West Des Moines CPA asks Supreme Court to overturn employment tax assessment on S corporation income. The taxpayer has filed a petition asking the U.S. Supreme Court to overturn the Eighth Circuit decision imposing employment tax on his share of S corporation income. The taxpayer had around @200,000 of income from his accounting S corporation but only called $24,000 of it compensation, treating the remainder as K-1 income not subject to FICA and Medicare tax. The courts raised his “salary” to about $90,000.
The petition says that the Eighth Circuit decision (Watson, 668 F.3d 1008 (8th Cir. 2012)) conflicts with a Seventh Circuit decision treating a C-Corporation CPA firm as paying disguised dividends through management companies. While I know and admire the attorneys on the Watson petition, the Seventh Circuit case (Mulcahy, Puritsch, Salvador & Co) doesn’t really cover the same ground as Watson.
The Supreme Court only hears a small fraction of cases it is asked to hear, so the chances for a Supreme Court decision on this issue are poor.
Janet Novack, Senate Report Details HP & Microsoft Offshore Tax Ploys:
A new report from the Senate Permanent Subcommittee On Investigations asserts Microsoft Corp. and Hewlett-Packard have used “aggressive” offshore ploys to save or defer billions in U.S. corporate tax.
For any expense other than tax, nobody would question the wisdom, let alone the patriotism, of “aggressive” cost-cutting. Related: Transfer Pricing and Common Sense, Martin Sullivan, Tax.com.
West Des Moines Patch, Metro Developer Walters Pleads Guilty to One Count of Bank Fraud:
Metro area developer Randal L. Walters pleaded guilty Thursday to one count of bank fraud in connection with a loan to develop a Des Moines area condominium project, announced federal court officials in a news release.
During the plea proceeding in federal court, Walters, 55, of Polk County, admitted to diverting money borrowed from First Bank of West Des Moines for a Des Moines area condominium project know as the Meadow Cove project, the release said.
The story said prosecutors are recommending against prison time.
Jim Maule, Subsidies and Tax Breaks:
When a special interest or specific industry gets a tax break, it causes one or the other, or a combination, of two things to happen. First, if nothing else is adjusted, the reduction in tax revenues causes an increase in the federal deficit, which in turn adversely affects everyone. Second, if revenue is maintained, it means other taxpayers must pay more in taxes to make up for the reduction in taxes for the special interest or specific industry, and that clearly affects everyone.
It’s just as true on the state level.
Richard Morrison,Context and Background on the Nonpayers Debate (Tax Policy Blog)
Anthony Nitti, Is Now a Good Time to Convert Your S Corporation to An LLC?
Jason Dinesen, “Consumer Reports” Highlights Identity Theft
Jack Townsend, Sentencing Enhancement for Defendant Perjury at Trial
Trish McIntire, e-Services and TIGTA
Robert D. Flach interviews TAX BLOGOSPHERE BUDDY – JAMAAL SOLOMON, EA
Have a great weekend!