Business and Tax Lawyer Blog

Current measures being taken to close the tax gap (the difference between taxes paid and tax owed) has begun to disproportionately affect small businesses. Part of this may be attributed to an increase in audits and information reporting requirements for small businesses, such as the new 1099 reporting requirement.

The National Research Program (NRP) generated tax gap estimates suggesting that the underreporting of income by small businesses represents $83-$99 billion of the $150-$187 billion individual income tax gap for 2001. After collection activities the total tax gap went from $345 billion to $190 billion. However, IRS auditors conducting NRP examinations have found that most underreporting of income that occurs is unintentional. The IRS focused its tax-gap study on individual tax income returns, and on returns not subject to withholding or third party reporting, causing an unfair skew towards small businesses.

To learn more about this article, visit Small Business and the Tax Gap .

Continue reading "The Tax Gap and Small Business" »

The next tax day may be far away, but thinking about tax day now can help you save later. Two options to consider are:

1. Bunch deductible expenses. Certain deductions have thresholds. For example, you can only write off medical expenses to the extent that they are 7.5% of your adjusted gross income. Miscellaneous expenses are subject to a 2% adjusted gross income floor. If you are coming close to qualifying for the medical deduction, consider bunching those expenses together.

2. Take advantage of green credits. Certain energy efficient products qualify for a tax deduction of 30% of the cost up to $1,500. Among these products are energy efficient air conditioners, biolers, furnaces, roofing, doors, water heaters and insulation. Some energy efficient hybrid cars also qualify for credits up to $3,400 of the purchase price. However, 2010 is the last year to take advantage of the hybrid write-off. See Department of Energy - Consumer Energy Tax Incentives for more information.

Taxes can seem complicated and it is hard to know your best options. Contact Wood, Atter & Wolf, P.A. to discuss with a tax attorney the tax options that are best suited for your needs.

The IRS' national taxpayer advocate recently said that a provision in the health care reform law could significantly increase tax recordkeeping requirements. This will affect nearly 40 million self-employed workers, small businesses and charities starting in 2012. Each of these entities will be required to issue Form 1099s to every vendor from which they purchase more than $600 worth in goods per year. Currently, Form 1099s are currently only required for payment to independent contractors but not for goods.

According to the IRS, underreported income is a high contributor to the nation's $300 billion "tax gap" - the different between the amount owed to the government and the amount taxpayers actually pay. Nina Olson, an IRS taxpayer advocate, said she is not sure that the information revealed from the new requirement will justify the burden placed on taxpayers. Also, businesses that make "qualified purchases" from more than 250 vendors in a calendar year will be required to file 1099s electronically. Some exceptions to these rules are being considered due to their potential adverse impact on small businesses, which are already struggling to succeed in a difficult economic environment.

For more information on this topic see More reporting for small businesses.

A tax attorney will be able to provide sound guidance on what these new laws mean for the future of your business. Contact Wood, Atter, & Wolf P.A. for legal assistance.

Former Lehman Bros. trader Lawrence McDonald told a University of North Florida audience last month that "the party is just getting started" in the legal fallout from the failure and Chapter 11 bankruptcy filing of the major Wall Street investment banking and securities brokerage firm.

McDonald, co-author of A Colossal Failure of Common Sense: The Inside Story of the Collapse of Lehman Brothers, said that regulators and prosecutors have already contacted many of the whistle-blowers who helped him write the book.

Lehman executives are potential targets for alleged accounting fraud prosecution in what the company called "Repo 105" transactions, an accounting loophole that allows a company to temporarily sell securities in order to move them off its balance sheets prior to the release of quarterly earnings, and then repurchase them after quarterly results are announced.

McDonald said that "Lehman Brothers told the world that they were in the moving business, not the storage business. They were wrong."

He places the blame for the collapse of Lehman squarely on the shoulders of top executives: "The collapse of Lehman Brothers comes down to one sentence: There were 24,992 people making money and eight guys losing it."

Making wise business decisions sometimes requires the help of savvy legal and tax counsel. If your company could use some assistance, contact our Jacksonville, Florida business and tax law firm.

Florida's Great Northwest is an economic development group that receives most of its funding from public sources. The group has claimed that it is exempt from Florida Sunshine laws, which require public entities in Florida to operate with transparency.

Other development groups in Florida also accept tax money, but claim exemption from the Sunshine Law, saying that the company negotiations they are involved in are very sensitive in nature. State Senator Don Gaetz and Representative Marti Coley have said that they will file legislation to clarify how the law applies to development groups who get their financing from both public and private sources. The legislation will seek to find a proper balance between transparency and privacy.

While Gaetz and Coley do not want to compromise sensitive negotiations, they believe that many functions of Florida's Great Northwest and other groups like it can be carried out in the sunshine without any negative effects on their businesses. The two have also asked Attorney General Bill McCollum for an opinion on whether Florida's Great Northwest should be subject to the Sunshine Law.

Florida's Great Northwest maintains that they are a private organization, not created by Florida statute that does not act on behalf of any state agencies, which means that they are not subject to the Sunshine Law. Read the full article at Bill may clarify Sunshine Law questions.

If you have any questions about how Florida statutes might affect your business, please contact Wood, Atter & Wolf, P.A. for legal counsel.

Impending federal rules that will affect Florida lakes, rivers and streams have business groups and politicians up in arms over what they call a "water tax" that could cost Florida residents up to $50 billion. But environmentalists disagree; arguing that the new, tougher standards are the only way to combat the algae blooms that plague state waterways. The new rules, to be handed down by the US Environmental Protection Agency (EPA) in January of 2010 are the result of a legal battle between the agency and environmental advocates. The EPA agreed several years ago to set new standards for "nutrient" concentration (from agricultural runoff and sewage) in Florida waters. The state currently uses a much more vague set of standards. High nutrient concentration directly impacts algae blooms in the waterways.

Affected businesses say that the EPA is unfairly singling out Florida with the rules. They also say that the new rules are not based on good evidence, and will cost a lot of money without actually helping the environment. Florida Water Environment Association Utility Council President Jim Oskowis has estimated that the new regulation could cost the state not only $50 billion to implement, but also another $1.3 billion per year to operate.

Lawmakers argue that any new standards should be set by the Florida Department of Environmental Protection rather than the EPA. Environmentalists call the cost estimates "laughable." Read more about the battle over the new standards at Looming federal water quality standards set off firestorm.

If you have a business that may be affected by the new standards, please contact Wood, Atter & Wolf, P.A. for legal counsel.

Good news for business owners and those entrepreneurial souls who are looking to start their own business, either from scratch or by acquiring an existing business. It appears that the Recession—the deepest since the Great Depression—is starting to recede. Bouyed by a loan agreement between the European Union and Greece over the weekend, the Dow Jones average closed Monday above the 11,000 mark for the first time in over 1 ½ years! And the Standard & Poor's 500 index closed a point below its own milestone of 1,200. It is expected that major business will report better earnings than expected. In addition, the jobless rate (expected to increase) has remained flat. Out of this Recession, there is an emerging economy of first-time entrepreneurs. Businesses and would-be business owners in Northeast Florida are realizing that now is an opportune time to consider either expanding their current business or starting their own. For those considering such a move, the assistance of Florida business and tax lawyers could prove invaluable, as there are many factors to consider and, once a decision is make, there are multiple moving parts to a successful transaction. These range from properly pricing the acquisition (which includes the valuation of an existing business) to obtaining proper permits and licenses, insurance, and the protection of intellectual property, such as trademarks.

To speak with a Jacksonville business and tax attorney about starting up a business, please contact Wood, Atter & Wolf, P.A. to set up a consultation.

Around this time of year, many bloggers, tax professionals, and media outlets circulate tax planning tips. But good tax planning is a discipline that takes place all year long – not just on April 14th. Florida residents and other taxpayers around the country can and should start planning now for their 2010 tax filings.

A tax planning strategy starts with the basics. Your net taxable income is your gross income (or top-line pay) less any deductible expenses. Tax planning are activities designed to minimize a person's net taxable income. That means using legal and ethical means of lowering your gross income while maximizing your deductions.

Lowering Gross Income

Lowering your gross income doesn't refer to quitting your job, it simply requires excluding certain income from your federal income tax. Some effective ways to accomplish this include:

• Direct more income into a 401k or 401b. Your contributions are subtracted from your gross income, and you are saving for retirement at the same time. It is a real win / win situation.

• Defer some income. Some examples include not sending invoices for work completed until January 1st of the next year, or deferring capital gains on the sale of a certain stock.

Maximizing Deductions

This can include taking deductions or taking advantage of tax credits. Some tips for taking these deductions include:

• Check into whether you qualify for certain tax credits. These include the child tax credit, hope and lifetime learning credit, child and dependent care credit, hybrid car credit, energy saving devices credit, and the making work pay credit

• Maximize the amount of deduction you can take by contributing to IRA accounts, deducting qualified medical expenses, taking allowed homeowner deductions, and certain business and personal expenses.

Read more tips and strategies for lowering your tax bill at Tax Planning Tips.

Tax law can be complicated, and changes from year to year. Be sure to consult a tax professional when creating a tax plan or preparing your return. If you live in the Jacksonville, Florida area and require assistance with tax planning, please contact Wood, Atter & Wolf for tax planning legal counsel.

Ben Franklin may have been overly optimistic for the Internal Revenue Service when he said that the only two certainties in life are death and taxes. For many people, avoiding their tax responsibility is an art form. From offshore accounts, to hiding income, to simply not paying the bill, the following six people have made the tax evasion hall of fame.

Walter Anderson

This telecom entrepreneur was at the center of the largest tax evasion case in United States history. A 2005 probe revealed that Anderson had used an elaborate network of offshore companies to hide money from the IRS. In the end he was found to owe $200 million to the government, and was ordered to pay $400 million after pleading guilty to the charges against him.

Sinbad

Celebrity and comedian Sinbad reportedly filed federal income tax returns every year between 1998 and 2006, but never actually sent in the money he owed on the returns. His total delinquent tax bill is $8.5 million, which may be hard for the IRS to collect, since Sinbad's 2009 bankruptcy filing reveals that he has a negative net worth.

Dionne Warwick

The California Franchise Tax Board has named Ms. Warwick one of the worst tax debtors in California. She reportedly owes $2.67 million to the state of California. She has apparently not been prosecuted, and sources report that she is in the process of paying what she owes.

OJ Simpson

Simpson is perhaps better known for more serious charges than tax evasion, but he has been accused by the state of California of owing the state $1.44 million in unpaid taxes, which he tried to avoid by moving to Florida.

Marc Anthony

Latino singer Anthony failed to pay his taxes from 2000 to 2004, saying that he had hired a firm to handle his finances and was unaware that he owed $2.5 million in taxes to the federal government. The firm pleaded guilty to tax felonies and was punished; Anthony paid his tax bill and was not prosecuted.

Leona Helmsley

In 1989 this billionaire hotelier was charged with one count of conspiracy to defraud the United States, three counts of tax evasion, three counts of filing false personal tax returns, sixteen counts of assisting in the filing of false corporate and partnership tax returns, and ten counts of mail fraud, according to Wikipedia. She was sentenced to sixteen years in prison but only served 19 months behind bars and two years on house arrest.

Read about some other top tax dodgers at The 12 Most Notorious Tax Evaders of All-Time.

If you live in the Jacksonville, Florida or Orlando, Florida area and require assistance with tax planning, please contact Wood, Atter & Wolf for tax planning legal counsel.

More than eighty percent of American households use either a paid tax preparer or tax preparation software to help them file their taxes. The Internal Revenue Service (IRS) recently announced that they are proposing new registration, testing, and continuing education of tax preparers for the 2010 tax year.

The IRS believes that higher standards will serve to protect taxpayers and increase compliance with tax laws. The goal of the new program is to ensure that taxpayers receive competent, ethical service from qualified professionals.

The requirements will include:

• All paid tax return preparers will have to register with the IRS to obtain a preparer tax identification number (PTIN). They will be subject to a limited tax compliance check to qualify.

• Competency tests for all paid tax return preparers who are not attorneys, certified public accountants (CPAs) or enrolled agents.

• Continuing education for all paid tax return preparers who are not attorneys, CPAs, or enrolled agents.

• The ethical rules which currently only apply to attorneys, CPAs and enrolled agents who practice before the IRS will now be required of all paid preparers.

Read more about the new requirements for paid tax preparers at IRS Proposes New Registration, Testing and Continuing Education Requirements for Tax Return Preparers Not Already Subject to Oversight.

If you live in the Jacksonville, Florida or Orlando, Florida area and require assistance with tax planning, please contact Wood, Atter & Wolf, P.A. for tax planning legal counsel.

Even though the Internal Revenue Service may seem all powerful, it does have a limited budget when it comes to auditing taxpayers in Florida and throughout the US. The IRS recently reported that it would focus its efforts on wealthy Americans who earn more than $100,000 a year. If you are one of the "lucky" ones to fall into this tax bracket, there are ways to lower your chances of getting audited.

If you are married and both spouses contribute to your family's income, it is legal to file taxes separately. This could help you avoid an audit if the separate returns each show an income of less than $100,000. If you were to be audited, it would only be on one of the returns, not both.

If you have a credit card tied to an offshore bank, cancel it. These credit cards are a very popular way for tax evaders to easily access their hidden offshore funds, and they raise a red flag with the IRS.

Never brag to anyone about how you got away with paying less than your fair share of taxes. If the person you bragged to (or someone else who overheard you) turns you in to the IRS they could be rewarded up to 30% on the additional tax collected from you. If you want to turn in a fraudulent taxpayer, the number to dial is 1-800-829-0433.

Be skeptical of tax planners or preparers who claim that they can get you a huge tax return, or that there is a secret structure that can insulate you from paying taxes. If you get caught and end up in court you could be fined as much as $25,000 for wasting the court's time.

Be careful with claiming business expenses. If you are running a legitimate, for-profit business, there are many expenses that are deductible. If the expense is questionable or you can't substantiate your claim, don't take the deduction.

Of course, always keep records to substantiate your deductions. If you do get audited you will be very glad that you did. Find out more about how to avoid an IRS audit at 6 Ways to Keep the IRS at Bay.

If you live in the Jacksonville, Florida or Orlando, Florida area and require assistance with tax planning, please contact Wood, Atter & Wolf, P.A. for legal counsel.

The Internal Revenue Service (IRS) of the United States has announced that it will start working closely with foreign governments to more carefully scrutinize corporate tax returns and those of the rich. The move is designed to stop corporations and wealthy individuals from getting away with "tax arbitrage," a term that describes evading taxes in one country by stashing money in another country with more favorable tax laws.

The program is part of a larger initiative to ensure that wealthy individuals and big corporations comply with US tax laws and pay their fair share. So far, the joint audits will only be held with other countries with whom the US has a treaty to do so. The IRS says they will especially be keeping an eye out for abuses of deferral of taxes on earnings abroad. The crackdown has already netted the US some return; after an investigation UBS AG agreed to pay $780 million in owed taxes.

Corporations and the rich have a duty to pay their fair share of taxes. Those that choose not to comply with US tax laws or try to stretch the rules for their own benefit may very well find themselves the target of a very thorough joint IRS / international audit. Find out more about the new IRS program at US IRS to start co audits with other nations.

If you have a business legal matter, please contact Wood, Atter & Wolf, P.A. for legal counsel.

Did you know you can deduct some or all of the sales tax you paid when you bought your car last year?  If you bought your car between February 16, 2009 and December 31, 2009, you can deduct the sale tax, limited up to $49,500 of the purchase price, you paid for your vehicle.  For example, if your car cost $20,000, you could deduct all the sales tax paid for that vehicle.  However, if your vehicle cost $60,000, you could only deduct 83% of your sales tax because you are limited to the amount of the tax you paid on $49,500.

This deduction is available for individuals with incomes of $125,000 or less or married couples filing jointly with incomes of $250,000 or less.  The deduction phases out and is not available for individuals with incomes greater than $135,000 or $260,000 for married couples filing jointly.

Remember, this is a deduction and not a tax credit.  A deduction reduces the amount of taxable income you have whereas a credit reduces the amount of tax you owe.  For example, if you have a $1000 deduction and you made $50,000 in taxable income last year, you would report only $49,000 of income.  Whereas if you had a $1000 tax credit and after all the calculations, the IRS said you owed them taxes of $1001, you would only owe them $1 since the credit reduced the actual tax bill.

If you think this deduction is applicable to you or you want to know more about other possible deductions, please consult with a tax professional in regards to your tax needs.

Throughout the course of the year, it is important to keep track of documents that you will use to fill out your tax return. Once the tax return is filed, however, how long must you keep those records? If you are audited by the Internal Revenue Service (IRS), you will be required to produce them.

According to the IRS website, the length of time a document should be retained depends on what type of document it is, and what activity it is documenting. In general, it recommends that taxpayers keep supporting tax documentation until the period of limitations on that year's return runs out.

The period of limitations refers to the time during which you may amend your tax return or the IRS may assess additional taxes. Some general guidelines for retaining tax returns and supporting documentations include:

• In general, keep copies of your filed returns indefinitely, for your own records and to help you fill out subsequent year's tax forms

• If you did not owe an additional tax and you have filed properly, keep records for three years

• If you did not report income that you should have reported, filed a fraudulent return, or did not file a return at all, keep the records indefinitely

• If you file a claim for a credit or refund after you filed your original return, keep records for three years from the date the original return was filed

• If you claimed a loss on securities or bad debt, keep records for seven years

• If the records relate to property, keep the documents until the period of limitations expires for the tax year in which you dispose of the property in a taxable disposition

Keep in mind that your insurance company or creditors may require you to retain records longer than the IRS does. Read the IRS article at How long should I keep records?

If you require assistance with tax planning, please contact a tax attorney for legal counsel.

Most people don't mean to cheat on their taxes, but sometimes vague rules and changing regulations can mean you are cheating on your taxes without even realizing it. The following are the three most common tax mistakes most people make, and how to avoid them.

Mistake #1: Not keeping business and personal affairs separate

This can be harder to do than it sounds. You may be friends with a customer, go on vacation with a client, or buy a vacation home that you rent out in the off season. But you will be better off if you can keep business and personal affairs as separate as possible. Some common mistakes in this area include claiming that a hobby is a business or trying to deduct the fees for your divorce because it put your business at risk.

Mistake #2: Not keeping good records

This isn't just for business owners. Gamblers should keep records of their losses; they can use them to offset a big win they get later in the year. Charitable donation should be made by check, not cash so that you have a record of how much you gave and to whom.

Mistake #3: Not keeping 1099 and other informational forms

1099s and 1098s are considered "information returns," meaning that you are not required to send them in with your return. But you need a system to track and account for 1099s whether you are the payer or the payee. Also be sure to check the information carefully and request a correction if required.

Read more details of each of these common tax mistakes at 3 tax mistakes made every day.

If you live in the Jacksonville, Florida or Orlando, Florida area and require assistance with tax planning, please contact a tax attorney for tax planning legal counsel.

While congress has yet to pass any laws addressing the 2010 estate tax lapse, several states are racing to enact legislation to assist families whose estate plans have fallen apart. Experts worry that the new, temporary estate tax laws could cause people to accidentally disinherit spouses, which in turn would lead to costly and lengthy court battles over the intent of the deceased. The lapse could ultimately impoverish widows and widowers, and end up requiring families to pay more estate taxes than are necessary.

Virginia has led a handful of other states in passing emergency legislation to nip these problems in the bud. Florida currently has estate tax legislation pending. Most of the emergency estate laws require any tax terms or formulas to be read as if the 2009 estate tax were still in effect, unless specifically spelled out otherwise. In Florida, potential beneficiaries may go to court if they believe that the actual estate plan is not what the deceased intended; those with ambiguous documents can go to court right away to determine the decedent's intent, and all heirs might have to wait until the court has ruled to collect their inheritance.

Unfortunately, since no one expected the congress to allow the estate and other taxes to lapse, most wills and trusts are still written to maximize estate tax savings under the 2009 estate and generation-skipping tax rules. Read more about the confusion caused by the estate tax lapse at States Race To Clean Up Congress' Estate Tax Mess.

If you live in the Jacksonville, Florida or Orlando, Florida area and require assistance with tax planning, please contact our firm for estate planning legal counsel.

There are many reasons why the State of Florida is a great state to declare your residency in.  I meet with clients and prospective clients all the time who are residents of another state and talk to them about why they should consider becoming a Florida resident.

The first reason to become a Florida resident is that there is no Florida income, estate, inheritance, gift, intangibles or generation-skipping tax.  Most states impose at least one of the above taxes on its residents.  Real property and tangible personal property are generally subject to estate tax by the state in which the property is located.  All other property such as bank and investment accounts are generally subject to the estate tax laws in place in the state the decedent resided in prior to their death.

An example that demonstrates this is Bob.  Bob has a checking account in a Florida bank, has him home in Florida homesteaded, a car, an IRA and a vacation home in New York.  Upon Bob's death, his vacation home in New York would be subject to New York estate taxes but the rest of his property would pass estate tax free under Florida law.  I won't discuss the federal estate tax as that is a completely different animal.

Florida residents and others should consult with an estate planning and tax attorney to review the various documents and strategies to take full advantage of the tax benefits under Florida law.

Congress is changing the rules for tax breaks on charitable donation made to Haiti relief efforts in the wake of the devastating earthquake that ravaged the country earlier this year. The breaks are modeled after similar measures passed after Hurricane Katrina and the Indian Ocean Tsunami.

One bill allows Florida taxpayers to deduct any donations made to Haiti relief efforts through the end of February 2010 on their 2009 taxes. For those who texted a $10 donation to the Red Cross (by texting "HAITI" to "90999"), a phone bill showing the donation is considered sufficient proof. It is estimated that the Red Cross has received nearly $25 million in text message donations.

Congressional representatives have stated that the bill would provide an immediate benefit for those who have already given and an incentive for those who are considering it. But keep in mind that the deduction is only applicable if you itemize deductions.

A second bill would exempt cash donations from certain deduction limits for both businesses and individuals. It also would extend a special rule for corporations to deduct the market value of food contributions.

Find out more about this story at Tax Breaks For Haiti Relief Widening.

If you live in the Jacksonville, Florida or Orlando, Florida area and require assistance with tax planning, please contact our firm for tax planning legal counsel.

Money Central at MSN.com recently published a helpful article for those who never want to get audited by the IRS. Following these steps can keep you off the IRS's radar and out of the hot seat at tax time.

Tip #1: Double check your math

The IRS automatically checks and corrects arithmetic errors on your return, and a few mistakes is not going to trigger an audit. That said, too many mistakes could send up red flags that you weren't careful in your preparation, and that could lead to an audit. To select audit subjects, the IRS generally compares your deduction to the average deductions claimed by similar taxpayers. If yours are significantly different, they may decide to take a closer look.

Tip #2: Don't stand out from the crowd

Several groups are more likely to be audited than others. A highly-audited group includes the self-employed, who have more opportunity to hide income or falsify business expenses. Other suspect groups include those who make most of their income in cash, offshore credit card users and high-risk, high-income taxpayers.

Tip #3: Be prepared to substantiate

If you are audited, the IRS will probably focus on those items that are typically not adequately documented by taxpayers. These are generally automobile expenses, travel, meals and entertainment. Meals and entertainment expenditures over $75 require a receipt, less expensive meals can be tracked in a diary.

Finally, if you do get audited, coming in with a box of disorganized receipts will work against you. The more receipts you can produce and the more organized you are, the better your chances of coming through the audit unscathed. Read more tips about avoiding an audit at 5 ways to avoid an audit.

If you live in the Jacksonville, Florida or Orlando, Florida area and require assistance with tax planning, please contact our firm for tax planning legal counsel.

Arguably the most versatile of the forms, the LLC is somewhat of a hybrid, in it allows for the management flexibility of a general partnership, but features the limited liability of a limited partnership. LLCs can be member-managed or manager-managed and no personal liability on behalf of the entity attaches. LLCs are taxed either pass-through or as a corporate entity. Florida requires the filing of articles of organization for LLCs.

The advantages of an LLC include: no shareholders, the option to operate like a partnership or elect one managing member, no personal liability for any of the members, and the option to choose tax treatment.

A "C" Corporation requires the issuance of shares and the election of a board of directors. There is no personal liability incurred by the shareholders, directors, or officers for actions by the corporation. "C" Corporations are subject to double taxation, since the corporate entity pays taxes on its income, and dividends to shareholders are also taxed. To form a "C" Corporation, a multitude of state filing formalities are involved.

The advantages of a "C" Corporation are: the ability to raise large sums of capital, management begins with the shareholders who select directors who then choose officers, and no personal liability. The disadvantages associated with a "C" Corporation are double taxation, articles of incorporation must be filed with the state and statutory rules of operation.

A "S" Corporation is the same as a "C" Corporation except that is gets "pass through" tax treatment. Formalities are generally the same as a "C" Corporation but there are additional criteria limitations such as the number of shareholders, and citizenship requirements.

LLPs allow for all of the partners to share in management, and in case liability arises (for malpractice or negligence only), the offending partner is personally liable. Just like any other partnership, LLPs have pass-through taxation. Forming an LLP requires a certified registration.

The advantages of the LLP are: all partners can participate in the management of the company, no personal liability on any of the individuals (with the exception of malpractice or negligence), and taxation passes through to the individual.

The disadvantage of the LLP is the mandatory state registration.

In a limited partnership, there are two classes of partners: general and limited.

The general partner is the one who runs and manages the business, oversees the day-to-day operations, and incurs personal liability on behalf of the partnership. The limited partner is simply a silent investor who typically has no management functions, and is liable on behalf of the partnership only to the extent of the amounts of money invested.

A limited partnership also features "pass through" tax treatment. For a limited partnership, a certificate of limited partnership must be filed. Limited partnerships can also be formed with a corporate general partner. What this means is that the partnership can be formed between an individual and a corporate entity. When in this form, Florida law allows the limited partners to engage in management, but by engaging in management, the limited partners incur personal liability. When a partnership involves a corporate general partner, a certificate of registration must be filed with the state.

The advantage of a Limited Partnership is that there is no liability to the limited partners for financial shortages outside of initial principal.

The disadvantages of a Limited Partnership are that the general partner is liable for any financial shortages outside of the initial principal, and the general partner bears all the risk but no liability beyond his own assets.

In a general partnership, agency theory applies wherein each of the partners can bind the entire partnership. Each partner also incurs personal liability, but benefits from what is termed "pass through" tax treatment. "Pass through" tax treatment means that although the partnership files an information sheet with the state, income passes through the entity and is taxed via each partner's individual tax return. A partnership requires some form of an agreement (in writing or oral) but this document does not have to be filed with the state.

The advantages of general partnerships include: no individual liability, taxation passes through to the individual and the entity itself is not taxed, flexibility to expand the scope of the business, the ability to spread losses, and no filing formalities involved.

The disadvantages are that the you may be liable for others, management control is divided, and others can speak for you and bind the partnership.

The sole proprietorship is owner-managed and is suitable for a single-owner/employee enterprise. The owner/employee faces total personal liability but is taxed personally via their individual income tax return. Although there are no structural formalities within a sole proprietorship, the name of the operation should be registered with the state.

The advantages of Sole Proprietorship are low start up costs, no double taxation (i.e. taxing the individual and the business), no liability for others, no profit sharing, and complete control over operations.

The disadvantages of Sole Proprietorships are that the owner incurs personal liability and can be thin on management.

CNNMoney.com offers an interesting set of financial planning articles called Money 101. One of their recent lessons covered estate planning. They broke down the basics into ten facts about estate planning everyone should know:

1. Estate planning is not just for the wealthy. Everyone should have a basic estate plan in place so that their financial wishes are carried out after they pass on.

2. An estate plan consists of several elements. These may include a will, power of attorney, a living will, or a trust.

3. Start by taking an inventory of all of your assets. Include investments, retirement accounts, insurance policies, and property and business interests.

4. Everyone should have a will. Dying without a will in place can be very costly for your heirs and gives you no say in what happens to your assets. If you have minor children, a will should designate who will take care of them.

5. Trusts are not just for wealthy people. Trusts can help reduce estate and gift taxes.

6. Discuss your estate plans with those who are affected by them. Being clear about what you intend can dispel conflicts later on.

7. Keep an eye on the federal estate tax rate and exemption. So far in 2010, the estate tax has been suspended, but Congress may still pass a law for 2010. Even if they don't, the tax will be reinstated in 2011 at a higher rate, and with a lower exemption than in 2009.

8. Leaving all of your assets to your spouse is tax free, but not necessarily a good idea. This can increase the taxes your children pay after your spouse passes.

9. Give tax free gifts to decrease your estate while you are still living. You can give up to $13,000 ($26,000 if married) to an individual each year. You may also pay an unlimited amount of medical and educational bills, as long as they are paid directly to the provider.

10. Consider leaving money to your favorite charity.

You can read more details of each of these points at Lesson 21: Estate Planning.

If you live in the Jacksonville, Florida area or North Florida and require assistance with estate planning, please contact our firm for estate planning legal counsel.

Under current US tax law, the federal estate tax was scheduled to be suspended in 2010. The US House of Representatives voted recently to permanently extend the current rare along with the $3.5 million per person exclusion; the US Senate has rejected a measure that would have extended it. It is expected that the Senate will look at the issue again early in 2010. Additionally, any law passed would most likely take effect retroactively, meaning that the IRS will take its share of any estates originated in 2010, starting with January 1st no matter when the legislation finally passes.

There is a chance that the Senate will be unable to come to an agreement, and any estates originating in 2010 will not be subject to federal estate tax. If this happens, heirs will still need to pay state estate taxes. They will also need to take into account the fact that any assets will be limited in their step-up in basis, which means that heirs may have to pay higher capital gains taxes. And if congress fails to take action in 2010, the estate tax will rise to fifty-five percent on all estates over $1 million in value in 2011.

Even if there will be no estate tax in 2010, estate planning is still important. Asset protection, disposition of retirement assets, family and charitable gifts and business secession plans are still critical aspects of good estate planning that need to take place whether there will be an estate tax in 2010 or not.

Estate planning is a complicated matter that requires the assistance of a professional estate planning attorney. If you live in the Jacksonville, Florida area or North Florida and require assistance with estate planning, please contact our firm for estate planning legal counsel.

Find out more about this story at Beating the estate tax to death.

It might seem like getting any advantage from the 2010 estate tax lapse would have to mean losing a loved one.  But those in a position to dole out some cash while still alive – and their recipients – will be able to benefit as well. When the estate tax was suspended on January 1^st, 2010, the gift tax rate also fell from 45% to 35%. Barring congressional action it will go back up to 55% come 2011.

That means that those deciding to make taxable gifts this year can potentially save their loved ones a great deal of money on taxes. The Congressional Budget Office has predicted that a rush of wealthy people bestowing taxable gifts on their heirs may cause gift tax income to the federal government to increase tenfold this year. Unfortunately, the congress still has the option to reinstate the estate and gift taxes at any rate they see fit, and they can do so retroactively. However, a carefully constructed estate plan can still help you maximize your tax savings no matter what the congress decides to do.

In order to benefit from this unprecedented opportunity, people will need to take fast action to creatively plan and draft trust provisions that minimize the tax burden on their heirs. If you live in the Jacksonville, Florida area, please contact an estate planning attorney for estate planning and gifting legal counsel. 

Read more details about how to minimize estate and gift taxes at Estate Tax Lapse Helps Healthy Rich.

Business groups have been pressing Florida state lawmakers to help them repeal an increase in the federal unemployment tax; Florida House democrats seemed inclined to help them.  Representative Ron Sanders, a democrat representing Key West, said that House democrats will send a proposal to President Barack Obama, asking him to erase the tax hike. Sanders noted that "there can be no better stimulus than keeping our small businesses going."

Some of the organizations leading the effort to get rid of the tax include the Florida Retail Federation, National Federation of Independent Business, and the Florida Chamber of Commerce. They are asking the federal government to roll back the tax hike and to lend Florida the money it needs to replenish the unemployment fund that currently pays benefits to nearly 1 million unemployed Floridians.

Florida House and Senate republicans told reporters that an outright repeal of the tax hike is not very likely, but that they appreciate any help the democrats can give them. Florida currently has an 11.5 percent unemployment rate, the highest the state has seen for thirty six years. Since August the state has borrowed $839 million from the federal government to pay unemployment benefits to its citizens. With tax bills due in the spring, observers are worried that the tax hike may lead to further layoffs. Read more about the unemployment tax hike and its effect on Florida business owners at Democrats Want Feds to Ease Unemployment Tax Hike.

How will the tax hike affect your Florida business? If you live in the Jacksonville, Florida or Orlando, Florida area and require assistance with business or personal tax planning, please contact our firm for tax planning legal counsel.

Even with expert tax planning, Florida taxpayers should be aware of the top five tax deductions and credits most people miss when filing their returns. These include:

1. Tax preparation and financial planning fees: Buying tax books, tax software or visiting a tax preparer are all deductible expenses. Financial planning fees, but not commissions, are also deductible. These are itemized deductions.
2. Work safety equipment and apparel: If you work for a company that expects you to provide your own safety equipment, and you use these items solely at work, you can itemize the expenses as a deduction. This may be of particular interest to Jacksonville, Florida military personnel, who frequently pay out-of-pocket for gear they cannot use while off-duty.
3. Taking care of other people's children: These tax credits can include adoption, foster care or even hosting an exchange student. These credits can be complex, so it is important to consult a tax professional before taking one.
4. Savings bond interest: Savings bonds used to pay college tuition or those placed in a Covedell or 529 college savings plan will not be taxed on interest provided the individuals meet IRS income guidelines. Series EE and I bond interest gains do not have do not have to be claimed until the bonds are spent, disposed of or matured.
5. Local and state income tax: Forty three states allow residents to deduct state and local income taxes paid on necessities like a home purchase. Florida residents may use a standard formula if they cannot determine their exact expenditures for the year.

Along with proper tax planning, an understanding of available deductions and credits can help minimize your tax bill come April 15^th. To read even more tips, visit The 10 Most Obscure Tax Deductions You Should be Using this Year.Many tax deductions and credits have complicated requirements and require the assistance of a qualified tax professional. If you live in the Jacksonville, Florida or Orlando, Florida area and require assistance with tax planning, please contact our firm for tax planning legal counsel.

Florida's chief financial officer and Democratic gubernatorial candidate, Alex Sink, told reporters recently that she's "not sold" on Republican plans to cut Florida's corporate income tax. The tax is currently 5.5% and generates $1.7 billion per year in revenue for the state. Ms. Sink pointed to the tough budget situation in Florida, and said she wondered where Florida would get the funds to replace the lost tax revenue. She added that Florida already has a comparatively low business tax rate. She finished by saying that Florida businesses have a responsibility to pay their share of services which benefit them, such as roads and schools.

Current Florida Governor, Republican Charlie Crist, announced last month that he was considering lowering the corporate income tax, but he hasn't said by how much. Republican representative and House Finance and Tax Chairwoman, Ellyn Bogdanoff of Fort Lauderdale, has said that she would like to eliminate the corporate tax altogether. Democrats are likely to fight either proposition; Democratic Representative Mark Pafford of West Palm Beach called the proposed tax cuts "voodoo economics."

Read the details of the proposed Florida corporate tax cuts at Sink on cutting corporate taxes: Where will the money come from?

How will the proposed tax cut affect your Florida business? If you live in the Jacksonville, Florida area and require assistance with tax planning, please contact our firm for tax planning legal counsel.

The last decade has been filled with financial ups and downs, as well as a bevy of tax law changes. Some of the highlights of the last ten years include:

George W. Bush Tax Cuts:

The provisions of George W. Bush's 2001 Economic Growth and Tax Relief Reconciliation Act have been phased in over the course of the last decade. Key points of the legislation included adding a ten percent tax bracket, broadening the fifteen percent bracket, which eased the "marriage penalty," and gradually lowering the top tax rate to thirty-five percent. It also increased the child tax credit, cut capital gains taxes, and phased out the estate tax. But all of these changes are only temporary; unless congress acts to extend the changes, taxes will revert to 2000 levels on January 1^st, 2011.

Tax Rebates:

Rebates were paid under the Bush administration in 2001, 2003 and 2008. The Obama administration has continued the trend, doling out Make Work Pay credits and mailing rebate checks to retirees.

Congress Acting Late:

Last minute tax law changes have kept the American tax payer and the IRS on their toes, often causing forms to be printed and reprinted as the filing deadline approaches. Most recently the Congress failed to extend the estate tax, meaning that it will either be enacted retroactively or not at all.

Crackdowns on Tax Evasion:

Tax evaders who were hiding money in offshore accounts came under greater scrutiny in 2009, when the US struck a deal with Swiss banking officials to cooperate with the IRS. At the same time the IRS offered amnesty to those coming forward on their own, which resulted in nearly fifteen thousand offshore account holders turning themselves in.

Read more interesting tax tidbits from the last ten years at A look back at the decade in taxes.

If you live in the Jacksonville, Florida area and require assistance with tax planning, please contact our firm for tax planning legal counsel.

Thousands of erstwhile taxpayers who have been sheltering funds in offshore accounts will be brought into compliance with US tax law, according to Internal Revenue Service (IRS) Commissioner Douglas Shulman. The IRS reached a deal with the Swiss government recently, which will give it access to 4,450 UBS AG accounts held by American citizens.

Shulman said that the IRS hopes to eventually gain access to over 5,000 accounts through a voluntary disclosure program. Under that program, investors who have evaded taxes by using a UBS account can report their tax activity and avoid prosecution. Shulman estimated that the accounts in question hold assets of up to $18 billion.

Observers note that this may be the end of an era for tax evaders, who can no longer stash money in Swiss, Cayman Island or Lichtenstein bank accounts without any consequences. Read more about the landmark deal between the IRS and the Swiss government at IRS gets a key to Swiss bank accounts.

Although this program is no longer available to taxpayers, it does show that the IRS is cracking down on tax evasion but also setting up programs for those taxpayers who decide to no longer hide their assets.  Evading your tax responsibility is not a good tax planning strategy. If you live in the Jacksonville, Florida area or north Florida and require assistance with tax planning, please contact our firm for tax planning legal counsel.