Category Archives: Tax Law

Dealing with Tax Debt: 7 Solutions From A Kansas City Tax Attorney

The stress that comes from trying to meet tax-filing deadlines is only the beginning for some taxpayers. And if you find yourself owing taxes that you can’t afford to pay at the filing deadline, you are already aware of the additional stress that can come from owing delinquent taxes. Fortunately an experienced Kansas City tax attorney can help you find solutions that can ease the stress that comes from owing back taxes.

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Kansas City Tax LawyerThe law has given taxing agencies unique authority to pursue and collect from individuals and businesses that owe tax debt.  And if delinquent taxes get out of control, your state’s Department of Revenue and the IRS can garnish wages, levy bank accounts, assert liens, and even seize your property – all without your permission.  So what are some of the options you have if you find yourself or your business owing taxes you can’t pay?  The Kansas City tax attorneys at Reneau & Shernaman can help. Before you give into the threatening letters, and surrender to the demands of the taxing authorities at face value, consider that you may have legal options available to you.  Consider these 7 options for dealing with delinquent tax debt:

  1. Do Nothing.  While in some civil matters doing nothing can be a viable option to let cooler heads prevail, this is rarely the case when you are facing a balance owed to the IRS or your state’s Department of Revenue.  Not only will the taxing authorities employ all sorts of uncomfortable measures to collect back taxes, the longer an individual or business waits to deal with delinquent taxes, the higher the balance owed becomes due to compounding penalties and interest that would make a credit card company blush.  Unless you are certain a taxing authority has stopped trying to collect on your tax debt, doing nothing is not a good option.

  2. Reduce or Eliminate the Tax Debt. In some circumstances, the law allows for aggressive means to reduce or even eliminate tax debt.  With the help of an experienced Kansas City tax attorney, individuals and businesses are often able to facilitate a successful reduction with the IRS or state Department of Revenue.

  3. Postpone the Tax Debt. In many cases, the Kansas City tax attorneys at Reneau & Shernaman can help you or your business legally postpone the collection and enforcement activity of the IRS or state Department of Revenue.  This option can be a lifesaver for the individual or business that just needs time to get their cash flow back up enough to pay the tax debt off at a later time when they can afford to do so.

  4. Bankruptcy. A common misconception with back taxes is that tax debt cannot be included in a bankruptcy, or that the tax cannot be fully discharged in a bankruptcy.  While some circumstances dictate that tax debt may not be fully dischargeable, in many cases, tax debt can be eliminated completely, or restructured into more manageable terms for the taxpayer.  Because the bankruptcy code is fairly complicated, be sure and consult with one of the Kansas City bankruptcy attorneys at Reneau & Shernaman before proceeding with this option.

  5. Challenge the Assessed Amount. Taxing authorities can make mistakes too.  But challenging an assessed amount of tax debt after an IRS audit, or substitution assessment can be extremely complicated and risky if you don’t know what you are doing.  Done without the protection of a Kansas City tax attorney, a misplaced challenge to an assessed tax debt can be used against you and even have the effect of becoming an unintended audit.  Bottom line — a challenge to an assessed tax debt can be a very effective tool to reduce your tax liability, but be sure you consult with a Kansas City tax attorney before you attempt this option.

  6. Negotiate an Installment Agreement. For many taxpayers, the Kansas City tax attorneys at Reneau & Shernaman can work out an agreement with the IRS or your state’s Department of Revenue to pay off the delinquent taxes over a period of time.  The IRS permits pre-determined budget limits for various routine expenditures when calculating whether or not a taxpayer can qualify for an agreement.  With help from an experienced tax attorney, these standard monthly expense amounts can be maximized to work out the best possible outcome in negotiating an installment agreement and even postpone collection indefinitely.

  7. Settlement. Occasionally it is in the best interests of both the taxing authority and the taxpayer to settle the tax debt all at once with a lump sum payment.  This option can work wonders for the individual or business whose circumstances qualify them for this option.

Ultimately, delinquent tax debt can be stressful and even lead to financial ruin if left unchecked.  If you or someone you know owes taxes you can’t afford, consider that you may have legal options available to you to help reduce, postpone, or even eliminate your delinquent tax debt.  For a free consultation with a Kansas City tax attorney, or call Reneau & Shernaman at 816-287-8080, today.

Legal Separation, Divorce, and Taxes: Can I claim my children as dependents?

What if my divorced or separated spouse and I disagree over who will claim our children as dependents?

Determining which parent can claim the children as tax dependents can be a volatile issue in a divorce or legal separation.  And for obvious reason — the tax code rewards parents of dependent children with lucrative tax deductions, and tax credits.  The bottom line is that the ability to claim your child can make the difference between thousands of dollars saved during tax time.  So what are your options if your divorced or separated spouse disagrees with which of you will claim the children as dependents?

Qualifying Child –

To answer the question, it’s important to know that in order for a child to be claimed as a dependent, Federal tax law requires that the child must be a “qualifying child.”  Parents who are separated, divorced, or getting a divorce, need to know that the IRS definition of a qualifying child is fairly clear.  The child must live with the taxpayer for more than half of the tax year.  The child must receive more than half of their support from the taxpayer.  And the child must be either under 19 years of age at the end of the year, under 24 years of age and enrolled full time in school for at least 5 months during the tax year, or any age and permanently disabled.

Custodial Parent –

Assuming a qualifying child exists, the general rule between separated or divorced parents is that the parent designated as the custodial parent in a divorce or legal separation has the right to claim the tax benefits.  But in most cases, if the custodial parent agrees, those rights can be shared, and essentially negotiated for during the settlement phase of a divorce or legal separation, and made a part of the final Court Order.  Parents who are not the custodial parent, but that are granted the ability to claim a child as a dependent should be careful to obtain IRS form 8332 signed by the other parent prior to filing their taxes.  A special rule allows parents of divorces that finalized between 1984 and 2009 the option to be able to provide qualifying pages from the divorce decree instead of a signed form 8332.  Be sure and seek legal advice from your tax attorney or divorce attorney about this option.

If my Divorce or Legal Separation isn’t final, should I  race to file my taxes before the other parent does?

If you’re asking this question, then you already know that only one taxpayer can claim a dependent for any given tax year.  And while the temptation may be to race to file your taxes, in hopes of claiming child dependents before the other parent does, this may not be the best move.  Regardless of when you file your return, if two parents claim the same child dependent on separate returns, the IRS can and will do a file review to determine which taxpayer has the right to claim the dependent.  In such cases, they will look to see which household the child lived with the longest during the tax year.  If the length of time is equal between the parents, then the IRS will grant the dependent status to the parent whose adjusted gross income is higher for that tax year.  Be aware, that the taxpayer who incorrectly benefited from claiming the dependent must pay back the benefit to the IRS, most likely with interest and penalties.  In general it’s always better to determine beforehand who can claim the children as dependents.  But if agreeing on this point isn’t an option, make sure you seek legal advice before you act, and risk making a tax-filing mistake that could cost you.

My Divorce or Legal Separation is final, but my ex-spouse isn’t abiding by the Court Order that states I get to claim the children as dependents.

While Federal law and State law operate together, they occasionally come into conflict.  That truth is no clearer than when talking about taxes and divorce.  Because the state Courts in Missouri view what is in the best interests of the children as such a high priority, issues dealing with children are often fluid – even post divorce.  It is not uncommon for parents to successfully petition the courts months or even years after a divorce or separation to modify custody, support, and even tax dependency status.  With that in mind, it’s important to know that the IRS (federal law) may not always rely on what the language of your divorce decree (state law) says to determine who claims the children as dependents.  Notwithstanding the special tax rules for divorces finalized between 1984 and 2009, often a state court judge, or average family law attorney has little to no experience in tax law, and may not include an adequate clause in the decree that the IRS can look to for guidance.  For those divorces that occurred during or after 2009, or for divorces that have been modified, or for divorces with inadequate tax treatment in the decree, it is often true that if a parent otherwise qualifies by the IRS standards to receive the benefit (regardless of what the decree says), that parent will have the right to claim the child.  Keep in mind a parent given a right by the state court to claim a dependent that is not allowed to do so by the IRS may still have a legal remedy.  In such cases, the state courts may be able to protect your provisional property rights as a parent (not as a taxpayer), and may hold the other parent in contempt for disobeying the Court ordered divorce Decree.

Other Considerations —

Remember, it may make sense to allow the other parent to claim the dependent if you make too much money to receive the child tax credit.  Often couples will use this financial benefit as a negotiating chip in their divorce.  While this is common, beware that issues relating to children can always be modified, and are therefore not permanent.  So be careful not to negotiate away permanent rights, like property division, for ones that can be modified later, like issues regarding the children.

Remember, this post is not meant to be comprehensive legal advice.  If you have legal concerns, please seek legal advice before making any decisions.  Our tax attorneys, and family law attorneys are available to answer your questions.  At Reneau & Shernaman, LLC Attorneys at Law, we make the complicated less complicated.  Call now for a free consultation – (816) 287-8080.

Making the Complicated World of Law Less Complicated

At Reneau and Shernaman, Attorneys at Law, our goal is to make the complicated, less complicated. We know the law can be confusing and unclear without a professional to help you sort through the legal terminology and get to the point. That’s where we come in. Not only are we experienced, we are excellent at listening. We sit down with you and get the details so we can understand your goals and show you the easiest and fastest way to achieve them.

All of the areas we focus on are sensitive. People considering bankruptcy are usually in an unpleasant place in their lives. Personal injury victims can be experiencing a great deal of pain and suffering. Family law usually involves strong emotions. And if you need a criminal lawyer, you may have made some unfortunate decisions that got you into trouble. No matter what kind of legal representation you need, Reneau and Shernaman can provide it and make it as painless as possible.

We take the time to explain everything clearly to you so you are aware of the legal consequences and choices. We do everything within our power to make the law work in your favor. We even make house calls for personal injury clients who are unable to get to our office as a result of their injuries. RS Law doesn’t stand for Really Simple, but it could. When you want a lawyer who takes the time to make sure you understand the law and who will make the law work in your favor, call us at Reneau & Shernaman. We make the complicated, less complicated. Making-the-complicated-world-of-law-less-complicated.