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Why Tax
Attorneys and CPA's Continue to Prosper
Data released
by Senator Byron on January 15 showed that the IRS incorrectly prepared 83%
of the tax returns it worked on last year.
In one study, Treasury Dept. auditors posed
as taxpayers and visited IRS Taxpayer Assistance Centers to ask questions
about their tax returns. They were given the wrong answer, or an incomplete
answer, more than one-third of the time.
More astoundingly, in a second study it was
discovered that 83% of the tax returns prepared for the anonymous auditors
by IRS Taxpayer Assistance
Center personnel were
prepared incorrectly.
This is the second year of the anonymous
audits. The year before, IRS answered more than half the questions
incorrectly or incompletely. Some progress!
Proceed With Caution!
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Greetings!
Welcome to the first edition of my tax newsletter. I
hope you find some items of interest, a few helpful hints and, perhaps,
some humor in Taxes, Taxes and More Taxes. Let me know if there are
topics of special interest that you want addressed in future newsletters.
Read on and enjoy!
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· Hire Family
Members and Save Taxes
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 Hiring a child or
another family member in a family business can save taxes for both the
business and for the family. The business reduces its tax liability
because it can deduct the compensation paid as a business expense. The
family saves taxes because the income can be spread over more taxpyaers.
The benefits of "income-splitting" is particularly powerful
when a child is employed since the child is likely to be in a lower tax
bracket.
To obtain
the compensation deduction, the employment relationship must be
structured so that real services are performed and the compensation is
reasonable for such services. Hiring a family member can also save taxes
by allowing insurance coverage and other benefits to be provided to that
family member and deducting the cost of such benefits; yet, such amounts
are excludable from the worker's gross income. Lastly, hiring a family
member can help build up their retirement benefits through the use of
certain retirement plans.
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· NYS LLC/LLP
Fees and Filing Deadline
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NYS legislation enacted in 2003 has changed the amount of
the filing fees payable by limited liability companies (LLCs) and limited
liability partnerships (LLPs) that are treated as partnerships for
federal income tax purposes. The new fees only apply to tax years
beginning in 2003 and 2004.
The
amount of the filing fee for LLCs and LLPs that have NY source income has
been increased to $100 per member or partner with a minimum of $500. The
form (IT-204-LL) must be filed within 30 days after the last day of the
tax year of the LLC or LLP with payment due attached to the form. For
calendar year filers, the fee for 2003 is due no later than January 30,
2004. There is no extension for filing Form IT-204-LL or paying the fee.
Read more...
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· IRS Waives
60-Day IRA Rollover Rule
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Although the 2001 Tax Act provided the IRS with authority to
waive the requirement that IRA-to-IRA rollovers be completed within 60
days, there had not been any private letter rulings issued granting
waivers to individual taxpayers until just recently. Suddenly, at the end
of 2003, the IRS released five such rulings.
It waived
the 60-day limit where bank or investment manager errors resulted in
improper distributions and in other instances where IRA owners' mental
disabilities prevented them from making timely rollovers. Since the need
for a waiver comes up relatively often with taxpayers, it is useful to
examine these rulings to get an idea of the types of circumstances for
which the IRS will issue a waiver. (PLRs 200401020, 200401023, 200401024,
200401025, 200402028.)
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