This is a list of 9 reasons why you might need a tax attorney
1. Taxable Estate
If you have a taxable estate you may have to develop complex estate planning strategies and you may be required to file an estate tax return.
The taxable estate is composed of the assets left behind by a deceased person that are still subject to some type of taxation action. There are many different types of assets that can be considered to be part of a taxable estate. Even people who do not posses a great deal of property or similar assets are likely to have at least a portion of their final estate subject to taxes of some type.
An example of a taxable estate item would be real estate holdings that are jointly owned with a spouse. Because many jurisdictions interpret joint ownership to mean that each individual in the partnership own one half of the holding, half of the value of a home or other real estate will be considered part of the assets of the deceased and may be subject to inheritance or other types of taxes. When no joint ownership can be proven, the total value of the property is considered to be subject to taxes.
Other types of assets can be included in a taxable estate. Investments such as stocks or bonds are easily included and are likely to carry a tax burden. Any cash assets, such as funds contained in a savings or checking account, will also be considered part of the taxable estate. When the payoff on a life insurance policy is set up to pay to the estate of the deceased, that amount may also be taxable. Even assets that remain in individual retirement accounts or other types of pension or profit sharing plans may also be subject to taxes, depending on how the account is structured.
Even trusts where the deceased had direct control may constitute an asset that can be considered part of a taxable estate.
In most countries, the only way to exclude a trust from taxation is to set up the trust so that there is no direct control and there is no way for the trust to be revoked once it is created and set in place. When there is any benefit derived by an individual from an established trust, there is a good chance that the asset will be counted as part of the taxable estate.
Many people attempt to reduce the amount of their taxable estate by arranging assets so they are exempt from taxation. For example, many retirement plans can meet government requirements that make it possible to exclude the asset from the taxable estate. Financial planners and counselors can often assist people in evaluating their assets and design and estate plan that makes use of every relevant and legal device to minimize the tax burden.
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2. Starting a new business.
If you're starting a business you may need legal counsel about the structure and tax requirements of your company.
Before the start of a new business, the entrepreneur must meet several federal requirements. This includes establishing the corporate structure of their new business, obtaining an EIN, acquiring the required permits and licenses that are necessary for daily business operations, and acknowledging the responsibility to pay different taxes. A new business owner is obliged to follow these federal regulations, and failure to comply can result in heavy penalties. The following information provides the relevant steps needed for a new business owner to properly fulfill his/her company’s federal requirements.
1. Determine business structure
Establishing the corporate structure for a new business is a major federal requirement. The most common forms of corporate entities that a new business owner may consider include Sole Proprietorship, Partnership, C-Corporation, S-Corporation, and Limited Liability Company (LLC). When determining the legal entity of a company, one should take into account both legal liability (the protection of a company’s assets in the event of debt) and the issue of taxation (the most suitable tax prospect for a company).
A. Sole proprietorship
This is the most basic type of the legal structures available for new businesses. It only applies to a new business whose owners plan to run the company themselves without any hired staff. In other words, when one is a sole proprietor, one will be going into business on their own. Rather than pay corporate taxes, sole proprietors are obliged to pay taxes on the profits made from their new business and are liable for their own business’ debt.
B. Partnership (general and limited)
When a new business is designated as a general partnership, two or more individuals equally invest in a company and willingly share in the profits and losses of their enterprise throughout the development of their company. This arrangement is made possible by a partnership agreement contract, outlining the responsibilities of each partner, the duration of partnership, and any management and financial arrangements acknowledged by all existing partners. Rather than pay corporate income taxes, each individual partner reports only their share of the total business income or losses on their tax return. However, they do not have any liability protection, and they are all equally responsible for any debt their business accrues. A common problem of general partnerships is that one partner often does more work than the others, leading to conflicts in the workforce.
In a limited partnership, there are general partners and limited partners involved. The general partner(s) often assumes the main duties of the company on a daily basis. The limited partners, on the other hand, have a more limited role- one with no managed control of the company. Limited partnerships have special regulations and will often require special state licensing. One disadvantage of limited partnerships is that general partners do not have any liability protection.
C. Corporation (C and S)
There are two types of corporations that exist. The C-Corporation comprises of shareholders who have voting rights and share in the wealth and losses of their company. A new business with a C-Corporation structure pays two types of taxes: the corporation, as a whole, is responsible for corporate taxes, and shareholders are taxed separately for dividends paid. Within this hierarchy establishment, stockholders have unlimited liability protection and other fringe benefits, including the option to have different kinds of stock.
An S-corporation is similar to the traditional C-Corporation; however, they are exempt from paying corporate taxes. Instead, the shareholders of an S-corporation must report their income on federal tax returns. Stockholders have limited liability protection but have only one class of stock. S-Corporation guidelines are considered strict. A company must first file for a C-Corporation structure and then apply for an S-Corporation status, an opportunity that is only available every five years.
D. Limited Liability Company (LLC)
One of the most promising legal structures for a new business is the Limited Liability Company. An LLC is organized in such a way that it combines several features of corporation and partnership structures. Another advantage of the Limited Liability Company structure is that the owner of the new business can select varying forms of distribution of profits. Unlike a common partnership where the split is 50-50, an LLC has much more flexibility.
2. Obtain an EIN
Federal requirements for a new business also include obtaining an Employer Identification Number (EIN) for the company. This is usually issued by the IRS when a business owner registers their establishment. An EIN functions in a similar way to a social security number; but rather than be used to identify an individual person, it identifies the company as a whole. If a new business owner plans on hiring paid employees, as in a partnership, corporation, or limited liability, they must register with the IRS to obtain their EIN. This federal requirement also applies to new business owners who plan to sell firearms, tobacco, or alcohol. In addition, existing companies who wish to change their corporate structure must also apply for a new EIN. New businesses that have a sole proprietor organization (no hired employees) need to apply for an EIN only if they plan to distribute firearms, tobacco, or alcohol. Otherwise, sole proprietors can simply use their own social security number when filing their taxes.
3. Attain necessary business licenses
Obtaining essential business licenses is another federal requirement for a new enterprise. Based on the type of business and the products and services offered to consumers, an entrepreneur may need to obtain several different licenses before their business can legally operate and move forward. For example, if new business owners plan to start a public transportation and trucking company, they need to obtain a license from the Federal Motor Carrier Safety Administration. If an entrepreneur plans on becoming involved in the food industry and wants to open a restaurant, they need to register the company with the Food and Drug Administration as well as the Bureau of Alcohol, Tobacco and Firearms if they intend on serving alcohol to customers. Likewise, an entrepreneur may need the approval from the Environmental Protection Agency if their business entails working with or using chemicals or toxic products.
Apart from these federal agencies, an entrepreneur also needs to get the approval of several state organizations before setting up their new business. This includes the city council, the water and sanitation department, and the fire department.
4. Tax obligations for a new business owner
A new business must also comply with federal requirements of taxation. It is often based on a new business’s corporate structure and the type of products and services offered.
A. Self-employment tax
This type of tax only applies to sole proprietors. It is a social security and Medicare tax the federal government withholds from the salary.
B. Federal income tax
Business establishments that designate themselves as sole proprietorships, partnerships, S-corporations, and limited liability companies (LLC) are all responsible to pay income taxes. Each of the mentioned entities is obliged to report their company earnings and expenses to the Internal Revenue Service (IRS), filing estimated and personal income taxes.
Corporations, on the other hand, are expected to report their company earnings and expenditures to the IRS using a corporate tax return form. Corporate tax payments are also made through estimated tax filings.
C. Franchise Tax
This tax only applies to corporations, whereby they are obliged by state and federal law to file a franchise tax report and pay a franchise tax annually. This tax is usually based upon location of the company, their corporate assets, and the number of stock shares they issue to their employees.
Federal requirements must be met before any new business owner can establish their startup. After deciding upon the organizational structure of their company, new business owners must obtain an Employer Identification Number. An EIN specifically pertains to the company’s unique identification number (similar to a social security number) that is granted for tax purposes. In addition, depending on the industry sector of the company, the new business owner must also obtain necessary licensure and permits from federal agencies to ensure the public health and safety for their prospective customers. In addition, they are also obliged to pay certain taxes depending on their corporate structure. For more information regarding the licenses and permits for a new business, please refer to new business licesing article
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3. Tax Fraud
If you've committed tax fraud you might need the advice of an attorney
Tax avoidance is the legal utilization of the tax regime to one's own advantage, to reduce the amount of tax that is payable by means that are within the law. By contrast tax evasion is the general term for efforts to not pay taxes by illegal means. According to the former British Chancellor of the Exchequer Denis Healey, the difference between tax avoidance and tax evasion is the thickness of a prison wall. The term tax mitigation is a synonym for tax avoidance. Its original use was by tax advisors as an alternative to the pejorative term tax avoidance. Latterly the term has also been used in the tax regulations of some jurisdictions to distinguish tax avoidance foreseen by the legislators from tax avoidance which exploits loopholes in the law.
Some of those attempting not to pay tax believe that they have discovered interpretations of the law that show that they are not subject to being taxed: these individuals and groups are sometimes called tax protesters. An unsuccessful tax protestor has been attempting openly to evade tax, while a successful one avoids tax. Tax resistance is the declared refusal to pay a tax for conscientious reasons (because the resister does not want to support the government or some of its activities). Tax resisters typically do not take the position that the tax laws are themselves illegal or do not apply to them (as tax protesters do) and they are more concerned with not paying for particular government policies that they oppose.
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4. Filing a lawsuit against the IRS
If you feel the Internal Revenue Service has treated you unfairly, you might hire an attorney to represent you in court.
The Internal Revenue Service was once virtually immune from lawsuits, even when it engaged in questionable practices. While this has changed, it is still difficult to sue the IRS. However, if you feel you've been wronged by the department, here are some tips to assist you in preparing a lawsuit.
Difficulty: Moderately Challenging
Understand the tax court system. The U.S. Tax Court handles most of the
litigation and allows taxpayers to litigate their tax disputes without paying the tax liability up front. The U.S. Federal District Courts hear federal tax claims brought by taxpayers however, they require taxpayers to first pay the tax liability assessed and sue for a refund. The U.S. Court of Federal Claims hears cases against the United States, including federal tax claims, and also requires taxpayers to prepay their tax liability before they can bring suit for a refund.
Recognize the different legal theories on which a lawsuit against the IRS can be based. The federal district courts allow suits against the IRS for those damages resulting from an IRS employee's reckless or intentional disregard of the tax collection procedures. These courts also allow a taxpayer to sue for damages resulting from the IRS's failure to release a lien.
Gather information. Before you sue the IRS, you need copies of all papers, documents or other evidence that helps establish your claim. This includes tax records and returns, receipts, correspondence with the IRS, etc.
Consult an attorney. You should speak with an experienced
tax attorney if you have any questions regarding the validity of your claim, and for advice and representation regarding how to sue the IRS.
Know that, before bringing suit
against the IRS, you generally must exhaust administrative remedies, first. This means following the appeals procedure within the IRS itself.
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5. Iternational business operations
If you plan to engage in international business, you may need help with contracts, tax treatment, and other legal matters
Going offshore is the most popular way of starting or managing your business. But also interesting onshore possibilities are possible. Offshore companies do not only offer tax exemption, different to any country, but also give you freedom of operation, confidentiality and protection. A good structure could also mean onshore companies involved.
What do you need to structure?
First thing you'll have to do is choose your domicile, depending on your wishes. We know, seeing the long list (see price list in the download section), that you probably will wonder which one to choose. You will probably be helped with our recommendations in the "rough" guide.
You already know?
If you already know what structure you like to have or its straight forward going offshore we can help you also: Basically we can and will provide you with a ready-to-go company of your choice.
preparation of memorandum
preparation of articles
Preparation of registration forms
Filing with the registrar of companies
payment of filing fees
certificate of incorporation share
certificates register of directors
register of shareholders
free access to 1200 business forms and templates
first year registration fee (chamber of commerce)
first year registered office
first year other fees (gov andmaintenance)
Although your offshore company will not reveal its shareholders, it will need directors. If you want to shield your (company's) name from all visible papers to completely erase any visible connection with yourself you can opt for a "nominee" The nominee will act as local director, shown on e.g. all chamber of commerce papers. The nominee is NOT a shareholder neither has he/she access to your bank account or books.
When you want to transfer money to or from your offshore company you will need an offshore bank account, this is something you can arrange yourself (we provided you with the needed papers) or we can provide it for you. The bank account doesn't have to be in the place you started you offshore.
When its likely you will receive postal mail (e-mail of course you can read and sent anywhere) you can take a virtual office. Again, the office doesn't have to be in the country you started your offshore. When you also want somebody to pick up the phone with your name, have your mail forwarded to you on a daily basis and help you locally , you should opt for a professional virtual office. If you want a actual office, meaning "square meters" for desk(s) and chair(s), you could opt for a "non-ezone" office. If you want to be in a "e-zone", you will need to have an office in a E-zone area; e-zone office.
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6. U.S. Tax Court
If you want an independent review of your case before the United States Tax Court, you may need an attorney
Disputes with the Internal Revenue Service (IRS) can be challenging, especially when you are not represented by an attorney, accountant, or other tax expert. If you have used all the appeals procedures available within the IRS
and the IRS has assessed a deficiency, you have to make a decision either to capitulate or to fight on. One option is to pay the deficiency or, if necessary, make arrangements to pay the deficiency in installments. This may be a route to take if the amount of the deficiency is relatively small or if you concede that the arguments supporting your position are weak. The other option is to seek judicial review of the matter. To bring suit in a federal district court or the U.S. Court of Federal Claims, you must pay the disputed amount and request a refund from the court. If you cannot, or are not willing to, pay the deficiency, you can bring the case before the Tax Court.
What is the Tax Court Like?
The Tax Court differs from a federal district court in several respects. One unique feature of the Tax Court is that it only hears federal taxation cases. Another factor that distinguishes the Tax Court is that, unlike other federal judges, the Tax Court judges are all tax law experts, selected for service because of their experience and expertise in taxation. According to the Tax Court's website, there are 19 Tax Court judges who are assisted by senior judges and special trial judges. A case is generally heard and decided by a single Tax Court judge. Although the Tax Court has its headquarters in Washington, D.C., the Tax Court judges travel to various cities throughout the U.S. to try cases. There are no jury trials in the Tax Court.
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7. Tax discrepancy
If your tax return was not completed correctly and you made an overpayment or an underpayment, a tax attorney can help correct the problem
8. Review business contracts and negotiations
An attorney could be of assistance in reviewing business contracts and negotiations
There are four main elements that must be in a contract to deem it valid.
The first of which is an offer. The offer is the initial start to any interaction from one or more parties intending to enter into a contract. An offer is defined as, the price at which an individual is willing to sell a security or commodity. This is the opposite of bid, which is the price at which an individual is willing to buy a security. An offer is the same as an Ask. The person to make the offer or have something for sale etc. is called the offeror. The recipient to the offer who will consider or accept the offer from the offeror is called the offeree.
For example if someone wanted to take out a mobile phone contract, the offer of the contract has been provisionally set up in the phone shop. Therefore that is where the offer takes place. The shop has the offer and is then the ‘offeror’ and you are the ‘offeree’ looking for the contract.
The second element to any contract is acceptance. The key part of acceptance is that it must be communicated and all terms negotiated or agreed by both parties before the next step of the contract can be entered into. Communication is vital so that both parties know the terms and conditions of the situation exactly and are happy to abide by these. If these terms are unaccepted then the contract will be altered to more suitable negotiations until both parties are happy with it. If any terms are broken within the contract it is called a breach of contract and the offending party can be taken to court.
When considering the phone contract the terms can often be negotiated and altered to suit the needs of the customer, therefore counter offers can be made which set up other contracts deeming their previous agreements void. Once terms are agreed by both parties there is then a solid binding contract in place which both sides are happy to taken part in. You can then move onto the consideration.
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If you're considering a business bankruptcy, an attorney could be very helpful
Bankruptcy law provides for the development of a plan that allows a debtor, who is unable to pay his creditors, to resolve his debts through the division of his assets among his creditors. This supervised division also allows the interests of all creditors to be treated with some measure of equality. Certain bankruptcy proceedings allow a debtor to stay in business and use revenue generated to resolve his or her debts. An additional purpose of bankruptcy law is to allow certain debtors to free themselves (to be discharged) of the financial obligations they have accumulated, after their assets are distributed, even if their debts have not been paid in full.
Bankruptcy law is federal statutory law contained in Title 11 of the United States Code. Congress passed the Bankruptcy Code under its Constitutional grant of authority to "establish... uniform laws on the subject of Bankruptcy throughout the United States." See U.S. Constitution Article I, Section 8. States may not regulate bankruptcy though they may pass laws that govern other aspects of the debtor-creditor relationship. See Debtor-Creditor. A number of sections of Title 11 incorporate the debtor-creditor law of the individual states.
Bankruptcy proceedings are supervised by and litigated in the United States Bankruptcy Courts. These courts are a part of the District Courts of The United States. The United States Trustees were established by Congress to handle many of the supervisory and administrative duties of bankruptcy proceedings. Proceedings in bankruptcy courts are governed by the Bankruptcy Rules which were promulgated by the Supreme Court under the authority of Congress.
There are two basic types of Bankruptcy proceedings. A filing under Chapter 7 is called liquidation. It is the most common type of bankruptcy proceeding. Liquidation involves the appointment of a trustee who collects the non-exempt property of the debtor, sells it and distributes the proceeds to the creditors. Bankruptcy proceedings under Chapters 11, 12, and 13 involve the rehabilitation of the debtor to allow him or her to use future earnings to pay off creditors. Under Chapter 7, 12, 13, and some 11 proceedings, a trustee is appointed to supervise the assets of the debtor. A bankruptcy proceeding can either be entered into voluntarily by a debtor or initiated by creditors. After a bankruptcy proceeding is filed, creditors, for the most part, may not seek to collect their debts outside of the proceeding. The debtor is not allowed to transfer property that has been declared part of the estate subject to proceedings. Furthermore, certain pre-proceeding transfers of property, secured interests, and liens may be delayed or invalidated. Various provisions of the Bankruptcy Code also establish the priority of creditors' interests.
However, a recent decision by the Supreme Court has shifted this power towards the debtor. In Rousey v. Jacoway, (April 4th, 2005), the Court held that assets in Individual Retirement Accounts (IRA's) are protected under 11 U.S.C § 522(d) and thus exempt from withdrawal from the bankruptcy estate. This decision has broad implications for the baby-boomer generation, providing millions of Americans nearing retirement with increased protection of their earnings.
Recent passage of the Bankruptcy Prevention and Consumer Protection Act in April 2005 has also resulted in major reforms in bankrupcy
law, outlining revised guidelines governing the dismissal or conversion of Chapter 7 liquidations to Chapter 11 or 13 proceedings. The law also expands the responsibilities of the United States Trustees Program to include supervision of random and targeted audits, certification of entities to provide credit counseling that individuals must receive before filing for bankruptcy, certification of entities that provide financial education to individuals before being discharged from debt, and greater oversight of small business Chapter 11 reorganization cases.
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