Greensburg Pennsylvania Tax Attorney Blog

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.

The advantages of a special needs trust for your disabled child

At the law offices of John A. Cochran, Esquire, in Pennsylvania, we understand how difficult your life is when you are the parent of a disabled child. Depending on the nature of your child’s disability, you may need to provide him or her with substantial daily care. Naturally you are concerned about who will continue to provide this care if and when (s)he outlives you, which in all likelihood (s)he will.

FindLaw explains that a special needs trust is something you definitely should look into as a method of ensuring that your child will continue to receive the care (s)he needs once you no longer can provide it yourself. When you set up such a trust for the benefit of your child, you can put whatever assets into it you choose, including the following:

  • Governmental benefits such as Medicaid and Supplemental Security Income
  • Any money that your child inherits
  • Any money (s)he receives in settlement of a lawsuit
  • Any additional money and/or income-producing assets that you wish

5 common components in complete estate planning

Living wills and advanced health care directives have the same aim: to ease the burden on your loved ones by documenting your end of life decisions in advance of any possible incapacitation.

Not surprisingly, some form of a will has existed since at least the 8th century BC. This goes to show that, although it can be difficult to accept death as a reality, we see the value in outlining our final wishes and protecting assets in the best way we see fit.

Why the IRS may audit you for real estate losses

Deducting rental losses on Pennsylvania real estate properties can be an attractive option for people who own real estate since there is no limit to how much that can be deducted. However, Time.com warns that unlimited deductions is precisely why the IRS carefully scrutinizes returns with real estate losses deducted. The IRS places strict rules on who may claim real estate losses, and any return that looks suspicious can be flagged for a tax audit.

To successfully qualify for real estate rental losses, an individual must be a real estate professional, which can include various fields such as real estate development, landlording over a property, or real estate brokerage. However, you do not have to actually be a real estate professional to qualify for rental losses. The IRS will consider your rental deductions to be legitimate if you “materially” participate in your real estate.

Using spendthrift trusts to support your children

At the moment, you may be putting away a lot of money into a trust that your child can inherit at a later date. Unfortunately, some people cannot handle coming into a lot of money quickly and may end up spending the money on frivolous material possessions, on friends, or on lavish vacations. That is why some parents turn to placing spendthrift protections into their Pennsylvania trusts so that their children cannot access the money unless they spend it as the parents wish.

Forbes describes how these spendthrift provisions can work. A spendthrift trust instructs a trustee to disperse money to a beneficiary to maintain lifestyle expenses, such as paying for shelter, food, education or various bills while keeping the money at arm’s length from the beneficiary. In other words, while the money in the trust can benefit your child or designated heir, the child cannot directly access the money. And just like many other trusts, you can make the trust last for your child’s lifetime or for a set period of years.

What should you know about the IRS during tax season?

When tax season rolls around, Pennsylvanians just like you are worrying about the possibility of debt due to tax delinquency or other tax-related problems. John A. Cochran, Esquire, is here to help if you find yourself buried under debt because of missed taxes or other tax-related mistakes and issues.

The first thing to know is that you absolutely shouldn't treat the IRS like a regular debt collection agency. They have the ability to deliver a Notice of Levy if you are in debt and haven't made any contact or tried to work out payments. The IRS has the authority to seize any of your assets, which includes retirement income, benefits, your bank accounts, wages, and more.

What happens if I file taxes late?

As with any tax dispute, it is important to address any problem associated with filing or paying your Pennsylvania or Federal taxes after the deadline has passed. However, it is not always entirely clear what, if any, consequences will arise from procrastination. 

One of the most common points of confusion is whether it is more important to file in a timely manner or wait until you are able to pay everything you owe. While this is a complicated question depending on your situation, there are a few predictable outcomes.

Understanding a power of attorney

It can be scary to think about, but at some point in your life you may become too old or infirm to competently manage your financial affairs. Mental incapacitation can leave you open for manipulation by an unscrupulous party seeking to siphon off your wealth, or at least, leave your finances vulnerable to other parties who may simply not have your or your family’s best interests at heart. That’s where a power of attorney comes in. You have the option of granting someone in Pennsylvania power of attorney duties to handle your estate in the event you are unable to do so.

According to the American Bar Association, a person you assign power of attorney to is called your agent. You may assign any number of powers to your agent, including managing your finances or selling or buying assets. You must spell out these powers officially in a document. When the time comes to act on them, the agent will present the document to activate the power. For example, an agent may present such a document to buy a piece of property on your behalf. If you wish, your power of attorney can handle your estate plan as well, including implementing your will.

Contact

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

Phone: 724-216-0704
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