Archives for May 2016

PA DEPARTMENT OF REVENUE 1099R NEWS

May 31, 2016 by Frank

The PA Department of Revenue (DOR) does not make it easy for its resident taxpayers.

If you are a retiree and receive IRA, pension or annuity retirement benefits, that income, while taxable for federal income tax reporting purposes, is not taxable for the PA personal income tax (PIT). This is one reason why many retirees find PA an attractive state to reside in their retirement years.

What happens if the payer of the retirement distribution withholds PA PIT? In the past, the taxpayer would claim the withheld tax on his/her tax return and that tax withholding would be used as a tax credit against any other taxes due, or be refunded to the taxpayer.

The PA DOR has now taken the position [Read more…] about PA DEPARTMENT OF REVENUE 1099R NEWS

WHERE IS MY PA PERSONAL INCOME TAX REFUND?

May 24, 2016 by Frank

Many PA residents are asking themselves “Where is my PA tax refund?”

In our March 15, 2016 blog, we explained how taxpayers can check on the status of their IRS, PA, NJ and DE income tax refunds. The PA Department of Revenue (DOR), concerned about identify theft, has developed a complex algorithm to minimize the likelihood of refunds being paid to scammers. While the PA DOR will not make public its algorithm, it recently shared why some refunds are delayed.

Reasons cited by the PA DOR included:

· Taxpayer’s return shows a new address from that used in prior years.

· The taxpayer has historically requested that a refund check be issued, and has requested a direct deposit of the refund in the current year.

· A new bank account is used this year than that used in prior years.

· The taxpayer has requested that the refund be made in the form of a debit card.

If anyone has been reading news articles about how identity theft scammers work the system, the above checks by the PA DOR make sense in that these fit the methods used by ID theft scammers.

If a taxpayer is habitually receiving significant PA personal income tax refunds, he should [Read more…] about WHERE IS MY PA PERSONAL INCOME TAX REFUND?

BE A PRINCE, OR NOT BE A PRINCE, THE CHOICE IS YOURS

May 17, 2016 by Frank

You likely have read that the entertainer, Prince, made a $250 million mistake by not having a will or estate plan in place. The future inheritance process could cost his heirs tens of millions of dollars in legal fees, and state and federal estate taxes.

Each tax season when meeting with new clients we ask if they have a will or estate plan in place. You may be surprised that Prince is not alone; many of these new clients acknowledge that they do not have a will.

While most of the above would likely say that they meant to implement an estate plan, many of these good intentions may have been cast aside as many people find addressing death and its financial consequences so daunting that they put it off.

For those who do affirm that they have an estate plan, you may also be surprised that many of these plans [Read more…] about BE A PRINCE, OR NOT BE A PRINCE, THE CHOICE IS YOURS

ALTER EGO IS HOW IRS PIERCES CORPORATE VEIL

May 10, 2016 by Frank

Our May 3, 2016 post discussed the importance of keeping business transactions separate from personal transactions so the corporate veil is not pierced. When we speak of the corporate veil, it not only applies to corporations, but also to limited liability companies (LLCs). Do you know that the IRS finds piercing the corporate veil of your corporation or LLC a relatively easy way to gain access to your personal assets (or vice-versa)?

The IRS collections and examination divisions pierce the corporate veil by availing themselves of the “alter ego doctrine”. The classification of a business entity as an alter ego of another entity, such as the business owner, can have significant adverse tax, legal and financial implications. While there is no federal statutory law or IRS regulations defining “alter ego”, it is a judicially recognized procedure or theory that has been established to address the potential injustice or alleged fraud actions that may occur in situations where individuals, persons and/or entities “mask” their ownership in equity and assets by placing them in the name and/or control of other persons or entities. While many in the legal profession would likely argue that the alter ego doctrine is governed by state law and not federal law, it is the published opinion of IRS Chief Counsel that federal common law governs.

Why would the IRS assert the alter ego doctrine? [Read more…] about ALTER EGO IS HOW IRS PIERCES CORPORATE VEIL

HOW TO LOSE YOUR LIMITED LIABILITY PROTECTION

May 3, 2016 by Frank

To protect your hard-earned assets, every business owner should operate in the form of a limited liability legal entity. We often hear business owners say that they don’t need a limited liability legal entity because they have insurance. If they get sued, their thought process is that the insurance company will pay for all damages. When you ask these owners how much insurance they carry, here is a quick version of such a conversation. “I have $2 million of insurance coverage.” “What happens if the claimant is awarded $3 million?” “H’mm, I never thought about that.” While no business should operate without insurance coverage, in today’s litigious society, insurance coverage is not a cure all.

We have always taken the position that the second-worse form of ownership is that of a sole proprietor. We believe that the worse form of ownership is that of a general partnership because you are not only responsible for your acts, but those of your partners.

So what type of entity should you form? [Read more…] about HOW TO LOSE YOUR LIMITED LIABILITY PROTECTION