Greensburg Pennsylvania Tax Attorney Blog

What is a testamentary trust?

There are many options you will have as you plan your estate in Pennsylvania. One of those options in a testamentary trust, which is a trust that is set up within your will, according to Yahoo! Finance. It is laid out and specified within the will. When you pass away, the assets indicated as part of the trust will go into the trust.

It is important to understand the point that the trust does not actually exist until you die. You have the ability to change it at any time, but once you die, it becomes irrevocable and cannot be changed by anyone else.

Why is the IRS auditing my business associate and me?

The IRS might choose to review your tax return in detail, particularly if you have dealings on record with individuals under audit. In fact, the IRS could decide to audit anyone at any time. There are only a few limitations on this power, although internal practices tend to limit tax reviews to returns filed over the past three years. The bottom line is that many Pennsylvania individuals and companies are audited every year — it is not an accusation of wrongdoing.

While the IRS does perform audits without evidence of error, it is often advisable to exercise caution after receiving any notice of review. It is also usually a good idea to prepare fully if you discover that a business associate is undergoing a concurrent audit. 

How do you prevent ademption?

Ademption decisions could potentially subvert the intent of your will. At the very least, they would probably diminish the value of your estate somewhat, as your beneficiaries and executors drew funds therefrom to research your intentions. You could potentially avoid subjecting your beneficiaries to the complexities of ademption with a few simple gestures.

Of course, preempting ademption requires an understanding of the process. This article focuses on what risk this law could pose to your estate and what you might do to mitigate the potential losses. 

What is legally deductible from federal taxes?

Many Pennsylvania businesses owners and individuals like the control and confidentiality that comes from preparing and filing their own taxes. However, this approach is often at best time-consuming. One of the largest pitfalls involves tax deductions and credits. In extreme cases, you could potentially file a faulty return that leads to fines, audits and even legal battles with the IRS. 

If you are new to filing your taxes on your own, then you might not know about the most common tax deductions that people take. Especially if you decide to itemize, it might be a good idea to start by filing your personal taxes — assuming you do not operate a sole proprietorship — and move on to business taxes in a later year.  

What to consider when estate planning

Are you one of those people who think that estate planning is just for the rich and famous? The reality is, estate planning is for everyone and it does not matter the size of your estate or income. It is important to make sure you create documents like wills, trusts and powers of attorney. When proper planning is in place, you make sure you don’t leave any confusion for your loved ones about your final wishes. 

When is an offer in compromise a good idea?

Even if you are not caught up on your Pennsylvania taxes or other bills, it could be advantageous to work with the Internal Revenue Service to manage your federal tax liabilities. One way you might be able to do this is to submit an application for a formal offer in compromise. However, like any dealings you might have with the IRS, it is often important to consider the details of your case over more general guidelines. 

In fact, the IRS itself would consider your case in great detail before even considering you eligible for the process. The IRS website has an online pre-qualifier test that is supposedly brief. However, it contains six steps and is not appropriate as an indicator of eligibility for many complex tax entities. You might have to complete a more detailed assessment of your situation if you were dealing with debt for one of the following:

  • Businesses, excluding sole proprietorships
  • Overseas residents
  • Certain military personnel

Common estate administration errors and how to avoid them

If you live in Pennsylvania and another Pennsylvania resident named you the executor over his or her estate, you face unique responsibilities that you must take care of within a timely, efficient manner. Serving as someone’s executor can require that you perform any number of duties, among them publicizing the estate, paying off any debts and seeing to it that beneficiaries receive their allocations. The process can prove complicated, however, and many first-time executors make similar errors. John A. Cochran recognizes the many areas in which executors commonly make mistakes, and he has helped many clients in similar situations work their way through the process.

Per Forbes, one of the most common errors today’s executors make is failing to properly or appropriately advertise the estate in the first place. Pennsylvania has specific laws you must follow when it comes to publicizing the estate so that any creditors owed money can make claims on it, and failing to do so can land you in considerable trouble.

You owe the IRS: Now what?

Few things are as terrifying as receiving a notice from the Internal Revenue Service alleging that you owe back and/or additional federal income taxes. If one of these notices arrives in your Pennsylvania mailbox, however, the first thing to remember is not to panic. You have options and you also have the right to due process.

As FindLaw explains, the worst thing you can do is to ignore the notice. While burying your head in the sand may give you a temporary sense of relief, it can result in your life quickly becoming miserable. The IRS is one of the most powerful governmental agencies. Some would say the most powerful. It is certainly the most tenacious, and it never gives up once it determines, rightly or wrongly, that you owe taxes. Ignoring its initial notice could result in any or all of the following:

  • Levy of your bank accounts
  • Garnishment of your wages
  • Seizure of your home
  • Shutdown of your business
  • Contact with your extended family, friends, neighbors, bank, employer, etc. regarding your alleged tax liabilities

What are the primary benefits of an irrevocable living trust?

If you are a Pennsylvania resident who is currently taking steps toward preserving your wealth for future generations, you may be giving some though to creating an irrevocable living trust. As the name suggests, you cannot change an “irrevocable” living trust once you create it, but there are many advantages that can make establishing such an arrangement an important component of your estate planning process.

According to The Motley Fool, an irrevocable living trust can help you protect your assets and preserve as much of your legacy as possible for your loved ones. What are some of the ways in which it does so? For starters, any assets you place into an irrevocable trust do not factor into the overall value of your estate, meaning doing so can reduce the amount of estate tax your loved ones must pay once you pass on.

When the IRS comes knocking at your door

If you are like most Pennsylvania citizens, you probably do everything possible to keep up with your tax obligations. However, mistakes are often inevitable when a system as complex as federal tax law is involved. Our practice here at John A. Cochran, Esquire, has even turned up instances of the IRS getting confused by the very rules it works with every day.

collection of tax debt would probably start with the IRS notifying you of the issue. You would probably do well to react quickly to this letter, but speedy replies are not always advantageous. You may not know what options you have available, especially if this is your first conflict with your taxes, so gathering information is of the utmost importance. As such, we have put together a brief discussion of the first steps that tend to be most successful for our clients.

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John A. Cochran, Esquire
140 S. Main St.
Suite 301
Greensburg, PA 15601

Phone: 724-216-0704
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