Document summaries for the week of April 11, 2022
Tax document summaries for the week of April 11–15, 2022, covering corporations and IRS procedure.
Corporation is liable for employment taxes on amounts paid to founder
The Tax Court held that a real estate expert who founded a corporation to offer real estate seminars was a statutory employee of the corporation under Sec. 3121(d)(1), and the corporation was liable for employment taxes on amounts paid to him. The court further held that the corporation (1) was liable for additions to tax under Sec. 6651(a)(1) for failing to timely file employment tax returns and (2) was not eligible for relief under Section 530 of the Revenue Act of 1978. The REDI Foundation, Inc., T.C. Memo. 2022-34 (4/11/22).
Nurses were employees, not independent contractors
The Tax Court held that a corporation engaged in the business of providing at-home private duty nursing services to children with special needs (1) failed to classify approximately 99 individuals (nurses) as employees during tax years 2016 through 2018; (2) was not entitled to relief under Section 530 of the Revenue Act of 1978, and (3) was therefore liable for federal employment taxes and related penalties. The court noted that the corporation hired the nurses on a permanent basis for an indefinite period, set the nurses' work schedules, and that the nurses could not end the working relationship without giving a minimum of two weeks' notice. Pediatric Impressions Home Health, Inc., T.C. Memo. 2022-35 (4/12/22).
IRS grants penalty relief for Superfund taxpayers
The IRS provided temporary relief from a penalty for failure to deposit Superfund excise taxes and affirmed the availability of a safe harbor for deposits. Notice 2022-15 (4/15/22) (see related news story).
Sec. 501(c)(6) league must pay unrelated trade or business tax on provision of healthcare benefits
The IRS Office of Chief Counsel advised that, in general, with respect to a Sec. 501(c)(6) business league, the provision of pension and health benefits to the league's members does not further its Sec. 501(c)(6) purposes and is not substantially related to the promotion of the common interest of the membership of the business league. The Chief Counsel's Office concluded that such activities relieve members of the business expense and burden of separately providing for, and managing, their health and pension benefits and such activities are generally unrelated to the basis for which exemption is granted under Sec. 501(c)(6) and are thus generally subject to the unrelated trade or business tax under Sec. 511. PMTA 2022-04 (4/15/22).
Couple must include in income the value of airline tickets given to adult relatives
The Tax Court held that a married couple was required to include in gross income the value of airline tickets provided by the husband's former employer to the couple's adult relatives as part of the husband's retiree benefits because the value did not qualify for exclusion under Sec. 132 since the adult relatives were not the couple's dependent children. The court further held that the value was not excludible as a "de minimis fringe," as defined in Sec. 132(e), because the tickets had a value high enough that accounting for their provision was not unreasonable or administratively impracticable. Mihalik, T.C. Memo. 2022-36 (4/13/22).
IRS to send letters about qualified opportunity funds
The IRS announced that taxpayers who may need to take additional actions related to qualified opportunity funds should begin receiving letters in the mail in April. IR-2022-79 (4/12/22) (see related news story).
IRS updates Schedule K-2 and K-3 FAQs
The IRS added eight new questions and answers to its frequently asked questions (FAQs) on Schedules K-2 and K-3, clarifying that affected partnerships and S corporations need complete only the forms' relevant portions and addressing an array of special circumstances. Schedules K-2 and K-3 Frequently Asked Questions (Forms 1065, 1120S, and 8865) (4/11/22) (see related news story).