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Tax Shelter Questions

What is a tax shelter?

A tax shelter is a legal method of reducing an individual’s taxable income. This in turn helps to reduce an individual’s tax liability towards the state and federal governments. There are various kinds of tax shelters like investments, limited partnerships and retirement plans. It is important for people to understand what tax shelters are. Answered below by Experts are some of the most commonly asked questions about tax shelters.

Can tax shelter annuity be used as child support?

Tax shelter annuity may not be used as child support. Child support is meant for the child’s benefit and should be accessible to the child.

What is the statute of limitations on securing a debt that was protected by tax shelter annuity in California?

The statute of limitations on securing a debt that was protected by tax shelter annuity is 4 years in the state of California.

Can an individual’s tax shelter be garnished if he/she is unable to repay a student loan that he/she co-signed?

An individual’s retirement tax shelter may not be garnished if he/she is unable to repay a student loan that he/she co-signed.

Can an individual rent his/her own house to their corporation in order to deduct if from their corporate taxes?

An individual may be able to rent his/her own home to a corporation and deduct it from their taxes if the house is going to be used by the corporation in some way. If while doing the audit of the company, the IRS finds out that the house is not of any use to the corporation, it may be considered to be an abusive tax shelter. As a result, all of the individual’s deductions may be denied.

Would a Limited Liability Company (LLC) be considered legitimate if it is almost owned completely by one person and managed by another person?

In most situations, an LLC that is almost completely owned by one person but managed by a different person altogether may be considered to be an abusive tax shelter by the Internal Revenue Service.

How can an individual decide which would be the best tax shelter for him/her?

In order to choose the best tax shelter for himself/herself, an individual may have to hire an accountant. The accountant may look into the individual’s books, assets and any taxable money and guide him/her on the tax shelter.

Can an individual close a tax shelter because of disabilities without having to pay any penalty?

An individual may be able to close a tax shelter because of disability and distribute the amount in it. The individual may be able to do this without a penalty under a 403 (b) sheltered plan. In order to do this, the individual may call the company with proof of their disability and ask them to begin the process of closing the shelter.

Individuals create tax shelters to protect themselves from paying a lot of money as taxes and saving whatever they can. You have to understand what tax shelters are and which shelters are considered legal and which are not so that you do not create an abusive shelter unintentionally. You may speak to an Expert if you do not understand any aspect of tax shelters and need more information on them.

Ask a Tax Professional

Wallstreet Esq.
Wallstreet Esq., Tax Attorney
Category: General
Satisfied Customers: 572
Experience:  10 years experience
16356563
Type Your Tax Question Here...
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    Ask follow up questions if you need to.
  • 100% Satisfaction Guarantee
    Rate the answer you receive.

Tax Professionals are online & ready to help you now

Wallstreet Esq.
Tax Attorney
Satisfied Customers: 570
10 years experience
Wendy Reed
Enrolled Agent
Satisfied Customers: 3052
15+ years tax preparation and tax advice.
Mark D
Enrolled Agent
Satisfied Customers: 985
MBA, EA, Specializing in Business and Individual Tax Returns and Issues

Recent Shelter Questions

  • A medical device company is registered and operated in PA

    A medical device company is registered and operated in PA and its products are shipped to wholesaler/retailers in other state for sale. In this case, should this medical company file state income tax in other state? thanks
  • Can an LLC schedule K profit for a participating member (100%

    Can an LLC schedule K profit for a participating member (100% participating in the LLC and also majority member) offset a long-term loss from stocks accrued for that individual member? I have about 100K in loss carryover from previous years and will have a 40K profit from my LLC that I work at full time and receive guaranteed payments for this work.
    Also, I own 70% of the company but will take 100% of the profits as outlined in our LLC operating agreement. Is this a red flag and should I be concerned about this? We receive 100% of our revenue from government grants (SBIR), which allow for the company to make a profit.
    Finally, If I took company draws that are more than this profit should I pay this back by Dec 31? Would there be any penalties if I did not pay back or paid back after Dec 31?
  • My wife and I continue to have unresolved Financial/Procedural

    My wife and I continue to have unresolved Financial/Procedural issues preventing us from filing our 2013 (thirteen) Federal and state taxes
    The issues are not so much "financially" detailed as they are "procedural"
    There are 3 main questions for which we request your assistance. We would need references to official documentation, where applicable, in case we require it. Thank you.
    1) I want to use my own CPA as I do not trust the CPA my wife wants to work with.
    Are we allowed to (i.e. are there any legal/procedural restrictions preventing us from) employing two different CPAs (ie "her" CPA, and "my" CPA), to complete:
    a) our federal taxes?
    b) our state taxes?
    If we are allowed to use two different CPAs, how would we file? I.e. Married/jointly; Married/separately…?
    2) If there are no such restrictions, How do we procedurally/legally(?) require the two CPAs to work together to submit all the necessary documentation? (My wife's current CPA may push back. I do not want his potential push back to impact already grossly delayed returns.)
    3) in investigating this "dual-CPA" issue ourselves, we started receiving some significantly disparate comments, all completely new, from the IRS regarding filing status for the past several years. We are unable to resolve The errors in the IRS database by email or by phone, despite providing the IRS copies of our returns as submitted and concomitant inputs to our joint banking account.
    During The years in question, we prepared and submitted, our own taxes (I.e. we did not use a CPA) and we always filed "MARRIED/JOINTLY." As such, my wife and I were BOTH required to sign the 1040 and all associated forms. Legally, since both the husband and the wife signed the joint return, are we BOTH responsible for any Subsequent impacts--either refunds or debts--incurred, if they exist at all?
    [I have prepared background information on the sources of our income if required. However, I would need to send this information directly to the respondent, to be used only by the respondent.]
    My apologies upfront: but considering the legal/tax implications involved, To be reimbursed, this question must be answered by a CPA (or a different titled position that is licensed to prepare, sign, and submit tax documentation for individuals) in the state of Virginia. While I do not know if "Megan C" meets the Virginia qualification, we would welcome her as an expert as well, certified in Virginia or not, given past performance with her.
    I fully understand, and expect that there will be an appropriate disclaimer, stating that your response will not be legally binding. I am just looking for direction at this point, and pointers toward reference material.
    THANK YOU
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