November 8, 2011

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Taking Advantage of Tax Amnesty: Act Now

As a sign of the times, the City and County of Denver, the State of Colorado and our Federal government are offering taxpayers an opportunity to minimize or avoid interest and penalties on certain unpaid taxes if they make payment in the very near future.

City & County of Denver
Recently, the City and County of Denver in Ordinance 11-403 has offered Denver taxpayers the opportunity for a tax amnesty on unpaid sales tax, retailer's use tax, consumer's use tax and occupational privilege taxes incurred on or before June 30, 2011. These taxes must be paid by December 30, 2011, and all penalties and any potential criminal prosecution will be avoided. Moreover, interest charges on delinquent taxes will be reduced by half. There are certain eligibility requirements. If you wish more information on how to take advantage of this amnesty, please feel free to contact Ryley Carlock & Applewhite attorneys. 

State of Colorado
In the Spring of 2011, the State of Colorado created a tax amnesty for the first time since 2003. It applies to individuals and businesses who owe taxes due on or before December 31, 2010. The tax amnesty applies to most Colorado taxes, but has a very short application period: Amnesty returns must be filed before November 15, 2011. Amnesty tax returns must be filed on a paper form and not by electronic filing. You can find the appropriate tax form on the Department of Revenue website. If a taxpayer pays the full taxes owed by November 15, there will be no civil or criminal penalties; however, the taxpayer must also pay one-half of the interest that has accrued. Even if a taxpayer cannot afford to make the entire payment by November 15, the State Department of Revenue will accept a partial payment by November 15 so long as the full amount due and one-half of the interest is paid by December 31, 2011.

Federal Payroll Taxes
On September 21, 2011, the Internal Revenue Service initiated a new program to give employers an opportunity to achieve a low-cost solution to the misclassification of employees as independent contractors. Under the Voluntary Classification Settlement Program ("VCSP"), eligible employers can obtain substantial relief from Federal payroll taxes; that they may have owed if they prospectively treat workers as employees. There are certain eligibility requirements and an application procedure on Form 8952. If an employer is accepted into the program, interest and penalties will be waived on unpaid payroll taxes; the IRS pledges not to audit payroll taxes on these particular workers for prior years and a very small payroll tax will be due on those workers who have been reclassified as employees. If you would like additional information on this program, please contact us.
Our tax practitioners continue to monitor the latest developments in many areas of tax law, and in particular in the estate and gift taxation area. A very recent decision, Estate of Paul H. Liljestrand v. Commissioner, TC Memo 2011-259, is an example of the use of a family limited partnership to try to avoid estate tax that went awry. In that case the Tax Court noted a number of factors in the establishment and the use of a family limited partnership that led to all of the partnership's assets being part of the decedent's estate. Factors such as a failure to obtain a federal employer tax identification number for the partnership upon its formation; a lengthy delay in opening up a bank account for the partnership; payment of the decedent's personal expenses from the partnership; and the decedent's lack of sufficient assets outside of the partnership's assets to pay his living expenses led the Tax Court to determine that the decedent retained enjoyment of the property contributed to the partnership and those assets continued to belong to him at his death.

Proper drafting and implementation of family limited partnerships is absolutely crucial to using these vehicles as effective estate planning tools. If you currently have a family limited partnership or family limited liability company or are interested in forming one, we would be pleased to assist you with guidance in this area.

John Lischer


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