What is Form W-3?

What is Form W-3?  A W-3 is a form (a transmittal) submitted to the Social Security Administration stating total numbers of W-2s all wages paid and social security and Medicare taxes and federal income taxes withheld.  The video below has been prepared by a tax attorney at The McGuire Law Firm regarding a W-3.  For general instructions regarding Forms W-2 and W-3 click: W-2 and W-3 Instructions.

You can contact The McGuire Law Firm to speak with a Denver tax attorney regarding your individual or business tax matters and questions.  A free consultation is offered to all potential clients.  The McGuire Law Firm hopes you have found this information helpful and welcome the opportunity to meet with you.

Transferring Property Subject to a Federal Tax Lien

What happens if I sell property and have an IRS tax lien?  Can I transfer property if the IRS has filed a tax lien against me?  These are common questions that individuals or businesses who have had a tax lien filed against them may ask a tax attorney.  John McGuire is a tax attorney in Denver, Colorado at The McGuire Law Firm and has drafted the article below to provide some information regarding the above topics.  Please remember that all information on The McGuire Law Firm website is for informational purposes and should not be relied upon, and does not create an attorney client relationship.  Furthermore, when cases are referenced in an article, it is important to know that case law may change, and again, should not be relied upon as current law.

When the IRS files a tax lien against a taxpayer this tax lien will attach to the property of the taxpayer and remain attached to the taxpayer’s property until the lien is either released, expires or the property is discharged from the tax lien.  It is possible to have property discharged from a tax lien whereby the lien remains, but the IRS no longer considers the lien to attach to the property.  This occurs through the acceptance by the Internal Revenue Service of a request for certificate of discharge of a federal tax lien, and will be discussed in other articles.  Once, the lien has attached to property, the transfer of such property that is subject to the federal tax lien does not impact the IRS’ tax lien.  See U.S. v. Bess, 357 U.S. 51, 57 (1958).  If the taxpayer sells property with a tax lien attached, the lien will attach to whatever the taxpayer receives through the transfer.  For example, if a taxpayer owns a corvette and a tax lien has been filed, and thereafter the taxpayer exchanges the corvette for an RV, the lien would attach to the RV.  Thus, the lien will attach to whatever the initial property is substituted or exchanged for because the tax lien can attach to all of the taxpayer’s property and rights to property.  See Phelps v. U.S. 421 U.S. 330, 334-35 (1971)  whereby a tax lien can even attach to cash received through a sale of property.  Of course, it would likely be pretty hard for the Internal Revenue Service to enforce a federal tax lien on cash.

If property that is encumbered by a federal tax lien is transferred to a third party and thereafter the third party exchanges or transfers such property for other property (substitute property) in a manner that the lien would not attach to the initial property (or property transferred) the lien will now attach to the substituted property.  See, Municipal Trust and Savings Bank v. U.S., F.3d 99 (7th Cir. 1997).

The transfer of property subject to a federal tax lien can create many issues including substituted property that the IRS then has a lien on as well.  Speak with a Denver tax attorney at The McGuire Law Firm if you have questions relating to a tax lien.

General Accounting Equation

The general accounting equation: Assets = Liabilities + Equity is an important equation for a small business owner, or any business owner to understand.  It is relatively simple and makes sense when you think about an asset, or assets and their related liabilities and thus your equity.  The equation can thus be stated in terms of ownership equity in a business.  For example, a corporation may look at the following: Assets = Liabilities + Shareholders Equity.  Thus, the greater the asset(s) value(s) or the lesser the corporate liabilities, the greater the equity a corporate shareholder will have in their stock, which is their equity interest in the corporation.

For example, think about a business buying a piece of property.  A business buys a $1M property and puts $200,000 down.  The asset would equal $1M, liabilities would equal $800,000 and equity would be $200,000.  These figures plugged into the equation would appear as follows: $1M = $800,000 + $200,000.

This equation is further discussed in the video below that has been created by Denver tax attorney John McGuire.  Mr. McGuire founded The McGuire Law Firm to assist individuals and businesses with their tax issues and questions, and work with businesses regarding their transactions, business contracts and other legal matters.  You can schedule a free consultation with a tax attorney and business attorney by contacting The McGuire Law Firm.

Denver Tax Lawyer Denver Tax Attorney IRS Tax Lien

A nice day

Lorem ipsum dolor sit amet, consectetuer adipiscing elit. Aenean commodo ligula eget dolor. Aenean massa. Cum sociis natoque penatibus et magnis dis parturient montes, nascetur ridiculus mus. Donec quam felis, ultricies nec, pellentesque eu, pretium quis, sem.

Nulla consequat massa quis enim. Donec pede justo, fringilla vel, aliquet nec, vulputate eget, arcu. In enim justo, rhoncus ut, imperdiet a, venenatis vitae, justo. Nullam dictum felis eu pede mollis pretium. Integer tincidunt. Cras dapibus. Vivamus elementum semper nisi. Aenean vulputate eleifend tellus. Aenean leo ligula, porttitor eu, consequat vitae, eleifend ac, enim.

Read more

A nice entry

Lorem ipsum dolor sit amet, consectetuer adipiscing elit. Aenean commodo ligula eget dolor. Aenean massa. Cum sociis natoque penatibus et magnis dis parturient montes, nascetur ridiculus mus. Donec quam felis, ultricies nec, pellentesque eu, pretium quis, sem.

Nulla consequat massa quis enim. Donec pede justo, fringilla vel, aliquet nec, vulputate eget, arcu. In enim justo, rhoncus ut, imperdiet a, venenatis vitae, justo. Nullam dictum felis eu pede mollis pretium. Integer tincidunt. Cras dapibus. Vivamus elementum semper nisi. Aenean vulputate eleifend tellus. Aenean leo ligula, porttitor eu, consequat vitae, eleifend ac, enim.

Read more

What is a Sole Proprietorship?

What is a sole proprietorship?  By definition a sole proprietorship is a business with a single owner.  Thus, there are not multiple partners, shareholders or individuals working together for a profit such as with a partnership or corporation.  I am surprised at how often I see individuals operating as sole proprietorship and I have seen individuals making $200,000 to $500,000 per years as a sole proprietorship!  It is not that the type of entity can help you make more money but rather, I always assumed with making such money, the individual would want to more structure and liability protection.  The article below has been drafted by a business attorney to provide some information regarding a sole proprietorship.

Within a sole proprietorship, the individual is the business and the business is the individual, there is no separate entity formed with the secretary of state.  In its simplest sense, the individual just starts operating the business.  Although this make a sole proprietorship simple and may be considered an advantage, there are disadvantages.  The proprietor is personally responsible for all debts and liabilities of the business.  Thus, the proprietor could be exposed to significant amounts of liability, especially depending upon the industry the proprietor is in.

From a tax perspective, a sole proprietorship does not file its own tax return, but rather the proprietor will prepare and file a Schedule C with their 1040 Individual Income Tax Return.  The proprietor will pay self employment tax on the net income of the business, which is calculated on a Schedule SE.  It is also interesting to note that a single member limited liability company (LLC) is considered a disregarded entity for tax purposes and thus the single member of an LLC will file a Schedule C with their 1040 tax return as opposed to a 1065 partnership income tax return.  The single member LLC may still receive limited liability in terms of liability protection, but in the eyes of the IRS, the single member is treated as a sole proprietorship.

In short, the defining characteristics of a sole proprietorship are that there is a single owner, no forms are filed or organized with the secretary of state and the proprietor is liable of the debts and liabilities of the proprietorship.

If you are considering forming a business or are looking at the entity structure of your current business, speak with a Denver business attorney and tax attorney at The McGuire Law Firm.  An attorney can assist your entity choices and discuss the tax implications of choosing a certain entity over another.  Further, a business attorney can assist you with the drafting of contracts, contract negotiations, the sale of your business or business assets and other business matters.

Denver Business Attorney

 

IRS Installment Agreement

What is an IRS installment agreement?  How much will the IRS want each month to pay back my taxes?  As a tax attorney, these are common questions I am asked when an individual or business owes back taxes to the IRS and is looking at paying such taxes through an installment agreement or payment plan.  The article an video below have been prepared by a Denver tax attorney at The McGuire Law Firm to provide information regarding an IRS installment agreement.

What is an installment agreement with the IRS?

An installment agreement with the IRS is an agreement whereby a taxpayer will make a monthly payment each month to eventually satisfy their IRS tax debt.  The payment can be made by mailing a check, paying via phone or other automatic payment options.

What forms may I need to complete?

If you owe 1040 individual income taxes, you may have to complete Form 433A or 433F.  If you own a business and the business owes taxes, you will need to complete 433B.

 

Do penalties and interest continue to accrue when I am on an IRS installment agreement?

Yes, penalties and interest continue to accrue.  The failure to pay penalty is cut in half to .25% per month as opposed to .5% per month when an agreement is finalized though.  This penalty will max out at 25%.  Interest continues to accrue until the debt is paid in full at the current interest amount.

Can the IRS levy me when I am on an installment agreement?

No, there is a hold on enforcement as long as you are complying with the installment agreement terms, which will include making the monthly payment and timely paying all future taxes and filing all tax returns.  Thus, if you are making your monthly payment per the payment plan arrangement, timely filing all applicable tax returns and timely paying all taxes, the IRS will not levy your bank account, garnish wages, seize assets or other types of collection action.

Can the IRS still file a tax lien if I am on an installment agreement?

Yes, the IRS can still file a Notice of Federal Tax Lien if you have established an installment agreement.  Although, formalizing an installment agreement can in some circumstances prevent the IRS from filing a federal tax lien, the IRS can still determine that the filing of a tax lien is in the best interest of the government.

Does an IRS installment agreement release my IRS tax lien?

No.  Formalizing an installment agreement with the IRS will not cause your tax lien to be released.  If you continue to make payments and pay off the tax debt, the IRS will release the tax lien or tax liens upon the debt being satisfied.

What if I cannot make my IRS installment agreement payment?

It is probably best to contact the IRS and advise them that the payment cannot be made.   You may be granted a grace period or the ability to adjust the payment amount.  If your overall circumstances have changed, you may even be able to settle your tax debt with an offer in compromise.  I have assisted clients where their circumstances changed and after being on an IRS installment agreement, they became a candidate for a tax settlement with the IRS offer in compromise unit.

 

If you owe taxes to the IRS, speak with a Denver tax attorney at The McGuire Law Firm regarding your options to resolve such debt.  A tax attorney can assist you with establishing an installment agreement with the IRS or analyzing your ability to settle your tax debt.  The McGuire Law Firm offers a free consultation to all potential clients.

Darlene K., Midland MI

By business had a large 941 tax liability mainly due to a family member’s death.  I had worked with other tax attorneys trying to resolve the issue with the IRS but felt like I was not getting anywhere.  I was referred to John McGuire, and hired John as my tax attorney to represent me before the IRS.  John dealt with the IRS while my business was sold  and then represented me personally because I was held responsible for a portion of the taxes.  I was so scared of the IRS, but the IRS never touched my business or me personally.  John was able to settle my personal tax debt with the IRS using an offer in compromise and the tax liens were removed.  I continue to consult John regarding my federal tax questions and he always takes the time to speak and work with me.  I have recommended John to family and friends and he has helped them with their personal and business taxes.  I would highly recommend John as a tax attorney to any individual or business.

How Does a Tax Lien Arise & What is the Duration of a Tax Lien?

How does a tax lien arise?  How long does the tax lien exist?  As a tax attorney these are common questions that I hear.  The article below will continue our discussion on tax liens and attempt to answer the questions above.

How is a tax lien created or how does a tax lien arise?

As we have discussed in previous articles, a tax lien is a statutory lien.  The tax lien will “arise” when an individual or a business is liable to pay an amount of tax to the government and fails to pay such amount after demand from the government.  Generally, demand would be considered a notice from the IRS stating the tax period or periods, the amount due and requesting payment.  See Internal Revenue Code Section 6321.  The Internal Revenue Code states a “person” and will define a person as an individual, estate, trust, partnership, corporation, association and companies under IRC Section 7701.  The tax lien is in effect and effective from the date the government assesses the tax, thus the lien can relate back to the assessment date when the taxpayers fails to pay the tax debt.  Do not confuse this issue with the filing of a Notice of Federal Tax Lien.  The IRS does not need to file the Notice of Federal Tax Lien for the tax lien to attach to property.  The key issue is, the Notice of Federal Tax Lien must be filed for the IRS to have priority over other creditors.  Thus, the actual Notice of Federal Tax Lien that becomes public knowledge gives the IRS priority, but the actual lien and attachment to assets dates back to the assessment date for the taxes due.

How long does an IRS tax lien last?

A federal tax lien will continue to remain in place until the tax liability is satisfied, or becomes unenforceable because the collection statute has expired.  See IRC Section 6321.  The collection statute expiration date (CSED) is the date the collection statue expires and thus the date the IRS can no longer actively collect on the tax debt through bank levies, wage garnishments and the seizure of assets.  Generally, after the assessment of tax, the collection statute is ten years under Internal Revenue Code Section 6502, and thus the tax lien could be in place until such collection statute expires.  It is important to note that certain actions can toll the collection statute or stop the statute from running.  For example, filing bankruptcy or an offer in compromise will toll the collection statute.  Moreover, requesting a collection due process hearing will toll the collection.  The common theme that tolls the collection statute is the government’s ability to collect.  If the government must hold on collections such as when a taxpayer files bankruptcy, the clock does not tick in regards to the amount of time the government can collect.  The collection statute can also be extended under a partial payment installment agreement and the release of a levy that is accompanied by an agreement to extend the statute to a specific date.  Furthermore, IRC Section 6503 tolls the statute under certain situations such as when the taxpayer is outside of the United States for at least six months.

Please contact The McGuire Law Firm to speak with a tax attorney regarding any of your tax questions and needs.  A tax attorney can assist you with IRS tax matters and individual and business tax planning and tax issues.

Denver IRS Tax Lien

Partnership K1

As a pass through entity, a partnership will pass gain, loss, deduction, credits and other items through to the partners.  These items are reported on Schedule K1.  Each partner will receive a K1 and these K1s are forwarded to the Internal Revenue Service and thus the IRS is aware of the pass through items the partner(s) should reported on their applicable tax returns.

The treatment of an item is determined at the partnership level and then passed through appropriately.  Thus, the K1 is an informational return whereby the partner receives information to report on their tax return and the IRS receives the items and information that each taxpayer should be reporting.

Please feel free to contact The McGuire Law Firm to discuss your individual and business tax questions with a tax attorney.  The McGuire Law Firm provides a free consultation to all potential clients and would welcome the opportunity to meet with you.  As a tax attorney, Mr. McGuire has assisted many individuals and businesses with their tax issues, matters and questions and continues to consult such individuals and businesses.  The video below is to provide additional information regarding a K1 from a partnership, and hopefully, you find it useful and informative.