Can I Deduct My Medical Expenses by Denver Tax Lawyer

I can deduct my medical and dental expenses, right?  This is common statement, or question asked of a tax attorney.  The answer is, yes, you can but Denver Tax Attorney and Denver Tax Lawyerthere are limitations.  The article below has been drafted by a Denver tax lawyer at The McGuire Law Firm regarding the deduction of medical and dental expenses.

Medical expenses are an itemized deduction and would be stated on Schedule A of an individual’s 1040 individual income tax return.  An individual will either itemize their deductions or take the standard deduction.  An issue that many taxpayers are unaware of is that the deduction for medical expenses is limited.  Yes, the limitation is based off of a taxpayer’s adjusted gross income.  Below, the limitation and other issues have been outlined

 

–          Prior to 2013, you could only deduct medical expenses in excess of 7.5% of your adjusted gross income.  Now, you can only deduct medical expenses in excess of 10% of your gross income.  For example, if your adjusted gross income on your 1040 individual income tax return was $100,000 you could only deduct medical expenses on the schedule A that were in excess of $10,000 (10% of $100,000).  This increase in the threshold percentage is actually a good example of how taxes can be “increased” without increasing the marginal tax brackets!  It is important to note that if you are older than 65, the 7.5 percentage threshold still applies and this threshold is in place until 2016.

–          As stated above, you would only claim medical expenses if you itemize your deductions on Schedule A.  Thus, if you do not itemized your deductions and you take the standard deduction, you cannot deduct your medical expenses.

–          You must have actually paid the medical expense during the tax year.  For example, to claim the deduction in 2013, you must have made payment in 2013.  The date of mailing is generally considered the date of payment if you mailed a medical payment late in 2013.

–          The medical costs of diagnosing, treating, preventing or easing an illness or disease can be deductible.  Medical insurance premiums may be deductible as well.

–          You may also be able to deduct the cost of travel for the applicable medical costs.

–          If you paid for the medical expense with a health savings account, you cannot take the deduction.  The Internal Revenue Service would view this as “double dipping.”

For medical costs that are deductible see Internal Revenue Service Publication 502.  You may also contact a Denver tax attorney at The McGuire Law Firm to discuss your tax issues and questions.  A tax attorney may be able to help you with your current tax issues and tax planning for the future.

Contact The McGuire Law Firm to speak with a Denver tax attorney and schedule your free consultation!

Trust Fund Recovery Penalty by Denver Tax Attorney

If you are asking what is the Trust Fund Recovery Penalty, it is likely that you own a business and that your business owes 941 taxes to the Internal Denver Tax LawyerRevenue Service.  If you find yourself in this situation, it is recommended that you contact a tax lawyer or tax professional.  Owing 941 taxes to the Internal Revenue Service is very serious and can impact you individually as well as your business.  The article below has been drafted by a Denver tax lawyer at The McGuire Law Firm to discuss the Trust Fund Recovery Penalty.  Please feel free to contact our law firm to speak with a tax attorney if you have any tax questions or issues.

The Trust Fund Recovery Penalty is the term used when the Internal Revenue Service personally assesses an individual the trust fund portion of a 941 tax debt.  The trust fund is the amount of taxes that an employer has withheld from an employee for the social security & Medicare taxes and federal withholding tax.  Thus, if looking at a 941 employment tax return, if you took 50% of the social security & Medicare taxes and added this amount to the federal income tax withheld, such amount would be the trust fund portion for that 941 tax period.

When not paid, the trust fund can be personally assessed to the individual business owners who the IRS deems as willful and responsible parties.  Thus, the trust fund can be personally assessed to one or multiple individuals and the debt is considered joint and several liability.  As a joint and several liability, the IRS can collect the entire debt from one individual.  Further, the IRS will collect the trust fund debt from individuals even while the business that accrued the debt is also making payments or under an agreement.  The IRS always wants to collect the trust fund portion as quickly as possible and will aggressively collect 941 debts from a business and the trust fund portion from the responsible individual parties.

The IRS has three years from the following April 15th once a 941 liability is assessed to personally assess an individual.  For example, if your business accrued a 941 tax debt in July of 2013, the IRS would have until April 15, 2017 to propose the personal assessment of the trust fund recovery penalty.  The IRS will propose the assessment of the trust fund after conducting the 4180 Interview, and you have 60 days to protest the assessment from the date of the proposed assessment.  Once assessed, the collection statue is 10 years and the trust fund recovery penalty cannot be discharged in bankruptcy.  The IRS will begin the collection process against you personally by issuing notices to your personal residence.  The IRS can also file a notice of federal tax lien against you personally, which is likely to impact your credit and ability to obtain lending.  Further, if you do not establish an agreement to resolve the IRS debt, the IRS can enforce collection of the tax via a bank levy, wage garnishment or even by seizing personal assets.

You can speak with a Denver tax attorney at The McGuire Law Firm if you are having 941 tax debt problems or other issues.  A tax attorney can represent you before the IRS, help prevent enforcement action and assist to resolve the tax debt through a formal agreement.

Contact The McGuire Law Firm to schedule a free consultation with a Denver tax attorney.

Converting a Corporation to an LLC by Denver Small Business Attorney

Small business owners may inquire as to their ability to convert a corporation to a limited liability company (LLC).  A small business attorney at The Denver Small Business AttorneyMcGuire Law Firm has drafted the article below to outline some basic issues concerning a corporate conversion.  Prior to converting your corporation, it is recommended that you consult with a business attorney and a tax attorney.

Prior to discussing a conversion, it is important to note a few issues.  First, there are multiple types of corporations, C corporations and S corporations.  Second, you may be working with a corporation that has been formed in Colorado or a corporation that was formed in a different state.  Third, an LLC can be taxed as a disregarded entity (schedule C), a partnership or as a corporation; Fourth, there are multi-member LLCs and single member LLCs.  The article below will focus on a closely held Colorado corporation converting in to a multi-member LLC.

Under Colorado law a corporation can undergo a statutory conversion and convert from a corporation to a limited liability company.  This process transfers the assets and liabilities of a corporation to the LLC.  You can use one business, and a separate LLC does not need to be formed.  The conversion procedure can be found in the Colorado Revised Statutes.  To convert you will need to take the following steps:

–         Prepare a plan of conversion and have such plan adopted by the board of directors

–         Obtain approval of the shareholders for the conversion

–         File Articles of Organization with the CO Secretary of State

–         File a statement of conversion with the Co Secretary of State

The plan of conversion should contain information such as: the state where the corporation was formed, the name of the corporation, the fact the business is currently formed as a corporation, the name of the LLC and fact the corporation will be converted to this LLC, the state law under which the LLC will be formed and the terms and conditions of the conversion.

The Colorado statute allows for a simple majority vote to approve the conversion by default, but alternative voting requirement may be in place.

If you convert your corporation to an LLC, you should consider drafting an LLC operating agreement, notifying customers, third parties and creditors, holding the required LLC meetings, using the official LLC name for the business moving forward.

From a tax point of view, converting a C corporation to a limited liability company may have negative consequences and result in a large tax bill to the corporation and potentially to the shareholders.  The Internal Revenue Service considers the conversion of a C corporation to an LLC as a liquidation of the corporation of thus gain may be recognized by the corporation and to the shareholders.  This is the double taxation you may have heard about as a C corporation because the corporation itself is taxed and the shareholders are taxed.  Generally, the tax consequences of converting an S corporation to an LLC are less because an S corporation is a pass through entity and taxed somewhat similarly to an LLC.  The tax complications of any entity conversions are likely to be complicated and you should consult a tax attorney or tax professional to discuss these tax implications.

Please contact The McGuire Law Firm to discuss your business issues and questions with a Denver small business attorney or tax attorney.

 

 

Denver Tax Attorney Outlines Common Tax Returns

With so many different types of tax returns, tax forms and tax schedules, many people get confused as to what each tax return or form is and if they Denver Tax Attorneyare required to file such tax return.  The article below has been drafted by a Denver tax attorney at The McGuire Law Firm to outline common tax returns and give a brief description as to the return.

1040 U.S. Individual Income Tax Return

Form 1040 is the tax return that all individuals with taxable income must file on or before April 15th of each year.  Some individuals may be able to file a 1040EZ if their circumstances allow.  All income such as wages, interest, dividends, business income, rents, royalties and other income are stated on the 1040.  Then the taxpayer can make adjustments to income and take the standard deduction or itemize their deductions.  Thereafter, federal withholding tax is calculated and the taxpayer may be able to receive the benefit of non-refundable or refundable tax credits depending upon their circumstances.  The taxpayer’s payments are applied and the taxpayer is able to see if they owe tax to the IRS or if they are due a tax refund.

1065 U.S. Return of Partnership Income

Form 1065 is prepared and filed on behalf of partnerships, which would include limited liability companies (LLC).  Typically, partnerships do not pay income tax and thus the 1065 is used to pass through the income, gain, loss, credits and deductions to the individual taxpayers on Schedule K-1.  The taxpayer will claim the income, loss or other items passed through to them on their 1040 individual income tax return.

1120 U.S. Corporate Income Tax Return

Form 1120 is prepared and filed for corporation.  A C corporation does not pay corporate income tax on the net corporate income.  A S corporation is a pass through entity like a partnership and the S corporation income is passed through to the individual shareholders on a K-1.  The S corporation will file an 1120S as opposed to the 1120.

941 U.S. Quarterly Employment Tax Return

Form 941 is filed by businesses to report wages paid, federal income tax and social security & Medicare tax.  There are also schedules to the 941 that may be used to report the federal tax deposits paid.  Form 941 is filed quarterly in April, July, October and January (following year).  The frequency of deposits is dependent upon the total tax liability.

The above tax returns are the common tax returns for individuals and most business entities.  If you have questions regarding your tax return filing requirements or other tax issues, please contact The McGuire Law Firm to speak with a Denver tax attorney.  All potential clients receive a free consultation to discuss your situation, needs and issues.

Contact The McGuire Law Firm to schedule your consultation with tax attorney or business attorney!

Denver Tax Attorney Outlines Common Tax Returns

With so many different types of tax returns, tax forms and tax schedules, many people get confused as to what each tax return or form is and if they Denver Tax Attorneyare required to file such tax return.  The article below has been drafted by a Denver tax attorney at The McGuire Law Firm to outline common tax returns and give a brief description as to the return.

1040 U.S. Individual Income Tax Return

Form 1040 is the tax return that all individuals with taxable income must file on or before April 15th of each year.  Some individuals may be able to file a 1040EZ if their circumstances allow.  All income such as wages, interest, dividends, business income, rents, royalties and other income are stated on the 1040.  Then the taxpayer can make adjustments to income and take the standard deduction or itemize their deductions.  Thereafter, federal withholding tax is calculated and the taxpayer may be able to receive the benefit of non-refundable or refundable tax credits depending upon their circumstances.  The taxpayer’s payments are applied and the taxpayer is able to see if they owe tax to the IRS or if they are due a tax refund.

1065 U.S. Return of Partnership Income

Form 1065 is prepared and filed on behalf of partnerships, which would include limited liability companies (LLC).  Typically, partnerships do not pay income tax and thus the 1065 is used to pass through the income, gain, loss, credits and deductions to the individual taxpayers on Schedule K-1.  The taxpayer will claim the income, loss or other items passed through to them on their 1040 individual income tax return.

1120 U.S. Corporate Income Tax Return

Form 1120 is prepared and filed for corporation.  A C corporation does not pay corporate income tax on the net corporate income.  A S corporation is a pass through entity like a partnership and the S corporation income is passed through to the individual shareholders on a K-1.  The S corporation will file an 1120S as opposed to the 1120.

941 U.S. Quarterly Employment Tax Return

Form 941 is filed by businesses to report wages paid, federal income tax and social security & Medicare tax.  There are also schedules to the 941 that may be used to report the federal tax deposits paid.  Form 941 is filed quarterly in April, July, October and January (following year).  The frequency of deposits is dependent upon the total tax liability.

The above tax returns are the common tax returns for individuals and most business entities.  If you have questions regarding your tax return filing requirements or other tax issues, please contact The McGuire Law Firm to speak with a Denver tax attorney.  All potential clients receive a free consultation to discuss your situation, needs and issues.

Contact The McGuire Law Firm to schedule your consultation with tax attorney or business attorney!

Denver Tax Attorney Outlines Common Tax Returns

With so many different types of tax returns, tax forms and tax schedules, many people get confused as to what each tax return or form is and if they Denver Tax Attorneyare required to file such tax return.  The article below has been drafted by a Denver tax attorney at The McGuire Law Firm to outline common tax returns and give a brief description as to the return.

1040 U.S. Individual Income Tax Return

Form 1040 is the tax return that all individuals with taxable income must file on or before April 15th of each year.  Some individuals may be able to file a 1040EZ if their circumstances allow.  All income such as wages, interest, dividends, business income, rents, royalties and other income are stated on the 1040.  Then the taxpayer can make adjustments to income and take the standard deduction or itemize their deductions.  Thereafter, federal withholding tax is calculated and the taxpayer may be able to receive the benefit of non-refundable or refundable tax credits depending upon their circumstances.  The taxpayer’s payments are applied and the taxpayer is able to see if they owe tax to the IRS or if they are due a tax refund.

1065 U.S. Return of Partnership Income

Form 1065 is prepared and filed on behalf of partnerships, which would include limited liability companies (LLC).  Typically, partnerships do not pay income tax and thus the 1065 is used to pass through the income, gain, loss, credits and deductions to the individual taxpayers on Schedule K-1.  The taxpayer will claim the income, loss or other items passed through to them on their 1040 individual income tax return.

1120 U.S. Corporate Income Tax Return

Form 1120 is prepared and filed for corporation.  A C corporation does not pay corporate income tax on the net corporate income.  A S corporation is a pass through entity like a partnership and the S corporation income is passed through to the individual shareholders on a K-1.  The S corporation will file an 1120S as opposed to the 1120.

941 U.S. Quarterly Employment Tax Return

Form 941 is filed by businesses to report wages paid, federal income tax and social security & Medicare tax.  There are also schedules to the 941 that may be used to report the federal tax deposits paid.  Form 941 is filed quarterly in April, July, October and January (following year).  The frequency of deposits is dependent upon the total tax liability.

The above tax returns are the common tax returns for individuals and most business entities.  If you have questions regarding your tax return filing requirements or other tax issues, please contact The McGuire Law Firm to speak with a Denver tax attorney.  All potential clients receive a free consultation to discuss your situation, needs and issues.

Contact The McGuire Law Firm to schedule your consultation with tax attorney or business attorney!

CDP Hearing Discussed by Denver Tax Attorney

If you owe taxes to the Internal Revenue Service, a Collection Due Process Hearing may be available to you and may be a valuable Denver Tax Lawyer“tool” and option to resolve your IRS tax debt.  The article below, drafted by a Denver tax lawyer at The McGuire Law Firm will discuss what a Collection Due Process Hearing is, when they are available and how such hearing may be used to resolve your tax debt or tax problem with the IRS.

A Collection Due Process Hearing (CDP Hearing) provides the taxpayer due process prior to the Internal Revenue Service collecting on a tax debt through enforcement action such as an IRS bank levy, wage garnishment or seizure of assets.  Thus, the hearing is available to the taxpayer before the Internal Revenue Service takes enforcement action to actively collect the tax debt.  The Collection Due Process Hearing is available when the taxpayer has been issued Letter 1058 (a Final Notice of Intent to Levy), a Notice of Federal Tax Lien or under certain circumstances when the taxpayer has been already experienced collection action.  Generally, a taxpayer would request a CDP Hearing upon request of a Final Notice of Intent to Levy from the IRS.  A taxpayer has 30 days from the date the final notice is issued to request the CDP Hearing.  The CDP Hearing is requested by filing Form 12153 with the IRS service center that issued the final notice.  Form 12153 states the taxpayer’s information (name, address, social security number etc), type of tax and periods for which the final notice was issued, why the request is being filed and the collection alternative (installment agreement, offer in compromise, etc.) the taxpayer is proposing.

After submitting the CDP Request, the taxpayer will be contacted by the IRS stating that the request has been received and the taxpayer will be contacted in the future.  Eventually, a hearing date with an appeals officer is established.  Generally, it will take 2-8 months to establish the hearing date.  When the hearing date is established, the appeals officer will also request certain documents to hold the hearing.  For example, if a taxpayer submitted a Collection Due Process Hearing Request requesting an offer in compromise as the collection alternative, the appeals officer will need the appropriate financial statements, offer in compromise forms and financial documents.  If proper documentation is not provided to the appeals officer, the appeals officer will not be able to make a determination regarding a resolution proposal. Thus, it is likely the appeals officer will sustain the IRS proposed action or hold that enforcement action is necessary to resolve the tax debt because a collection alternative could not be agreed upon.

There is a hold on enforcement action once the hearing request is filed and leading up to the hearing, which will prevent the IRS from issuing bank levies and wage garnishments.  It should be noted that the IRS has provided guidance stating the automatic hold will not apply to businesses owing 94 taxes if the business is not in compliance when making the request and leading up to the hearing date.  If an agreement is reached with the appeals officer, a determination will be issued outlining the terms of the agreement.  If an offer in compromise is submitted through the hearing, the offer is likely to be submitted to the IRS offer in compromise unit.  If an agreement is not reached, the appeals officer will issue a determination stating the fact and the taxpayer may be open to enforcement action 30 days after the determination notice has been issued.

Requesting and holding a CDP Hearing can be effective mean by which to resolve an IRS tax debt or other matter.  A Denver tax attorney at The McGuire Law Firm can assist you with your tax matters, and represent you before the IRS.

Contact The McGuire Law Firm to discuss your tax questions and issues with a Denver tax attorney.  A free consultation is given to all potential clients.

Forming an LLC by Denver Small Business Attorney

As a business attorney, I have had many clients in my office who are ready to start a business.  They have a wonderful business Denver Small Business Attorneyplan, they have the capital and they are ready to begin. But yet, they ask, “how do I form an LLC?”  The article below has been drafted by a Denver business attorney at The McGuire Law Firm to help shed some light on the above question.

In forming a limited liability company (LLC), there are steps that must be taken and steps that probably should be taken.  First you need to file the appropriate documents with the Colorado Secretary of State if you are forming the limited liability company in Colorado.  You can go on the Colorado Secretary of State website to file the Articles of Organization.  The Articles of Organization will ask general questions regarding the name of the LLC, the address, the members, whether the LLC will be manger managed or member managed etc.  You will complete these articles and pay the filing fee and the LLC will be formed with the state of Colorado.  If you plan to have a trade name, you can apply for your trade name with the Colorado Secretary of State as well.

As a multi-member LLC you will also need to obtain your taxpayer identification number, also referred to as an Employer Identification Number (EIN).  You can obtain your EIN through the Internal Revenue Service and the EIN will be the number used to identify your business/entity.  Form SS-4 is completed with the IRS to apply for your EIN and usually you can obtain the EIN online at the same time you apply.  As a single member LLC, you are considered a disregarded entity for tax purposes.  Thus, as a single member LLC you would file a Schedule C with your 1040 Individual Income Tax Return (like a sole proprietorship) as opposed to the 1065 U.S. Partnership Income Tax Return that a multi-member LLC would be required to file.

Now that you have your Articles of Organization and EIN, you can go to the bank and most banks will allow you to open a business checking account.  You will want to open a business bank account to separate personal expenses and business expenses.  Co-mingling of personal and business funds is a no-no and is likely to create accounting issues and potential tax problems.

Although, you do not necessarily need a partnership agreement or operating agreement, it is highly recommended that you have an agreement in place.  This agreement should spell out how the business will operate, voting issues, how income, gain, deductions and losses will be allocated, how & when the LLC will dissolve or liquidate and other pertinent issues.  Further, the operating agreement can state what each member contributed in cash and property as their initial capital contributions and discuss other special allocation issues if needed.  It is recommended that you have this agreement in place from the beginning and thus the agreement can be referred to as opposed to a he said she said argument in the future.

If you have any questions regarding your business or forming a business, speak with a Denver business attorney at The McGuire Law Firm.  A business attorney can assist you with the formation of your business, structure of your business, business contracts and other business transactions such as the sale or transfer of your business interests or assets.

Schedule a free consultation with a Denver business attorney- contact The McGuire Law Firm!

Denver Tax Attorney Discusses IRS Final Notice of Intent to Levy

You owe taxes to the Internal Revenue Service.  You know you owe taxes to the Internal Revenue Service and you have received Denver Tax Lawyernotices from the Internal Revenue Service.  However, you have been scared and unable to pay the tax debt so you have not contacted the IRS or established an agreement to resolve the tax debt.  One day you receive a notice from the Internal Revenue Service that states, “Letter 1058” and “Final Notice of Intent to Levy.”  What is this notice?

The Final Notice of Intent to Levy (Letter 1058) is exactly what it says.  This notice is the IRS giving you your last chance to formalize an agreement before the IRS will take enforcement action to collect the tax such as a IRS bank levy, IRS wage garnishment or the seizure of assets.  Therefore, do not ignore this notice like you may have the prior IRS notices!

Generally speaking, the IRS will issue a handful of notices when a tax debt is due.  Initially the notices are “nice” maybe acting as a reminder that you owe taxes.  When you do not respond to these notices, the IRS will issue notices that are not so “nice” and eventually the Final Notice of Intent to Levy.

A Final Notice of Intent to Levy may be issued on one period of tax debt or can be issued on multiple periods of tax debts depending upon the situation.  If you receive a final notice, immediate action is required.  The issuance of the Final Notice of Intent to Levy starts the clock ticking for you as the taxpayer to exercise certain rights.  A taxpayer has thirty (30) days from the date of the Final Notice of Intent to Levy to make the request for a Collection Due Process Hearing.  If the Request for a Collection Due Process Hearing is not made within 30 days from the date on the final notice, the taxpayer has lost their rights to request such a hearing, but may still request an Equivalent Hearing.  The difference between a Collection Due Process Hearing and an Equivalent Hearing is that the Request for a Collection Due Process Hearing will act as an automatic hold on any enforcement action for the periods the hearing will cover, whereas you are not guaranteed a hold on enforcement when you request an Equivalent Hearing.  Therefore, if you are concerned about and wish to prevent bank levies and wage garnishments, you will want to make sure you request the Collection Due Process Hearing prior to the deadline.

The failure to request a Collection Due Process Hearing or establish a formal agreement with the Internal Revenue Service is likely to lead to enforcement action on the tax debt.  The IRS can levy monies in your bank account, garnish wages and even seize assets.

If you have received a Final Notice of Intent to Levy, you should consult with a tax attorney or tax professional immediately.  Do NOT ignore this notice!  You can contact a Denver tax attorney at The McGuire Law Firm if you have any questions regarding a tax issue or notice from the IRS.

Contact The McGuire Law Firm to schedule your free consultation with a Denver tax attorney.  Offices in Denver and Golden Colorado.

Testamentary Assets by Denver Estate Planning Attorney

Estate planning attorneys are likely to receive the question, “what are testamentary assets?”  Many people are aware of the termsdenver-estate-planning-lawyer will, testamentary and probate.  Further, many people are aware that there are means by which to avoid probate, but they still do not fully understand what a testamentary asset is.  The article below has been drafted by an estate planning attorney in Denver to provide a little insight as to what constitutes testamentary assets.

Testamentary assets are those assets that are part of an individual’s probate estate and are subject to the probate court process at death.  Sometimes these assets are also referred to as “probate” assets.  Examples of testamentary or probate assets are below.  Assets held in fee simple (100% individual ownership) whereby there is full and absolute ownership and no other owners with survivorship interests.  Thus, it could be a bank account, house, stock certificate whereby there is no payable on death designation or survivor interest.  Property held as tenants in common would be a testamentary asset.  Tenants in common could be defined as two or more people owning property without rights of survivorship.  Under this situation, each tenant’s ownership interest will become part of their probate estate and therefore distributed to the individuals designated in their will and last testament.  As a tenant in common, you absolutely own your percentage share in the property.  You may sell the interest during your lifetime or you can leave the interest to your chose beneficiaries upon your death.

As you may have inferred from the above information, there can be ways by which assets can avoid probate.  Some people do not care if their assets go through probate, while others feel strongly that their assets not pass through the probate process.  Many people think probate is costly, time consuming and troublesome for their loved ones.  It is possible to defer or avoid probate by titling assets, holding assets in trust, establishing beneficiary designations, establishing payable on death designations or holding property in joint tenancy with a right of survivorship.  Some of the above options work well in certain circumstances, but there can be potential disadvantages as well.  The options to avoid probate will be discussed in future articles.

Please contact The McGuire Law Firm to speak with a Denver estate planning attorney regarding your estate plan and related questions.  We offer all potential clients a free consultation and estate plans that are affordable and fit your needs.

A free consultation can be scheduled with a Denver estate planning attorney by contacting The McGuire Law Firm.