The recently released Rev Proc 2014-61 indicates the 2015 federal tax rates. Of particular interest to estate planning attorneys are the federal gift and estate tax exemption amounts.
The exemption amount for gifts in 2015 remained at $14,000.
The exemption for estates in 2015 increased by $90,000 from $5,340,000 to $5,430,000.
The list of tax rates and exemption amounts can be found at http://www.irs.gov/pub/irs-drop/rp-14-61.pdf
Thursday, November 6, 2014
Sunday, June 8, 2014
How To Keep the Cost of Tax Attorney As Low As Possible
When I'm discussing representation with a potential client, the first question I always get asked is "How much is this going to cost me?" Unless I'm working on a contingency or a flat fee, there is no way that I can answer that question. I can give a ballpark figure based on how my client describes his or her situation, but two clients are never alike. For instance, I recently obtained Offers in Compromise(a process in which the IRS settles your tax liability for a fraction of what it was worth) for two clients, each who owed over $150,000 in federal income taxes. However, I was able to settle one for about $1,500 and the other for $12,000. And guess what - Client A, who settled his case for $1,500, paid about $2,500 in legal fees while Client B, who settled for $12,000, paid nearly $25,000 in legal fees. At the end of the day, both saved well over $100,000 on taxes due, but wouldn't you rather be the person who only spent $2,500 instead of ten times that amount?
Here's some tips for keeping your legal fees as low as possible:
1. STAY UP TO DATE ON YOUR TAX FILINGS. In order for the IRS to consider collection alternatives (such as an Offer in Compromise or Installment Agreement), the taxpayer at issue must be current on filing all his tax returns. If, in the middle of a negotiation, the IRS learns the taxpayer has not filed a tax return that became due, the Service will be unable to consider any payment amount that you proposed. Offers in Compromise and some Installment Agreements can take a long time to be processed by the IRS. While your matter is pending, file any tax returns that become due. Client A stayed on top of his filing obligations, whereas Client B constantly gave excuses about why a return could not be filed on time. Each time Client B failed to timely his return, I had to ask the IRS employee working on his matter to give him more time. Sometimes an IRS employee would work with me, other times they would say tough luck and Client B would have to start all over from scratch.
2. STAY UP TO DATE ON YOUR TAX PAYMENTS. The IRS also requires that all tax payments be made while a collection alternative is pending. If you are a W-2 employee, then that generally means you must pay your income tax by April 15. If you are a 1099 employee, that means that you must make your quarterly estimated tax payments when due. Staying up to date for a W-2 employee generally is not difficult, but I frequently encounter problems with 1099 employees who do not make estimated tax payments. Both Client A and Client B were 1099 employees. Client A budgeted and managed to make all his estimated tax payments timely. Client B on the other hand constantly failed to make his estimated tax payments for various reasons. Each time Client B failed to make these payments, his Offer in Compromise was returned and we had to start all over again.
3. IF AN ATTORNEY ASKS YOU FOR DOCUMENTATION, GET IT TO HIM/HER AS SOON AS POSSIBLE. The IRS almost always requests financial documentation to verify the income and expense figures that are claimed on financial information forms. The Service frequently asks for copies of paychecks, bank account statements, auto loan statements and mortgage statements. In fact, chances are the IRS will request updated statements because usually by the time an IRS employee gets to work on your matter, three or four months has passed and those documents are no longer current. When the IRS requests documents, they generally give a two week window for a taxpayer to submit them. If the forms aren't filed by that time, the IRS will most likely deny you collection alternative unless you have a really good reason for the delay. Between Client A and Client B, I'll let you guess which one constantly failed to provide documentation when the IRS requested it.
4. DON'T LIE OR OMIT ANYTHING TO YOUR ATTORNEY. Part of an attorney's job is to take all information that you give to him or her and present it to the IRS in a manner that is both truthful and beneficial to you. If you think there is something that will hurt your chances of reaching a deal with the IRS, let your attorney know! I promise that if you know about something damaging to your case, chances are the IRS will know about it too. Before accepting an Offer in Compromise, the IRS generally runs a credit check, land records, vehicle registrations, and other publicly available information to make sure you have not omitted anything on your financial statement. Client A was up front with all of his financial information, while Client B failed to tell me about a new vehicle he purchased in the middle of negotiations. The IRS told me about Client B's vehicle purchase before Client B did. The vehicle purchase ended up having no bearing on his Offer in Compromise, but because he did not disclose the purchase the IRS spent additional time reviewing his financials and requested more documentation than it normally does. As a result, Client B incurred additional attorneys fees
If you follow these four tips, chances are you will end up saving money not only on attorneys fees, but on the amount you owe the IRS as well.
Here's some tips for keeping your legal fees as low as possible:
1. STAY UP TO DATE ON YOUR TAX FILINGS. In order for the IRS to consider collection alternatives (such as an Offer in Compromise or Installment Agreement), the taxpayer at issue must be current on filing all his tax returns. If, in the middle of a negotiation, the IRS learns the taxpayer has not filed a tax return that became due, the Service will be unable to consider any payment amount that you proposed. Offers in Compromise and some Installment Agreements can take a long time to be processed by the IRS. While your matter is pending, file any tax returns that become due. Client A stayed on top of his filing obligations, whereas Client B constantly gave excuses about why a return could not be filed on time. Each time Client B failed to timely his return, I had to ask the IRS employee working on his matter to give him more time. Sometimes an IRS employee would work with me, other times they would say tough luck and Client B would have to start all over from scratch.
2. STAY UP TO DATE ON YOUR TAX PAYMENTS. The IRS also requires that all tax payments be made while a collection alternative is pending. If you are a W-2 employee, then that generally means you must pay your income tax by April 15. If you are a 1099 employee, that means that you must make your quarterly estimated tax payments when due. Staying up to date for a W-2 employee generally is not difficult, but I frequently encounter problems with 1099 employees who do not make estimated tax payments. Both Client A and Client B were 1099 employees. Client A budgeted and managed to make all his estimated tax payments timely. Client B on the other hand constantly failed to make his estimated tax payments for various reasons. Each time Client B failed to make these payments, his Offer in Compromise was returned and we had to start all over again.
3. IF AN ATTORNEY ASKS YOU FOR DOCUMENTATION, GET IT TO HIM/HER AS SOON AS POSSIBLE. The IRS almost always requests financial documentation to verify the income and expense figures that are claimed on financial information forms. The Service frequently asks for copies of paychecks, bank account statements, auto loan statements and mortgage statements. In fact, chances are the IRS will request updated statements because usually by the time an IRS employee gets to work on your matter, three or four months has passed and those documents are no longer current. When the IRS requests documents, they generally give a two week window for a taxpayer to submit them. If the forms aren't filed by that time, the IRS will most likely deny you collection alternative unless you have a really good reason for the delay. Between Client A and Client B, I'll let you guess which one constantly failed to provide documentation when the IRS requested it.
4. DON'T LIE OR OMIT ANYTHING TO YOUR ATTORNEY. Part of an attorney's job is to take all information that you give to him or her and present it to the IRS in a manner that is both truthful and beneficial to you. If you think there is something that will hurt your chances of reaching a deal with the IRS, let your attorney know! I promise that if you know about something damaging to your case, chances are the IRS will know about it too. Before accepting an Offer in Compromise, the IRS generally runs a credit check, land records, vehicle registrations, and other publicly available information to make sure you have not omitted anything on your financial statement. Client A was up front with all of his financial information, while Client B failed to tell me about a new vehicle he purchased in the middle of negotiations. The IRS told me about Client B's vehicle purchase before Client B did. The vehicle purchase ended up having no bearing on his Offer in Compromise, but because he did not disclose the purchase the IRS spent additional time reviewing his financials and requested more documentation than it normally does. As a result, Client B incurred additional attorneys fees
If you follow these four tips, chances are you will end up saving money not only on attorneys fees, but on the amount you owe the IRS as well.
Tuesday, May 20, 2014
New Phone Scam Targeting Taxpayers
In the past few weeks, I've received numerous panicked inquiries from clients of mine concerned about phone calls they have received. The caller, who usually has a foreign accent and calls from (202) 506-9010, claims to be an IRS agent and tells the victim that the police are on their way to arrest him/her. The only way to prevent the arrest is to immediately make a $500 payment with a debit card. The caller then gives the victim the name of an "agent" to call, a phony agent ID number, and another phone number with a 202 area code so that payment can be made. The agent names given are generally common ones or taken from TV shows. For instance, one client was told he needed to call Agent Don Johnson (like the guy from Miami Vice); another received a call from "Victor" and was asked to call (202) 506-9274. If the victim calls the number given to him/her, he/she is asked for his/her name, social security number and debit card number. Fortunately, none of my clients have shared their personal information (or if they had they would not admit to it).
THIS IS A SCAM!
First off, the IRS NEVER makes its initial contact with a taxpayer by telephone. The IRS almost always sends a letter to you indicating that there is an issue with your account. They might also show up at your residence or place of business seeking to discuss the matter with you, but this is extremely rare. If the IRS comes to your door and you ignore them, they generally leave their business card and a polite note asking for you to call them.
Secondly, the IRS (or any other government agency for that matter) NEVER tips you off that it is about to arrest you. Why would they want to give you a running head start out the door? Plus, merely owing taxes is not a criminal offense.
If you receive one of these calls, and you think it might be legitimate, hang up and call the IRS Hotline at (800) 829-1040 and speak to an IRS employee. They'll let you know whether you actually owe anything.
IRS Circular 230 Notice: To ensure compliance with certain regulations promulgated by the U.S. Internal Revenue Service, we inform you that any federal tax advice contained in this communication (including any attachments) is not intended or written to be used, and cannot be used, by any taxpayer for the purpose of (1) avoiding tax-related penalties under the U.S. Internal Revenue Code, or (2) promoting, marketing or recommending to another party any tax-related matters addressed herein, unless expressly stated otherwise.
THIS IS A SCAM!
First off, the IRS NEVER makes its initial contact with a taxpayer by telephone. The IRS almost always sends a letter to you indicating that there is an issue with your account. They might also show up at your residence or place of business seeking to discuss the matter with you, but this is extremely rare. If the IRS comes to your door and you ignore them, they generally leave their business card and a polite note asking for you to call them.
Secondly, the IRS (or any other government agency for that matter) NEVER tips you off that it is about to arrest you. Why would they want to give you a running head start out the door? Plus, merely owing taxes is not a criminal offense.
If you receive one of these calls, and you think it might be legitimate, hang up and call the IRS Hotline at (800) 829-1040 and speak to an IRS employee. They'll let you know whether you actually owe anything.
IRS Circular 230 Notice: To ensure compliance with certain regulations promulgated by the U.S. Internal Revenue Service, we inform you that any federal tax advice contained in this communication (including any attachments) is not intended or written to be used, and cannot be used, by any taxpayer for the purpose of (1) avoiding tax-related penalties under the U.S. Internal Revenue Code, or (2) promoting, marketing or recommending to another party any tax-related matters addressed herein, unless expressly stated otherwise.
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