Tax Lawyer Blog

A Blog written by the Tax Attorneys for Individuals and Businesses

What do you do if you can’t pay your taxes?

Date Published April 2009 San Francisco Business Times

It seems to common a problem with our politicians. However many businesses may find it challenging to come up with the cash to pay taxes this year. April 15 is the deadline to pay the income taxes that you may owe. Even if you are filing an extension, the extension is an extension of time to file, not an extension of time to pay. What if you don’t have the money? Many businesses may be faced with this dilemma this year.

At our law firm we have seen clients who cannot pay taxes owed for various reasons. Some have viable businesses, but with a cash-flow challenge. The first question to ask is can you borrow? Can you apply for a business loan, line of credit or borrow from a family member or friend? We are of course assuming you have taken every deduction available to you. However, once you have done your tax planning and you still find yourself owing a balance then knowing how to work with the IRS or State can make the difference that you need.

First understanding how the IRS will analyze you and how you will be classified makes a difference as to what will best serve you. Do you owe income tax, payroll tax or sales tax? Payroll tax treatment is often different than income tax treatment. Owing to the federal government is different than owing to the state government. There may be planning and strategy that may make a huge difference as to when you pay and the options available to you based on your availing yourself to all of your rights.

If the IRS is unreasonably demanding money from you, you can stop the IRS from collecting from you pending the incredible power of a collection due process hearing if you have a federal tax challenge. If the IRS is unreasonable, you can take the IRS to Tax court and have the judge decide rather than be subject to IRS demands.

Penalties:

Don’t neglect to file either your tax return or an extension by April 15 because the failure to file penalty is 5% a month to a maximum of 25% a year. The failure to pay penalty is only ½ of 1% a month.

You may qualify to have a variety of penalties abated and this can be included in your due process hearing.

The bottom line: keep your taxes the least painful by availing yourself of all your legal rights.

For more information or if you have questions please use our contact form.

How do you make a great deal better? TAXES.

Date Published: Mar 2009 San Francisco Business Times

What is a great deal? It reminds me of the old legal maxim “You can name your price, if I can name the terms.” Most people focus on “how much do I have to pay” or “how much do I receive.” Negotiating the details of a transaction can make a tremendous difference in the amount of taxes incurred or saved. Not understanding the effect of the taxes can greatly affect the “true” price.

Why would taxes make a difference? It gets back to the terms. Most purchases or sales focus on price first and then terms: length of payment, interest, balloon payments, payment dates, inventory value, good will, and perhaps the details of what is being transferred, etc. So what about taxes? The more savvy the dealmaker the sweeter the deal and nothing is more sweet then little or no tax for my clients.

Over my 30 plus years of practicing tax law, I have negotiated for many clients, but one deal stands out to me as an example of the benefit of negotiating taxes. I was hired by one of my clients to negotiate the terms of a business that he was buying. The seller and his attorney were fixated on the price.

My client, the buyer, asked me to negotiate the terms that would affect his taxes, his general attorney had already negotiated the price and the general terms. When I arrived in the meeting the seller and his general attorney greeted me. The seller was a very determined person and before he could properly greet me, looked me in the eye and said, “I don’t care how many fancy lawyers are brought in, I’m not budging from the price.” I smiled and extended my hand and let him know I was not here to negotiate the price. He would have his price! I simply wanted to discuss the tax portion of the deal.

With that, he and his general attorney relaxed and we sat down to work on completing the deal.

The result of that meeting provided my client with all of the tax benefits, leaving the seller with all of the tax detriments. My client was very happy and the other side may never know how much the insisting on price and ignoring the tax effects really cost him. The seller received his price, but netted far less in his and account then if he had lowered the price and kept some of the tax benefits.

This concept works in so many aspects of business and should be considered before any negotiations begin. Use the tax code to your advantage and make your deal better.

For more information or if you have questions please use our contact form.