Archives For Law

The following infographic reveals some of the more bizarre things you can get tax reductions for. Enjoy!

Big thanks to the folks over at NowSourcing for creating the infographic. You can check out the original link here

 

JDKatz: Attorney's At Law

JDKatz, P.C. is a full-service law firm focused on tax lawbusiness and transactional lawestate planning and elder law. We are dedicated to minimizing your existing liability and risks while providing valuable tax planning to streamline your tax issues in the future. Please call us at 301-913-2948 to schedule an appointment to meet with one of our trusted attorneys, or visit http://www.taxattorneymd.com.

Hotel taxes might be an afterthought when you’re planning a vacation. But they add up quickly, so you should know what you’re in for before you book. Here’s an infographic of how certain cities use the taxes! Continue Reading…

It is a period of civil war.

IRS spaceships, striking from a hidden base, have won their first victory against the evil Corporate Empire (See: IRS Wins Massive Tax Shelter Case, Denying BNY Mellon $900 Million in Tax Benefits)

During the battle, IRS spies managed to steal secret plans to the Empire’s ultimate weapon, STARS transactions, an armored code of business law with  enough power to dodge billions in tax payments.

Pursued by the IRS’ sinister agents, Corporate lawyers raced home aboard their starships, remiss of the stolen plans that made their companies thrive and restored the secret swiss bank account to the galaxy.

In these dark times, the power to shelter corporate profits offshore is insignificant next to the power of the Economic Substance Doctrine.

 

In the upcoming months a string of high profile cases will showcase the U.S. government’s fight against corporate tax sheltering.

The accused are four major U.S. banks previously involved in structured transactions with London-based Barclays Plc.

The transactions, known as STARS deals, were designed entirely for purposes of tax avoidance, according to the IRS.  STARS is short for “structured trust advantaged repackaged securities.”  The banks, meanwhile, claim STARS were done to “enhance their core business model,” and are challenging the IRS over back tax charges worth hundreds of millions of dollars a piece.

BNY Mellon – the world’s largest custody bank – was the first to sue the IRS after it received a tax bill of around $900 million for improperly claimed foreign tax credits related to its STARS transactions with Barclays.  The U.S. tax court ruled in the IRS’ favor: “U.S. tax laws and treaties do not recognize sham transactions or transactions that have no economic substance as valid for tax purposes,” the court said in its opinion.

BNY Mellon is appealing that decision. Three other banks – Wells Fargo,  BB&T Corp and Santander Holdings are taking on the IRS in separate cases.  In total, over $3 billion of transactions are on the line.

The IRS’ main weapon in these cases is economic substance – a doctrine in U.S. tax law under which a transaction must have an economic purpose other than the reduction of tax liability in order to be considered valid.  While not as clumsy or random as a blaster, it may not be the ultimate weapon that prosecutors need it to be; one tax expert called it a”club in the closet” for the IRS that it is using too broadly.

Enhancements to the economic substance doctrine were written into the President’s 2010 healthcare system overhaul, upping the ability of the IRS to prove tax avoidance and allowing them to impose punitive penalties of up to 40% of the tax liability.

“For the IRS, said Robert Probasco, a partner at Thompson & Knight, the doctrine is a ‘convenient way to dispose of cases without some of the messiness of statutory interpretation.'”  Tax and legal experts are divided over whether that argument will hold through the appeals process and future legal showdowns.

Still, “If BNY Mellon loses its appeal of the Tax Court’s February decisions, ‘it will be the most remarkable extension of the economic substance doctrine around,'” said Jasper Cummings, a tax analyst with Alston and Bird LLP.

Already, BB&T Corp recognized a $281 million expense as a result of the BNY Mellon case.  A U.S. tax court heard closing arguments over their entire $892 million STARS dispute on July 30; a decision is expected sometime in the fall.

Santander and Wells Fargo will take the hot seat later this year as well, but Barclays – the bank that marketed and arranged the transactions – is not a party for the STARS cases.

In any case, those eagerly awaiting the summer 2015 release of Episode VII have plenty of STARS wars to keep themselves busy with.


JDKatz: Attorney's At Law
JDKatz, P.C. is a full-service law firm focused on tax law, business and transactional lawestate planning and elder law. We are dedicated to minimizing your existing liability and risks while providing valuable tax planning to streamline your tax issues in the future. Please call us at 301-913-2948 to schedule an appointment to meet with one of our trusted attorneys, or visit http://www.taxattorneymd.com.

Beginning Jan. 1, 2014 the Affordable Care Act (ACA) will come into full effect. While parts of the law are already in place, 2014 will bring in a whole new set of changes, including dozens of tax provisions, that can be difficult to understand. Among them is the requirement for minimum essential coverage, which mandates individuals maintain an approved health insurance plan or face a penalty – the greater of 1% of household income or $95 per household member.

Thanks to the folks at Block Talk, we’re going to post a series of infographics that make it easier to understand the 1,000-plus page ACA. Read close! Most of these provisions don’t apply to everyone:

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There are two certainties in the lives of every American according to Ben Franklin: death and taxes. So how much of every working day do we spend working to pay Uncle Sam?

Below is a breakdown of an average workday by time spent working to pay taxes. Based on a 7 1/2 hour-workday, we spend about 2 hours each of those days earning enough to cover our tax bill.

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The Supreme Court’s ruling that section 3 of the Defense of Marriage Act (DOMA) is unconstitutional should be good news for tax paying same-sex couples; but, they, along with their employers, are left in a cloud of uncertainty as to how the IRS and other tax authorities will implement the changes.

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*IRS seeks stay of earlier judge’s order halting rules — *Program was first attempt to regulate tax return preparers — * Opponents say IRS lacks authority for such regulation

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With economic uncertainty still abound and fiscal cliff negotiations at a standstill, these industries are among the few whose profits have remained steady throughout the financial crisis.  As a law firm specializing in tax law, we’re fortunate to see that legal services and tax preparation are among the top service related industries with regards to their pre-tax profit margin.  Also of note in the below infographic is that financial investment activities remain the most profitable sector in America despite all we’ve heard about crippling regulations, bailouts, the downfall of Wall Street, etc.  As for the future, the Bureau of Labor Statistics projects that home healthcare and individual family services will benefit from the most growth in 2013 and beyond, but if you really want to go where the money is, consider dentistry school – which sits just below financial investment activities on this list.
Here’s to a brighter smile tomorrow!

The most profitable Industries, pre-tax

 

JDKatz, P.C. is a full-service law firm focused on tax law and estate planning. We are dedicated to minimizing your existing liability and risks while providing valuable tax planning to streamline your tax issues in the future. Please call us at 301-913-2948 to schedule an appointment to meet with one of our trusted attorneys.

 

Thanks to Face the Facts USA for producing this infographic explaining the Alternative Minimum Tax (AMT). Check out our original post on this subject by scrolling the above post: Forget the Cliff: Why the AMT is the Real Taxmageddon

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Dirty Dozen Tax Scams

February 22, 2012 — Leave a comment

 

Every year the IRS issues a “dirty dozen” common tax scams that many taxpayers have encountered over time.  When filing tax returns, it is always important to remain cautious and aware of the wide range of schemes that can greatly hinder your financial security. The following list of scams can occur accidentally or purposely, however, the only way to protect yourself is to be aware and conscientious of these situations:

1) Identity Theft –perhaps the most common scam – thieves that use a taxpayer’s identity and personal information to claim a fraudulent refund

2) Phishing – unsolicited e-mail or a fake website that encourages taxpayers to provide their personal information for a “tax return” NOTE: The IRS NEVER E-MAILS taxpayers

3) Return Preparer Fraud – suspecting tax preparers have been known to charge inflated fees by promising inflated refunds, take a portion of the taxpayer’s refund as compensation, and add forms that you have never filed before. Every tax preparer should have a Preparer Tax Identification Number and you should always review your return prior to submitting it to the IRS

4) Hiding Income Offshore – every taxpayer must report financial accounts abroad, regardless of where or how the money is used

5)  “Free Money’ from IRS & Tax Scams involving Social Security – flyers and advertisements saying there is free money from the IRS by filing a return with little to no documentation. These scams prey on the elderly and low-income individuals. Do not trust a flyer or non-professional individual with your finances.

6) False/Inflated Income and Expenses – entering an inflated income to earn more credits is a highly used scam among taxpayers. These intentional mistakes are easily recognized and the taxpayer must pay interest and penalties on those errors.

7) False Form 1099 Refund Claims – sometimes taxpayers knowingly submit a Form 1099 Original Issue Discount to claim a false refund. You could face criminal prosecution if this form is submitted without any justification.

8) Frivolous Arguments – promoters encourage taxpayers to make outrageous and unreasonable claims against paying taxes they owe. Every tax liability can be contested in court, however, you cannot disobey the law.

9) Falsely Claiming Zero Wages – typically a “corrected” Form 1099 or Form 4852 (substitute W-2) are used to improperly reduce income. If you have a W-2, you must submit your exact income, or you could potentially face a $5000 penalty.

10) Abuse of Charitable Organizations and Deductions – taxpayers have been known to exaggerate their charitable contributions for the year. These charities submit their own tax forms as well, so this could be detrimental to the fraudulent taxpayer.

11) Disguised Corporate Ownership – there have been cases where false employer identification numbers have been submitted to claim fictitious deductions, facilitate money laundering, or underreport income.

12) Misuse of Trusts – while some trusts protect a taxpayer’s assets, there has been substantial abuse of private annuity trusts and foreign trusts to alter income and deduct personal expenses. You should always seek the advice of professional before shifting your assets in a trust. 

The attorneys at JDKatz, P.C. understand the comprehensive scamming techniques undertaken by criminals. We can assist you in resolving your financial and legal matters as a result of these unscrupulous methods of tax filing.