Tax Blog

The Internal Revenue Code permits businesses to deduct their ordinary and necessary businesses expenses, including “a reasonable allowance for salaries or other compensation for personal services actually rendered.” I.R.C. § 162(a)(1). The compensation must be “reasonable” and “purely for services.” Treas. Reg. § 1.162-7(a). For C-corporation shareholders, especially those in closely held businesses, the double-layer of taxation, effective income tax rates, preferential dividend rates, and other considerations create tension between whether to treat ...

As discussed in-depth in a previous post, there is an ongoing fight between the Tax Court and the IRS over whether the penalties imposed under IRC § 6038 for failing to comply with international reporting requirements relating to foreign assets actually have any real teeth. Essentially, the dispute centers on whether these penalties are “immediately assessable” – i.e. whether the IRS can assess the penalty without first having to obtain a court judgment.  That assessment, in turn, records a taxpayer’s liability and triggers the broad collection powers of the IRS, raising ...

Background:

Millions of Employee Retention Credit (ERC) claims have been filed with the IRS as a result of the COVID-19 pandemic, with millions of taxpayers already receiving their refunds and others still waiting to receive refund checks. The IRS audits and Appeals work has commenced with a fury at a dizzying pace. While many appropriate ERC claims have been filed, the IRS has seen a number of erroneous claims as well. On December 21st, the IRS launched a new initiative to address the issue of erroneous ERC claims. The Voluntary Disclosure Program, part of a broader IRS effort to ...