Tax Details We Should Talk About

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Periodically I get client questions or responses to my emails or blogs that are important enough to put in an article but end up having really short answers. Today I’ve got a grab bag of such comments and questions.

From the “Is Grandma Going to Lose Her House?” email and blog, I received a question about what happens with Medicaid. Medicaid has some federal funds but are administered on a state level. The states get to set the rules, subject to some parameters. It’s an important question because Medicaid often steps in to take care of Seniors in nursing homes and assisted living centers when there is not enough money to cover it. However, the problem is that you first need to exhaust your assets.

So, could a family protect some of Grandma’s assets while taking advantage of the Medicaid benefits?

The answer is, “It depends.” State law rules here. Some states allow an unlimited exemption for the elder’s primary residence. Other states allow a certain dollar amount of equity to be exempted. Other states don’t allow any exemption. The house has to be sold and liquidated for expenses.

Talk to a tax and legal expert in your home state to find out what laws apply where you live.

A question I received via email just this week was a good one and one that I receive often. “If I set up an LLC, elect to be taxed as a C Corp, how do I sign the return?”

We call that kind of entity an LLC-C. An LLC that has elected to be an S Corp would be an LLC-S. Typically owners in an LLC are called managers, members (owners) or member-managers (members who are the managers of the LLC). But the officers in an S Corp or C Corp are called President, VP, Secretary, Treasurer, Director or similar typical corporate terms.

So, do you sign like it’s an LLC (which it is) or like it’s a corporation (which is how it’s taxed)?

The worst answer is to just sign with your own name. If you do that, someone could argue you haven’t followed the corporate formalities and that means you voided the corporate veil or lost protection. In other words, someone could sue, win and lodge a personal judgement against you.

Since in this case, the person was signing tax paperwork, we recommend they sign as the IRS sees you. In that case, it would mean using the conventional corporate formalities of president, VP, secretary, treasurer or etc.

For other documents you could sign using either the LLC terms or the corporate terms. It’s probably better to stay consistent, though, and if you said you were a President before, you should sign again as a President.

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