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Erin Houck-Toll is a dual Florida Bar Board Certified Health and Tax attorney, one of only three in the entire state of Florida. She concentrates her practice in the areas of federal and state taxation, including representing taxpayers before the IRS and Florida Department of Revenue. Erin also assists clients in many aspects of business planning, health care law matters, mergers and acquisitions, and intellectual property issues. She also represents nonprofits and tax exempt organizations in various matters, including assisting in initial organization and obtaining tax exempt status. Erin is admitted to practice in the State of Florida and before the United States Tax Court.

There is a change in the federal partnership audit rules that take effect for tax years on or after January 1, 2018, that may impact you.

Who is Affected?

All entities classified as partnerships for federal tax purposes. This includes, for example, multi-member LLC’s that have not elected to be taxed as corporations (C or S). If the entity files IRS Form 1065, it is a partnership. Certain partnerships may opt out of the new audit rules, but they must meet the eligibility requirements, including identity and number of partners (no more than 100 partners, all must be individuals, estates, C corporations and S corporations).

The Changes

The new law and regulations proposed by the IRS will replace the current audit regime. The details of the changes to the audit regime are beyond the scope of this letter, but in general, under the new partnership audit rules, any adjustments to tax items for a partnership are generally determined, and the tax attributable to such adjustments is assessed and collected, at the partnership level, with the tax assessed at the highest tax rate then in effect. The adjustments relate to a prior year (the “reviewed year”), but the assessment and collection of the tax will affect the partners in the year of the assessment (the “adjustment year”). The partnership may be able to elect to “push out” the adjustments to the partners who were partners in the reviewed year, rather than assessing it at the partnership level.

In addition, the partnership is now required to designate a “partnership representative” on an annual basis. This designation replaces the appointment of a “tax matters partner” under the prior regime. Comparing the two, the requirements for who may serve as a partnership representative are broader (e.g., not required to be a partner) and the partnership representative has significantly more authority in dealing with the IRS on behalf of the partnership (i.e., sole authority to act and the other partners have no right to receive notice from the IRS or participate in the audit).

What Does This Mean For You?

All partnership agreements (or operating agreements, in the case of an LLC taxed as a partnership) should be reviewed and amended to adopt appropriate changes to reflect the application of the new IRS rules effective January 1, 2018. The nature of these amendments will differ among partnerships/companies depending on the specific situation. Changes may include:

  • appointing the partnership representative, with a mechanism for appointing replacements and any contractual limitations on his authority;
  • ensuring the partnership is eligible to opt out of the rules by restricting who can be a partner;
  • providing for a method of allocating the adjustments in the event of changes in partners between the reviewed year and the adjustment year; and/or
  • providing for an election to “push out” the adjustments to the reviewed year partners.

Please feel free to reach out to any of our tax attorneys to update your partnership’s and/or company’s agreements to remian compliant with these federal tax law changes:

 

In order to help the Southwest Florida community recover from Hurricane Irma, the following is a non-exhaustive list of resources:

Tax

FEMA

Interest Free Loans

Payroll

Construction

United Way

  • United Way 2-1-1 is a United Way program that provides free information and referral to human/social service agencies within Lee, Hendry, Glades and Okeechobee Counties. Clients can call and receive information and referrals appropriate to their needs, https://www.unitedwaylee.org/what-is-united-way-211/.

We will continue to update the list as they become available.

As our area recovers in the aftermath of Hurricane Irma, one less thing we need to worry about in the immediate future are certain tax matters. The IRS has issued relief to taxpayers in Presidential Disaster Areas, which includes Lee, Charlotte, and Collier Counties. Among the relief granted, for affected individuals and businesses there is an extension to January 31, 2018 to file returns and pay taxes originally due during the period starting September 4, 2017.  So, if you were on extension to file your income tax return for your business (generally due September 15, 2017) or individually (due October 15, 2017), you now have until January 31, 2018 to file that return.

Keep in mind, this relief does not extend the time to pay income taxes for 2016, which were due on April 15, 2017 (even if your return was on extension).

The IRS continues to provide updates on areas covered and the relief granted. More information can be found at https://www.irs.gov/newsroom/help-for-victims-of-hurricane-irma.

Tax photo courtesy of 401(K) 2012 under Flickr Creative Commons License

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Intellectual Property Resolutions: Take Stock of Your IP Assets

Often people resolve in the New Year to take stock of their assets to see where they are in terms of not only protecting what they have but also to implement long-range planning and goals. While businesses may often check their status and progress against things like five-year plans, they should not forget to also take stock of their assets, especially Intellectual Property (“IP”) assets. IP assets can often be the most important assets to a business. Unfortunately, they can also be the most overlooked and under-protected.

With the new year upon us, this is an opportune time for businesses to audit their IP to make sure these important assets are secure by following these three steps:

  1. Identify all of a company’s IP in its various forms such as trademarks, copyright, trade secret and patents.
  2. Review those assets to ensure they are properly protected, including review of registration status, reviewing licenses and contractor agreements or non-disclosure agreements.
  3. Develop internal policies to make sure newly created IP is documented and protected as well as procedures to ensure secrecy of proprietary information.

Our Intellectual Property practice group is available to assist with auditing your IP assets and to devise IP protection plans. For more information, please feel free to contact me at mark.nieds@henlaw.com.

Business Law Resolutions

It’s that time of year when we all make New Year’s Resolutions to improve ourselves. From Henderson Franklin’s Business and Tax Practice, Erin Houck-Toll reminds us that as you make and implement your personal resolutions, don’t forget your business. This is a good time to review your business’ governing documents—bylaws, operating agreements, employment agreements and shareholder agreements—to ensure they still make sense, both in terms of current law and tax strategies, as well as how you are actually operating. If you have any questions, please feel free to email me at erin.houck-toll@henlaw.com.

As the deadline for filing entity returns closes and the deadline for individual income tax returns approaches, there are issues outside the four corners of the return that taxpayers should keep in mind:

  1. Stay current with your tax obligations. To avoid default or rejection of an installment agreement or offer in compromise under review or in payment status, be sure to file your return or request an extension by the deadline. In addition, even if the return is on extension, there is no extension for payment and a failure to make payment by April 15th (for individual income taxes) may result in a default or rejection.
  2. Be cautious with your personal information. The IRS has identified identity theft, phone scams, and phishing among its “dirty dozen” scams for 2016. Criminals seek to obtain your personal information, including name, address, social security number, and credit card and banking information, in an effort to steal both directly from your accounts and to file fraudulent returns under your name and claim the refund for themselves. The IRS will never call to demand payment or about taxes owed without mailing a bill first and generally does not contact taxpayers to request personal or financial information by email. If you receive an unsolicited call or email purportedly from the IRS, do not provide any of your personal information. If you are not certain whether the information is legitimate, contact the IRS.

For help and other resources within the IRS, see https://www.irs.gov/Help-&-Resources.

For more on the IRS’ 2016 “dirty dozen” list, see https://www.irs.gov/uac/Newsroom/IRS-Wraps-Up-the-Dirty-Dozen-List-of-Tax-Scams-for-2016.

tax burdenCommercial leases and short-term residential rentals are generally subject to sales tax, and it is the tenant’s responsibility to pay it, but the landlord’s responsibility to collect and remit the tax to the Florida Department of Revenue. Other than writing the check to the landlord for the rent, including the sales tax, the tenant often forgets about the sales tax issues. However, there are areas where the tenant could still be responsible directly to the Department of Revenue, as well as areas for planning when negotiating the lease terms.

What if the landlord fails to pay the Department of Revenue?

Sales taxes are what are commonly referred to as “trust fund taxes,” meaning the person collecting the tax (here, the landlord) is holding those funds in trust for the state. Those monies are the state’s property at the time of collection, and if the landlord fails to pay it to the state, the state can then seek the taxes, penalties, and interest not only from the landlord-entity, but from its owners, officers, and employees who were responsible for paying (or failing to pay) the tax. Depending on the circumstances, criminal sanctions may also be sought.

Continue Reading Sales Tax on Leases – Traps for the Unwary