Tax Monitor

Tax Court Invalidates a Micro-Captive Insurance Arrangement; Likely to Embolden IRS in its Compliance Efforts

September 11, 2017

In recent years, the Internal Revenue Service (the “IRS”) has increased its audits of micro-captive insurance companies in the belief that small businesses are using them to insure against improbable risks on which they never pay claims, and which the premiums return to the business owners or heirs with little to no tax.  In fact, micro-captive insurance is one of the IRS Large Business and…

New Audit Rules May Require Amendments to Partnership Agreements and LLC Operating Agreements

March 1, 2017

Overview.

Effective for tax years beginning on January 1, 2018, the IRS has a new set of rules to govern partnership audit procedures.  Since the vast majority of limited liability companies (LLCs) are taxed as partnerships, these new rules may require amendments to LLC operating agreements as well as partnership agreements to ensure that the economic burden of future tax assessments are allocated…

Filing Deadline Changes for Tax Year 2016

December 12, 2016

Beginning with returns for tax year 2016, a new law will go into effect which revises the due dates for partnership and C corporation returns and changes the extended due dates for some returns. The new rules are summarized below.

Due Dates Prior to Change

Before this change, domestic corporations (including S corporations) had to file their returns by the 15th day of the third month after the end…

Tax Deferred Annuities – Heightened Fiduciary Scrutiny

November 14, 2016

Over the last several years, much has been written in connection with the surge of “excessive fee” litigation against Section 401(k) plans.  The surge continues and has now been extended to Section 403(b) plans which are often referred to as Tax Deferred Annuities.  One commentator estimates that over twenty class action excessive fee litigation cases were filed during the first quarter of 2016…

Tax Commissioner publishes tentative 2017 Natural Resource Valuation Variables for Public Comment

July 13, 2016

On June 30, 2016, the State Tax Commissioner published the 2017 tentative natural resource property valuation variables developed by the State Tax Department for appraising natural gas, oil, coal, managed timberland and other natural resources for ad valorem tax purposes. The Tax Department will accept written public comments on the valuation variables until August 1, 2016.  Final valuation…

Certified Professional Employer Organizations

July 7, 2016

A growing trend among small to medium sized companies is the outsourcing of payroll, and in some cases, other functions such as benefits and human resources.  It is estimated that in the range of 180,000 businesses employing over 3.4 million individuals outsource their payroll tax responsibilities.  It is further estimated that approximately 6,000 new clients per year are utilizing…

Partners as Employees of Disgregarded Subsidiary Partnerships

May 11, 2016

The Employee Benefits Group of Jackson Kelly PLLC provides third party administrative services to numerous qualified plans.  A large percentage of the plan sponsors are either partnerships or limited liability companies(LLC) electing to be taxed as partnerships.  Oftentimes when we receive payroll data, we will see partners/members who are receiving both K-1’s as partners and W-2’s as…

Employee or Independent Contractor? That is the Question

February 11, 2016

The federal government continues to focus on what various agencies refer to as “misclassified” employees -- workers who should be treated as employees but whom the employer classifies as independent contractors. Many businesses prefer to utilize independent contractors rather than employees. With independent contractors, businesses are not subject to FICA/FUTA obligations, federal and state…

Increased Limited Liability Company Tax Audits Are Coming

January 7, 2016

The increase in usage of limited liability companies (“LLCs”) as the business form of choice has led to changes in the IRS statutes concerning audits of LLCs. On November 2, 2015, President Obama signed the Bipartisan Budget Act of 2015 (“BBA”) into law. The BBA brings drastic changes to the audit process of partnerships which will allow the IRS greater enforcement and collection authority in…