McFarlane Law

A Tax Law Firm - 480.991.0032

As Society Reopens, Don’t Be Duped by ‘Tax Relief Experts’

As we come out of the COVID-19 societal lockdown and you have significant tax problems to resolve, don’t be duped into giving money to non-tax professional outfits who claim to be “Tax Relief Experts.” Most times they will take your money but cannot resolve your tax issues. They do not have the expertise or relationships that are essential in efficiently resolving your tax problems. So, do not waste your money! Rather, call a local tax attorney who you can meet and depend upon.

We at McFARLANE LAW – A Tax Law Firm - T.991-991-0032 – are licensed attorneys who are professionally liable to zealously represent you and assist in resolving your tax problem. In a previous blog, we explain why you need to engage a CPA or tax lawyer such as McFarlane Law – A Tax Law Firm - T.480-991-0032.

There are many national outfits who profess to be ‘Tax Relief Experts.” They are not what they profess to be – just google the many Attorney’s General class action lawsuits filed against these outfits after misleading customers as to their services. So do not get duped into wasting your time and money.

Stephen McFarlane MBA, JD, LL.M (Tax Law) is a Master in Tax Law (Boston University, School of Law, Graduate Tax Program, 1990). Mr McFarlane has 30 years handling federal, state, and local tax law cases. He is a Former IRS Tax Litigation Attorney. Over his 30 years representing small business and taxpayers, he has established the important relationships with the federal, state and local government agents, officers, and their managers.

If you feel like you may have been targeted by a fraudulent tax relief company, contact Attorney Stephen McFarlane today. Our consultations are free, confidential and without any obligation on your part. We can help answer your questions and resolve your tax controversy.

TIP: If you are desperate to alleviate your federal, state, or local tax debts, call

McFARLANE LAW – A Tax Law Firm

T. 480-991-0032 / e: stephen@taxlawaz.com / net: www.taxlawaz.com

We provide real help for a reasonable fee.

We represent clients at all administrative agency and appeal levels, the Arizona Tax Court, and the federal US Tax Court, and throughout Arizona: Phoenix, Glendale, Peoria, Scottsdale, Mesa, Tempe, Chandler, Queen Creek, Yuma, Casa Grande, Tucson, Sierra Vista, Bisbee, Flagstaff, Prescott, Payson, Coconino County, Yavapai County, Maricopa County, Pima County, Cochise County, Pinal County.



I took an Early Withdrawal from my Retirement Account. Now what?

On a regular basis I get clients who have taken a distribution out of their qualified individual retirement account or retirement plan before reaching 59 ½ years of age (the time when you can take a distribution and be subject to the 10% penalty). They do this before informing their bookkeeper, CPA, or attorney of their intent. This can trigger an additional tax on top of other income tax they may owe.

Early Withdrawals. An early withdrawal normally is taking cash out of a retirement plan before the taxpayer is 59½ years old. The IRS charges a 10 percent penalty on early withdrawals from most qualified retirement plans. There are many complicated exceptions to this general rule. So taxpayers should consult with their tax professional prior to taking a distribution.

For example, the additional tax does not apply to distributions due to an IRS levy of the plan. While the plan may be protected from creditors under state laws, a levy action by the IRS is a contested collection action that needs to be addressed by an experienced tax attorney.

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Is your Business Subject to a Transaction Privilege (Sales) or Use Tax Audit?

States are increasingly looking to audits and enforcement to raise much needed revenue, and Arizona is especially aggressive. The State is employing newly acquired technology and new audit methodologies to find delinquent or noncompliant business taxpayers. Auditors and supervisors are taking increasingly aggressive positions on tax matters and documentation requirements.

If this is a concern, or if you have been contacted by the ADOR, call
McFARLANE LAW – Your Tax Law Firm at T.480.991.0032

We represent businesses and individuals before the ADOR and all administrative levels, and before he Arizona Tax Court. We can help you better prepare for sales and use tax audits in the current tax climate. While you may wish to handle the matter yourself, there are significant advantages in hiring a tax attorney from the very beginning of your case. We have decades of experience dealing with the personalities and intricate procedures. Going alone and thinking your case will be resolved is a mistake. If you seek to streamline the audit process, call McFARLANE LAW. We can help you achieve better results.

14500 N. Northsight Blvd., Ste. 217
Scottsdale, AZ 85260
T. 480.991.0032 / e: stephen@taxlawaz.com



The $10,000 Federal Tax Deduction Limit on Payments for State & Local Taxes

The Treasury Department and the IRS intend to propose regulations addressing the federal income tax treatment of certain payments made by taxpayers for which taxpayers receive a credit against their state and local taxes. The IRS does not like the fact that some state legislatures are trying to circumvent the tax deduction restriction.

Section 11042 of “The Tax Cuts and Jobs Act,” Pub. L. No. 115-97, limits an individual’s deduction under § 164 for the aggregate amount of state and local taxes paid during the calendar year to $10,000 ($5,000 in the case of a married individual filing a separate return). Normally those state or local tax payments are fully deductible on an individual’s Schedule A. However, with the new tax law, state and local tax payments in excess of the $10,000 limit are not deductible. This new limitation applies to taxable years beginning after December 31, 2017, and it sunsets January 1, 2026. This may affect many taxpayers who otherwise would have been able to file a Schedule A, Itemized Deductions, and claim greater state/local tax payments as well as other deductible expenses.

In response to this new limitation, some state legislatures are considering or have adopted legislative proposals that would allow taxpayers to make transfers to funds controlled by state or local governments, or other transferees specified by the state, in exchange for credits against the state or local taxes that the taxpayer is required to pay. The aim of these proposals is to allow taxpayers to characterize such transfers as fully deductible charitable contributions for federal income tax purposes, while using the same transfers to satisfy state or local tax liabilities.

Despite these state efforts to circumvent the new statutory limitation on state and local tax deductions, taxpayers should be mindful that federal law controls the proper characterization of payments for federal income tax purposes. If taxpayers claim additional state/local tax payments as “charitable contributions,” the IRS may disallow the deduction. This could open an audit.

In an attempt to curtail the legislative activity, the Treasury Department and the IRS intend to propose regulations addressing the federal income tax treatment of transfers to funds controlled by state and local governments (or other state-specified transferees) that the transferor can treat in whole or in part as satisfying state and local tax obligations. The proposed regulations will hopefully make clear that the requirements of the Internal Revenue Code, informed by substance over-form principles, govern the federal income tax treatment of such transfers. The proposed regulations will hopefully assist taxpayers in understanding the relationship between the federal charitable contribution deduction and the new statutory limitation on the deduction for state and local tax payments.

If you have a tax problem, contact McFARLANE LAW – A Tax Law Firm at 480.991.0032.

McFARLANE LAW, PLC
14500 N. Northsight Blvd., Ste. 217
Scottsdale, AZ 85260
stephen@taxlawaz.com / www.taxlawaz.com



Considerations for Taxpayers Who Need to Amend a Return

Taxpayers who discover they made a mistake on their tax returns after filing can file an amended tax return to correct it. This includes changing the filing status and dependents, or correcting income, credits or deductions. What you may not know is that every amended return gets a set of eyes – this is different from filing your initial return, in which the computer scans the informational entries. By filing an amended return, you subject your return to a higher scrutiny, and therefore a greater likelihood that the return may be picked up for other items. So be aware of this process and potential for greater scrutiny, and be wise in your decision to amend. Here are some considerations:

    • Taxpayers should not file an amended return to fix math errors, because the IRS computers will correct those and send out a notice to the taxpayer.
    • Aside from math errors, taxpayers also do not need to amend their return if they forgot to include a required form or schedule. The IRS will mail a request to the taxpayer, if needed.
    • Taxpayers filing an amended return because they owe more tax should file Form 1040X and pay the tax as soon as possible. This will limit interest and penalty charges.
    • Wait to file an amended return until your initial return is processed. You have a three-year time limit to file for a refund. Generally, to claim a refund, taxpayers must file a Form 1040X within three years from the date they timely filed their original tax return or within two years from the date the person pays the tax – usually April 15 – whichever is later.

If you want or need to amend a return, it is best to discuss the matter with your tax professional.

Contact Tax Attorney Stephen McFarlane at McFARLANE LAW – A Tax Law Firm
T. 480.991.0032 or stephen@taxlawaz.com



Missed the 2017 tax return filing or payment deadline? Here is what you need to do

The 2017 federal income tax-filing deadline has passed for most people who did not extend the filing date for the 2017 tax return. So, the people who still haven’t filed a return or an extension to file, and those who also haven’t paid their 2017 taxes (there is no extension permitted to late-pay the 2017 tax due) need to address their non-compliance. Failing to file a return (when required under the law) or pay the tax is a misdemeanor crime.

Didn’t file by April 18? There is no penalty for filing a late return after the tax deadline if a refund is due. Penalties and interest only accrue on unfiled returns if taxes are not paid by April 18. The IRS provided taxpayers an additional day to file and pay their taxes following system issues that surfaced early on the April 17 tax deadline. Anyone who did not file and owes tax should file a return as soon as they can and pay as much as possible to reduce penalties and interest. Contact your tax professional for assistance.

Filing soon is especially important because the late-filing penalty on unpaid taxes adds up quickly. Ordinarily, this penalty, also known as the failure-to-file penalty, is usually 5 percent for each month or part of a month that a return is late. It maxes-out at 25%, but quickly, so file sooner than later. Again, your tax professional can assist you.

If a return is filed more than 60 days after the April 18 due date, the minimum penalty is either $210 or 100 percent of the unpaid tax, whichever is less. This means that if the tax due is $210 or less, the penalty is equal to the tax amount due. If the tax due is more than $210, the penalty is at least $210.

Is there penalty relief? In some instances, a taxpayer filing after the deadline may qualify for penalty relief. If there is a good reason for filing late, an explanation should be attached to the return. Contact your tax attorney for optimal language to use in that explanation.

Taxpayers who have a history of filing and paying on time may qualify for “first-time penalty abatement” relief. A taxpayer will usually qualify for this relief if they haven’t been assessed penalties for the past three years and meet other requirements. Contact your tax attorney to assist with this relief.

House-keeping items: Changing your withholding. Because of the 2017 tax changes taking effect in 2018, if you are a Form W-2 employee, including if you have other sources of income, you need to perform a paycheck checkup now. Doing so now (it is already May!) will help avoid an unexpected year-end tax bill and possibly a penalty. It may also reveal you are withholding too much tax. Contact your tax professional for advice as to changing your withholding.

Do you owe taxes or need to make installment payments? If you owe taxes and cannot full pay, but need to pay over an extended period of time, contact your tax attorney for assistance in obtaining the best payment arrangement.

Do you need to fix an error on a return? After filing your return, if you find an error or omitted something from their return (a late arriving or revised Form 1099), you may need to amend your return. This is not preferable and you should seek advice from an experienced tax attorney. You don’t want to file an amended return as such amended returns are scrutinized by IRS agents. Often, an amended return is not necessary if a taxpayer makes a math error or neglects to attach a required form or schedule. Normally the IRS will correct the math error and notify the taxpayer by mail. Similarly, the agency will send a letter requesting any missing forms or schedules. If you need to file an amended return, Form 1040X, Amended U.S. Individual Income Tax Return, must be filed by paper. Those expecting a refund from their original return, should not file an amended return before the original return has been processed. File an amended tax return to change the filing status or to correct income, deductions or credits shown on the originally-filed tax return. It takes the IRS up to 16 weeks for processing amended returns.

Remember the IRS will not call you – they write correspondence. If you receive a telephone call from a person claiming to be an IRS agent, it is a scam. Do not speak with that person and insist they communicate with you by mail. If you receive mail from the IRS and need help responding to an IRS notice or letter, call your tax attorney for advice and an analysis of your case facts. While the IRS notice or letter might explain the reason for the contact and give instructions on how to handle the issue, you should seek experienced legal tax advice on how to respond. Do not delay as there are often short response periods, that if missed, curtail any right to contest the proposed action. Do not rely solely on the internet for answers. The IRS procedures are intricate. An improper response can result in IRS taking draconian actions that could have been avoided, or lessened.

Contact McFARLANE LAW–A Tax Law Firm to help resolve your tax issues.
T. 480.991.0032 or e-mail: stephen@taxlawaz.com




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