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FEATURED CONTENT
Trust Issues: Don’t Try to Save Your Way to the Trust Fund Recovery Penalty
When people reach out to me about reducing their tax bill, there are two things that they bring up. The first is starting an LLC, and the second is converting their business to an S-Corp. When I ask why they think an S-Corp will help, the common knee jerk reaction response is to eliminate self-employment tax. It is true that their net income will no longer be subject to self- employment tax and neither will their distributions. However, what they fail to learn in their S-Corp online class from YouTube university is that they need to be on payroll if they are working in the business. Not only that, but they also need to receive reasonable compensation while on payroll. So, what happens if they go a year or two without being on payroll before they find this out? The TFRP is the biggest ouch a business owner can face and threatens to close businesses each year. It's the penalty that business owners pay for stealing from their employees and the IRS. To better understand it, let's look at what the trust fund is, how the IRS calculates the penalty, and who is responsible.
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CURRENT EDITION
Worrisome Messages Subtly Delivered Via Recent Tax Developments
Tax professionals are inundated with tax developments from all branches of the government and from all levels of government on a daily basis. Our technical tax knowledge expands weekly. Given the immensity of tax law changes in P.L. 119-21 (July 4, 2025), informally named the One Big Beautiful Bill Act (OBBBA), and the guidance we’ll continue to get over the next few years along with non-OBBBA updates, we might run out of time and bandwidth to step back and ask what additional relevance this guidance, as well as various reports issued by the government every day, mean for the well-being of our tax system. This article unpacks select tax law changes and government documents to offer four subtle messages within them. Generally, the messages don’t bode well for an effective tax and revenue system. The article ends with some suggestions on what can help improve our tax system.
Sirius Solutions and the S Corp or Partnership Choice
The Fifth Circuit Court of Appeals opinion in Sirius Solutions L.L.L.P. v. Commissioner may change our views of entity choice. If the decision holds up, partnerships will be able to effectively make the portion of limited partner income subject to self-employment tax whatever they want, including zero. This contrasts with the IRS position upheld by the Tax Court in Soroban Capital that treated all of the income of limited partners who were active in the business as self-employment income.
Niche Down to Scale Up: How Specialization Drives Visibility and Profitability
For many accountants, narrowing our focus can feel risky. We are trained to serve anyone who needs help and provide stability in any financial situation. Choosing a niche often raises concerns: Will we turn away good clients? Will we limit opportunities or reduce business stability? These are common doubts many of us have faced in our careers.
SIMPLIFIED TAX STRATEGIES &
PRACTICAL IMPLEMENTATION
Think Outside the Tax Box provides tax reduction strategies along with practical
implementation advice in order to reduce your clients’ federal tax bill with ease.
