Accountants who handle LLC formations must decide whether their LLC forms need to be changed to reflect the U.S. Treasury Department’s new regulations concerning partnership audits. Below are title and the initial sentences in a new article in the latest Tax Notes that provides guidance on this issue:
Getting the Partnership Audit Rules Up and Running
By Donald B. Susswein and Ryan P. McCormick
Susswein and McCormick, who were involved in developing some of the concepts underlying the new partnership audit rules, describe the major procedural issues that the IRS will likely face in implementing section 6226, which allows audited partnerships to pass through the tax liability for audit adjustments to their direct and indirect partners. They suggest several procedural steps and regulatory rules that may help the IRS minimize its administrative burden, while ensuring that the new rules are implemented consistently with the underlying intent of Congress. The views expressed are the authors’ and not necessarily those of their organizations.
I always feel hesitant to recommend to LLC asset protection clients the use of off-short LLCs (e.g., Nevis LLCs) and other off-shore entities. The new Minnesota legislative described under the following link is one reason why:
Minnesota Joins Trend of States Proposing Tax Haven Legislation
By Maria Koklanaris
Minnesota will become the latest state this legislative season to consider tax haven legislation to address the taxation of foreign-source income and will do so with a bill that includes a list of tax haven countries that must be accounted for when companies file combined reports.
State Sen. John Marty (DFL) on March 29 introduced SF 3318 , which lists the U.S. Virgin Islands and 45 foreign countries as tax havens. The bill would apply to any U.S. corporation that “is incorporated in a tax haven; that reports 20 percent or more of its gross income derived from sources in one or more tax havens; or that has the average of its property, payroll, and sales factors . . . within the 50 states of the United States and the District of Columbia of 20 percent or more.”
The bill also provides that a country would no longer be on the tax haven list after the first tax year in which it either enters into a tax treaty with the United States or imposes a tax rate of at least 10 percent on a tax base equal to at least 90 percent of the tax base that applies to corporations under the Internal Revenue Code.
With SF 3318, Minnesota’s first tax haven bill since 2013, the state becomes part of a trend of states not only introducing tax haven bills but increasingly doing so in the most controversial way — by specifying what opponents call a “blacklist” of tax haven countries.
If you help clients form LLCs for use in their businesses, you may sometimes wish to advise them that they should be thinking about retirement plans for the members of their LLCs and that they can learn the basics concerning these plans, as outlined by the IRS, by clicking on this link:
If you ever have occasion to form single-member LLCs (or, for that matter, multi-member LLCs) whose members (or one or more of them) are citizens of a foreign country, you should read the post under this link: http://www.lexology.com/library/detail.aspx?g=9c94e94a-8960-49f3-9ec7-c539fc29c48a&l=7R1JVQ7.
Steven Gorin is a St. Louis, Missouri tax lawyer and the author of a massive set of materials about federal income tax issues and estate and gift tax issues affecting business owners and their business entities and trusts. He also publishes extremely useful quarter newsletters about these issues. The table of contents alone for the above materials is 41 pages long. I have begun following Steve’s newsletters, and I provide links to them in my websites whenever these newsletters appear. I also highly recommend his materials (which, despite Steve’s modest disclaimer, I view as a massive specialized treatise). If you want to view and download his materials or subscribe to his newsletters, click here:
LLC accountants often have to advise their clients about how to classify people who work with them as employees or independent contractors. The following is the title and first couple of paragraphs of an excellent new article on this subject in Tax Analysts Federal Tax Notes (the best daily source on federal tax developments that I know of):
Clarifying the Tax Classification of Workers
By Donald T. Williamson
Misclassifying workers as independent contractors or employees can result in substantial adverse tax consequences for both workers and employers.
For example, Lyft Inc., a ride-hailing company based in San Francisco, recently agreed to pay $12.25 million to settle a class action lawsuit by drivers seeking recognition as employees instead of independent contractors.
For estate planners and for LLC lawyers concerned about estate planning issues and not already familiar with the IRS’s reporting requirements for estate fiduciaries, here is a link to a new post about these requirements, as of today, in the Fiduciary Law Blog: http://www.fiduciarylawblog.com/2016/04/new-reporting-required-of-estate-fiduciaries-by-irs.html.
In case it’s relevant to any of your LLC formation clients, here is a note in today’s Tax Analysts Federal Tax Notes about a new IRS “Tax Time Guide” on E-Pay Options:
E-Pay and Payment Agreement Options Available for Taxpayers
Summary by Tax Analysts The IRS has released (IR-2016-58) a Tax Time Guide, one in a series of 10 tips, reminding taxpayers who owe taxes that they can choose among several e-pay options and that several relief programs are available for those who can’t pay on time. The Tax Time Guide is aimed at helping taxpayers with common tax issues as the tax deadline approaches.
Accountants who work with series LLCs under the laws of their own or other states may find interest in the article below.
35-MAR Am. Bankr. Inst. J. 24
American Bankruptcy Institute Journal
SERIES LLCS: CAN A SERIES FILE FOR BANKRUPTCY, AND WHAT IF IT DOES?
Steven J. Boyajian
Robinson & Cole LLP
Copyright © 2016 by American Bankruptcy Institute; Steven J. Boyajian
I’m an asset protection lawyer, but I avoid forming entities in jurisdictions known as tax havens, because I think this will make my clients look bad to judges and juries if they ever get sued by creditors. In today’s Tax Analysts Federal Tax Notes, see the article whose title and first paragraph are below.
‘Panama Papers’ Include Nevada and Wyoming Among Offshore Tax Havens
By Amy Hamilton
Nevada and Wyoming are among the 21 jurisdictions identified as offshore tax havens in the so-called Panama Papers exposé that’s based on 11.5 million files leaked from the internal database of Mossack Fonseca & Co. in Panama, the fourth largest offshore law firm in the world.
Nevada was listed as the eighth most popular tax haven used by the firm for incorporating entities, ranking above Hong Kong and the United Kingdom, according to initial charts released by the International Consortium of Investigative Journalists (ICIJ).