Tax Controversy Lawyer Blog

South Carolina DME sales tax audits are ramping up throughout SC. The Department of Revenue is opening sales tax audits for Durable Medical Equipment retailers requesting lots of records and information. The audit period is generally three years. If you have received a South Carolina SC DME sales tax audit notice you do have options.

South Carolina has several sales tax exemptions that apply to certain durable medical equipment or DME items. For example, South Carolina Code of Laws provides:

SECTION 12-36-2120. Exemptions from sales tax.

Exempted from the taxes imposed by this chapter are the gross proceeds of sales, or sales price of:

(28)(a) medicine and prosthetic devices sold by prescription, prescription medicines used to prevent respiratory syncytial virus, prescription medicines and therapeutic radiopharmaceuticals used in the treatment of rheumatoid arthritis, cancer, lymphoma, leukemia, or related diseases, including prescription medicines used to relieve the effects of any such treatment, free samples of prescription medicine distributed by its manufacturer and any use of these free samples;

(b) hypodermic needles, insulin, alcohol swabs, blood sugar testing strips, monolet lancets, dextrometer supplies, blood glucose meters, and other similar diabetic supplies sold to diabetics under the authorization and direction of a physician;

(c) disposable medical supplies such as bags, tubing, needles, and syringes, which are dispensed by a licensed pharmacist in accordance with an individual prescription written for the use of a human being by a licensed health care provider, which are used for the intravenous administration of a prescription drug or medicine, and which come into direct contact with the prescription drug or medicine. This exemption applies only to supplies used in the treatment of a patient outside of a hospital, skilled nursing facility, or ambulatory surgical treatment center;

(d) medicine donated by its manufacturer to a public institution of higher education for research or for the treatment of indigent patients; and

(e) dental prosthetic devices;

Continue reading "South Carolina Sales Tax Audits Ramp Up for Durable Medical Equipment (DME) Retailers" »

Once the shock has worn off from being audited by the IRS or finding that the IRS wants to collect those back taxes you have not paid, you will want to know what your options are to resolve the tax debts. There are a number of tax solutions that a taxpayer may avail himself or herself of to finally get a good night's sleep. One such tax solution, the Installment Agreement, is key to paying down and eventually eliminating the tax debt. And, while it may not cause all memories of your dealings with the IRS to fade into oblivion, it sure will help.

The Installment Agreement is an agreement entered into between the IRS and the taxpayer to pay down the IRS-assessed liability, i.e., your tax debt, over time. If you qualify for an Installment Agreement, the IRS will establish a payment plan where the taxpayer agrees to make monthly payments and in return the IRS will not issue bank levies or wage garnishments. The Installment Agreement payments are usually applied toward the oldest debt first, and once that debt is paid the payments are applied to the next oldest debt and so on and so forth until all the tax debts are paid or are uncollectible.

Careful attention must be paid to structuring the Installment Agreement, because sometimes the IRS allows an Installment Agreement with a small monthly payment for the first year and after that the new payment amount is bumped up to a payment that many taxpayers cannot afford. I call these "teaser" Installment Agreements. This scenario typically applies to taxpayers with significant credit card or other unsecured debts. The IRS does this to allow taxpayers time to reduce these "non-allowable" expenses and otherwise get their finances in order so that they can afford to make heftier payments down the line. This is not to say that this practice does not have its benefits. Taxpayers just need to be aware of the "teaser" Installment Agreement.

While not perfect, the Installment Agreement can be extremely helpful in permitting the IRS to collect what it will, and still allowing the taxpayer to get a solid 8 hours of sleep...OK, maybe 6 at the very least...

Continue reading "Counting Sheep? Consider an Installment Agreement" »

The IRS has selected approximately 260,000 returns claiming the first-time homebuyer credit for correspondence audits so far in 2010. The audits are apparently the result of filers failing to include sufficient documentation with their tax returns. These correspondence audits constitute approximately 21% of all correspondence examinations. Accordingly, the IRS is truly turning up the heat this summer on those claiming the first-time homebuyer credit.

The IRS requires homebuyers claiming the credit to attach the following:

• A copy of the settlement statement showing all parties' names and signatures, the property address, the contract sales price, and the date of purchase

• In the case of a mobile home, a copy of the executed retail sales contract

• In the case of a newly constructed home where you do not have an executed settlement statement, a copy of the certificate of occupancy

Additional documentation may be necessary, as indicated below:

Homebuyers who purchased after April 30, 2010, but before July 1, 2010, that entered into a binding contract before May 1, 2010 to purchase a home before July 1, 2010, must also attach:

• A copy of the pages from a signed contract to make a purchase

Homebuyers who are claiming the credit as a long-time resident of the same main home must attach copies of one of the following:

• Form 1098, Mortgage Interest Statement

• Property Tax Records; or

• Homeowner's insurance records

Continue reading "The IRS Attacks: First-Time Homebuyer Credit Claims" »