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Glen E. Frost

Attorney at Law *
Certified Public Accountant **
Certified Financial Planner®
Master of Laws in Taxation
Every Tax Problem has a Solution

10480 Little Patuxent Pkwy, Ste. 400
Columbia, MD 21044
Phone:  (410) 497-5947
Fax:      (888) 235-8405

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06/28/18

Permalink 12:18:32 am, by jjbisnar Email , 597 words   English (US) latin1
Categories: News

Release or Withdrawal of Federal Tax Lien: Which is Better?

When you fail to pay the taxes you owe to the government after the Internal Revenue Service sends you a bill with an explanation for how much you owe, the tax collection agency could place a lien against your property. This lien essentially protects the government's interest in your property, which could include personal property, financial assets, automobiles and real estate including your primary residence.

There is no question that facing a federal tax lien can be scary for any taxpayer. That's because a lien could affect you in many ways. For one, it could attach itself to all of your assets and future assets you might acquire for the duration of the lien. You may not be able to get credit or your ability to get credit may be limited until the issue is resolved. In addition to personal property, a lien also attaches to all business property including accounts receivable. Your tax debt and tax lien may continue even after you file for bankruptcy protection.

Understanding the Solutions

Once the IRS has enforced a tax lien, it can be removed or resolved only after you pay your tax debt. But, this could be done through a tax lien release or a tax lien withdrawal. While the consequence of both processes is the same, the manner in which a federal tax lien is removed could have a major impact on your credit ratings.

Withdrawal: The IRS files what is known as a Notice of Intent to File a Tax Lien before it attaches a lien to your assets. When this notice is withdrawn, the agency is essentially taken a proactive step to remove the lien even before it is actually placed. This type of withdrawal occurs when you as the taxpayer take the initiative to repay your tax debt in full as soon as you get the notice in the mail. Once your tax bill has been paid in its entirety, the IRS is required to withdraw its intent to file a lien within 30 days of your payment.

Release: This is issued when a taxpayer fully repays the tax debt, but only after the lien has already been placed on his or her account. A tax lien release happens when a taxpayer fails to respond to the IRS's notice of intent to file a lien and the federal agency goes ahead to place the lien on the taxpayer's account. You may also be able to enter into an agreement with the IRS where you can pay off your tax debt with installments over a period of time. In general, the IRS will accept payments from taxpayers to resolve a tax debt.

Which is the Better Option?

Generally speaking, a tax lien withdrawal is a far better option for taxpayers compared to a tax lien release. This is because a withdrawal takes place before the lien actually attaches itself to your assets. As a result, your credit rating does not suffer because credit agencies don't get notice of the lien until it is actually placed on your account. However, a tax lien release takes place after the IRS enforces the lien. So, your credit report will contain details about the lien for up to seven years, which could have an adverse impact on your credit rating.

If you are overwhelmed by tax debt and are wondering about potential options, our Maryland IRS tax lawyers can help you examine possible solutions. We can help provide you with more information about the options out there and help you arrive at a decision that will produce the best possible outcome.

06/26/18

Permalink 02:27:18 pm, by dmerritts Email , 414 words   English (US) latin1
Categories: News

IRS Responds to States' Attempts to Circumvent SALT Cap


By: Mary Lundstedt, Esq.


On May 23, 2018, the IRS issued Notice 2018-54,[1] making it abundantly clear that when it comes to state efforts to circumvent the recently enacted state and local tax (SALT) deductions cap, "taxpayers should be mindful that federal law controls the proper characterization of payments for federal income tax purposes."


Section 164 of the Internal Revenue Code (IRC) lists the following four categories of taxes that may be deducted whether or not the taxpayer has a trade or business or for-profit activity: (1) state and local, and foreign, real property taxes,[2] (2) state and local personal property taxes,[3] (3) state and local, and foreign, income, war profits, and excess profits taxes,[4] and (4) the generation-skipping transfer tax imposed on income distributions.[5]


Beginning in 2018 and continuing through 2025, the 2017 Tax Cuts and Jobs Act (2017 Act)[6] significantly limited the applicability of §164. The 2017 Act added §164(b)(6) which disallows the deduction of foreign real property taxes and caps an individual’s deduction for the total amount of SALT paid during the calendar year to $10,000 ($5,000 for a married individual filing a separately). Thus, any SALT payments exceeding the cap are not deductible.


Some states have reacted to the SALT cap by proposing and/or adopting legislation that is intended to circumvent the new cap. For instance, New York residents may now convert local property taxes into charitable contributions. This conversion, or reclassification, means that the property taxes escape the cap and become fully deductible from federal taxes. Other states like New Jersey and Connecticut are trying to implement similar plans.


Notice 2018-54 informs taxpayers that it intends to issue proposed regulations "addressing the federal income tax treatment of certain payments made by taxpayers for which taxpayers receive a credit against their state and local taxes." Additionally, the Notice indicates that the proposed regulations would clarify that "the requirements of the Internal Revenue Code, informed by substance-over-form principles, govern the federal income tax treatment of such transfers." Finally, the Notice states that the proposed regulations would also "assist taxpayers in understanding the relationship between the federal charitable contribution deduction and the new statutory limitation on the deduction for state and local tax payments."


Taxpayers should note that, although Notice 2018-54 targets the use of charitable deductions as a loop-hole, The New York Times has already reported that a senior Treasury official indicated that this notice is a broad warning against all "gimmicks."


If you need assistance with state and local tax issues, please contact Frost & Associates, LLC today.


[1] 2018-24 I.R.B. __ (June 11, 2018).


[2] §164(a)(1).


[3] §164(a)(2).


[4] §164(a)(3).


[5] §164(a)(4).


[6] Pub. L. No. 115-97, §11042.

06/18/18

Permalink 01:40:41 pm, by dmerritts Email , 376 words   English (US) latin1
Categories: News

New Tax Laws in Maryland in Response to Federal Tax Reform



By: Mary Lundstedt, Esq.


On May 15, 2018, Maryland enacted laws which are projected to counteract the recent federal tax reform's negative effects on a significant portion of Maryland taxpayers. Recent estimates issued by the Comptroller's office indicated that 23% of Maryland taxpayers would experience an increase in their state and local taxes due to the new federal code unless Maryland laws were changed.


Significantly, Governor Hogan signed House Bill 365/Senate Bill 184, now Chapter 575, effective July 1, 2018, which addresses the status of the personal exemption. For federal income tax purposes, the deduction for personal exemptions is suspended for tax years beginning after Dec. 31, 2017, and before Jan. 1, 2026. According to state estimates, eliminating the personal exemption at state level would result in approximately 92% of all Maryland returns exhibiting an increase in state taxes. The new Maryland law will preserve the Maryland taxpayers' ability to deduct the personal exemptions for state income purposes. Going forward, Chapter 575 also requires the Board of Revenue Estimates to provide an updated report on the federal tax law impact to the governor and General Assembly by December 15, 2018.


The press release issued after the signing states that "The governor and presiding officers signed House Bill 365/Senate Bill 184, which will save Marylanders from nearly $3 billion over the next five years in increased state taxes as a result of the federal tax overhaul by adjusting state law on personal income tax exemptions."


At the same signing ceremony, Governor Hogan signed bills increasing Maryland's standard deduction amounts for the first time in 30 years and expanding Maryland's earned income credit. Specifically, Governor Hogan signed House Bill 1190/Senate Bill 318, now Chapter 577, increasing Maryland's maximum standard deduction amounts to $2,500 for single taxpayers and $5,000 for couples filing jointly. This change is applicable to all tax years beginning after December 31, 2017.


Furthermore, the enactment of House Bill 856/Senate Bill 647, now Chapter 611, means that even Marylanders between the ages of 18 and 24 years old, who do not have qualifying children, may benefit from the earned income credit. The Fiscal and Policy Note accompanying the bill indicates that fiscal year 2019 general fund revenues will decrease by $7.5 million as a result of the credit's expansion. The act is effective July 1, 2018.


If you have questions or concerns about how the new tax laws may affect you, please contact Frost & Associates, LLC today.

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* Licensed to practice in Maryland, Florida, and the District of Columbia. May represent taxpayers nationwide in IRS disputes.
** Licensed in Maryland

10480 Little Patuxent Pkwy, Ste. 400
Columbia, MD 21044
(410) 497-5947
© 2018 Glen E. Frost