What happens if you receive a K-1 from an LLC and there are self-employment earnings listed on line 14? Are you responsible for reporting those as subject to the self-employment tax? The self-employment tax is an additional payment of 15.3% to account for Medicare and Social Security. We’re taking a page from the Tax Times blog today to talk about this issue. For the most part, a taxpayer’s portion of ordinary income from partnerships (including LLC’s) reported on a K-1 is indeed subject to the self-employment tax. There are, of course, exceptions. This requires the assistance of an experienced team of accountants and tax attorneys, since the solution for you likely depends on your individual circumstances, the state of formation for the LLC and whether the LLC is taxed as a pass-through entity. In any case, it could be worth your while to discuss this issue with a trained professional to learn whether you are liable for the self-employment tax or not. To learn more about complicated tax issues and reporting of self-employment income, contact our offices at 732-521-9455 or through email at info@lawesq.net. 
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Important IRS Update: Significant Interest Penalty Increase for Tax Underpayments
The Internal Revenue Service (IRS) has recently announced a critical change that could significantly impact taxpayers who underpay their taxes. This update is particularly relevant as we approach the next tax filing season. Previously, the IRS charged a 3% interest penalty on estimated tax underpayments. However, this rate has now been increased to a substantial
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Will Inflation Hurt Stock Returns? Not Necessarily
Investors may wonder whether stock returns will suffer if inflation keeps rising. Here’s some good news: Inflation isn’t necessarily bad news for stocks. A look at equity performance in the past three decades does not show any reliable connection between periods of high (or low) inflation and US stock returns. Since 1993, one-year returns on
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Maximize Your Charitable Impact with These Four Strategies
As the year draws to a close, it’s a perfect opportunity to rethink how you give to charity. This is important for managing how much tax you pay and how much help reaches those in need. Here are four effective strategies: Need Guidance? Reach Out to Us! These strategies are just a starting point. There
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Take a look at the articles out there on either side of the issue and you’re likely to find compelling arguments for and against the use of corporate tax inversions. Some believe that tax inversions are not patriotic, but others see the issue as maximizing gains while “playing the rules” of the tax code game. Did you know that there’s a personal tax inversion you might be able to use to save hundreds of thousands (or more) on your state income taxes? It’s not right for everyone, but in the right situation can be a valuable tool.
In this situation, you can reap the benefits of having your assets located in a different jurisdiction, preferably one with no state income tax at all. A personal tax inversion, however, might be even simpler, because it doesn’t require you to transfer assets outside the country- just to another state. This can be done through a non-grantor trust. You are in some sense not really seen as the owner of the trust for tax purposes. Ensure that you work with an attorney who understands what, if any, gift tax implications there are of making such a move. The attorney drafting your paperwork should explain this to you and make you aware of whether you will be subject to gift taxes in exchange for giving up the burden of being hit with state income taxes. To learn more about non-grantor trusts, give us a call today at 732-521-9455 to get started.
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Do I Need a Trust?
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As trusts have gotten more popular and evolved in type to appeal to a lot of people, so now you might be under the impression that you must have a trust. While it’s not for everyone, there are so many trusts out there that it’s very likely you could find one that will help you to meet your goals, including to protect your assets and minimize taxes.
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Major liquid assets, setting up care for a child with special needs, and a variety of real estate ownership are a few of the reasons that people might initially turn to trusts. If you’re a resident of a state with a high state estate tax, income tax or probate costs, you’re likely to be concerned about the hit of taxes, too. This refers to situations where a federal estate tax is factored into your asset value, but an additional taxable event occurs at the state level. Without proper planning, you could find that the value of the assets you have worked so hard to build is extremely vulnerable to these taxes and costs.
Contact our offices today to learn more about how these trusts can help you. Send us a message at info@lawesq.net or call us 732-521-9455.
Right now, gift and generation skipping transfer tax exemptions, set at $5.34 million each, have caused a resurgence in interest regarding self-settled trust. As of now, only fifteen states allow for these types of trusts: Alaska, Delaware, Hawaii, Mississippi, Missouri, Nevada, New Hampshire, Ohio, Oklahoma, Rhode Island, South Dakota, Tennessee, Utah, Virginia and Wyoming. Several of these states, including Delaware and Nevada, tend to be popular locations for DING/NING trust establishment when the trust creator lives in a high state income-tax and capital gains tax environment.
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Under a self-settled trust, grantors may even be a beneficiary of an irrevocable trust that is established for their own family. As long as no assets are transferred fraudulently, no exception creditors, and no pre-existing arrangement between the trustee and grantor, a trust grantor can establish himself or herself as a beneficiary.
These trusts are most often used for domestic asset protection in four separate ways: a self-settled trust, spendthrift protection, modern discretionary trust protection, and the establishment of a limited liability company to shield and own trust property. In their most common form, self-settled trusts are used as an alternative to off-shore trusts. To learn more about trust creation and management that maximizes protection, email us at info@lawesq.net or contact us via phone at 732-521-9455.
Offshore account taxpayer Ashvin Desai was recently sentenced to six months in prison in addition to six months of home confinement for not reporting foreign bank accounts on tax returns and FBAR filings. The medical device manufacturer had previously been convicted of hiding more than $8 million in foreign bank accounts.
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In addition to being charged with tax evasion and tax perjury, he also pleaded guilty to failing to file an FBAR. The money from his offshore accounts were used to invest in CODs, where he earned interest rates up to nine percent. In addition to all the other charges and penalties for the efforts he took to hide the assets, he was also assessed a $14,229, 744.00 FBAR penalty. While these penalties may seem severe, he was actually very lucky in the sentencing, as he could have been facing 552 months in prison.
The government was forced to prove their case in court, but what sealed the deal was email proof that Desai was making efforts to conceal the money and how it was being transferred. While there are obvious lessons here about using email to share any kind of sensitive information, it’s also an opportunity to highlight the importance of proper FBAR filing. To ensure the proper compliance with FBAR, contact us today at info@lawesq.net or via phone at 732-521-9455.