Tax Warrior Chronicles

Your Kids in the Family Business Post-Trump Tax Reform

Posted on Mon, Aug 12, 2019

By: Melissa Boyce, CPA

 

The Tax Cuts and Jobs Act of 2017 (TCJA) changed many areas of the tax code, including when family business hires their child(ren). While there was a similar pre-TCJA benefit to hiring one’s child(ren), the new law increased several tax savings and warrants another look at hiring children into the family business.

 

Income Shifting

The largest benefit of hiring a child into a family-owned business is the ability to convert the parents’ high-taxed income into tax-free or low-taxed income. There are rules that must be followed; specifically, the children’s work must be legitimate, and the amount the enterprise pays them must be reasonable for the wages to be

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IRS Rules Post-Retirement Payments Are Subject to Self-Employment Tax

Posted on Tue, Feb 21, 2017

By: Tiffany Diaz, CPA

 

In a perfect world, retirees would receive post-retirement payments from former employers tax-free. However, a recent IRS letter ruling puts a damper on that notion. In this short blog, we give an overview of the details and the only exception to the rule regarding post-retirement payments.

 

The IRS letter ruling 2016-0081 determined a retiree’s payments from a former employer were subject to the self-employment tax, since the payments were earned as a result of the retiree’s 34 years of service to the company and were not being treated as wages subject to payroll taxes. The IRS used Section 1402(b) of the Internal Revenue Code ("the Code") to analyze the

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IRS Takes Action Based on Supreme Court Decision on Severance Pay

Posted on Mon, Feb 23, 2015

Last year we were all disappointed by a huge taxpayer loss in the Supreme Court case of the US v. Quality Stores in March 2014. The Supreme Court decided that severance pay constitutes wages subject to FICA and the Railroad Retirement Tax Act (RRTA). 

 

So if you appealed your rejected refund claim for taxes on severance pay and are still waiting for your IRS Appeals reply…let us tell you about the newly announced IRS view of this case and what you should do now. But first a little background.

 

Prior to this Supreme Court decision, thousands of taxpayers requested the Appellate Division of the IRS to consider their appeals regarding prior refund claims rejected by the IRS related to FICA

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2014 Q1 Tax Headlines – A Roundup of This Year’s Tax Changes, So Far

Posted on Thu, Apr 24, 2014

While The Tax Warriors® have been hard at work for the last few months, completing tax returns, shoveling out of snow storms and filming Oscar-worthy videos, the tax laws have been just as active.  There have been Tax Court and Supreme Court case decisions, newly released IRS guidance, and Congressional action all focused around taxes. Below is a summary of the most important tax developments that have occurred in the past three months that may affect you, your family and your investments.

 

U.S. Supreme Court Rules Severance Payments Subject to FICA Taxes 

In a unanimous decision (with one justice not participating), the Supreme Court, reversing the Sixth Circuit Court of Appeals, has

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Tax Withholding Requirements of the ACA: Is Your Business Ready?

Posted on Tue, Jan 28, 2014

A host of tax changes occurred last year (2013) and now the filing season—the moment of truth--is here. Do you have all the information you need to make the right decisions concerning your business taxes? Through our blog, e-newsletter and timely email messages, we’ll be covering these changes through the filing season, just as we have done throughout 2013.

 

The Patient Protection and Affordable Care Act of 2010 (ACA), infamously known as ObamaCare, has triggered many of the changes in the tax code that will be prevalent in your filings this year. And, though many of these provisions are for healthcare end-users, some are for businesses as well.

 

Beginning in 2013, the ACA called for

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BIG NEWS! SCOTUS to Decide FICA Tax Treatment of Severance Pay

Posted on Mon, Oct 07, 2013

Cert granted in U.S. v. Quality Stores and this is big news!

The Supreme Court of the United States (SCOTUS) has agreed to review a decision of the Court of Appeals for the Sixth Circuit, which held that severance payments aren't wages for purposes of FICA tax. This means that the Supreme Court will resolve a circuit split that currently exists between the Sixth and Federal Circuit Courts on the issue.

 

Here is the background: The income-tax withholding provisions under the law generally define "wages" in substantially the same way as it does for FICA purposes. In general, the term means all remuneration for employment, including the cash value of all remuneration (including benefits)

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Social Security Wage Base Expected to Rise for 2014

Posted on Thu, Jun 06, 2013

 

Social Security has become the third rail of politics.  If a candidate has a plan to fix it, it is scrutinized.  If a candidate does not have a plan to fix it, they are vilified. As the population rises and people are living longer, the pot is getting smaller and smaller.

 

As a result, in its attempt to keep money flowing through and funding the program, the Social Security Administration's Office of the Chief Actuary (OCA) has projected that the Social Security wage base will increase from $113,700 for 2013 to $115,500 for 2014.

 

We all know about this tax but maybe the correct names and a review of rates will set the stage.  The Federal Insurance Contributions Act (FICA) imposes two

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