In Quintanilla v. Commissioner, T.C. Memo. 2016-5, the U.S. Tax Court concluded that a set designer for TV commercials was an independent contractor and not an employee for tax purposes. This case provides a good example of factors that show that a worker is in fact an independent contractor. Facts & Procedural History Mr. Quintanilla…
Category: Tax
Tax
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R&D Credit Made Permanent & Enhanced
Congress made the research tax credit permanent and enhanced the credit. The changes are retroactive back to January 1, 2015. Temporary Nature of the R&D Credit The permanent research tax credit solves one of the ongoing problems with the credit. As critics of the credit have noted, the credit cannot provide much of an incentive…
Tax Attorney’s Brain Cancer Insufficient to Avoid Penalties
If a tax return is filed late or taxes are paid late, penalties may be imposed by the IRS. However, there are exceptions to these penalties if the taxpayer can prove that the failure was due to reasonable cause and not due to willful neglect. One might think that brain cancel might fit the bill…
LLC Owned by Self-Directed IRA Cannot Pay Wages
The U.S. Court of Appeals for the Eleventh Circuit recently affirmed Ellis v. Commissioner, which held that the payment of wages for services to a self-directed IRA owner for his services rendered to an LLC owned by a self-directed IRA was a prohibited transaction. This case provides yet another example of how not to handle…
How are Employer Loans in Lieu of Wages Taxed?
Can you avoid paying Federal income tax by having your employer make loans to you in lieu of wages, and then have the employer forgive the loans over time? The court addressed this in Wyatt v. Commissioner, T.C. Summary Opinion 2015-31. Facts & Procedural History Dr. Wyatt was a gynecologist. He recruited to practice in Putnam…
Truck Stop Electrification Expenses Deductible, But Travel Expenses and Traffic Ticket Are Not
In Howard v. Commissioner, T.C. Memo. 2015-38, the U.S. Tax Court concluded that truck stop electrification expenses were deductible, but travel expenses and a traffic ticket were not deductible. Facts & Procedural History Mr. Howard was a long-distance truck driver for a Nebraska trucking company in 2009. He logged business travel for 358 days out…
Opting Out of Gaming Industry Tip Compliance
The IRS often challenges the amount of income received by workers who are paid tips. The IRS’s Gaming Industry Tip Compliance Agreement Program (“GITCA Program”) provides a method for avoiding these disputes. But what happens if you opt out of the tip program? The Sabolic v. Commissioner, T.C. Memo. 2015-32, case provides the answer. The Facts &…
Over-the-Road Truck Driver Not Entitled to Deduct Travel Expenses
In Jacobs v. Commissioner, T.C. Summary Opinion 2015-3, the U.S. Tax Court concluded that an over-the-road truck driver was not entitled to deduct travel expenses for traveling away from home since he lived in his truck. Facts & Procedural History Mr. Jacobs is a truck driver. He operated his own truck prior to 2006, worked…
Research Was Not Routine, But Compensation Was Excessive
For the research tax credit, when is research so routine that it does not qualify for the tax credit? And what if the founder of the company is paid an unreasonably high wage–can the high wage be considered as an expense for computing the credit? The court addressed these issues in Suder v. Commissioner, T.C. Memo.…
Bad Debt Deduction Not Allowed Until Business Fails
If you lend money to a failing business and the business eventually fails, can you take a bad debt deduction? And if so, when? The U.S. Tax Court addressed this in Cooper v. Commissioner, 143 T.C. 10, which provides an opportunity to consider the question. Facts & Procedural History The Coopers started Pixel in 1983. Pixel…