In the labyrinth of tax planning and business structure, the path to protecting your client’s multiple business strategy from the ever-watchful eye of the IRS can be as intricate as a well-played game of chess. However, while the strategic moves might be complex, the rules of the game are quite clear. Today, let’s dissect these rules with a blend of cautionary tales and cheeky wisdom, ensuring your business maneuvers stay sharp and IRS-compliant.
Ever heard of the tax strategy to just “create a new C corporation” and shift income by paying management fees from your main company? Well, so has the IRS, and they are highly skeptical when they see it in the field. The Aspro, Inc. v. Commissioner case serves as a stark reminder for taxpayers about the importance of meticulous documentation and the strict adherence to IRS guidelines for deducting management fees. Aspro, an Iowa-based C corporation in the asphalt-paving business, faced scrutiny over its practice of paying "management fees" to its shareholders, which the IRS and subsequent court rulings reclassified as non-deductible disguised dividends.
READ MOREIn modern business, accountants face a dual challenge: They must maintain a firm grasp of financial intricacies and regulatory frameworks and navigate the increasingly competitive marketing and sales landscape. As traditional methods evolve, entrepreneurial accountants must leverage innovative marketing tools to bolster their outreach and attract clientele. Webinars have emerged as a powerful medium among these marketing tools, offering a dynamic platform for education, engagement, and lead generation. Herein, I will explore the fundamental role of webinars in accountants’ marketing and sales efforts, shedding light on their benefits, strategies, and best practices.
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In the AI era, especially with tools like GPT, plagiarism isn't just copying another's work, but also presenting AI-generated content as one's unique thought without understanding or modifying its output. It's about intent and attribution. If someone blindly takes an AI's output and presents it as their own, especially in professional or academic settings, it can be considered a form of plagiarism. For certified tax planners, understanding and addressing this nuanced form of plagiarism is crucial for maintaining professional integrity and credibility.
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Everything becomes a tax story eventually. That is what provides me with a lot of "I was today years old" experiences as tax stories are the one thing that I follow religiously. So I first learned about the field of Telephone Consumer Protection Act (TCPA) litigation from reading the proposed findings and recommended dispositions in the case of Ruben Escano v. Innovative Financial Partners LLC and Josh Benson. Innovative Financial Partners is a subsidiary of Humana.
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What one Judge called "the wrinkled skin of tax law" is on display in US Tax Court again. This month was a technician's bento box, a variety.
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Creativity on a tax return is a natural tendency. Many strategies and behaviors we know are wrong, e.g. not reporting all income. However, is it ever okay to disregard some deductions and pay more tax? At first glance, it would seem that the IRS should like the idea of more reported income and a higher tax liability attached to the additional income. The IRS does not.
The gig economy involves more than one-off and part-time jobs. It also includes when you share your property in exchange for money. This can be a residential property, a vacation home, or even a vehicle. The gig economy has connected those who need rides and places to stay with owners via online platforms. We refer to this part of the gig economy as the share economy.
Accessing these accommodations is easy with the online platforms. But how the people participating should report their income isn’t quite as straightforward. Last time we looked at how your clients should report gig income, just like any other income made as a sole proprietor.
But making money from renting your property out is different, right? If you have clients with rental properties, you report their income on Schedule E (1040), Supplemental Income and Loss. We know from last time that we report gig economy income on Schedule C (1040), Profit or Loss from Business. So, how does rental income derived from the share economy get reported on a tax return? Every taxpayer’s favorite answer, it depends.
A 2023 Tax Court decision upheld what many small business owners and tax practitioners have wondered about for some time. The court found that shareholders of an S corporation could exclude rental income paid to them by their S corporation for holding planning meetings in their homes. While the IRS and court found that the amounts charged by the shareholders were excessive, the court found the arrangement itself within the bounds of the law.
This article examines this case and underlying law and when and how this is a planning idea worth pursuing, the limitations and unknowns involved, and the policy implications of this long standing exclusion. The case is Sinopoli, TC Memo 2023-105 involving the exclusion at IRC Section 280A(g).
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