There are changes coming to any business operation that is currently taxed as a partnership in the United States. The concept of the “tax matters partner” is being done away with in favor of what is called a “partnership representative.”
If you become aware of the fact that you’ve failed to report and pay tax due to New York State, don’t think that it will go away. It will only get worse. Penalties, interest and especially criminal charges are serious business. The New York Tax Department has a Voluntary Disclosure and Compliance Program that you can avail yourself of.
Faced with the situation that you or your company has been misreporting income or miscalculating taxes, you should not stick your head in the sand and hope that it never catches up with you. You should work with your accountant and attorney and calculate the amount due.
First, the IRS has two voluntary disclosure programs. The first is for domestic voluntary disclosure of tax issues, which I am discussing here. The other is a separate program for Offshore Account Voluntary Disclosure (to be discussed in a later post).
On July 1, 2014, the IRS introduced a new application form to allow small charities to apply for tax exempt status under IRC Section 501(c)(3).
Form 1023-EZ is only three pages long, and organizations with gross receipts of $50,000 or less and assets of $250,000 or less are eligible to use it. Charities filing the 1023-EZ, provided everything is in order, will know of their status within a couple of weeks (that’s right, weeks, not months).
Compare this with the regular Form 1023 which is 26 pages long and asks for a laundry list of information on the charity, the board of directors and officers. Many applicants using the Form 1023 didn’t hear back from the IRS for many months, sometimes as long as nine, which can seem like an eternity when in fundraising mode.
First of all, I won’t advise anyone to withdraw their 401(k) funds early as the tax hit the IRS enacts is insane. If you are thinking about doing that, please don’t, or at least don’t do so until you’ve spoken to your accountant.
This post will, however, detail how to use your qualified retirement plan or IRA to start a new, or buy an existing, business. This name given to the process I’ll discuss is rollovers as business startups (“ROBS”). The main gist is that an individual’s current retirement plan is rolled over into a newly established 401(k) plan sponsored by a startup company and then used to purchase the startup company’s stock. The ROBS arrangement allows income taxes and penalties (see IRC Section 72(t))to be avoided because it is a rollover from one qualified plan to another.