Payroll tax disputes can be more difficult to resolve with the IRS than some other types of taxes. This is largely due to the IRS’s notice of deficiency process. The IRS’s notice of deficiency is the final notice the IRS sends before it assesses or records a tax as being due. The notice is required…
Category: Employment Tax
Employment Tax
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Worker Reclassification: Degree of Control
The Groundhog Day movie from the 90’s starring Bill Murray portrays a news anchorman who lives the same day over and over again. He is stuck in a loop. Each day starts the same way. Bill tries to alter his conduct and he interacts with different people throughout the movie. The other characters act and…
Does an Author Pay Self-Employment Tax on Royalties?
Taxpayers are free to structure payments for services rather than for something other than services. This can save self-employment taxes. But can a taxpayer carve out part of their service income by asserting that some part of the income is not from a business? The Slaughter v. Commissioner, T.C. Memo. 2019-65, case addresses this in…
Can LLC Use Crewman’s Exemption for Employment Taxes?
This is a question about international tax laws. Can a U.S. citizen who owns and operates a vessel outside of the U.S. avoid paying U.S. employment taxes for its crewmen by using a foreign legal entity? The court considered this issue in DAF Charters LLC v. Commissioner, 152 T.C. 14, for a single-member LLC formed…
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, T.C. Memo. 2018-55. Facts & Procedural History The case…
Court Says Employer Entitled to Worker’s IRS Records
When the IRS determines that independent contractors are taxed as employees, it is up to the employer to show that the IRS determination is incorrect. One way to do this is to show that the workers paid tax even though the employer did not withhold the tax. In Mescalero Apache Tribe v. Commissioner, 148 T.C.…
The Disqualified Employment Tax Levy
Taxpayers generally know that an IRS levy is not a good thing. Most have some sense that it can affect their financial well-being. If they have not been subject to an IRS levy, this may be all they really know about it. The term “levy” is a verb that, in the context of the IRS,…
IRS Collections for Payroll Taxes & Single Member LLC Owners
The IRS has broad collection powers. These powers generally trump state law. This is even true of state Limited Liability Company (“LLC”) rules that prevent parties from suing or reaching the LLC’s assets. There are nuances to these rules when it comes to income and payroll taxes. The payroll tax rules have changed completely. Many…
IRS Can Force Business to Shut Down
There is something about the human condition where we expect reason to prevail. We expect that if given the opportunity to explain, reasonable parties who take contrary positions will agree. This is not always the case, and it is often not the case when it comes to the IRS. For example, many businesses that owe…