Tax Law Insights Blog | Burr & Forman LLP

The Joy of Reporting Income Earned in Foreign Countries to the IRS

Erik P. Doerring — Fri, 16 Dec 2011 09:00:01 -0500

U.S. citizens that work or receive income from abroad are subject to U.S. income taxes on foreign income. The tax is applicable regardless of where U.S. citizens reside. U.S. taxpayers receiving foreign income must file an income tax return with the IRS reporting all foreign income and must pay the reported U.S. tax liability. U.S. taxpayers may be eligible for a partial foreign income exclusion as well as a housing cost exclusion. Foreign earned income is defined to include wages, salaries, or professional fees, and other amounts received as compensation for personal services ...

The IRS Offer in Compromise: A Way to Resolve Outstanding Federal Tax Liabilities

Erik P. Doerring — Thu, 10 Nov 2011 09:00:02 -0500

Generally, there are four methods of resolving an assessed federal tax liability: (1) full payment, (2) payment through installments under a written agreement, (3) an offer in compromise, and (4) bankruptcy. The IRS also has the authority to temporarily suspend collection or payment of federal taxes through placing an account in currently uncollectible status.

An Offer in Compromise (OIC) is an agreement between the taxpayer and the IRS that settles a tax liability for payment of less than the full amount owed. The IRS will generally accept an offer in compromise when it is unlikely ...

Management and Executive Compensation in Nonprofit Organizations: Part 2

Joseph D. Walker — Thu, 03 Nov 2011 09:00:03 -0400

To minimize the risk of engaging in an excess benefit transaction related to compensation paid in connection with an organization exempt from income tax under Section 501(c)(3) of the Internal Revenue Code of 1986, as amended (an "Exempt Organization"), the compensation should be (1) approved by a committee of the board of directors composed of persons who have no conflict of interest with respect to the disqualified person; (2) determined and based upon specific data that establishes that the compensation is reasonable; and (3) documented in the committee's minutes. If these ...

Management and Executive Compensation in Nonprofit Organizations: Part One

Joseph D. Walker — Thu, 27 Oct 2011 09:00:04 -0400

Many of us have both the privilege and the responsibility of serving as a board member or as a trustee of a charitable organization. Many of these charitable groups are organizations exempt from income tax as organizations described in Section 501(c)(3) of the Internal Revenue Code of 1986, as amended, (an "Exempt Organization"). Because these Exempt Organizations are exempt from tax and receive other income tax benefits, they are generally held to a higher standard of care and are subject to strict compliance rules in certain areas.

One example of this higher standard of care are the ...

Transferring Sales Tax Liability to Purchasers in South Carolina

Jeffrey T. Allen — Mon, 17 Oct 2011 09:00:05 -0400

South Carolina imposes various taxes and reporting requirements on purchasers transacting business in the state. A sales tax is imposed on the sale at retail of tangible personal property and certain services in the state. South Carolina imposes a sales tax of six (6) percent (plus an additional one (1) percent "local option" tax in certain counties) on the retail sale of tangible personal property between a purchaser and seller within the state. A seller or retailer is required to collect the sales tax from a purchaser and remit the tax to the South Carolina Department of Revenue ...

IRS Announces Settlement Program for Employers Using Independent Contractors Who Should Be Classified as Employees

Erik P. Doerring — Thu, 29 Sep 2011 09:00:06 -0400

The IRS announced an important settlement program on September 21, 2011 where the IRS will now give many employers substantial tax relief for treating employees as "independent contractors". Details of the settlement program were provided in Announcement 2011-64, which will officially be published in the Internal Revenue Bulletin 2011-41, to be issued October 11, 2011.

Whether a worker is performing services as an employee or independent contractor depends on the facts and circumstances and is generally determined under a multiple factor common law test focusing on whether the ...

South Carolina Supreme Court Determines That Property Leased By Public Tax-Exempt Entity to a Private Entity is Subject to Property Tax

George E. Morrison — Thu, 08 Sep 2011 09:00:07 -0400

On August 15, 2011, the South Carolina Supreme Court ruled in Clarendon County v. TYKAT, Inc. (Op. 270252011, WL 3568536) that Section 12-37-950 of the Code of Laws of South Carolina, 1976, as amended (the "Code"), subjected a leasehold interest in real estate to property taxation where the property was otherwise exempt from such taxation in the hands of the owner. The court's ruling in TYKAT affirmed the ruling of the South Carolina Administrative Law Court (the "ALC") below finding that TYKAT, Inc. ("TYKAT") was liable to Clarendon County for property taxes on the value of TYKAT's ...

Single Member LLC Qualified for Favorable Property Tax Treatment

Joseph D. Walker — Thu, 01 Sep 2011 09:00:08 -0400

In a case that will have far reaching implications for many estate and financial planners, the South Carolina Supreme Court reversed the South Carolina Administrative Law Court and concluded that real property owned by a single member limited liability company may qualify for favorable property treatment as a legal residenceCFRE, LLC v. Greenville County Assessor, Opinion No. 27032 (SC Supreme Court filed August 29, 2011).

In order to put this opinion in perspective, a brief review of South Carolina income and property taxation is helpful. Turning first to the income tax, South ...

Preserving the Availability of Section 530 Relief When Workers are Misclassified

Jeffrey T. Allen — Fri, 19 Aug 2011 09:00:09 -0400

Employers are generally required to withhold and pay employment taxes on wages paid to employees. Conversely, employers are generally not required to withhold and pay employment taxes on wages paid to independent contractors or nonemployees. If an employer incorrectly treats an employee as a nonemployee, the employer is potentially liable for the employment taxes which should have been withheld. The employer may often not learn of this liability for years, until an IRS notice appears in the mail.

Section 530 of the Revenue Act of 1978, as amended, provides relief for employers who ...

United States Tax Court Agrees with Taxpayer and Finds Reasonable Cause to Abate Employment Tax Penalties

Erik P. Doerring — Fri, 29 Jul 2011 09:00:10 -0400

This post was co-authored by Adam Landy and Erik Doerring.

On July 5, 2011, the United States Tax Court abated penalties assessed by the IRS against a business taxpayer for failure to pay its employment taxes. The Tax Court agreed with the taxpayer that it had shown reasonable cause. In Custom Stairs & Trim Ltd. v. Commissioner, T.C. Memo 2011-155, the taxpayer, Custom Stairs and Trim Ltd. had a history of filing its IRS Form 941 timely and making timely employment tax deposits. Beginning in 2005 and continuing through 2008, however, Custom Stairs began experiencing financial hardship ...