Demetrius J. Karos, Ltd.Demetrius J. Karos, Ltd.2024-03-11T19:14:10Zhttps://www.karos-law.com/feed/atom/WordPress/wp-content/uploads/sites/1103277/2023/08/cropped-site-icon-32x32.pngOn Behalf of Demetrius J. Karos, Ltd.https://www.karos-law.com/?p=505612024-03-11T19:14:10Z2024-03-11T19:14:10ZCommon tax controversies for small businesses
Unpaid or underpaid taxes are among the most critical issues that small business owners encounter, particularly with payroll taxes. Failing to withhold or remit payroll taxes on time can lead to hefty penalties and legal repercussions.
Misclassifying employees as independent contractors is a common mistake among entrepreneurs that can lead to significant tax liabilities. This is because employers are responsible for payroll taxes for employees but not independent contractors.
Business owners should also remember that accurate and organized financial records are crucial for tax filing and audits. Inconsistent or incomplete records may raise red flags and invite scrutiny from tax authorities.
Another crucial point to remember is that not all business expenses are eligible for tax deductions. Claiming unsubstantiated or illegitimate deductions can trigger an audit and potential tax adjustments.
Finally, small business owners should know that neglecting to file tax returns, even if accompanied by the intention to pay later, can result in significant penalties and interest charges.
Strategies for navigating tax controversies
The first step towards overcoming tax controversies as a small business owner is to collect and organize all relevant documents. These may include:
Tax returns
Receipts
Invoices
Business logs
This documentation can be essential for building a case and demonstrating the business’ compliance efforts.
Additionally, business owners should be proactive and transparent if they discover errors or inconsistencies in their tax filings. A small business owner can avoid a lot of legal trouble simply by contacting the tax authorities and taking steps to rectify any tax situation that comes to their attention.
More importantly, entrepreneurs should make a habit of maintaining clear and consistent communication with the tax authorities throughout the resolution process. Responding promptly to requests for information and adhering to deadlines may be an excellent demonstration of good faith.
Tax controversies can be daunting, but small business owners don’t have to face them alone. By understanding common pitfalls, seeking legal guidance and taking proactive steps, entrepreneurs can navigate these challenges effectively and minimize their impact on their business.]]>0On Behalf of Demetrius J. Karos, Ltd.https://www.karos-law.com/?p=505592024-03-05T12:37:44Z2024-03-05T12:37:44ZUnderstanding IRS notices
The first step in the IRS collection process involves sending a bill to the taxpayer. This bill details the amount owed, including taxes, penalties and interest. Taxpayers must understand that these notices also provide information on how to dispute the amount if they believe it is incorrect. Ignoring these notices can lead to more severe actions by the IRS. It’s important for individuals to either pay the amount due promptly or contact the IRS to discuss alternative arrangements.
Consequences of non-payment
Failing to address tax debts can lead to significant financial and personal consequences. Beyond the immediate financial strain of liens and levies, non-payment can adversely affect an individual’s credit rating, making it difficult to obtain loans or credit in the future. Because of this, it’s in the best interest of taxpayers to respond promptly to IRS notices and take proactive steps to resolve outstanding tax debts. Engaging with the IRS at the earliest opportunity can help avoid escalating debt collection actions and allow for a more manageable resolution process.
Some taxpayers may have realized that the IRS notices stopped for a while because of changes in how the agency was funded and operated. Those notices are ramping up again in 2024, but some taxpayers will have limited relief from the penalties that amassed during the time those notices were stopped. Despite the limited relief, the original tax debts still remain.
Given the complexities of this issue and all that is at stake, taxpayers should strongly consider working with a legal representative to determine what options they have for addressing their past-due balances with the IRS.]]>0On Behalf of Demetrius J. Karos, Ltd.https://www.karos-law.com/?p=505572024-02-04T16:36:06Z2024-02-04T16:36:06ZWhat difference can a lawyer make?
One of the most important ways that an attorney's representation benefits those buying real estate in Illinois is through support while customizing their documents. A lawyer can help someone select the right contingencies to include in an offer for their protection. They could also help set terms for a post-closing occupancy agreement that could help ensure someone can take possession of the property as expected.
A lawyer's review is also important after finalizing terms and signing a contract. They can help spot issues within the documents that buyers might not recognize as problematic. Little differences in language can make a big impact on someone's contractual obligations.
The average person may (understandably) not understand how the legal system interprets certain words or phrases. As such, an attorney could catch sneaky contract inclusions or discrepancies that could derail a closing or put a buyer in a very difficult position after finalizing the transaction. Getting the support of a licensed attorney can make a major difference for those preparing to purchase a home, which could very well be the biggest purchase they make in their entire lives.]]>0On Behalf of Demetrius J. Karos, Ltd.https://www.karos-law.com/?p=505552024-02-03T23:47:14Z2024-02-03T23:47:14ZTestamentary documents
Wills and possibly trusts can help people transfer property to others after their deaths. These testamentary documents are the backbone of any estate plan. Testators often draft wills to clarify who should inherit their property and name guardians for their minor children. They may also want to use a trust. Some people use a trust instead of a will, while others may create a will and a trust. The size of someone's estate, parties who may inherit from the estate and other personal factors influence which option is the best choice.
Powers of attorney
Testamentary documents are not the only paperwork a thorough estate plan should include. People can also talk about what might happen if they experience a major personal emergency. Powers of attorney allow people to designate someone they trust to manage their medical and financial matters if they become incapacitated. Given that people's health may decline when they age, they may want to address permanent incapacitation. If someone creates durable powers of attorney, they can significantly reduce the likelihood that they would be subject to a guardianship later in life if their health declines.
Advance medical directives
Both Illinois and Michigan allow individuals to provide advance written instructions about their medical preferences. Advance healthcare directives describe someone's wishes in depth. They may leave instructions about life support and anatomical gifts so that their loved ones have clarity about their true desires.
If someone intends to draft a will, it may be worthwhile to continue the estate planning process and draft other documents as well. People can plan for a future in which they might need Medicaid, provide guidance for their loved ones and protect themselves from unexpected emergencies. Creating a comprehensive estate plan can prove beneficial for a testator and the people closest to them alike.]]>0On Behalf of Demetrius J. Karos, Ltd.https://www.karos-law.com/?p=505532024-01-05T14:50:08Z2024-01-05T14:50:08ZLiens and levies, although terms used interchangeably by many, are distinctly different. A lien is a legal claim against property to secure payment of a tax debt, while a levy involves the seizure of property to satisfy the debt.
Process from tax lien to tax levy
A tax lien is the government's legal claim against your property that may be put into place if you neglect to pay a tax debt. This action doesn't involve the immediate seizure of assets but rather secures the government's interest in your assets. When the IRS places a lien on your property, it essentially announces its legal right to your property to other creditors.
The process begins with the IRS sending a bill that explains how much you owe. This is known as the Notice and Demand for Payment. If you fail to pay the debt in full in time, the IRS files a public document, the Notice of Federal Tax Lien, to alert creditors that the government has a legal right to your property.
The presence of a tax lien can significantly affect your financial standing. It can:
Hamper your ability to sell or mortgage property as buyers or lenders see the lien as a red flag.
Negatively impact your credit scores, making it harder to obtain credit.
Attach to business property, including accounts receivable.
Unlike liens, a levy authorizes the actual seizure of your property to satisfy a tax debt. If you don’t pay your taxes or make arrangements to settle your debt, the IRS may levy, seize and sell virtually any type of property you own or have an interest in.
The levy process
Before seizing your property, the IRS will send a Final Notice of Intent to Levy and Notice of Your Right to A Hearing. This notice can be given in person, left at your home or workplace or sent to your last known address by certified or registered mail, return receipt requested. You generally have 30 days to respond before the IRS seizes your property.
If you have received such a notice or are concerned that you might, seeking personalized legal guidance can be beneficial. Protecting your assets is sometimes possible through programs offered by the IRS, but it can be challenging to secure such opportunities without help from someone who understands tax law inside and out.]]>0On Behalf of Demetrius J. Karos, Ltd.https://www.karos-law.com/?p=505492023-12-06T13:56:45Z2023-12-06T13:56:45ZIllinois is not a community property state
The IRS does allow one spouse to assert that they were unaware of and played no role in income tax evasion or fraud. The spouse who did not file the tax return could potentially request innocent spouse relief from the IRS.
Illinois is an equitable distribution state when it comes to handling marital resources, so innocent spouse relief is not available. Thankfully, there is an equitable relief program that may benefit those who do not qualify for innocent spouse relief. One spouse can potentially demonstrate through financial records that they did not know about or directly profit from the tax misconduct of the spouse filing the tax return. Those who separate or file for divorce may qualify for relief by separation of liability.
Both of these options could be available to certain people who filed a joint tax return in Illinois. Those seeking relief need to file paperwork with the IRS. They can only qualify if they were unaware of the misconduct or fraud that occurred. Someone who knew they spouse engaged in intentional tax underpayment will not qualify.
The IRS reviews each relief case on an individual basis. Factors ranging from someone's education to changes in someone's spending habits can impact how the IRS responds to such requests. The non-filing spouse may sometimes be able to avoid culpability for certain tax debts and criminal prosecution for misconduct on the part of their spouse.]]>0On Behalf of Demetrius J. Karos, Ltd.https://www.karos-law.com/?p=505452023-11-02T23:38:05Z2023-11-02T23:38:05ZClaiming the Earned Income Tax Credit
The Earned Income Tax Credit (EITC) is a very valuable tax break available to working-class Americans. However, because of how valuable it is, there is concern about the possibility of fraudulent claims. Therefore, those who claim the EITC may be at elevated risk of an audit even though their overall income is modest.
Using business and self-employment deductions
Individuals who work as independent contractors and those who own small businesses often need to use write-offs and deductions to lower their federal income tax liability. As with the EITC, there is a risk of abuse associated with those write-offs and deductions. The IRS may look more carefully at someone's tax return when they file as a self-employed individual or business owner.
Filing a return with mistakes or omissions
Some people realize a few weeks after filing their tax return that they forgot to include income from a part-time job that only lasted a month or revenue generated by a small investment. They can file paperwork to amend their tax return once they discover those errors. However, any circumstance in which the income and assets reported by businesses and financial institutions to the IRS do not align with what someone includes on their tax return may increase the likelihood of the IRS looking more closely at someone's finances.
Even those who are fastidious about their tax returns can still end up facing an audit. Undergoing an audit does not automatically mean that someone will need to pay penalties nor that they will face prosecution. Yet, having legal guidance during the audit process can ultimately make a big difference for those worried about the possible consequences associated with an audit.]]>0On Behalf of Demetrius J. Karos, Ltd.https://www.karos-law.com/?p=505392023-10-06T08:47:21Z2023-10-16T08:46:59ZIssues with the property
Most people buying a financed home will need to have an inspection performed on the property. Sometimes, the inspection process turns up unexpected issues with the home. The buyer may no longer feel comfortable completing the transaction, and the seller may not agree to make any concessions given the defects uncovered. Other times, there might be an issue with the title records that will prevent the closing from moving head smoothly.
Issues with financing
Maybe one of the spouses who just made an offer on a home will lose their job next week. A sudden change in financial circumstances, including a drop in income, could easily lead to a lender refusing to finalize the mortgage. There could also be an issue with the appraisal coming in low, at which point the buyer would either need to produce liquid capital to cover their expenses or negotiate a new arrangement with the seller. Even when the buyer comes to the table with the pre-approval letter, there can still be issues that prevent them from successfully closing on the home.
Either party changes their mind
Those seeking to buy a property usually include at least a few contingencies in their offer paperwork so that they can cancel the closing without penalty. Sellers could just as easily change their minds about the sale, and the contract may give them the ability to do so. Not having anywhere to go might lead to a seller panicking and canceling the closing at the last minute when there is a lack of inventory on the market, for example.
The parties involved in real estate transactions need to be aware of issues that might prevent them from moving forward with a closing. Seeking legal guidance and being prepared for the various risks that can impact a scheduled closing can help people better navigate the complexities of Illinois real estate transactions.]]>0On Behalf of Demetrius J. Karos, Ltd.https://www.karos-law.com/?p=505422023-10-06T08:52:40Z2023-10-09T08:51:48ZChoosing not to report income
Many people have at least one secondary stream of income. Whether they use their truck to haul large items for their neighbors occasionally or babysit their relatives' children for cash, they may feel like they can simply keep the money paid for their services. However, the taxpayers generally need to report any stream of income that generates $400 in revenue or more each year.
Inflating personal deductions
Particularly when someone runs a small business, they may be able to write off a number of expenses that they incur to run or promote their business. This is very tempting to write off a meal with family members as a client's dinner or to include personal travel receipts along with business travel receipts. However, if such misrepresentations eventually come to light, they could trigger sizable tax penalties and possibly criminal charges. Even honest mistakes, like claiming the children after the divorce when the other parent has primary custody, could lead to claims of tax evasion.
Hiding taxable assets
People have to pay income taxes when they earn their money and then often sales taxes when making purchases. Some people resent needing to pay taxes based on their personal holdings. They may try under-reporting their assets. In some cases, people intentionally move funds into international accounts to avoid reporting them to the government. Those who get caught with unreported taxable assets could face penalties and possible prosecution.
Recognizing when one's efforts to reduce taxes might actually cross the line and become tax evasion can help people avoid preventable mistakes and more effectively respond to claims that they have mismanaged their taxes.]]>0On Behalf of Demetrius J. Karos, Ltd.https://www.karos-law.com/?p=505372023-10-05T23:13:50Z2023-10-05T23:13:50ZContract negotiation and acceptance
The journey of a residential real estate closing begins with the initial offer. As a buyer, you’ll work with a real estate agent to make an offer on a property you’re interested in. This offer includes:
The purchase price
Contingencies
The proposed closing date
Negotiations may take place as the seller considers your offer, and they may choose to accept, reject or counter it. Once your offer is accepted, the inspection and appraisal are next. You’ll typically have a specified period to conduct a home inspection to help ensure the property is in the condition you expect. A professional appraiser will also assess the property’s value to confirm it aligns with your agreed-upon purchase price.
Mortgage and financing
Securing financing is a critical part of the residential real estate closing process. You’ll need to apply for a mortgage and provide your lender with essential financial documentation, such as:
Bank statements
Tax returns
Employment verification
After your loan application is submitted, it undergoes a thorough underwriting process. During this stage, the lender assesses the risk associated with lending to you. They will examine your credit score, debt-to-income ratio and the property’s appraisal value. If everything checks out, you’ll receive a formal mortgage approval.
Title search and insurance
One crucial aspect of residential real estate closings is helping ensure a clear and marketable title to the property. A title search is conducted to uncover potential issues affecting your ownership rights. This search may reveal:
Outstanding liens
Unpaid taxes
Ownership disputes
Resolving these issues is essential before proceeding with the closing. To help protect your investment, you’ll need to purchase title insurance. Title insurance provides coverage in case any unforeseen title issues arise after the closing. It offers peace of mind, knowing you won’t be responsible for any hidden defects in the property’s title.
Understanding the essential steps in residential real estate closings is helpful but remember that enlisting the help of experienced professionals can make all the difference. When the stakes are this high, the benefits of seeking legal guidance cannot be overstated.]]>0