Tax Procedure Trust Fund Penalties

Loaning Money to Business Triggers Trust Fund Penalty

You work hard to build a business, you find success over the years, and then you find out that your long term accountant did not remit payroll taxes and you owe a significant balance.  What do you do?  The recent McClendon v. United States, No. 17-20174 (5th Cir. 2018) case provides some answers. The Facts & Procedural […]

Tax Procedure Tax Returns

Shareholder Cannot Make S Corp. Separately Stated Item Election

S corporation’s account for separately stated items that flow through to the shareholder’s tax returns. They are computed on page 3 of the Form 1120S and then listed separately on the Schedule K-1. The idea for breaking these items out separately is that they can impact the shareholder’s individual returns differently. That makes sense, but […]

Federal Income Tax

The Statutory Employee Classification Post-TCJA

The Tax Cuts and Jobs Act (“TCJA”) made several changes to our tax laws. One such change is that employees are no longer able to deduct unreimbursed expenses incurred as an employee. Given this change, employers and their workers may need to re-evaluate their relationship. For some workers, this may mean re-evaluating whether the worker […]

Federal Income Tax

Credit for Employment Taxes Reported in Error for Another Entity

If employment taxes are paid by one legal entity but incorrectly reported to the IRS for another legal entity, can the entity that paid the taxes get credit for the payment? The IRS said ‘no;’ the U.S. Tax Court said ‘yes.’ The case is E.C.C.B.A. v. Commissioner,┬áT.C. Memo. 2018-55. Facts & Procedural History The case […]

Business Tax S Corporation Tax Tax

Court Says Rent Income from S Corp Not Subject to Self-Employment Taxes

In Martin v. Commissioner, 149 T.C. 12 (2017), the court concluded that S corporation shareholders can avoid self-employment taxes by holding their farming operations in their S corporation. While the court case considered farming operations, its holding is not limited to farming operations. The case provides authority shareholders may cite in support of similar but […]

Tax Litigation Tax Procedure

Court Denies IRS Injunction in Employment Tax Dispute

It is common for the IRS to make various demands on businesses that are undergoing employment tax audits or businesess that are trying to deal with employment tax collection issues. One common demand is that the taxpayer immediately start complying with the employment tax laws. But what if the taxpayer cannot comply, perhaps due to […]

Business Tax S Corporation Tax Tax

IRS Says Personal Expenses Paid by S Corp. Not Loan Repayments

If a Subchapter S corporation pays its shareholders personal expenses, can the payments be for the repayment of loans not subject to employment instead of wages subject to employment taxes? This is a common issue that has to be addressed when preparing S corporation tax returns. The IRS addressed this in AOD 2017-04 disagreeing with […]