Blog Archives

Why to Revoke An S Election and How to Do It – Internal Revenue Code Section 1362(d); Reg § 1.1362­6(a)

Many entrepreneurs get caught up in selecting the "most appropriate business structure" - particularly people planning to conquer the moon right out of the gate. If this is you beware as business structure is a determination that is best driven out

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Posted in Employment Tax, Entity Classification, Paying Taxes, Payroll Tax Problems, Penalty, Small Business, Social Security, Social Security Tax, Sole Proprietor, Start up costs, Sub-chapter S, Tax Abuse, Tax Guidance & Preparation, Tax Problems & Requests

LLC Income is INDEED Subject to Self Employment Tax: IRS Chief Counsel Advice 201436049

In 1997, the IRS issued proposed regulations governing when the distributive share of partnership income for Limited Liability Company (LLC) members was to be included in self-employment income. It basically advised that an LLC member would be treated as a

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Posted in Employment Tax, Entity Classification, Limited Partnership, LLC, Material Participation, Passive Activity, Payroll Tax Problems, Small Business, Social Security Tax, Taxable Income, Uncategorized

IRS Form 1099-misc Filing Requirements Defined as per IRC 6041

I was talking with a taxpayer the other day who registered as an LLC with Colorado Secretary of State. She developed an intriguing business model that is doing remarkably well according to the financial statement. As part of a tax

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Posted in Business Expense, Business Income, Cash, Cash Transaction, Employee Business Expense, Employment Tax, Entity Classification, FICA, Income, Independent Contractor, Payroll Tax Problems

IRS Notice 2006-83: The Bankruptcy Estate

When an individual files a bankruptcy petition under chapter 7 or 11 of the bankruptcy code a bankruptcy estate is established. The bankruptcy estate is treated as a separate taxable entity. If a trustee is appointed, the trustee is responsible

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Posted in Bankruptcy, Entity Classification, Foreclosure, Tax Guidance & Preparation

IRS Form 1040 Schedule C: Profit or Loss from Business

IRS Form 1040 Schedule C: Profit or Loss from Business

IRS Form 1040 Schedule C: Profit or Loss from Business can be a tough form to work through.  Tread lightly and seek guidance. The sole proprietorship or single member Limited Liability Corporation (LLC) is in my opinion the easiest type

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Posted in Accounting Method, Business Expense, Business Income, Car expense, Depreciation, Disallowed Expenses, Employee Business Expense, Entity Classification, FICA, Health Insurance, Hobby, Home Office, Husband/Wife, IRS Form 1040 Schedule C, Medicare, Net Operating Loss, NOL, Passive Activity, Self Employ, Small Business, Social Security, Social Security Tax, Sole Proprietor, Start up costs, Sub-chapter S, Tax Guidance & Preparation, Tax Problems & Requests

Personal Guarantee of Corporate Debt Does NOT Add to Basis (Investment)

Taxpayers who own shares in an S corporation are allowed pass-through losses to the extent of their basis (also commonly referred to as investment) under §1366(d) in their entity. Shareholders can obtain basis in a variety of ways such as direct investment,

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Posted in Cost Basis, Disallowed Expenses, Entity Classification, NOL, Self Employ, Small Business, Sub-chapter S

IRA’s Cannot Hold Sub-Chapter ‘S’ Stock: Trusts Can Though

To be taxed as an S corporation, a C corporation must elect S status by filing IRS Form 2553. Electing S status is fairly simple for a new or existing corporation, but meeting the requirements for S status can be more complex when the

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Posted in Abusive Tax Shelter, Entity Classification, Self Employ, Small Business, Sole Proprietor, Sub-chapter S, Tax Abuse, Tax Court, Tax Fraud, Tax Guidance & Preparation

Do You Have A Business? Or Is It A Hobby?

The IRS has developed a rule of thumb for analyzing business losses called the Hobby Loss Rule of Thumb that basically says if a business reports a net profit in 3 out of the last 5 years it is presumed to

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Posted in Appeals & Audit Resolution, Audit Reconsideration, Business Expense, Correspondence Audit, Deductible Expense, Disallowed Expenses, Entity Classification, IRS Audit, IRS Examination, Tax Deductible Expenses

Simple Trusts – Basic Observations

For tax purposes a Simple Trust requires that all income generated by the trust be distributed each year to the trust’s beneficiaries.  Even if a trust distributes all its income every year this alone does not necessarily make it a

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Posted in Entity Classification, Estate Tax, Gift Tax, Tax Guidance & Preparation, Trusts

Sale Leaseback

From a tax perspective the fundamental issue is whether a legitimate business purpose exists for the formation of a distinct entity to do a sale leaseback. If one exists and this is pursued all elements of the transaction should meet

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Posted in Asset Classification, Capital Gain, Capital Loss, Cost Basis, Cost Segregation, Entity Classification, Estate Tax, Family, Gift Tax, Self Employ, Small Business, Sole Proprietor, Tax Guidance & Preparation, Tax Problems & Requests, Tax Relief
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