When we think of taxes, we often think of income taxes. But for business owners, they also have to contend with payroll and/or self-employment taxes. These other taxes can be substantial for businesses and their owners. This is why Congres and taxpayers have devised several ways to avoid these taxes. The rules are nuanced enough…
Tax Articles
The Limited Augusta Rule for Self-Rentals
While many taxpayers want to pay less in tax and there are legitimate ways to do so, some of the tax planning concepts that are frequently discussed miss the mark. The so-called Augusta rule is often one of them. Tax planners often cite this rule and provide tax savings estimates based on unreasonable assumptions. This…
What is a Partnership: State Law vs. Federal Tax Law
One of the nuances that come up in tax planning involves the interplay of state law and federal tax law. This brings in all of the nuances and challenges under state law to federal tax law. For example, one common nuance in business transactions arises when the parties to a business arrangement do not document…
Taxation of Variable Prepaid Forward Contracts
Do you own a company and want to sell to de-risk your holdings but don’t want to pay tax now? And when you do sell, do you still want lower capital gains rates? That’s the most common goal for those considering tax planning. Capital gains rates are lower than ordinary income rates. Tax planning focuses…
Limiting IRS Access to Your CPA & Tax Attorney Records
A core principle of U.S. law and a foundation of our legal system is the presumption of innocence. The burden of proof lies with the accuser, not the accused. This underpins the right against self-incrimination and the right to legal counsel to mount a vigorous defense. However, this framework unravels if the accuser can access…
Does E-Filing Change Late Tax Filing Penalties?
Our tax law imposes penalties on taxpayers who fail to file tax returns or pay taxes on time, unless the taxpayer can show “reasonable cause” for the delay. In United States v. Boyle, the Supreme Court established a bright-line rule that reliance on an accountant or agent does not constitute “reasonable cause.” There are nuances…
Court Clarifies Tax Treatment of Loyalty Programs
Programs involving third-party vendors providing rewards, like hotels, airlines, and fuel companies, can amass substantial value over time. The term “substantial” is an understatement. “Massive” is more fitting. The tax law for these arrangements is not clear as it touches on concepts like trust funds, accounting methods, and redemption deductions. Given the size of the…
Forget the 5-Year Rule – Change Entity Classification Early
Many believe that once you elect an entity’s tax classification, you are locked into that choice for at least 5 years. Conventional wisdom says that the tax status cannot be changed within a 5-year or 60-month period. However, a recent IRS private letter ruling shows this is not necessarily the case. In PLR 202341001, the…
Think Twice Before Handing Records to the IRS
There have been several lawsuits filed against the IRS for unlawful disclosure of taxpayer information. These include a suit filed by President Biden’s son, a lawsuit filed by the IRS against IRS contractor Charles Edward Littlejohn for leaking taxpayer information to news outlets–which apparently included former President Trump’s tax returns and returns for many other…
Breach of Contract as Theft Loss Tax Deduction
Many people have experienced the pain of an investment gone wrong. You put money into a business, loan funds to a friend, or participate in a real estate venture, expecting strong returns. But instead of profits, you end up suffering losses when the deal unravels. It leaves you wondering – can I at least deduct…