Monthly Archives: May 2017

The Trust Fund Penalty – No One Is Safe

Employers are required to withhold federal income and payroll taxes from their employees’ wages for payment of payroll taxes such as federal income taxes and FICA (Federal Insurance Contributions Act) taxes. Such taxes are held in trust by an employer until it makes a federal deposit of the due amounts.

The IRS applies a term, “Trust Fund Recovery Penalty” (TFRP), for the fine related to an employer’s willful failure to pay over necessary federal income and FICA taxes. “Responsible persons” making such payments may be subject to criminal charges for any willful failure to remit these taxes. Most TFRP cases involve corporate officers and companies that are no longer in business, in which case the IRS may only collect TFRP from “responsible persons.”

Most Confusing Parts Of The Income Tax Code, Part 6: Taxes On Social Security Benefits

Many provisions of the Internal Revenue Code are complicated. Proper interpretation of the rules and regulations contained in these provisions requires the assistance of an experienced and knowledgeable tax professional. The sixth part of the series about the most confusing provisions of the Internal Revenue Code addresses taxes on social security benefits.

Why Is It Confusing?

  • Complicated formula to determine benefits
  • Requires a lengthy multi-step worksheet to calculate

Hobby v. Business Loss – Ramifications Of The Herb Vest, TC Memo 2016-187

The rules for reporting the income and expenses associated with a “hobby” or “pastime” is dependent upon whether or not the activity has the genuine purpose of making a profit. The Herb Vest case is an interesting Tax Court Memorandum decision regarding a wealthy taxpayer’s attempt to deduct from gross income, expenses related to the investigation of his father’s mysterious death. Among several issues discussed in the case, the Tax Court discussed not-for-profit activities and the factors considered in determining profit objective.

Customer Based Tax Incentives For Businesses

Taking advantage of tax incentives makes good sense for businesses. One reason a business owner should use tax incentives is to help underwrite the cost of maintaining its existing customer base, while continually striving to increase it. Whether a sole proprietorship, partnership, corporation, S corporation, or limited liability company (LLC), certain customer-based tax incentives may help a business reduce taxes.

The first priority for the owner of a business enterprise is to reduce taxable income by taking all of the deductions to which it’s entitled as business expenses. If the expense is ordinary and necessary to the business, it may be deducted under I.R.C. § 162. As defined by the Supreme Court:

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