Category: Tax – State Income

The Best Entity for Your Maryland Business: LLC or Corporation?

Choosing an entity for your business can be a difficult decision. There are many types of entities available, and you are not limited to forming an entity in your state. Further, the entity you choose does not necessarily determine how the entity will be taxed. For instance, you may choose to form a Maryland LLC but also choose to have it taxed as an s-corporation. The decision depends upon many factors including: the business purpose, the property to be owned, expectations to terminate or sell the business, the owner’s estate planning concerns, and, of course, taxes. There is no universal “best entity”, and choosing the proper entity requires every business to be individually analyzed.

Most states, including Maryland, provide you with the following popular state entity choices: the sole proprietorship, the general partnership, the limited liability company, and the corporation. Other entities for more specialized purposes also exist, such as the limited partnership and the professional association (a P.A. or P.C.).

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Maryland Sales Tax Audit Defense

With Maryland tax audits increasing, you should ensure your company is prepared. An ongoing, organized approach to preserving necessary documents will streamline a sales tax audit and may even lead to tax refunds. First, beware, a state auditor visiting your office for a sales tax audit isn’t required to keep the focus solely upon sales taxes. A typical audit may cover other area such as your payroll taxes, and information obtained through the audit can lead to income tax adjustments as well. So, while a sales tax deficiency may only cause a minor sales tax adjustment, the revenue and expense information obtained can lead to sizable state income tax adjustments. Further, since states share their income tax adjustments with the IRS, you may trigger a federal income tax audit and adjustment as well. Continue reading “Maryland Sales Tax Audit Defense”

Voluntary Disclosure Agreements

Many companies discover they did not file required state tax returns, but they do not know how to address the issue.  States understand that taxpayers often do not uncover income tax or sales tax filing obligations until a potentially large tax bill makes coming forward difficult, if not impossible.  Most states provide voluntary disclosure programs to bring these reluctant, but otherwise law-abiding, taxpayers back into the flock.  The voluntary disclosure programs forgive all but the most recent tax years and reduce or eliminate penalties and interest. Continue reading “Voluntary Disclosure Agreements”

State Tax Nexus Reviews & Studies

Introduction

All states are becoming more aggressive in locating non-filing businesses, particularly those operating largely outside their state. Unfortunately, many businesses first realize their filing obligation to another state when visited by the state’s auditor. An analysis of your company’s connections, or “nexus”, to the states it touches, directly and indirectly, will be beneficial regardless of whether your business is a start-up or established, expanding or contracting.

Each state’s laws for determining whether your company has a filing obligation vary, but all states are limited by the “minimum contacts” standards established under the U.S. Constitution. Adding to many companies’ confusion, there are separate standards applied for sales and use tax nexus and income tax nexus. For instance, a company with a representative in a state may not have an income tax filing obligation but may have a sales tax obligation. Continue reading “State Tax Nexus Reviews & Studies”

8 Ways to Spot Tax Settlement Scams

Many unscrupulous tax debt settlement companies use the legitimate IRS offer-in-compromise process to swindle consumers. Tax relief companies are some of the companies most complained about by consumers by consumers. I do not doubt their horrible ratings! As a tax attorney, I have received countless calls from taxpayers who previously fell victim to scam tax relief companies claiming they could resolve any tax issue through the IRS tax debt settlement program, the Offer-In-Compromise.

My conversations with clients previously cheated by these companies gave me the following indicators of when a tax relief company may not be legitimate:

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2009 Maryland Tax Amnesty Summary

The Maryland Tax Amnesty for 2009 officially ended on October 30, 2009, but if you missed the deadline you may still be able to negotiate payments and reduce your penalties for past due taxes.   For instance, you may be able to use a Voluntary Disclosure Agreement. Please contact my office for more information.

Updated 5/19/2009, Following publication, the Maryland Comptroller’s Office announced early filings and payments will not be eligible for amnesty. The Comptroller’s Office is drafting an official amnesty application. Payments “under protest” for contested liabilities are eligible for amnesty if otherwise meeting the amnesty requirements. To receive notice when the Comptroller issues the amnesty application or further updates, please feel free to e-mail me.

The 2009 Maryland Tax Amnesty bill was signed into law on May 7, 2009, but the Maryland Comptroller’s Office will need to consider certain policy issues regarding its implementation. One obvious question Maryland tax attorneys and tax accountants are asking is, “What if you file prior to the Maryland Tax Amnesty period?”

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Maryland Senate Proposes Tax Amnesty

Updated: I now provide a new article summarizing the final Maryland tax amnesty bill being sent to the governor and some policy issues the Maryland Comptroller will likely consider given the bill’s delayed implementation date. 

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Additional States Require Pass-Through Entity Withholding

The states of Massachusetts and Illinois recently enacted withholding requirements for flow-through entities. These states joined a score of states that enacted similar measures to prevent nonresident partners, members and shareholders from avoiding their personal filing requirements.

The current list of states with similar withholding requirements include: California, Colorado, Georgia, Indiana, Kansas, Kentucky, Michigan, Minnesota, Missouri, Nebraska, New Jersey, New Mexico, New York, North Carolina, North Dakota, Oklahoma, Oregon, Pennsylvania, South Carolina, Virginia, and Wisconsin.

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