Sole proprietors and partners who provide services to their partnership business have to pay self-employment taxes on the income they earn from the business. Self-employment taxes include Social Security and Medicare taxes. The owner of the sole proprietorship is then able to deduct one half of this amount in determining his federal income tax liability.… Continue reading Using a Subchapter S Corporation to Reduce Payroll Taxes for a Sole Proprietorship or Partnership?
Tax Articles
IRS Guidance on Whistleblower Informant Program
The IRS whistleblower program allows taxpayers to obtain payment from the IRS for providing information about alleged tax wrongdoing by other taxpayers. How the IRS has administered the program has drawn criticism from politicians, taxpayers, and others. The IRS’s recent guidance aims to address these criticisms. It provides a three-step process for handling whistleblower claims: 1.… Continue reading IRS Guidance on Whistleblower Informant Program
Taxpayer Cannot Rely on Incompetent Tax Attorney
The IRS can impose a number of different types of penalties. It often does so when it should not. The recent Wilson v. Commissioner, T.C. Summary Opinion 2008-91, case considers a situation where the court concludes that the tax attorney was incompetent and could not be relied on to avoid the imposition of penalties. Facts &… Continue reading Taxpayer Cannot Rely on Incompetent Tax Attorney
Refunds After Innocent Spouse Relief Granted
If a taxpayer pays the couple’s income taxes and is then granted innocent spouse relief for the liability, is the innocent spouse entitled to a refund of the amount paid? The 9th Circuit Court of Appeals addressed this in Orlock v. Commissioner. Facts & Procedural History The IRS granted the wife innocent spouse relief. Prior to… Continue reading Refunds After Innocent Spouse Relief Granted
Qui Tam Settlements and the Tax Benefit Rule
What Is A Qui Tam ? A qui tam claim involves a lawsuit where a private citizen helps the government prosecute fraud perpetrated against the government. These claims are often filed by employees or former employees who know of wrongdoing by an employer. These are often whistleblower claims. In exchange for helping to prosecute the… Continue reading Qui Tam Settlements and the Tax Benefit Rule
IRS Details the Federal Income Tax Consequences of Gift Cards
If an accrual method taxpayer issues a gift card, does the taxpayer have to recognize taxable income at the time that the card is sold or when the card is redeemed? The IRS Office of Chief Counsel recently issued a legal memorandum that addresses this question. According to the IRS attorneys, taxpayers who issue gift… Continue reading IRS Details the Federal Income Tax Consequences of Gift Cards
Reporting Requirements for ISOs and ESPPs
The IRS has released proposed Regulations to implement the recent changes in Code Sec. 6039. These Regulations require corporations to report the transfer of stock upon the exercise of incentive stock options (ISOs) and by employee stock purchase plans (ESPPs). Pursuant to the changes in Code Sec. 6039, corporations must provide this information to the… Continue reading Reporting Requirements for ISOs and ESPPs
Discharging Tax Debts in Bankruptcy: The Three Year Look-Back Period
Bankruptcy is often the best method of resolving unpaid tax debts. The U.S. Tax Court recently addressed one of the rules for discharging unpaid tax debts in bankruptcy in Lehman v. Commissioner, T.C. Summary Opinion 2008-83. Facts & Procedural History On Lehman’s Case In Lehman, the taxpayers initially sought Chapter 13 bankruptcy relief. The taxpayers filed… Continue reading Discharging Tax Debts in Bankruptcy: The Three Year Look-Back Period
Tax Disputes Involving Alimony Payments
If payments qualify as alimony pursuant to federal tax law, the payments may be tax deductible by the payor spouse and included in gross income to the payee spouse. The opposite is true if the amounts are not alimony for federal tax law. Whether an expense counts as alimony is frequently the subject of disputes… Continue reading Tax Disputes Involving Alimony Payments
IRS Recognizes Employee Tool and Equipment Plans
The IRS recently issued a Coordinated Issue Paper that sets out its view of what constitutes an acceptable Employee Tool and Equipment Plan. What Is Employee Tool & Equipment Plan ? An Employee Tool and Equipment Plan is an agreement between an employer and one or more of its employees to reimburse the employee for the… Continue reading IRS Recognizes Employee Tool and Equipment Plans