Posted on

IRS May Issue Guidance on Parnter/Employee Issue

By:  Amanda Wilson

When deciding how to form their new business, small business owners are often encouraged to organize as an S corporation because of self-employment tax savings. This recommendation is because the IRS does not recognize that a partner in a partnership can also be an employee. As a result, the IRS takes the position that all of the partner’s income from the partnership should be subject to self-employment taxes, instead of just the amount that reflects a reasonable salary.  In contrast, an owner of an S corporation can clearly be treated as both an owner and an employee, resulting in self-employment tax savings. read more

Posted on

IRS Provides Administrative Guidance to Employers in the Wake of Its Recognition of Same-Sex Marriage

By:  Amanda Wilson

Last month, the IRS announced that same-sex marriages would be recognized as marriages for federal tax purposes.  It is important to recognize that this position extends beyond individual income tax consequences and can impact employers as well. A number of income tax and employment tax provisions exclude from gross income and wages certain employee benefits provided to the spouse of an employee.  Before last month, the IRS took the position that benefits paid to same-sex spouses of employees did not qualify for these exclusion provisions.  The IRS has now changed its position and has stated that this change can be applied retroactively.  As a result, employers may find themselves in the situation of having overpaid employment taxes for employees that have a same-sex spouse.  The IRS has issued Notice 2013-61 to provide guidance to employers on how to deal with this situation.  Employers that have employees with same-sex spouses should be aware of this notice and consider how it may apply to them. read more