2013 Year-End Tax Planning: Personal Tax Considerations

As January 1, 2014 gets closer, year-end tax planning considerations should be starting to take shape. New tax legislation has brought greater certainty to year-end planning, but has also created new challenges. The number of changes made to the Tax Code and the opportunities these changes bring may seem overwhelming. However, early planning will help you to maximize your potential tax savings and minimize your tax liability. This letter is intended to be a mile-high view of some key year-end tax planning strategies.

Changes for 2013 and beyond

In 2012, year-end planning was complicated by the great uncertainty over the fate of the Bush-era tax cuts. For more than 10 years, individuals had enjoyed lower income tax rates, but these rates were scheduled to expire after 2012. Moreover, many tax credits and deductions that had been made more generous were also set to expire after 2012. In January 2013, Congress passed the American Taxpayer Relief Act of 2012, which made permanent many, but not all, of the Bush-era tax cuts and also some tax benefits enacted during the Obama administration. Congress also permanently “patched” the alternative minimum tax (AMT) to prevent its encroachment on middle income taxpayers. The result is much greater certainty in year-end tax planning for 2013 because we know what the individual tax rates are in 2014, how many tax credits and deductions are structured, and much more.

Of course, there are always complexities in the Tax Code. In 2013, two new Medicare taxes kicked-in (3.8-percent net investment income (NII) surtax and a 0.9-percent Additional Medicare Tax). In addition, the U.S. Supreme Court ruled that the federal government’s denial of recognition of same-sex marriage was unconstitutional, opening the door to allowing married same-sex couples to file joint federal tax returns and take advantage of other tax benefits available to married couples. Beginning in 2014, some of the most far reaching provisions of the Affordable Care Act will become effective: the individual mandate, the start of Marketplaces to obtain insurance and a special tax credit to help offset the cost of insurance.

Planning for expiring tax incentives

First, do not lose the benefit of some generous, but temporary tax incentives that are available in 2013 but may not be in 2014. Are you planning to purchase a big-ticket item such as a new car or boat? The state and local sales tax deduction (available in lieu of the deduction for state and local income taxes) is scheduled to expire after 2013, and you may want to accelerate that purchase to take advantage of the tax break. A valuable tax credit for making certain energy efficient home improvements, including windows and heating and cooling systems, and a deduction for teachers’ classroom expenses are also scheduled to expire after 2013. These are just some of many incentives that will sunset after 2013 unless extended by Congress. The window for maximizing your tax savings for 2013 is closing. Please contact our office for more details.

Planning for new taxes and rates

Some individuals may be surprised that they owe additional taxes in 2013, even with the extension of the Bush-era tax cuts. Three new taxes are in effect for 2013: the NII surtax, the Additional Medicare Tax and a revived 39.6 percent tax bracket for higher income individuals. The 3.8-percent NII surtax very broadly applies to individuals, estates and trusts that have certain investment income above set threshold amounts. These amounts include a $250,000 threshold for married couples filing jointly; $200,000 for single filers. It should also be noted that trusts will hit the highest tax rate with only $11,950 of retained taxable income.  One strategy to consider is to keep, if possible, income below the threshold levels for the NII surtax by spreading income out over a number of years or finding offsetting above-the-line deductions. If you are considering the sale of your home, and the gain will exceed the home sale exclusion, please contact our office so we can discuss any possible NII surtax.

The Additional Medicare Tax applies to wages and self-employment income above threshold amounts including $250,000 for married couples filing joint returns and $200,000 for single individuals. If you have not already reviewed your income tax withholding for 2013, now is the time to do it. One way to reduce the sting of any Additional Medicare Tax liability is to withhold an additional amount of income tax.

As discussed, ATRA extended the Bush-era tax rates for middle and lower income individuals. ATRA also revived the 39.6 percent top tax rate. For 2013, the starting points for the 39.6 percent bracket are 450,000 for married couples filing jointly and surviving spouses, $425,000 for heads of households, $400,000 for single filers, and $225,000 for married couples filing separately. ATRA also revived the personal exemption phaseout and the limitation on itemized deductions for higher income individuals.

Starting in 2013, ATRA also sets the top rate for capital gains and dividends to 20 percent. This top rate aligns itself with the levels at with the new 39.6 percent income tax rate bracket starts: capital gains and dividends to the extent they would be otherwise taxed at the 39.6 percent rate as marginal ordinary income will be taxed at the 20 percent rate. ATRA did not change the application of ordinary income rates to short-term capital gains. However, individuals should plan for the possibility of being subject to a higher top rate (39.6 percent).

Planning for health care changes

Before year-end, individuals need to review how the Affordable Care Act will impact them. The Affordable Care Act brings a sea-change to our traditional image of health insurance. The law requires individuals, unless exempt, to either carry minimum essential health care coverage or make a shared responsibility payment (also known as a penalty). Most employer-sponsored health insurance is deemed to be minimum essential coverage, as is coverage provided by Medicare, Medicaid, and other government programs. Self-employed individuals and small business owners should revisit their health insurance coverage, if they have coverage, before year-end and weigh the benefits and costs of obtaining coverage in a public Marketplace (or a private insurance exchange) for themselves and their employees. Small businesses may be eligible for a tax credit to help pay for health insurance. Individuals may qualify for a premium assistance tax credit, which is refundable and payable in advance, to offset the cost of coverage. Please contact our office for more details about the Marketplaces, and health insurance coverage for small businesses and individuals.

Individuals with health flexible spending accounts (FSAs) and similar arrangements should take a look at their spending habits for 2013 and predict how they will use these tax-favored funds in the future. In 2013, the maximum salary-reduction contribution to a health FSA is $2,500. Remember that health FSAs have strict “use it or lose it” rules, and the cost of over-the-counter drugs cannot be reimbursed with health FSA dollars unless you obtain a prescription (there are some exceptions).

Individuals who itemize their deductions also need to keep in mind the 10 percent floor for qualified medical expenses. This change took effect at the beginning of 2013. It means that you can only claim deductions for medical expenses when they reach 10 percent of adjusted gross income (for regular tax purposes and for alternative minimum tax purposes). There is a temporary exception for individuals over age 65 for regular tax purposes.

Planning for gifts

Gift-giving is often overlooked as a year-end planning strategy. For 2013, individuals can make tax-free gifts (no tax consequences for the giver or the recipient) of up to $14,000 to any individual. Married couples may “split” their gifts to each recipient, which effectively raises the tax-free gift to $28,000. Gifts between spouses are always tax-free unless one spouse is not a U.S. citizen. In that case, the first $143,000 in gifts made in 2013 is tax-free.

There are special rules for gifts made for medical care and education that can be a valuable component of a year-end tax strategy, especially for individuals who want to help a family member or friend. Monetary gifts given directly to a college to pay tuition or to a medical service provider are tax-free to the person making the gift and the person benefitting from education or medical care.

Gifts to charity also are frequently made at year-end. Through the end of 2013, taxpayers age 70 ½ and older can make a tax-free distribution from individual retirement accounts directly to a charity. The maximum distribution is $100,000. Individuals taking this option cannot claim a deduction for the charitable gift.

Planning for retirement savings

Year-end is a good time to review if your retirement savings plans and tax strategies complement each other. For 2013, the maximum amount of contributions that can be made to an IRA is $5,500, with a $1,000 catch-up amount allowed for individuals over age 50. Keep in mind that the maximum amount that can be contributed to a Roth IRA begins to decrease once a taxpayer’s adjusted gross income crosses a certain threshold. For example, married couples filing jointly will begin to see their contributions begin to phase out when their AGI is $178,000. Once their AGI reaches $188,000 or more, they can no longer contribute to a Roth IRA. For single filers the corresponding income thresholds for 2013 are $112,000 and $127,000. Please note that 2013 contributions, for tax purposes, may be made until April 15, 2014.

Traditional IRAs and Roth IRAs are very different savings vehicles. A traditional IRA or Roth IRA set up years ago may not be the best savings vehicle today or for the immediate future if employment and other personal circumstances have changed. Some individuals may be contemplating rolling over a workplace retirement plan into an IRA. Very complex rules apply in these situations and rollovers should be carefully planned. The same is true in converting a traditional IRA to a Roth IRA and vice-versa. Every individual has unique goals for retirement savings and no one size fits all. Please contact our office for a more detailed discussion of your retirement plans.

Planning for Small Businesses

There are also strategies available for small businesses seeking to maximize tax benefits in 2013.  Two of the business incentives scheduled to end or significantly change after 2013 are the bonus depreciation allowance and the enhanced section 179 expensing provisions.

Bonus depreciation is scheduled to end after 2013 if not renewed by Congress. Additional 50-percent bonus depreciation was extended by the American Taxpayer Relief Act of 2012 (ATRA, signed into law on January 2, 2013) for one-year only and applies to qualifying property placed in service before January 1, 2014. In the case of property with a longer production period and certain non-commercial aircraft, the extension also applies to property acquired before January 1, 2014 and placed in service before January 1, 2015.

Unlike regular depreciation, under which half- or quarter-year conventions may be required, a taxpayer is entitled to the full, 50-percent bonus depreciation irrespective of when during the year the asset is purchased. Therefore, year-end placed-in-service strategies can provide an almost immediate “cash discount” from qualifying purchases, even when factoring in the cost of business loans to finance a portion of those purchases.

An enhanced section 179 expense deduction is available until 2014 for taxpayers (other than estates, trusts or certain non-corporate lessors) that elect to treat the cost of qualifying property (so called section 179 property) as an expense rather than a capital expenditure. The current section 179 dollar cap for 2013 is $500,000. For tax years beginning after 2013, that dollar limit is officially scheduled to plunge to $25,000 unless otherwise extended by Congress. For tax years beginning in 2013, the overall investment limitation is $2 million. That level is also scheduled to fall to $200,000 in 2014. Please contact our office regarding how to best benefit from these provisions in 2013.

Georgia Tax Credits

The State of Georgia has several state specific credits against Georgia income taxes.  Many of you may be aware of or have utilized the Georgia Private School Credit.  Each year Georgia sets aside an amount of money which is available to taxpayers who qualify in advance for the benefit.  Married taxpayers can claim up to $2500 and single taxpayers up to $1000.  Since there is a finite amount available, the fund will be fully utilized well before the end of 2014.  If you wish to claim this credit, you should make it a New Year’s resolution and apply for qualification at the beginning of 2014.  You can get more specific information at http://www.gadoe.org/External-Affairs-and-Policy/Policy/Pages/Tax-Credit-Program.aspx or talk directly with your private school.  This credit is a win/win since you get every dollar up to the limit back on your tax return and you also get a federal income tax deduction on Schedule A if you itemize. 

The film industry in Georgia is entitled to tax credits.  The law allows these credits to be transferred to other taxpayers.  As a result, unused credits are being sold at a discount and you can purchase them to satisfy your Georgia tax liability.  Additionally, you get a full itemized deduction for the amount of the credit but you must report the discount as a short-term capital gain on Schedule D.  An additional benefit is that the credit is treated like withholding and can minimize or eliminate the need for estimated payments and possibly withholding.

A small but frequently overlooked credit is the $150 Driver Education Credit.  If you pay for your child to take a driver’s education course and get a certificate of completion, you are entitled to a credit of the amount spent up to $150.

It should also be noted that the income tax exclusion on retirement income, for taxpayers who are 65 and older, will increase from $100,000 in 2013 to $150,000 in 2014, $200,000 in 2015, and to an unlimited retirement income exclusion effective in 2016.

We have reviewed only some of the many year-end tax planning strategies that could help you minimize your 2013 tax bill and maximize savings.  Please contact our office to schedule an appointment to personalize your 2013 year-end tax planning.

For more information regarding this or any other tax planning concern, please visit the Hoffman & Associates website at www.hoffmanestatelaw.com, call us at 404-255-7400 or send us an email.

In accordance with IRS Circular 230, this article is not to be considered a “covered opinion” or other written tax advice and should not be relied upon for IRS audit, tax dispute, or any other purpose. The information contained herein is provided “as is” for general guidance on matters of interest only. Hoffman & Associates, Attorneys-at-Law, LLC is not herein engaged in rendering legal, accounting, tax, or other professional advice and services. Before making any decision or taking any action, you should consult a competent professional advisor.

The 2013 Medicare Surtax: What You Need to Know

The American Taxpayer Relief Act of 2012 and the Patient Protection and Affordable Care Act of 2010 have ushered in new income tax provisions which become effective in 2013.  One of the new provisions is the 3.8% Medicare surtax on an individual’s Net Investment Income.  This tax is one of the funding provisions for the new health care legislation, known as Obamacare.  The surtax will impact high income taxpayers who have a modified adjusted gross income in excess of specific thresholds.

FIRST OF ALL, WHO IS A “HIGH INCOME” INDIVIDUAL?  WILL I BE SUBJECT TO THIS TAX?

Individuals will be subject to the tax if they have any amount of net investment income and their modified adjusted gross income (“MAGI”) for the year is greater than the following threshold amounts:

  •   Married filing jointly                                              $250,000
  •   Married filing separately                                        $125,000
  •   Single or head of household                                   $200,000

HOW IS THE TAX CALCULATED?

The 3.8% tax is calculated on the lesser of (1) your net investment income or (2) your MAGI in excess of the threshold amount.  Some common types of investment income are: interest (excluding tax exempt interest), dividends, capital gains, rental income (if you are not a real estate professional) and passive income from partnership activities.

DOES THE TAX APPLY TO THE GAIN ON THE SALE OF MY PERSONAL RESIDENCE?  WHAT ABOUT A VACATION HOME OR INVESTMENT REAL ESTATE?

Net investment income only includes the net taxable gain from the sale of a personal residence, which is the gain in excess of $500,000 for married individuals and $250,000 for single individuals.    The entire net capital gain from the sale of a vacation home, investment property or rental real estate is included in investment income.

DOES THIS TAX APPLY TO TRUSTS?

The tax will apply to estates and trusts with undistributed net investment income and an adjusted gross income in the amount of $11,650 for 2013.

WHAT CAN I DO TO MINIMIZE THE IMPACT OF THE SURTAX?

The timing of transactions becomes a very important tax planning tool in avoiding or minimizing the impact of the 3.8% surtax.  This is especially true for sales transactions of stock, real estate and other investments.  The current year tax impact of net investment income and other gains and losses should be reviewed in order to minimize the tax.

Other potential opportunities to minimize the surtax impact are:

  • Consider converting traditional IRAs to Roth IRAs.  This would reduce the MAGI in future years when distributions are taken from the accounts.
  • Investing in tax exempt bonds instead of taxable bonds.  The interest from the tax exempt bonds is excludable.
  • Harvesting capital losses to offset capital losses to reduce net investment income and MAGI.
  • Managing retirement plan distribution to maintain MAGI under the threshold amounts.

IS THE 3.8% SURTAX ON NET INVESTMENT INCOME THE ONLY MEDICARE SURTAX?  WHAT ABOUT EARNED INCOME?

No, there is also a .9% Medicare surtax on the wages and self-employment income of high income taxpayers.  This tax applies to earned income in excess of $200,000 for single filers, $250,000 for married taxpayers filing joint returns and $125,000 for married taxpayers filing separately.

For more information regarding tax planning, tax compliance and controversy, estate planning, or business law,  please visit the Hoffman & Associates website at www.hoffmanestatelaw.com or call us at 404-255-7400 or send us an email.

In accordance with IRS Circular 230, this article is not to be considered a “covered opinion” or other written tax advice and should not be relied upon for IRS audit, tax dispute, or any other purpose. The information contained herein is provided “as is” for general guidance on matters of interest only. Hoffman & Associates, Attorneys-at-Law, LLC is not herein engaged in rendering legal, accounting, tax, or other professional advice and services. Before making any decision or taking any action, you should consult a competent professional advisor.

Tax Law Changes in the News

Stay up to date and informed about changes in tax law.  Highlighted in this article are some of the most recent.

Form 706 In Final Form:  On October 11, the IRS  issued the 2012 estate tax return (Form 706) in final form.  New on this form is the  portability election.  With portability, if an individual dies and does not utilize his or her applicable exemption amount,  the unused portion transfers to the surviving spouse if so elected by the deceased spouse’s personal representative.

According to regulations issued in June of 2012, executors choosing to make a portability election must estimate the total value of the gross estate based on a determination made in good faith and with due diligence. The instructions on Form 706 will provide ranges of dollar values, and every executor must identify the particular range within which the best estimate of the total gross estate falls.  An amount corresponding to this range will be included on the Form 706, which must be filed in order to execute the applicable exemption amount.  However, since this form is newly released, it is recommended that clients consult a tax professional and file extensions for early 2012 deaths.

New Tax Laws: Georgia’s Jobs and Family Tax Reform Plan is a comprehensive reform of how taxes are collected in Georgia.  The plan eliminates both the sales and ad valorem tax on automobiles and replaces them with a one-time title fee that is paid when the title is transferred from one owner to another.

The bill also phases out taxes assessed on energy used in manufacturing, so Georgia is now at an advantage in allocating new manufacturing in this state.  For example, Caterpillar added 1,400 jobs because of the phase out of such tax.

The bill also levels the playing field between retailers by requiring online retailers to collect and remit sales tax, just as brick and mortar stores do now.

Finally, the bill caps retirement income exclusion for senior citizens at $65,000 for a single filer and $130,000 for joint filers.

The Georgia Tax Tribunal Act provides a low cost mechanism for Georgia citizens to resolve tax disputes with the Department of Revenue.  The Tribunal, which will come into existence on January 1, 2013, ensures Georgians will be able to come before an expert to handle challenges to state tax assessments and denials of state tax refund claims.

 

For more information regarding estate planning, business law or tax controversy and  compliance, please visit the Hoffman & Associates website at www.hoffmanestatelaw.com or call us at 404-255-7400.

 

In accordance with IRS Circular 230, this article is not to be considered a “covered opinion” or other written tax advice and should not be relied upon for IRS audit, tax dispute, or any other purpose.  The information contained herein is provided “as is” for general guidance on matters of interest only.  Hoffman & Associates, Attorneys-at-Law, LLC is not herein engaged in rendering legal, accounting, tax, or other professional advice and services.  Before making any decision or taking any action, you should consult a competent professional advisor.

SELF-CANCELING INSTALLMENT NOTE (SCIN)

The Self-Canceling Installment Note (“SCIN”) is a planning technique usually used in a sale of an asset to either a trust or directly from an older family member to a member or members of a younger generation.  Basically, the older generation sells the asset in exchange for an installment note with a term shorter than the seller’s life expectancy, which is found in Internal Revenue Service (IRS) Tables.  The SCIN is a valuable tool because, if the seller dies before the term of the note, the remaining balance is completely canceled and is not included in the seller’s estate.

The SCIN is best structured as requiring interest-only annual payments until a balloon principal payment is due at the end of the term.  By deferring the principal payment until the end of the term, the amount canceled upon death will include the entire principal amount of the promissory note.

Of course, the IRS would not allow this transaction without a modification of the terms of the note to make it an arms-length transaction between the parties.   So, either the principal amount or the interest rate must be increased to make this a bona fide transaction.  The older the seller is, the greater the mortality risk premium will be.  However, with long-term interest rates being at historical lows right now, the time has never been better for an estate-freezing transaction using a SCIN.

For example, using October’s rates, a 55-year-old person could sell assets using a 28-year SCIN with a balloon payment and an interest rate of only 2.695%.   If the seller died before the end of the term, the value of the entire principal amount would be transferred to the trust without incurring any estate tax.

These low rates make a SCIN not only a good idea for clients looking to freeze some of the value of their estates, but there is also opportunity for clients who have already entered into DGT sales (see other articles on website that describe DGT sales as a popular estate planning/freezing technique) to refinance with a SCIN, possibly at lower rates and the self-canceling feature.

 

For more information regarding estate planning, business law or tax controversy and compliance, please visit the Hoffman & Associates website at www.hoffmanestatelaw.com or call us at 404-255-7400.

 

In accordance with IRS Circular 230, this article is not to be considered a “covered opinion” or other written tax advice and should not be relied upon for IRS audit, tax dispute, or any other purpose.  The information contained herein is provided “as is” for general guidance on matters of interest only.  Hoffman & Associates, Attorneys-at-Law, LLC is not herein engaged in rendering legal, accounting, tax, or other professional advice and services.  Before making any decision or taking any action, you should consult a competent professional advisor.

Grantor Retained Annuity Trust (GRAT)

Another advanced estate planning technique is known as a grantor retained annuity trust (a “GRAT”). GRATs  are created by transferring one or more high yield assets into an irrevocable trust and retaining the right to an annuity interest for a fixed term of years or for the shorter of a fixed term or life.  When the retention period ends, assets in the trust (including all appreciation) go to the named “remainder” beneficiary.  In some cases other interests, such as the right to have the assets revert back to the transferor’s estate in the event of the transferor’s premature death, may also be included.

GRATs provide a fixed annuity payment, usually based on a fixed percentage of the original value of the assets transferred in trust.  For example, if $500,000 is placed in trust and the initial annuity payout rate is 6%, the trust would pay $30,000 per year, regardless of the value of the trust assets in subsequent years.   If income earned on trust assets is insufficient to cover the annuity amount, the payments will be made from principal.  Therefore, the transferor is assured of steady consistent payments throughout the term of the GRAT.    At the same time, all income and appreciation in excess of that required to pay the income beneficiary is accumulated for the benefit of the remainder beneficiary free of gift tax and without using the transferor’s lifetime gift tax exemption.

 The gift tax value of the transferred assets is determined at the time the trust is created and funded by subtracting the value of the annuity interest from the fair market value of the assets transferred to the trust.   The annuity interest is generally valued based on the 7520 rate published by the IRS.    Therefore, if the return on the GRAT assets over the term of the GRAT is greater than the 7520 rate, it may be possible to transfer assets to the remainder beneficiary when the trust terminates that far exceed the gift tax value of the transferred assets.

The one drawback of a GRAT is that GRAT assets will be included in the transferor’s estate if he/she passes away during the term of the GRAT.  Therefore, the GRAT is a bet to live strategy – the transferor is betting that he/she will survive the term of the GRAT to reap its estate and gift tax benefits.

There may be other non-tax reasons to form a GRAT as well.   A GRAT can help you ensure succession. For example, if a client wants specific assets, such as stock in a closely held corporation, other business interest, land, or family compound to go to one child rather than another, or the client does not want a former spouse, creditor, or someone who contests his/her Will to be able to obtain that asset, a GRAT can be used to implement such a contingency.

 

For more information regarding estate planning, business law or tax controversy and  compliance, please visit the Hoffman & Associates website at www.hoffmanestatelaw.com or call us at 404-255-7400.

 

In accordance with IRS Circular 230, this article is not to be considered a “covered opinion” or other written tax advice and should not be relied upon for IRS audit, tax dispute, or any other purpose.  The information contained herein is provided “as is” for general guidance on matters of interest only.  Hoffman & Associates, Attorneys-at-Law, LLC is not herein engaged in rendering legal, accounting, tax, or other professional advice and services.  Before making any decision or taking any action, you should consult a competent professional advisor.

Family Limited Partnership (FLP) and Limited Liablity Company (LLC)

A family limited partnership or a limited liability company can provide important tax and non-tax benefits. From a non-tax standpoint, these entities are important in that they can provide a vehicle for managing family assets and can protect you from liabilities arising in connection with the assets held in the FLP or LLC. It can also provide asset protection, in that a creditor who might successfully seize the partnership interest from you will succeed only to your distribution rights, and may not be able to force a liquidation of the partnership (making it a much less attractive asset to seize.) Thus, a FLP or LLC is an excellent way to own buildings or an unincorporated business. From an income tax standpoint, a FLP or LLC can be superior to a corporation because there are no federal income taxes, and minimal or no state income taxes, on the income.

From a gift and estate tax planning standpoint, a FLP or LLC can give rise to significant valuation discounts. If a person owns a percentage interest in a FLP or LLC, the value of that interest will be less than the same percentage of the value of the net assets of the partnership. For example, assume that a FLP owns assets worth $100,000, and you own 10% of the partnership. Generally, your interest would be worth less than the $10,000 you’d receive if the partnership terminated and distributed the assets to the partners. That’s because you probably can’t force the partnership to terminate and distribute the assets. Rather, you’re entitled only to whatever distributions the general partner of the FLP or manager of the LLC elects to make. Typically, discounts from “liquidation value” will range from 15% to 40%, depending on the facts of the case.

If you make gifts of interests in a FLP or LLC, the value of the gift is based on the rights that the recipient has in the interest. Thus, the more power you retain in the partnership (and the less power the recipient has over the partnership), the smaller the value will be for the gift. On the other hand, on your death, the value of the asset in your estate will be based on the rights you’ve retained. Thus, the more power you retain in the partnership (and the less power the recipients of gifts you’ve made have received), the greater the value will be in your estate.

For more information regarding estate planning, business law or tax controversy and  compliance, please visit the Hoffman & Associates website at www.hoffmanestatelaw.com or call us at 404-255-7400.

In accordance with IRS Circular 230, this article is not to be considered a “covered opinion” or other written tax advice and should not be relied upon for IRS audit, tax dispute, or any other purpose.  The information contained herein is provided “as is” for general guidance on matters of interest only.  Hoffman & Associates, Attorneys-at-Law, LLC is not herein engaged in rendering legal, accounting, tax, or other professional advice and services.  Before making any decision or taking any action, you should consult a competent professional advisor.

H&A Wins Self Dealing Penalty Abatement

The IRS confronted our client with an assessment of over $700,000 in self dealing transaction penalties under Internal Revenue Code Section 4941 for its dealings with a private foundation.  H&A obtained a full abatement of the assessed penalties through hard work,  creative thinking, and attention to detail.  This was a collaborative effort by our tax controversy team and is a testament to the wide ranging skills and knowledge offered to our clients.

We cannot guaranty abatement of penalties.   The success or failure of a request or claim for penalty abatement depends on the facts and circumstances of each individual case.  If you need help dealing with the IRS, please call or email Hoffman & Associates today at 404.255.7400.