Prospective buyers of New York City's large rental apartment properties must be aware of the tax burdens that may accompany their purchases. It is important to note that the owners of the largest buildings pay 36 percent of the city's property tax total, while these properties comprise only 24 percent of New York City's market property value.
However, this is not to discourage anyone from buying a large rental building in the city as part of a real estate transaction. Such a decision can be a wise investment that will pay dividends for years to come. However, buyers of these properties will want to know all of the tax liability associated their investments, both during the transaction and over the course of ownership, to ensure their goals are achieved.
Source: nydailynews.com, "NYC taxes hit large rental buildings hardest," Phyllis Furman, May 2, 2012
]]>When a woman sold her Connecticut house last year to move into a New York City condo, she incurred a $1.16 million tax debt for capital gains, interest and a tax penalty from the state of New York. The sale of the woman's house was set to close before she moved from Connecticut, but the closing was delayed until two weeks after she began living in New York.
]]> Because of this delay, New York tax authorities claimed that the gains should accrue to the state where the woman lived when the sale actually closed -- New York. This was despite the fact that the woman had already paid $577,000 in capital gains tax to Connecticut.New York's tax court agreed with the state's tax authority. It ruled that because the sale of the home was not closed before the woman moved to New York, the sale was not completed for tax purposes until the final closing, which occurred while the woman was living in her New York City condo. She is appealing the ruling.
The outcome of this case will ultimately be important for anyone considering moving to New York, especially if a move would involve selling property. For anyone considering relocation to New York from another state, it is vital to consult an experienced tax attorney who understands the tax burdens they may be responsible for when moving to New York.
Source: Forbes, A $1.16 Million Downsizing Mistake - New York Tax Collectors Get Really Greedy, Ashlea Ebeling, April 27, 2012
]]>The proposed law would likely give rise to tax disputes because commuters would be subject to tax liability even though they do not vote in New York City. As residents of other states, they are not represented in the New York district.
]]> The law, which first appeared in the mid-1960s, was repealed by the New York State Court of Appeals. The Court ruled that it was unconstitutional to impose a tax on out-of-state residents only. This means that the proposed revival of the tax law would have to apply to all people who commute into New York City, including New York state residents who live outside of the city.Any tax law that imposes a tax on only a certain group of people may give rise to claims of unfair, discriminatory or unreasonably burdensome taxation. Under the Privileges and Immunities Clause of the U.S. Constitution, states are prohibited from discriminating against non-residents. Further, courts may examine challenged tax laws under the Commerce Clause test, which requires taxes to be fairly apportioned.
A tax law must also pass muster under the Due Process Clause, which prohibits state and local governments from depriving anyone of life, liberty, or property without providing for standards of fairness.
An unexpected tax obligation can be difficult for businesses and for individuals. Although in this case the commuter tax may bring up a constitutional process argument, many individuals struggle with tax disputes. Legal advocates with tax experience can inform a client and negotiate a settlement in the case of penalty.
Source: fairlawnpatch.com, "Will NYC Revive the Out-of-State Commuter Tax?," Colleen O'Dea, April 25, 2012
]]>The $100 million case moves ahead as the first to be filed under the sales tax liability law, which allows for charges of triple the amount owed by the company if proven that a company purposely underpaid its sales taxes.
]]> Sprint-Nextel has denied any wrongdoing, and the company asserts that all taxes due have been paid.This case highlights the problem areas a company may face when calculating their tax liability. Some typical questions a company could encounter include: Which items are subject to tax? How do we minimize our tax liability? How should we manage our records? What is the best way to defend ourselves if we are audited?
Sprint-Nextel is being accused of deliberately under-collecting and not fully paying $100 million in state sales taxes to keep its competitive prices down with their monthly calling plans. The state of New York alleges that the company underpaid their sales tax, because a 2002 state law states that the full charge of their monthly calling plan fees must be used in calculating the amount of sales tax to collect and pay.
The New York Attorney General has said that "New York tax law is clear" in this case. That may be true for a licensed attorney, but many New York residents and companies would probably agree that when it comes to tax laws, they could be described as anything but clear.
Federal tax law is difficult enough, but adding state tax law on top can double the complications, especially in New York.
New York companies know that collecting and paying state sales tax is an important part of their financial considerations. Failure to pay the required amount can lead to substantial penalties.
Source: Fox News, "Sprint-Nextel sued for $100M in NY sales taxes," April 19, 2012
]]>Vonn made an announcement after the news broke of her tax troubles and she said, "It is no secret that my last year off the mountain has been filled with many personal challenges. This matter was only recently brought to my attention, and I took immediate and deliberate steps to remedy the situation." She also stated that the money owed was for the 2010 tax year which was paid on time and in full. She also elaborates that she's learned her lesson on not being in control of her own finances and relying on someone else to take care of her best interest is something she will not do in the future.
While Vonn's back tax situation, may be resolved, if you find yourself in a similar situation and can't make your tax payments, you should contact an experienced tax attorney who understands the complexities of tax law and can work with you to develop a plan for resolution.
Source: USA Today, "Lindsey Vonn owes $1.7 million in back taxes," April 15, 2012
]]>The Internal Revenue Service caught onto the scheme in 2009 when the IRS' Fraud Detection Center flagged a number of electronically filed 2008 personal income tax returns seeking the First Time Home Buyer Credit on homes purchased in Salem and Penns Grove, New Jersey. The tax returns sought refunds between $7,000 and $11,500.
]]> The First Time Home Buyer Credit Program was put into place to help home buyers who were purchasing primary residences between Apr. 8, 2008 and Dec. 1, 2009. These homebuyers could take a credit on their tax return of up to $8,000 if they purchased a home between these dates.The fraud unit of the IRS began investigating the large number of requests for the First Time Home Buyer Credit and found that the taxpayers applying for the credits had not purchased homes and were not employed by the companies listed on their 2008 tax returns.
The man behind this crime is accused of exploiting the program during tough economic times and obtaining millions of dollars of public funds and exploiting the tax program. He admitted that he was responsible for filing more than 100 fraudulent tax returns in the names of other people.
The man, 41, was charged with conspiracy to submit false tax refund claims to the IRS, submission of false claims, wire fraud conspiracy and wire fraud. In all, he was charged with a 36-count indictment. In addition, he allegedly had a co-conspirator, who shared in the fraudulent refunds and this man was indicted last year on charges of conspiracy and submission of false claims for tax refunds.
These serious charges mean that this man could face a maximum sentence of 10 years in prison, a $250,000 fine and he has been ordered to repay the IRS at least $1,020,388. The man's sentencing is scheduled for Nov. 8.
Source: delawareonline, "New Jersey man pleads guilty to filing fraudulent tax returns," Terri Sanginiti, April 12, 2012
]]>When you start your business it's a good idea to hire a certified public accountant to handle your quarterly taxes and keep you up-to-date on any changing tax laws. There are many small businesses out there that have horror stories about not knowing or understanding the tax implications of their business.
]]> For example, let's say a company starts a business and at the end of the year their accountant tells them that they owe the IRS $15,000. The small business owner is shocked and doesn't understand how this happened or how they will be able to pay this back. A big mistake that small businesses make is that they need to pay their income taxes quarterly in order to avoid this big shock at the end of the year. Filing quarterly works in favor of a small business, because taxes are for income made during that quarter, so if you made less one quarter, you'd pay less in taxes.If a business owner falls into this situation, there are options for repayment. If your credit is good, you could take out a line of credit to pay your tax bill or the IRS will work out a payment plan with you over time.
Believe it or not, the IRS does understand if you are in a situation where you can't pay right away, but they do encourage you to file anyway. The penalty for not filing is 4.5 percent per month in addition to a late payment penalty and interest.
As a business owner, paying, collecting and filing taxes are part of owning a business and one of the many things you'll learn to navigate.
Source: New Jersey Herald, "Can't pay the IRS? One business owner's solution," Joyce M. Rosenberg, March 30, 2012
]]>Procrastination is probably the number one reason that people file late or not at all. If you don't file a return, the law provides taxpayers with a three-year window to claim a refund. If you are having trouble or have questions with your taxes, there are hundreds of free IRS volunteer tax help sites to assist taxpayers in preparing basic tax returns. Basic tax returns are typically for older taxpayers, people with disabilities, and non-English speaking individuals. Tax volunteers can be found at local libraries, senior centers and college campuses.
]]> For individuals that earn $57,000 or less per year, they can e-file their tax returns for free through the IRS website. For those with incomes higher than $57,000 they can also use the Free File Fillable Forms through the IRS website and it does not require any special software because the form does all of the basic math calculations for you.If you are preparing your taxes yourself and have a low income, you should check into your eligibility for the Earned Income Tax Credit to see if you would qualify for tax relief. In 2011, 552,000 filers in New Jersey collected approximately $1.2 billion in EITC payments and the average amount was $2,117. This is a great opportunity for qualified low income earners to get a larger refund.
The IRS is warning tax payers to watch out for scams. It is important to remember that the IRS does not initiate contact with a taxpayer about their return through email, text messages or other social media.
And finally, if you cannot file your return by April 17, make sure you file for an extension, which would give you until October 15 to complete your taxes.
Source: LawrencevillePatch.com, "IRS Tax Tips for Busy New Jersey Taxpayers," March 28, 2012
]]>There are many fraudulent tax preparers out there, but ultimately if a person knowingly files a false tax return, they could be charged with a fine. While you may turn over your receipts and records to your tax preparer, it is still your responsibility to know what is on your income tax return and what gets filed with the IRS.
]]> Some preparers may try and get you a larger refund by claiming inflated personal or business expenses, false deductions, or excessive exemptions on the tax return. The IRS has ways of detecting fraudulent returns and if you are caught, the tax payer must pay the additional taxes and interest and may be hit with penalties. The tax preparer is not punished.Most tax preparer's are professional and honest, but there are a few things you should keep in mind when choosing someone to prepare your tax return:
The tax deadline is quickly approaching, but there is still time to find a qualified tax preparer. Finding one now will reduce the stress of waiting until the last minute to file your return.
Source: SummitPatch.com, "IRS Urges Caution When Choosing a Tax Preparer," Adam Bulger, March 14, 2012
]]>All non-profit hospitals have full disclosure when it comes to their operating budget, business holdings, executive compensation and other financial data that they have to submit to the Department of Health and Senior Services in order to receive their charity care funding. They also must post the information to their website.
]]> This legislation will also give for-profit hospitals a way to track their uncompensated care that they provide to uninsured and low-income patients as they also receive the charity care funding. The bill requires the for-profit hospitals to submit the same information as a nonprofit hospital in order to receive the funding. The New Jersey Department of Health and Senior Services will collect and post the information on its website according to the bill's provisions.The New Jersey Hospital Association has not decided whether it is backing this bill or not, but feels that the amended bill does a better job of how the reporting structure will be similar between for-profit and nonprofit hospitals. They also support the purpose of the bill and think in the long run it will benefit all hospitals.
Source: Healthcare Finance News, "Bill to require financial transparency for all NJ hospitals," Kelsey Brimmer, Mar. 12, 2012
]]>The draw for people who become involved in the scam is that they are promised refunds and they have little or no income. In some instances these individuals are not required to file a federal income tax return. The scammers promise that they can obtain a refund or nonexistent stimulus payment based on the American Opportunity Tax Credit, even though the individual is not enrolled or paying for college.
]]> Many people have already fallen for the scam and the IRS wants everyone to be on guard so that no one else becomes a victim of this crime. The IRS has detected and stopped thousands of these false claims and is continuing to investigate the sources of the scheme in the hopes that those involved in the scam will be caught and prosecuted.While the promise of free money is enticing, it ends up costing the victims money that they don't have. There is an upfront fee anywhere from $500 to $1,000 that is said to be a credit, but the victims end up losing that money.
Every taxpayer needs to remember that they are legally responsible for the accuracy of their returns and must repay any refunds received in error plus interest and penalties if applied. Those that intentionally try to defraud the government could face criminal prosecution.
Taxpayers should be on alert if approached with the following scenarios:
Your best bet is to choose a tax preparer carefully and be aware of refund schemes. If you aren't sure whether a company or individual is legitimate, contact your local Better Business Bureau.
Source: NJToday.net, "IRS Warns Of Bogus Refund Schemes Abusing Popular College Tax Credit," Mar. 5, 2012
]]>The turmoil with such a large trust is that those left in charge of deciding what to do, is difficult. Many families think about what money that is unearned can do to a family -- they don't understand the hard work that went into creating the trust and don't appreciate the wealth. In the movie, the father decides to not sell the land.
]]> So, what should you do if you have a large estate and want to make sure that your wishes are met? The first thing you should do is create a living will, which alleviates any one family member trying to figure out your wishes and avoids conflict if family members disagree on final care.Be wary of joint ownership of land with relatives. It can lead to family squabbles if someone wants to sell the property for development. A way around this would be to create a limited liability company, managed by the people who manage the trust. Those involved would receive shares from the property or could opt out and take a cash payout.
When putting together your estate think about how long-term trusts can pose their own unique challenges. Will the person be able to know what to do when circumstances change dramatically? It's hard to have a crystal ball into the future, but plan carefully.
Finally, whoever you choose to be your trustee, they must be objective and they will have legal obligations to act in the best interests of the beneficiaries and to avoid conflicts of interest.
Source: Forbes, "George Clooney Makes Estate Planning Sexy," Deborah L. Jacobs, Feb. 23, 2012
]]>The issue seems to stem from the IRS' Where's My Refund tool and when electronic filers can expect their refund to arrive. When people have filed and then log back into the system to check their status, they are told that the IRS has no information about their tax return.
]]> This is scary and frustrating for people who have filed their taxes and are concerned about where their tax return ended up. The IRS has acknowledged the problem and has reassured people that this is a temporary glitch and that they have received the tax information that has been filed, but the site is not reflecting it. In addition, the IRS does not want tax payers to call them about this issue, because the matter should be resolved. Refunds will be issued within 10-21 days as it says on the site when you file.The glitch has affected people who filed electronically Jan. 17-25 and chose the option of direct deposit for their refund.
People should be assured that if they filed through TurboTax and received an acknowledgment that their return was accepted, they will not need to file their return again.
This latest glitch is blamed on a recently upgraded system that the IRS installed prior to the tax season. So far this has been the only issue with the upgraded system.
Source: San Francisco Chronicle, "IRS has trouble with e-file system," Kathleen Pender, Feb. 16, 2012
]]>Many years ago, Houston lent her father a large sum of money and they set up a way for him to pay her back. Houston's father took out a life insurance policy on his own life and named his daughter the beneficiary. He also structured the policy not to be included as income for his daughter for tax purposes. Upon his death in 2003, the policy proceeds went to his daughter and should have gone smoothly, but neither planned that his wife would file her own suit to collect on the proceeds of the life insurance policy. His wife wanted the proceeds of the policy to pay off the mortgage on the residence she shared with her husband. Houston counter-sued and recently won the multi-year battle a few weeks ago.
]]> Even though Houston's father had the policy properly set up to avoid income and estate taxes, there are independent rules for income and estate taxes and only a professional tax attorney can navigate the differences between the two.No matter your age or whether you are a celebrity or not, you should consider creating a comprehensive estate plan that minimizes estate taxes and respects your wishes regarding the distribution of your assets. An attorney will help you develop an estate plan that deals with both taxable and nontaxable issues that most families face. With no estate plan in place, you risk the federal government and the state you live in to determine how your estate is distributed to your loved ones. You will also increase the likelihood that federal or state taxing authorities will collect a significant portion of your estate in taxes.
As for Houston's estate, the coming months will show if she had a good estate plan in place for her loved ones.
Source: Forbes, "Whitney Houston's Death and Taxes," Robert W. Wood, Feb. 13, 2012
]]>The calculation is figured by taking the average level of sales tax for each state, county, Indian reservation, municipality, and special districts and then adds them together. The sales tax can vary widely so consumers should do a little research before traveling to different states, so that they can plan out their purchases.
]]> The worst sales tax rate recorded is 13.725 percent and New Jersey comes in at 7.0 percent, which is the middle of the pack. According to Vertex, during 2011, 459 taxing jurisdictions made changes to their sales tax rate and all but 51 were increases or new taxes.This year's presidential election will focus on income tax paid by the wealthy because they can take advantage of laws taxing investment gains at lower levels. Because the majority of sales taxes are paid for by the poor, who pay a higher percentage of their income in sales tax, this will be a contested topic.
As a business owner, paying, collecting and filing taxes are part of owning a business. Some business owners may not understand what items are subject to sales taxes and what determines a tax on a service or a product. Businesses who have been accused of failing to file their sales taxes or need help determining tax rates, should contact a tax attorney. There are a lot of complex tax laws that only the expertise of an attorney can sort through. They can help you figure out how to maintain proper records of your sales to help minimize your sales tax liability.
Source: Forbes, "Average U.S. Sales Tax Rate Drops - A Little," William P. Barrett, Feb. 2, 2012
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