Category Archives: Taxes

Overpaying Philadelphia Property Taxes?

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The State Tax Equalization Board reduced that the 2012 common level tax rate for property in Philadelphia to 18.1% for the first time in decades. However, Philadelphia continues to use an assessment rate of 32%, which appears to violate Pennsylvania law. The Pennsylvania General County Assessment Law provides that there cannot be more than a 15% difference between the common assessment level rate and the county’s Established Predetermined Ratio . 72 P.S. § 5020-511(c).  The Philadelphia Tax Review Board yesterday agreed; it reduced a parking lot owner’s tax  bill by 44%. While Philadelphia intends to appeal the board’s decision to the Court of Common Pleas, more than 100 property owners have filed appeals of their 2012 tax assessment bill.  If you own property in Philadelphia, you may have been overpaying your property tax.   Call me for a free consultation at 215-242-5260 or email me at http://mckeeoffice.com/blog2/contact-us/

Phila to reduce business taxes for some

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The Mayor of Philadelphia, Michael Nutter, announced a pilot program that will reduce the city’s tax rate for certain business industries. The program targets  Research-and-development firms in engineering and life sciences as well as computer system design firms.  Under the program, these city will exempt a portion of their net income from the business privilege tax.  For everyone else, the formula will remain the same: 50 percent on sales, 25 percent on payroll and 25 percent on property.   The revenue commissioner will issue new regulations in the spring to introduce the pilot program. The program is an effort to make Philadelphia more competitive and attractive to businesses.

Sharmil McKee | Business Attorney | blog@mckeeoffice.com

Taxes: how not to borrow money

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Karns Prime & Fancy Food, Ltd. v. Comm’r of Internal Revenue, No. 06-1031, UNITED STATES COURT OF APPEALS FOR THE THIRD CIRCUIT (Filed: July 20, 2007)

A grocery store chain, Karns, borrowed $1.5 million from its principal supplier, Super Rite. The IRS claimed that the $1.5 million was taxable income. Karns argued that the money was a loan. (By law, loans are not taxable).

For the Third Circuit court, the key question was whether, at the time Karns received the money, was it unconditionally obligated to repay the loan. Super Rite provided Karns with $1.5 million on condition that it purchases $16 million of Super Rite’s products a year. As long as Karns fulfilled its terms of the bargain, i.e., to purchase $16 million of Super Rite’s product, the $1.5 million “was its to keep.” Therefore, yesterday, the court ruled that the $1.5 million was NOT a loan.

Karns has to pay $486,355 in taxes on its $1.5 million income. 

Business Law Lesson: Do not attempt to avoid taxes by classifying received money as a loan instead of income. Borrowing money from your principals or suppliers with no real obligation to repay the money is not a “loan” for tax purposes.

Sharmil McKee | Business Lawyer | blog@mckeeoffice.com

Our Tax Law Services

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Our Tax Law Group helps business clients, like you, develop tax planning strategies. Our strategies help you to take full advantage of the legal tax shelters afforded by federal and state laws. For example, we can structure your partnership venture to shift your tax burden to the venture. We will work directly with your accountant to ensure that your business is not exposed to more than its fair share of taxes. For example, did you know that your legal fees are legitimate deductible business expenses?
 
In addition to tax planning, we also negotiate with federal, state, and local agencies to reduce your tax liabilities. Our Tax Law Group can also defend your business if you are sued by a government taxing agencies. And finally, if an agency has taken more property than it is entitled to under the law, we can also negotiate and pursue the agency to recover the overpayment.

Please contact us today for your free consultation to discuss your many options.

Independent Contractors and Worker’s Compensation

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A Pennsylvania court recently ruled that a claimant was not entitled to worker’s compensation because he was not an employee, but rather he was an independent contractor.

The Court, while ignoring the independent contractor agreement and the non-compete agreement signed by the company and the claimant, examined the nature of the employment to determine if the driver was an employee and eligible for worker’s compensation. Based on the following factors, it determined that the escort driver was NOT an employee and therefore NOT eligible for worker’s compensation:

  1. the company did not control the details of the trip.
  2. the claimant may refuse any assignment.
  3. the company provides no training or equipment.
  4. the drivers did not need to attend any functions at work (i.e. no mandatory employee meetings)

Beacon Flag Car v. W.C.A.B., No. 928 C.D.2006 (Oct. 31, 2006).

What does this case mean for you, as a business owner?  The Unemployment Compensation Board and the Workers Compensation Board are not required to respect your independent contractor agreement.   The boards, including the Internal Revenue Service, will examine your actual relationship with the work to determine if he or she is independent.  So, for examine if you control the hours and activities of the worker, the I.R.S. may declare that your independent contractor is an employee for tax purposes.

What should you do? In addition to carefully drafting your independent contractor agreement, you must critically examine your relationship with the person.  It is best to develop a standard operating procedure for governing and working with your independent contractors. 

Do you have a legal question? We offer free consultations regarding this and others legal issues.  Call today or chat online, privately, with an attorney every Monday through Friday from 8 a.m. to 8 p.m. at www.mckeeoffice.com
 
 
Sharmil McKee
Business Lawyer
 
McKee Law Office
245 W. Allens Lane
Philadelphia, Pa 19119
 
Telephone:     215-242-5260

Toll-Free:         1-877-273-0749

Skype Us!              mckee.law.offices

Web: http://www.mckeeoffice.com

Business and Payroll Taxes

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During a meeting, a business client mentioned that she was trying to develop a budget for the next 12-months but she did not know what her tax rates or requirements were.  So, in addition to setting up a meeting with my small business CPA, I provided her with the following list.  These are the 2006 tax rates for the Federal, Pennsylvania, and Philadelphia government.

  • Federal Net Income tax is graduated from 10% to 25% depending on your income level
  • Pennsylvania Net Income tax is 3.07%
  • Philadelphia Net Income tax (also called the Business Privilege Tax) is 6.5%
  • Philadelphia Gross Receipts tax is 0.023%

Payroll tax usually refers to the money that an employer must withhold from the employee’s paycheck: federal income tax, plus one-half of the Social Security tax, and one-half of the Medicare tax.  In addition, the employer must match the money that is withhold from the employee’s check for federal taxes.  Together, the employer’s and employee’s shares of the Social Security and Medicare taxes are known as the FICA tax.  These are the tax rates:

  • Federal Social Security Tax 6.5%
  • Federal Medicare Tax is 1.4%
  • Federal Unemployment Tax is 6.2%
  • Pennsylvania Personal Income Tax is 3.07%
  • Philadelphia Wage Tax for Residents is 4.331%
  • Philadelphia Wage Tax for Non-Residents is 3.8197
Do you have a legal question? We offer free consultations regarding this and others legal issues.  Call today or chat online, privately, with an attorney every Monday through Friday from 8 a.m. to 8 p.m. at www.mckeeoffice.com
 
 
Sharmil McKee
Business Lawyer
 
McKee Law Office
245 W. Allens Lane
Philadelphia, Pa 19119
215-242-5260 (office)
1-877-273-0749 (toll-free)
Skype Us! (mckee.law.offices)
http://www.mckeeoffice.com