Paul Jones | Utah Attorney

Form 8857, Request for Innocent Spouse Relief

paul — Thu, 02 Sep 2010 18:19:24 +0000

When you file a joint income tax return, the law makes both you and your spouse responsible for the entire tax liability. This is called joint and several liability. Joint and several liability applies not only to the tax liability you show on the return but also to any additional tax liability the IRS determines to be due, even if the additional tax is due to the income, deductions, or credits of your spouse or former spouse. You remain jointly and severally liable for taxes, and the IRS still can collect from you, even if you later divorce and the divorce decree states that your former spouse will be solely responsible for the tax.

If you believe that only your spouse or former spouse should be held responsible for all or part of the tax, you can request relief from the tax liability, plus related penalties and interest. To request relief, you must file Form 8857. The IRS will use the information you provide on the form and any attachments to determine if you are eligible for relief. There four types of relief are available. They are:

Innocent spouse relief
Separation of liability relief
Equitable relief
Relief from liability arising from community property law

Each type has specific criteria by which the IRS will grant relief. If you need assistance completing Form 8857 or if you have been denied relief contact Paul to discuss your situation by clicking here.

Estate Planning with a Utah Tax Attorney

paul — Tue, 17 Aug 2010 17:17:43 +0000

There are no shortage of people who think about the need to have a will in preparation for their inevitable departure from this life. Many of those people also wonder if they need a trust as well. In general, people just want to know the best way to handle their affairs while they are alive so their loved ones don’t have to worry about it (too much) when they pass away. Preparing for that time is called estate planning. As you can imagine, there are a lot of issues to consider in putting together your estate plan. One of the most confusing aspects of estate planning are the tax effects of your estate planning decisions. There are actually several types of taxes that must be considered in a properly executed estate plan, such as income tax, estate tax, gift taxes, and generation skipping transfer taxes. For that reason it is important to choose a attorney who understands the tax implications of your estate planning decisions. As an attorney specializing in tax issues, Paul Jones understands how these taxes will affect your estate planning decisions. Understanding these tax issues will help you make better decisions. If you would like to review your own estate plan or get one started click here to contact Paul.

Form 5227 Split-Interest Trust Information Return

paul — Wed, 21 Jul 2010 17:25:36 +0000

All charitable remainder trusts described in Internal Revenue Code Section 664 must file Form 5227. All pooled income funds described in IRC Section 642(c)(5) and all other trusts such as charitable lead trusts that meet the definition of a split-interest trust under section 4947(a)(2) must also file Form 5227. A Form 5227 is to report the financial activities of a split-interest trust, provide certain information regarding charitable deductions and distributions of or from a split-interest trust, and to determine if the trust is treated as a private foundation and subject to certain excise taxes. For the first return filed a copy of the trust must be filed with the return. If you have questions about Form 5227, need us to prepare it, or have questions about charitable remainder trusts, pooled income funds, or other types of split interest trust click here to contact Paul.

Extension to the First-time Homebuyer Credit

paul — Mon, 12 Jul 2010 17:07:42 +0000

Legislation enacted in July 2010 extended the closing deadline on the first-time homebuyer credit from June 30 to Sept. 30, 2010. Legislative changes in November 2009 expanded and extended the credit and also added documentation requirements for claiming the credit. Here are the new requirements:

You must have bought — or entered into a binding contract to buy — a principal residence on or before April 30, 2010.
If you entered into a binding contract by April 30, 2010, you must close (go to settlement) on the home on or before Sept. 30, 2010 (recent legislation extended the June 30 deadline previously in effect).

If you have any questions regarding the first-time homebuyer credit, contact Paul by clicking here.

Tax Deduction: Percentage Depletion versus Cost Depletion

paul — Thu, 01 Jul 2010 14:37:34 +0000

Depletion is the using up of natural resources by mining, quarrying, drilling, or felling. The depletion deduction allows an owner or operator to account for the reduction of a product’s reserves. There are two ways of figuring depletion: cost depletion and percentage depletion. For mineral property, you generally must use the method that gives you the larger deduction. For standing timber, you must use cost depletion. Cost depletion is computed on the basis of initial capitalization costs. Over the life of the well, a portion of these costs can be recovered each year based on the percentage of the production for the year as compared to the estimated recoverable oil and gas reserves at the beginning of the year. Percentage depletion is computed on the basis of the income from the property rather than capitalization costs. The tax shelter provided by percentage depletion may result in a larger deduction than cost depletion. Percentage depletion allows a tax deduction equal to 15% of the gross revenue from and oil or gas producing property. If you have questions regarding depletion or related issues click here to contact Paul.

Insurance Captives: Utah and other domestic jurisdictions

paul — Wed, 09 Jun 2010 16:28:20 +0000

A captive insurance company or a “Captive” is an insurance company formed to insure the risks risks of its parent and/or affiliate organization(s). Captives give their insured business entities control over the operations and tailor coverage to the organization’s specific needs. Captives are very common among large national and multinational business. Utah is becoming a popular destination for captives. Captives in Utah are regulated by the Utah Captive Insurance Division. Utah’s captives have no premium taxes and impose no taxes other than an annual fee. Utah’s regulators very accessible and easy to work with. Captive have many income tax advantages as well. There was a time when captives were largely an off-shore endeavor. However, with states now providing favorable legislation to Captives more and more captives are organizing or forming domestically. If your organization needs assistance forming a captive, changing jurisdictions (domesticating it, etc), or is in need of representation in this area click here to contact Paul.

Form 5472, Information Return of a 25% Foreign-Owned U.S. Corporation or a Foreign Corporation Engaged in a U.S. Trade or Business

paul — Wed, 26 May 2010 15:24:22 +0000

Foreign companies often form U.S. subsidiaries when they enter or expand their U.S. operations. If your business involves a foreign entity and US related entity your business will have to file IRS Form 5472 for every transaction with its related business entity. Form 5472 is an information return and does not impose a tax, but rather the form is used as a reporting mechanism to ensure compliance with US tax law. In short, it is a audit tool for the IRS. It becomes very important to properly report on Form 5472 so that the IRS does use this audit tool as a weapon against its filer. If you need assistance in preparing or reviewing your company’s 5472 and related party transactions click here to contact Paul.

HIRE Act–Hiring Incentives to Restore Employment Act

paul — Mon, 24 May 2010 20:37:41 +0000

On March 18, 2010 the Hiring Incentives to Restore Employment (HIRE) Act was enacted. The HIRE act contains two new tax benefits that are available to employers who hire certain previously unemployed workers (the Act calls them “qualified employees”).

The first, referred to as the payroll tax exemption, provides employers with an exemption from the employer’s 6.2 percent share of social security tax on wages paid to qualifying employees, effective for wages paid from March 19, 2010 through December 31, 2010.

The payroll tax compliance issues here are a bit daunting.

The second tax benefit is that for each qualified employee retained for at least 52 consecutive weeks, businesses will also be eligible for a general business tax credit, referred to as the new hire retention credit, of 6.2 percent of wages paid to the qualified employee over the 52 week period, up to a maximum credit of $1,000.

If you have questions about qualifying for the tax credits under the HIRE Act, contact Paul by clicking here.

Expatriate Tax Issues (Form 8854 and other issues)

paul — Wed, 28 Apr 2010 21:58:21 +0000

Expatriation and being termed an “expatriate” have very specific meaning in the Internal Revenue Code. Expatriation tax provisions apply to U.S. citizens who have relinquished their citizenship and long-term residents who have ended their residency (expatriated). You are an long-term resident if you were a lawful permanent resident of the United States in at least 8 of the last 15 tax years ending with the year your status as an long-term resident ends. Expatriation includes the acts of relinquishing U.S. citizenship and terminating long-term residency. Many people think of expatriation as living abroad for a period of time that would allow for the Foreign Earned Income Exclusion. Recent changes in the law state that until you file Form 8854 and notify the Department of State or the Department of Homeland Security of your expatriating act, your expatriation for immigration purposes does not relieve you of your obligation to file U.S. tax returns and report your worldwide income as a citizen or resident of the United States. Because US Citizens are subject to income tax on their worldwide income a person expatriating for non-tax avoidance purposes must act carefully or they may remain liable for US income tax on income earned after expatriation without realizing it. If you would like to discuss expatriation or any other matters relating to the US tax consequences of foreign income contact Paul by clicking here.

Health Care Tax Credit for Small Businesses

paul — Tue, 20 Apr 2010 15:52:28 +0000

President Obama’s health care bill adds a new tax credit for small businesses of up to 50% (or up to 35% for tax-exempt small employers) of the total insurance premium cost for providing health insurance coverage to their employees.

To be eligible for the credit, the small business employer must contribute at least 50% of the total premium cost per employee (not including employee salary reduction) of a qualified health plan offered by the employer through an Exchange or a benchmark average premium. Small businesses eligible for the credit must have fewer than 25 employees and average annual wages of less than $50,000 for 2010 through 2013, adjusted for inflation beginning in 2014. Employers with 10 or fewer employees and average annual wages of less than $25,000 are eligible for the full credit.

Lower credit amounts apply for 2010 through 2013. For those years, small employers receive a small business tax credit for up to 35% of their contribution toward employee health insurance premiums. Eligible tax-exempt small employers receive a 25% tax credit for those years.

For 2014 and beyond, small employers that purchase coverage for their employees through an Exchange will receive a tax credit of up to 50% of their contribution to premiums. Tax-exempt small employers will receive a tax credit of up to 35% of their contribution to premiums. The credit period will have a two consecutive year limit.

Effective in general for amounts paid or incurred in taxable years beginning after December 31, 2009. Effective for credits determined under Code §45R in taxable years beginning after December 31, 2009, and to carrybacks of such credits.

If you have questions about how the new health care legislation will affect your business contact Paul by clicking here.