At Buckingham & McGuire, LLC our Denver tax attorneys assist clients in resolving IRS debts, audits and other matters, as well as applying the tax laws to our client’s individual and business issues. All of our tax attorneys have obtained an additional degree in taxation known as an LL.M. Our additional knowledge and education in taxation not only helps resolve IRS issues, but allows us to better assist our clients regarding their business transactions, estate planning and overall tax planning.

Your Right To Notice and a Hearing Before the IRS

As taxpayer you have the right to notice and a hearing prior to the IRS enforcing collection of any tax due.  After the IRS has issued a series a notices, the IRS must issue a Final Notice of Intent to Levy and allow you 30 days to request a hearing, which is generally referred to as a Collection Due Process Hearing.  During this hearing you can provide information and a proposal to prevent enforcement action such as an installment agreement or an offer in compromise.  This is the due process afforded to you and can be very beneficial in resolving an issues with the Internal Revenue Service.  The video below has been prepared by a tax attorney to provide additional information regarding your right to a hearing.

If you have any questions or are experiencing problems with the IRS, you can speak with a tax attorney by contacting The McGuire Law Firm.  The McGuire Law Firm has offices in Denver, Golden, Broomfield and DTC where you can meet with a tax attorney.

Depreciation and Impact on Basis

When an asset is placed into service and depreciation is taken as a deduction, the adjusted basis of the asset will be impacted.  The video below has been prepared by a tax attorney at The McGuire Law Firm to discuss this issue.  Please remember to always consult your tax attorney, business attorney, CPA and/or other advisers regarding your specific facts and circumstances.

John McGuire is a tax attorney and business attorney at The McGuire Law Firm.  You can contact John at 720-833-7705 or via the website at: https://jmtaxlaw.com/contact-us/

 

What is a 401(k) Deferral?

Contributions to a 401(k) are qualified deferrals.  This means that the amount should not be included in your income when calculating income tax.  You can check your W-2 and the amount of taxable wage should not include the 401(k) contributions.  The video below has been prepared by a tax attorney at The McGuire Law Firm to provide additional information regarding this matter.

Common Capital Contributions to a Partnership

When forming a partnership the partners will make initial capital contributions and may make additional contributions depending upon the operations of the partnership and partnership agreement.  Common capital contributions may include cash, property (vehicles, equipment, computers etc.) and sometimes services.

The video below has been prepared by a tax attorney and business attorney at The McGuire Law Firm to discuss capital contributions.

John R. McGuire is tax attorney and business attorney at The McGuire Law Firm.  The McGuire Law Firm represents and advises clients on tax matters from IRS debts and tax audits or overall tax planning and the tax implications of certain transactions.  Further, the firm represents small and medium sized business with their contract issues as well as the formation and sale of businesses or business interests.  In addition to his law degree, John holds an advanced degree in taxation known as an LL.M.  The McGuire LAw Firm provides a free consultation with a tax attorney.

Who Can Represent Me Before the IRS?

If you are under audit by the IRS, have received a notice of deficiency or the IRS is attempting to collect past due taxes, you can receive representation.  The video below has been prepared by a tax attorney at The McGuire Law Firm to provide information regarding who can represent you before the Internal Revenue Service.

John McGuire is a tax attorney in Denver, Colorado at The McGuire Law Firm.  John’s practice focuses primarily on issues before the IRS, tax planning & analysis and advising individual and business clients on the tax implications of certain transactions such as the purchase or sale of a business.

When is a Collection Due Process Hearing Available?

A taxpayer has the right to a collection due process hearing with the Internal Revenue Service Appeals Office under certain circumstances.  This hearing can be very beneficial to a taxpayer in terms of preventing enforcement action such as a bank levy or wage garnishment and by a means to establish or propose an agreement with the IRS such as an installment agreement or offer in compromise.

The video below has been prepared to provide information as to when a taxpayer may be able to request a collection due process hearing.  If you are experiencing any issues with the IRS, you can speak with a tax attorney, by contacting The McGuire Law Firm.   As a tax attorney John McGuire has assisted many individual and business taxpayers before the IRS, including via collection due process hearings with the IRS Appeals Office.

Denver IRS Tax Attorney

IRS Appeal Rights

What are my rights as a taxpayer?  What appeal rights do I have regarding IRS actions or decisions?  These are common questions a taxpayer may have when a tax liability is owed to the IRS and the taxpayer is in the collection process with the IRS.  The information below has been provided for general information purposes.  If you owe taxes to the IRS and/or the IRS is attempting to collect the tax liability, it is highly recommend you speak with a tax attorney regarding a resolution to the matter.

Many IRS collection actions can be appealed to the IRS Appeals Office.  The appeals office is a separate office from IRS collections and is supposed to make independent decisions apart from IRS collections.  You can review Revenue Procedure 2012-18, which provides more in depth information regarding the IRS appeals’ office independence from collection.

The appeals office follows two main procedures regarding appeal action.  These two procedures would be Collection Due Process (often referred to as CDP) and Collection Appeals Program (CAP).

A Collection Due Process Hearing would be available under the following circumstances:

  • The IRS Filed a Notice of Federal Tax Lien
  • The IRS Issued a Final Notice of Intent to Levy
  • The IRS Issued Notice of Jeopardy Levy
  • The IRS Issued a Notice of Levy on Your State Tax Refund
  • Post Levy you request a hearing

A Collection Appeals Program would be available under the following circumstances:

  • Before or after the IRS files a Notice of Federal Tax Lien
  • Before or after the IRS levies or seizes your property
  • Upon the termination or proposed termination of an installment agreement
  • Upon the rejection of an installment agreement
  • Upon the modification or proposed modification of an installment agreement

A Collection Appeals Program (CAP Appeal) will generally result in a quicker appeals decision and as stated above is available for somewhat of a broader set of circumstances.  However, one should not that you cannot go to court after the CAP Appeal if you disagree with the CAP decision.

Can I represent myself?  This is a common question, and yes, just like in any court matter you can represent yourself, but you may want to consider speaking with a tax attorney if you are not experienced in IRS procedure and tax law. You can also be represented by a family member, or if you are business, a full time employee can represent the business or partners and/or officers of a business can represent the business.

The above article has been prepared by John McGuire of The McGuire Law Firm.  Mr. McGuire’s practice focuses primarily in taxation, including the representation of both individual and business taxpayers before the IRS.

IRS Appeal Rights Denver Tax Attorney

 

Deducting Business Expenses

Can I deduct my meals as a business expense?  Can I deduct this flight as a business expense?  Can I deduct the cost of my clothes or uniform as a business expense?  As a tax attorney, these are common questions I am asked, and rightfully so as everyone wants to take advantage of all potential deductions allowed by the Internal Revenue Code.  Not only is the deductibility of certain business expenses a hot topic with business owners, it is a hot topic and highly litigated topic with the Internal Revenue Service.  In fact, I recall reading a recent annual report to Congress by the Taxpayer Advocate Service whereby the deductibility of trade or business expenses he been one of the top ten most litigates issues for a very long time.  Furthermore, the same report stated that the courts affirmed the position taken by the Internal Revenue Service (the dissallowance 0f the deduction) in the vast majority of cases and that the taxpayer only prevailed (in full) about two-percent (2%) of the time.  The article below is not intended to be legal advice, but rather to provide general information regarding this issue.

First and foremost, we should start with the current law regarding deductions for business expenses.  Internal Revenue Code (the “Code”) Section 162 allows deductions for ordinary and necessary expenses incurred in a business or trade.  What actually constitutes ordinary and necessary may better be understood through an analysis of the case law, which is significant, surrounding the question.  Generally, the determination is made based upon a court’s full review of all facts and circumstances.

Based upon the black and white law under the Code, what constitutes a trade or business for purposes of Section 162.  Perhaps it is ironic that the term “trade or business” is so widely used in the Code, but yet, neither the Code nor the Treasury Regulations provide a definition for Trade or Business.  Personally, I think it would be quite hard to provide a definition for trade or business, especially under the auspices of income tax.  The concept of trade or business has been refined and defined by the courts more so than the Code.  The United States Supreme Court has held and stated that a trade or business is an activity conducted with continuity and regularity, and with the primary purpose of earning a profit.  Albeit broad, I would agree this definition would be sufficient for the majority of businesses I work and assist.

Now that we have an idea of what may constitute a trade or business, what is “ordinary and necessary?”  Again, the Supreme Court has helped provide definitions for these broad, but important terms.  Ordinary has been defined as customary or usual and of common or frequent occurrence in the trade or business.  Necessary has been defined as an expenses that is appropriate and helpful for the development of the business.  Further, it should be noted that some courts have also applied a level of reasonableness to each expense.

John McGuire is a tax attorney and business attorney at The McGuire Law Firm focusing his practice on issues before the IRS, tax planning & analysis and business transactions from formation to sale.

Denver Tax Attorney

Attempting to Avoid Shareholder Loan Reclassification

Many corporate shareholders may have taken a loan from their corporation.  In a prior article we discussed issues related to corporate loans and issues considered regarding the reclassification of a loan.  The article below discusses issues and actions a shareholder may consider taking to prevent the reclassification of a loan.  Please remember that this article is for informational purposes and it is recommended that you discuss any corporate loan issue directly with your tax attorney, business attorney or other advisors.

Proper recordkeeping and maintaining current promissory notes are of extreme importance regarding this issue.  The promissory notes must be kept current and reflect the payments that have actually been made by the shareholder to the corporation, the accrual of interest and other related issues in the previously executed notes.  Moreover, the approval of the loans should follow the proper approval and acceptance by the corporation’s board of directors and memorialized via the corporate minutes and other corporate memorandums.  The shareholder should also be able to verify that the interest has been paid on the note, the interest should be paid at regular intervals, and at least on an annual basis.  Contemporaneous evidence is always important when verifying loan payment and loan treatment to the Internal Revenue Service. From a tax return perspective, the corporate tax return should accurately reflect the loan on the balance sheet.

Because payment of the loan is such a vital factor, I often find it can be helpful to have multiple options or strategies for repayment.  Of course, the shareholder can make regular payments on a monthly, quarterly or yearly basis, but there are also other options for repayment.  If the corporation has strong earnings and profit, the shareholder could also use a distribution to pay make payment on the loan, perhaps even a lump sum payment to expedite payment on the note.  The shareholder may also be able to provide additional services to the corporation and receive bonuses for their work.  These bonuses could be paid to the shareholder and then paid to the corporation, or at least taxed to the shareholder as compensation and then reduce the amount of the note.

In short, generally the most important issues will be recordkeeping from corporate documents such as minutes, agreements and returns to the actual promissory note and making sure the shareholder is making payments with interest on the loan.

John McGuire is a tax attorney and business attorney at The McGuire Law Firm.  John assists clients with matters before the IRS, tax planning and advice, and business matters from contracts to the sale of business assets and interests.

Tax Attorney Denver Tax Lawyer Denver

Rental Losses

Many individuals hold property for rent.  Rental properties can make good investment options as they diversify an individual’s overall portfolio, the mortgage can often be satisfied by the rental payments as equity grows in the property and with the allowable deductions, including depreciation, a loss may exists that allows the individual to lower their total income and thus taxable income.  In regards to the losses, it is important that those renting property understand rental losses and when they are allowed and when the rental loss is not allowed.  The article below has been prepared to provide general information regarding rental losses.

Rental income is generally considered a passive activity and thus is subject to the passive loss allowance rules under the Internal Revenue Code.  Under the code, a passive loss would generally not be allowed unless: 1) the taxpayer had passive income (passive losses can be allowed to the extent of passive income); 2) the taxpayer actively participated in the real estate activity and qualifies for the $25,000 rental real estate loss allowance; 3) there is a qualifying disposition under the Internal Revenue Code; or 4) the taxpayer meets the criteria to be considered a real estate professional.

It is likely the most common fact or circumstance that allows a taxpayer to take the passive loss is the $25,000 rental real estate exception. This exception allows a taxpayer with certain income to take the passive loss, up to $25,000 if the taxpayer actively participated in the rental.  Further, the taxpayer should know that the rental activity cannot be an equipment leases, but rather a real estate rental, they must have actively participated and their adjusted gross income needs to be within a certain amount or the allowance can be lessened or not allowed at all.

Thus, how does a taxpayer show active participation in a rental activity?  In general, if the taxpayer participates in the management of the rental activity they are likely to be considered to actively participate.  The taxpayer does not necessarily need to work a certain number of hours, but rather show they are exercising their own independent judgment and decisions regarding the rental, and not following the requests of another individual.  There are specific taxpayers that do not meet the active participation requirement, which are: 1) A limited partner; 2) A taxpayer with less than 10% ownership; and, 3) A trust or corporation, because the $25,000 allowance is only intended for a natural person.  It should be noted that a grantor trust could be an exception to number 3 above because a grantor trust is owned by a natural person because it is not deemed a separate entity.

The above article has been prepared by John McGuire, a tax attorney and business attorney at The McGuire Law Firm.  John’s practice focuses primarily on matters before the IRS, tax planning & analysis for individuals and businesses and business transactions from business formation to business contracts and the sale of business assets and interests.

Denver Tax Attorney