payroll management are some aspects of tax preparation which you can do yourself of can get the service of a reliable and certified public accountant agency.

 US tax laws can be quite complicated for under these laws, you may have to make payments to all four levels of the US government such as the local, regional, state and federal level. The federal tax system is widely criticized for being extremely complex and completely outdated. In order to file federal tax for an individual, a person has to submit a Form 1040 to the Internal Revenue Service (IRS) in the United States.

There is one major change to the tax laws that has been introduced in the year 2008, which will benefit the tax-payers in 2009 also. In 2008 a new tax law called the Economic Stimulus Act (ESA) has been introduced, which will give the qualified individuals who have completed tax filing for the year 2007, tax rebates in advance via rebate checks. The qualifying income is at least $3,000 for the year 2007. Other than this, it has provisions that will encourage businesses to invest into new machineries.

The tax changes that were announced for the year 2009 are going to benefit a large number of tax-payers, especially those within higher income brackets. From 1st January 2009 onwards, the basic amount of exemption on federal estate tax increased to $3.5 million. It is going to result in huge tax saving for large real estate owners. Another changes is the increase in the maximum amount, which a tax-saver can contribute to a 401(k) plan. Many tax-payers and non-residential US citizens now will be able to save more of their payments thanks to this change.

The gift-tax exclusion in 2009 has been increased to $13,000 per year. Therefore, you can donate up to $13,000 in a year without paying taxes for it and in the process, reduce your taxable income size to some extent. The maximum amount of earnings that is subjected to Social Security taxes rose to $106,800. Still, a lot of employees will have to pay more Social Security taxes because of the raises in their salaries.

By: Elle Wood

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Many consumers with tax issues ask their tax attorneys a very important question, "How long is this process going to take?".  The tax relief process is a long, lengthy one as the steps from hiring an attorney to a thorough review of your particular tax debt to the paperwork and communication process with the IRS>  This is not a process to take on yourself, find a tax attorney that will represent your legal rights and ensure that you get the best outcome for your tax debt issues.

Hiring Representation

At first glance, hiring representation may seem like it will only delay tax relief. It is just another layer between you and your goal - either tax debt resolution or IRS collection relief. In reality, having a knowledgeable attorney serve on your side may make the end result better for you. In case you did not know, the IRS has very specific rules and regulations that they must abide by when resolving back taxes or releasing levies, liens, and garnishments of taxpayers. A competent attorney will know these IRS guidelines, and the best way to try to get you the tax relief you are seeking.

An attorney will know what information is going to be needed early on in the process to prove your case. For example, did you know that releasing an IRS wage garnishment will require proving income and necessary living expenses? Did you know that getting an Offer in Compromise accepted will require all missing tax returns to be filed? An attorney knows these requirements and understands the nuance of the negotiations that work hand-in-hand with the evidence. Lastly, having an attorney will allow you to focus on other aspects of your life while they are trying to get you the tax relief that you need.

Power of Attorney

If you decide to hire an attorney to help resolve your IRS tax problem, the first thing you will need to do is authorize the attorney to discuss your personal tax matter with the IRS. This can be accomplished by completing IRS Form 2848 and filing it with the IRS. Without an active Power of Attorney on file with the IRS, the IRS will refuse to discuss your case with anyone, but you. The power of attorney requirement is a safeguard for you, because it prevents unauthorized individuals from discussing your personal tax matters with the IRS. Completing and filing the IRS form is easy. However, sometimes there is difficulty in the IRS processing the form. Sometimes, it can take weeks for the IRS to process. However, this delay can oftentimes be overcome by having your attorney file the Power of Attorney at the same time that he or she enters into negotiations with the IRS.

Evidence & Documentation

Before requesting tax relief from the IRS, you and your attorney will need to collect and review your current financial information. You will also need to provide your attorney with documentation that substantiates the financial information you communicated to him/her. The documentation may include paycheck stubs, current bank statements, and proof of payment for your mandatory expenses. After you send these documents to your attorney, they will be reviewed and analyzed before contact is made with the IRS. Once necessary income and expense information is supplied to your attorney, he or she will then present it to the IRS in the light most favorable to your case. This is the same process that is used for all forms of IRS tax debt resolution - such as Offer in Compromise, Installment Agreement, and Currently Not Collectible status - and is also used to end IRS collections.

Negotiation with the IRS

You and your attorney quickly gathered your financial information and have submitted it to the IRS. You are now hoping for a quick response from the IRS to resolve your tax debt problem. Unfortunately, a common misconception is that once your attorney contacts the IRS and submits your financial information that IRS collections will immediately end and/or your back tax issue will be immediately resolved. In fact, that rarely occurs - the IRS does not make decisions that quickly. Regardless of the type of resolution you are seeking, the IRS takes time to review your case and the evidence presented.

The main goal of the IRS is to collect the debt owed and, consequently, it can take time for them to determine whether they can collect the debt owed more profitably via another method - i.e. continued collections. It can take the IRS anywhere from 2-6 weeks to respond for an Installment Agreement or Currently Not Collectible Status and up to 3 months for an Offer in Compromise. Oftentimes, the IRS will request updated financial information and documentation to verify that income has stayed the same. If the IRS believes that it they can collect more from a taxpayer than what was submitted, the IRS may delay the case and seek additional information or reject it.

Two of the most important things to remember when seeking IRS tax relief is that you must remain patient and must play by the IRS’s rules. Because the IRS provides options that are beneficial to the taxpayer, they have established a very strict set of standards and regulations that dictate the available forms of tax relief for a taxpayer. The IRS has established these regulations in order to ensure that these benefits are not abused.

By: roni deutch

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