Feature Article

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.

The IRS has spent the past several months crowing about the relative ease of filing season 2023 and improvements the service has made on behalf of American taxpayers. Filing season 2024 opened on Monday, January 29 with Commissioner Danny Werfel thanking the tax professional and assuring us that “your efforts make a difference, not just for your clients, but for the IRS and the entire nation.” Despite Werfel’s rose-colored press releases, there’s still plenty of room for improvement, especially on the tax-professional-facing side of the service.

The only thing scarier than owing Uncle Sam a lot in taxes is being unable to pay the bill. Luckily, the Internal Revenue Service has ways for you to whittle what you owe. Just make sure which method works for you, depending on such factors as the size of your tax debt and what you can afford to pay and when. Don’t panic. Here’s how individual taxpayers can proceed – and what to watch out for.

For many, owning a small business is the American dream. However, the tax situation incurred by turning your hobby into that business can be a real American headache. Still, who can resist the allure of a job that’s loved and makes the hours fly? You don’t have to resist it. Just be sure of what you’re getting into with Uncle Sam.

Life is the best teacher, especially in the tax industry. You can take all the continuing education that your heart desires, but sometimes the information doesn’t seem to really click until you have hands-on experience. That’s how it was for me when it came to Health Reimbursement Arrangements (HRAs). I learned about them in school. I even remember learning about them at the first accounting firm I worked at. But it wasn’t until I was working with a small business owner with his own “insurance” that I got it.

Just in – the IRS dropped a hot alert about the Employee Retention Credit (ERC), and it's time to pay attention . With the March 22, 2024, deadline creeping up for the ERC Voluntary Disclosure Program, it's crucial for those who mistakenly filed a claim to take action. This program lets businesses repay just 80% of the claimed amount, so it's a chance to make things right. If your clients filed a claim that's still in the pipeline, it's time for a double-check. Review the guidelines ASAP and withdraw the claim if it doesn't pass muster.

Tax shelters offered high income taxpayers an easy way to reduce and even eliminate federal income taxes at the individual level. The growing tax avoidance schemes, many questionable in nature, threatened to collapse the U.S. tax system. Hence the need for tax reform and the Economic Recovery Tax Act of 1981 (ERTA). New rules cannot keep a tax professional down. Real estate was once again the favorite tool for reducing taxes. Enter cost segregation. Couple that with bonus depreciation and the automatic change of accounting method using Form 3115 , and you have a recipe for serious tax reduction. The tax shelters of the 1970s were often questionable. Cost segregation is still a valid way to accelerate deductions for income property owners. But none of that compares to the tax benefits available under the Inflation Reduction Act of 2022 (the IRA).

Lane Grigsby is back in the “news” as one of the major backers and advisers of Louisiana Governor Jeff Landry, but that’s not what gets the chairman of Cajun Construction in Think Outside the Tax Box. For that, we have a recent decision in the United States Court of Appeals for the Fifth Circuit. Judge Patrick Higginbotham wrote the opinion, and it’s all about the research credit.