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December 2016 Archives

Strict compliance with the tax code means just that

One of the more difficult concepts of tax law is that for the most part, it is arbitrary. While there is some narrative that follows from the idea that tax is typically owed on "all income from whatever source derived," the devil is in the details and if you gaze on the 10,000 plus pages of tax statutes and regulations, you quickly realize that it is mostly details.

Employee or independent contractor? You need to know

As an employer, one of your more important jobs is to properly determine if the individuals who work for you are employees or independent contractors. You probably know that employees bring with them a host of obligations for you as an employer. Payroll taxes and withholdings are one of the most important of those obligations, as the Internal Revenue Service imposes severe penalties for employers who are negligent with these withholdings.

What's a John Doe summons

In most cases when a law enforcement agency wants information, it can use a summons, for instance, if it wants additional information from a taxpayer concerning details of their tax returns from specific years. A summons typically is issued by a court for an individual taxpayer, but when the Internal Revenue Service needs information regarding a larger group of taxpayers, it may not have specifics, because the identity of the taxpayer is part of the information they are seeking.

What is reasonable compensation? Pt. 2

Last week, we looked at the factors the Tax Court uses to determine if compensation paid to employee/owners of a company qualify as "reasonable." In a case involving a concrete contractor, the court found that the five-factor test supported the company's assertion that the payment of $4 million and $7.3 million to two brothers who ran the company was reasonable.

What is reasonable compensation? Pt. 1

When a company pays employees, it is presumed to some degree, that it pays them only enough to prevent them from leaving and going to work elsewhere. This equation changes when the company is controlled by the individual being paid. The IRS often suspects owners are manipulating pay of insiders as a means of obtaining a tax deduction or reducing the income of the entity.

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