Tax Law Insights

Corporations, limited liability companies, and certain other business entities can make an election with the Internal Revenue Service to be taxed under Subchapter S of the Internal Revenue Code.  If such an election is made, the business entity becomes an “S corporation” for federal income tax purposes, and also under the tax laws of many states.  The S corporation must file an annual tax return with the Internal Revenue Service (Form 1120S), and an annual state income tax return with those states that recognize S corporations.  The S corporation does not pay income tax, and its ...

President Biden has proposed major changes to the Federal tax laws, some of which are sought to be effective earlier in 2021 (i.e., we are already operating under these changes, if they later become adopted), as compared to the effective date the new tax law changes may be passed by Congress or a later effective date (such as beginning January 1, 2022).  The Biden administration proposals must first be approved by Congress.  As Congress is now considering these tax law change proposals, the following is a summary of some of the most important:

1. Increase the corporate income tax rate from 21 ...

Due to unprecedented temporary closings of offices and businesses and stay-at-home orders issued across the United States during the Coronavirus (COVID-19) pandemic, many businesses have implemented temporary work at home options for employees. As a result, the South Carolina Department of Revenue (SCDOR) announced temporary relief regarding a business’s establishment of South Carolina state tax nexus solely because an employee is temporarily working in a different work location due to COVID-19, and also provided guidance with respect to employer withholding ...

The State of South Carolina has now adopted legislation allowing “pass through” entities to elect each year to be taxed at the entity level on their active trade or business income instead of having their owners taxed at the individual level on this income. This includes partnerships, S-corporations and LLCs taxed as partnerships or S-corporations.  This election can be filed for tax years beginning after December 31, 2020.

South Carolina has now joined a growing number of states that have enacted federal state and local tax “workaround” legislation, and which shifts state ...

Tobacco manufacturers and distributors have long made refund/rebate payments to retailers for the retailer’s purchase of cigarettes and other tobacco products from the manufacturer, provided the retailer reduces the price of the cigarettes and other tobacco products sold to the retailer’s customers.

In 2020, the South Carolina Department of Revenue issued SC Revenue Ruling #20-3 (“Buydowns – Tobacco Company Payments to Retailers”), and related Information Letter #20-35, administratively determining that these “buydown” payments from the ...

President Biden has signed the PPP Extension Act of 2021. The new law extends the Paycheck Protection Program (PPP) application filing deadline from March 31, 2021 to May 31, 2021.  The new law gives qualifying businesses and individuals more time to apply for a PPP loan.

While this new law does not increase the amount of funding available for PPP loans, Congress did authorize $7.25 billion in additional PPP funding under the recent American Rescue Plan Act.

The second PPP loan program is due to expire March 31, 2021.  Many eligible businesses have still not applied.  President Biden announced changes to the program on February 22, 2021 making it easier to qualify for a PPP loan now, and particularly for sole proprietors, independent contractors, and self-employed individuals.

The PPP loan program still has funds available.  Congress could also extend the March 31, 2021 termination date for loan applications.  However, Congressional extension is not certain, and qualifying individuals and businesses should consider applying for a PPP ...

The US Department of Justice announced the first civil settlement involving allegations of fraud against a PPP borrower.

SlideBelts Inc. received a PPP loan under the CARES Act.  SlideBelts is an internet retail company and debtor in bankruptcy.  SlideBelts and its president/CEO agreed to resolve the allegations in connection with the PPP loan by paying the government damages and penalties of $100,000.  SlideBelts had already repaid the $350,000 PPP loan it had received.

The announced civil settlement resolves claims that the conduct of SlideBelts and its president/CEO violated ...

PPP loans received by individuals and businesses under the CARES Act will be audited (“reviewed”) by the SBA.  The new Economic Aid Act also requires the SBA to submit a forgiveness audit plan within 45 days after enactment and report updates every 30 days thereafter. Additionally, the Economic Aid Act now allocates $50 million for PPP audits and fraud mitigation efforts.  PPP loans of $2 million or more will automatically be audited by the SBA.  Many PPP loans of less than $2 million will be audited as well.

PPP loan audits are being handled by the SBA.  Borrowers will often receive ...

The Economic Aid Act authorizes new PPP loans for first-time borrowers, as well as applications for a Second Draw PPP Loan for those that already received a loan last year. This alert addresses the requirements and issues for the self-employed and sole proprietors with no employees, who wish to apply for a Second Draw PPP Loan under the new law.

Requirements:

If you are self-employed/or a sole proprietor, with no W-2 employees, and you report income from your business on your personal tax return (Form 1040/Schedule C), and if you qualified for a First Draw PPP Loan and would continue to ...

The President signed new stimulus legislation into law on December 27, 2020.  The new law, the Economic Aid to Hard-Hit Small Businesses, Nonprofits, and Venues Act, P.L. 116-260 (“Economic Aid Act”), authorizes new and additional PPP loans and modifies the CARES Act for this purpose. The Economic Aid Act authorizes funds of $284.5 billion for PPP loans, and which includes $35 billion for first-time borrowers.  The United States Small Business Administration (SBA) and the United States Treasury also issued new guidance interpreting the new law.

The new SBA/Treasury guidance ...

The SBA has now released broader information on borrowers who received loans under the Payroll Protection Program.  The SBA’s release of this information was ordered by United States District Judge James E. Boasberg in a case filed against the SBA, WP Company LLC d/b/a The Washington Post, et al., v. U.S. Small Business Administration, Civil Action No. 20-1240 (JEB) and a related case, Center for Public Integrity v. U.S. Small Business Administration, Civil Action No. 20-1614 (JEB).

The SBA had previously released information for borrowers that received PPP loans of $150,000 or ...

A United States District Judge in Washington ordered the SBA to release the names and other information of all Paycheck Protection Loan borrowers.  In WP Company LLC d/b/a The Washington Post, et al., v. U.S. Small Business Administration, Civil Action No. 20-1240 (JEB) and a related case, Center for Public Integrity v. U.S. Small Business Administration, Civil Action No. 20-1614 (JEB), United States District Judge James E. Boesberg issued a November 5, 2020 order requiring the SBA to release the names and other information for all PPP loan borrowers by November 19, 2020.

The SBA ...

A United States District Judge in Washington has ordered the SBA to now release the names and other information of all Paycheck Protection Loan borrowers.  In WP Company LLC d/b/a The Washington Post, et al., v. U.S. Small Business Administration, Civil Action No. 20-1240 (JEB) and a related case, Center for Public Integrity v. U.S. Small Business Administration, Civil Action No. 20-1614 (JEB), United States District Judge James E. Boesberg issued a November 5, 2020 order requiring the SBA to release the names and other information for all PPP loan borrowers.  Under the order, the SBA ...

On October 31, 2020, the SBA released new forms and related instructions requiring borrowers with PPP loans of $2 million or more to provide additional information related to their PPP loans.  Titled “Loan Necessity Questionnaire”, the SBA released separate forms and instructions applicable to both for-profit and non-profit borrowers.  The SBA explains that “the purpose of this form is to facilitate the collection of supplemental information that will be used by SBA loan reviewers to evaluate the good-faith certification that you made on your PPP Borrower Application.”

PPP loans under the CARES Act are being audited by the SBA.  All PPP loans over $2 million will be audited, and many more under $2 million will be audited as well.  Applying for forgiveness of a PPP loan increases the likelihood of an audit.

An audit or “review” by SBA of a borrower and its PPP loan can result in an SBA determination that the borrower (1) was ineligible for a PPP loan; (2) was ineligible for the PPP loan amount received or used the PPP loan proceeds for unauthorized uses; (3) is ineligible for PPP loan forgiveness in the amount determined by the lender in its full or partial ...

The South Carolina Department of Revenue (“DOR”, “SCDOR”, the “Department”) recently issued SC Information Letter #20-22 in which it released a series of helpful “Information Guides” concerning updated and specific administrative appeal procedures involving the following South Carolina tax/tax areas:

• State Tax Appeal Procedures for State Tax Refund Claims (Other than Property Tax, Bingo, and Alcoholic Beverage Matters);
• State Tax Appeal Procedures for State Tax Assessments including License Revocations and Denials (Other than Property Tax, Bingo, and ...

The SBA and the United States Treasury have now released a list of over 600,000 PPP loan borrowers who received PPP loans of $150,000 or more.  This list includes the name of the borrowers, the general loan range of the PPP loans received, the state in which the borrower is located, and other information.

The list released by SBA/Treasury contains expected information about borrowers in many industries, including restaurants, construction, and other industries hard-hit by the COVID-19 pandemic, and certainly in need of financial help to get through the economic uncertainly and ...

The Paycheck Protection Program under the CARES Act ended June 30, 2020, and with over $520 billion loaned to nearly 4.9 million self-employed individuals and businesses.  The PPP was hastily passed by Congress and inconsistently-interpreted by government agencies.  Over $125 billion remained available under the PPP, but because of the often complex and uncertain conditions for receiving loans under the program no one was interested in receiving these remaining funds - even where they could have been forgiven.

With the US economy still struggling, Congress has now rushed to pass an ...

In disputed tax cases in South Carolina, the South Carolina Department of Revenue (SCDOR, DOR, or Department) will often argue that our courts should defer to SCDOR’s own interpretation of the tax laws at issue in the case.  Whether SCDOR’s administrative views are entitled to any weight and, if so, to what extent, are for our courts to decide.  In the recent decision of Synovus Bank v. South Carolina Department of Revenue, Docket No. 17-ALJ-17-0418-CC, the South Carolina Administrative Law Court (SCALC or ALC) identified the standard under which SCDOR’s administrative ...

The U.S. Justice Department has opened an investigation into businesses and self-employed individuals that applied for loans under the Paycheck Protection Program. Over $500 million in loans to over 4.6 million businesses and individuals have been made under the PPP, and with over $100 million still available under the PPP to be loaned.

In connection with this investigation, Assistant Attorney General Brian Benczkowski, head of the Department of Justice’s criminal division,  stated “whenever there’s a trillion dollars out on the street that quickly, the fraudsters are ...

Banks have loaned over $500 billion in PPP loans under the CARES Act, and to over 4.6 million businesses and self-employed individuals.  These PPP loans are critical for these businesses and individuals – and their employees – to survive the economic devastation wrought by the COVID-10 pandemic.

PPP loans are administered by the U.S. Small Business Administration (SBA), and the SBA has issued a steady stream of administrative guidance concerning its interpretation of the Payroll Protection Program.  Some of this SBA guidance is based on the agency’s interpretation of the ...

Many South Carolinians who have been furloughed or laid-off from work have received unemployment benefits from the South Carolina Department of Workforce.  These benefits have been increased under the federal Coronavirus Aid, Relief, and Economic Security Act (CARES Act), and where an individual can be paid up to $926/week for 33 weeks.

The CARES Act significantly expanded unemployment benefits for workers impacted by the Coronavirus (COVID-19) outbreak. For unemployed workers, the CARES Act funds the following additional benefits under South Carolina’s unemployment ...

The Payroll Protection Program (PPP) under the CARES Act can provide eligible businesses with a forgivable loan from the government to be used to keep and pay employees, and for certain other purposes, and to help businesses, their owners, and their employees get through this difficult COVID-19 pandemic.  However, the amount of a PPP loan – and the amount that potentially can be forgiven - may depend on the type of legal entity under which a business operates.

For example, partnerships/limited liability companies and self-employed individuals (including an individual operating ...

Payroll Protection Program (PPP) loans under the CARES Act are available not only to small business but to self-employed individuals, too.  Banks began accepting PPP loan applications for self-employed individuals beginning April 10th.  The Small Business Administration (SBA) has now issued helpful guidance to self-employed individuals who may apply for these PPP loans.  More information about the CARES Act and PPP loans can be found at www.burr.com.

Under the new SBA guidance, an individual is eligible for a PPP loan if: (i) you were in operation on February 15, 2020; (ii) you are an ...

Due to the COVID-19 pandemic, many employers have furloughed some or all of their workforce in South Carolina.  Furloughed employees may now be entitled to receive unemployment benefits, and enhanced by $600 per week by the federal government through the CARES Act.

In South Carolina, unemployment benefits paid to unemployed workers are funded by the South Carolina Unemployment Insurance Tax (UI Tax).  The UI Tax – also known as South Carolina’s version of “SUTA” – is imposed on employers and paid to the South Carolina Department of Employment and Workforce (SCDEW) and which ...

On April 13, 2020, the South Carolina Department of Revenue issued SC Information Letter #20-8 with updated guidance concerning COVID-19 related filing and payment extensions.  This guidance provides:

• Filing Deadlines Extended. South Carolina tax relief to July 15, 2020, now applies to all taxpayers that have an income tax, franchise tax, or corporate license fee filing or payment deadline (originally or pursuant to a valid extension) between April 1, 2020 and July 15, 2020. Individuals (including individuals working or living outside the United States), corporations ...

The IRS issued Notice 2020-23 on April 9, 2020 and announced that the deadline for making estimated tax payments for the second quarter 2020, due June 15, 2020, has been extended to July 15, 2020.  This notice supplements prior IRS guidance extending the deadline for making estimated tax payment for the first quarter of 2020 to July 15, 2020.  Now, all 2020 estimated tax payments due on or before June 15th are due on July 15, 2020.  Interest and penalties do not apply to these estimated tax payment extensions.

March 25, 2020 – The IRS announced a major suspension of many “tax compliance” dates and tax collection measures.  Published in IRS Information Release 2020-59 as the “People First Initiative”, the IRS announced that it is “temporarily adjusting our processes to help people and businesses during these uncertain times” and where the announced changes range from postponing certain payments related to Installment Agreements and Offers in Compromise to suspending tax collection measures and limiting certain enforcement actions.   The IRS will be announcing more ...

On March 17, 2020, the South Carolina Department of Revenue announced, through SC Information Letter #20-3, that all South Carolina tax filing and payment deadlines starting on April 1, 2020 were extended to June 1, 2020.  Penalties and interest are waived by SCDOR during this period.  This includes not only state income taxes, but also sales taxes, admission taxes, and other taxes administered by SCDOR.

The IRS had initially announced that the due date for 2019 federal income tax payments was extended to July 15, 2019, but that the April 15th tax return filing date was not extended.  The ...

The IRS announced today that it has temporarily closed all Taxpayer Assistance Centers and discontinued face-to-face service throughout the country until further notice. The IRS also announced that it is continuing to process tax returns, issue refunds, and help taxpayers through this difficult time.

In response to the COVID-19 Coronavirus pandemic, Treasury Secretary Steven Mnuchin announced Tuesday that Americans will have until July 15th to pay their 2019 federal income taxes – and without late payment penalties or interest during this extended payment due date.  The IRS has now followed with the issuance of specific guidance in IRS Notice 2020-17.

Under the new IRS notice, any person with a Federal income tax payment due April 15, 2020, is affected by the COVID-19 emergency and is considered an “Affected Taxpayer”.

For an Affected Taxpayer, the due date for making ...

In what is appearing to be a fairly fluid situation with the United States Treasury Department and the IRS, Treasury Secretary Steven Mnuchin announced, via Twitter, that not only tax payments but also the filing of individual tax returns will be extended from April 15 to July 15.     Secretary Mnuchin specifically tweeted that “At @realDonaldTrump’s direction, we are moving Tax Day from April 15 to July 15. All taxpayers and businesses will have this additional time to file and make payments without interest or penalties.”

This tweet from the Treasury Secretary represents a ...

In response to the COVID-19 Coronavirus pandemic, Treasury Secretary Steven Mnuchin announced Tuesday that Americans will have until July 15th to pay their 2019 federal income taxes – and without late payment penalties or interest during this extended payment due date.  No special filing with the IRS is required for this payment extension.  The announced payment extensions are limited, however.  Individuals can defer payment of up to $1 million in taxes, and corporations can defer payment of up to $10 million, and without penalties or interest.  Individuals and businesses with 2019 ...

The South Carolina Department of Revenue (SCDOR or DOR) recently issued a draft of long-awaiting guidance overhauling DOR’s administrative practices concerning disputed tax audits, refunds, license revocations, and other related matters.  The draft guidance, SC Revenue Procedure #20-x, was released January 22, 2020.  If finalized, the new Revenue Procedure will apply to all administrative protests and appeals filed with SCDOR on or after the effective date of the Revenue Procedure (presently, January 2020), and including protests and appeals pending as of this date.

The ...

The South Carolina Department of Revenue (DOR) has issued a proposed Revenue Ruling which will have a significant impact on South Carolina tobacco retailers, if finalized in its present form.  The proposed Revenue Ruling, to be effective on January 1, 2020, addresses tobacco manufacturer rebates and refunds to retailers, and which DOR characterizes as “buydowns” and “promotional payments”- i.e. sales volume discounts.  The proposed Revenue Ruling determines that these payments to retailers are subject to sales tax.

Tobacco manufacturers have provided their retailers ...

The South Carolina Department of Employment and Workforce (SCDEW) administers the South Carolina unemployment benefit program for state residents, and which is funded by a state-wide unemployment tax on employee wages. Employers are responsible for the payment of this tax.

SCDEW, and its predecessor agency, the South Carolina Employment Commission Security Commission, have had financial difficulties raising sufficient unemployment taxes to be able to pay unemployment benefits to South Carolina workers. The financial problems became so significant that SCDEW became ...

The Fixing America’s Surface Transportation (FAST) Act, signed into law December 4, 2015, created new Internal Revenue Code § 7345 which requires the IRS to notify the United States State Department when an individual is certified as owing a “seriously delinquent tax debt”. When this notification of certification is received from the IRS, the State Department is generally required to deny the individual a U.S. passport (or renewal of a U.S. passport) or may revoke any U.S. passport previously issued to that individual. The State Department has the sole authority to revoke or ...

President Trump signed the “Taxpayer First Act”, H.R. 3151, into law on July 1, 2019.  The Taxpayer First Act may be one of the most significant “taxpayer rights” laws since the adoption of the Internal Revenue Service Restructuring and Reform Act of 1998.  The key feature of the new law is its requirement that, within the next 12 months, the IRS submit to Congress a “written comprehensive customer service strategy”, and within 24 months “make available the updated guidance and training materials [under the strategy] … [which will be] easily understood … and provide ...

With the adoption by Congress of the 2018 Farm Bill, which decriminalized the cultivation and growing of industrial hemp and related products, states now, including South Carolina, have adopted and expanded programs authorizing the growing of industrial hemp and also the processing of products from the plant, most notably CBD oil.

The South Carolina Hemp Farming Act, adopted in March 2019, authorizes state residents to apply with the SC Department of Agriculture (SCDA) to grow and/or process industrial hemp in the state; however, under the present status of the law, only ...

Under the 2017 Tax Cuts and Jobs Act, Congress enacted the new Section 199A 20% profit deduction for owners of pass-through businesses, and which include Subchapter S corporations, LLCs, sole proprietorships, and even certain trusts. Section 199A is intended to provide a deduction to owners of these pass-through business entities who do not otherwise benefit from the new 21% flat tax Congress has given to corporations under the new tax law.

The 20% pass-through deduction is not applicable generally to certain businesses that provide services, such as doctors, lawyers ...

Many employers began to receive notices from the IRS in 2018 proposing the assessment of a payment against the employer for the tax years 2015 and 2016 under Section 4980H of the Internal Revenue Code.  The issuance of these notices by the IRS has now increased through 2019 to-date, and where employers may have received an initial notice in 2018 for the 2015 tax year, and now a second and additional notice proposing the assessment of a payment under Section 4980H for the 2016 tax year.  Additional IRS notices for 2017 are certainly to follow.

Section 4980H(a) imposes an “assessable ...

Under the 2017 Tax Cuts and Jobs Act, Congress enacted a new Section 199A 20% profit deduction for owners of pass-through businesses, and which include Subchapter S corporations, LLCs, sole proprietorships, and even certain trusts. Section 199A is intended to provide a deduction to owners of these pass-through business entities who do not otherwise benefit from the new 21% flat tax Congress has given to corporations under the new tax law. While Section 199A is intended to benefit these generally smaller types of business entities and their owners, the new tax law is riddled with ...

Under the 2017 Tax Cuts and Jobs Act, Congress enacted a new Section 199A 20% profit deduction for owners of pass-through businesses, and which include Subchapter S corporations, LLCs, sole proprietorships, and even certain trusts. Section 199A is intended to provide a deduction to owners of these pass-through business entities who do not otherwise benefit from the new 21% flat tax Congress has given to corporations under the new tax law. While Section 199A is intended to benefit these generally smaller types of business entities and their owners, the new tax law is riddled with ...

Under the 2017 Tax Cuts and Jobs Act, Congress enacted a new Section 199A 20% profit deduction for owners of pass-through businesses, and which include Subchapter S corporations, LLCs, sole proprietorships, and even certain trusts. Section 199A is intended to provide a deduction to owners of these pass-through business entities who do not otherwise benefit from the new 21% flat tax Congress has given to corporations under the new tax law. While Section 199A is intended to benefit these generally smaller types of business entities and their owners, the new tax law is riddled with ...

A bedrock of IRS administrative practice has been the voluntary disclosure.   Where an individual or business has not filed tax returns or believes they may have criminal tax exposure for prior actions, IRS procedures have long-sanctioned a form of  “criminal tax amnesty” if the taxpayer voluntarily comes forward before being contacted by the IRS, discloses his tax misdeeds, fully cooperates to correct the back tax issues, and then becomes compliant going forward.  In exchange for this “voluntary disclosure”, while criminal tax prosecution may not be recommended, the ...

On January 18, 2019, Treasury and the IRS issued final regulations for the new Section 199A 20% profit deduction for pass-thru businesses adopted under the 2017 Tax Cuts and Jobs Acts.  The new regulations are eagerly anticipated because filing season for the first year of the new tax law, 2018 generally, is now upon us.  The final regulations were issued after public comments were received in response to proposed Section 199A regulations issued last August.  The IRS, in IR-2019-04 (January 18, 2019), also released a new set of additional proposed resolutions under Section 199A ...

Aside from corporate tax reductions, one of the most important aspects of the new Tax Cuts and Jobs Act beginning this year is the new 20% deduction for "pass-through" businesses - i.e. businesses that are not corporations. With the corporate tax rate being reduced to a flat 21%, the 20% deduction for other forms of businesses was designed to give a reduction to these businesses approximating the lower corporate tax rate. However, this 20% deduction, found in new Internal Revenue Code § 199A, is saddled with exclusions, phase-outs, technical issues, and uncertainties so that many ...

The new 20% deduction for "pass-through" business owners under the Tax Cuts and Jobs Act is raising many questions from owners of real estate-related businesses. Can these owners qualify for this important deduction, and under what conditions?

For most pass-through business owners (such as owners of LLCs, Subchapter S corporations, and partnerships), the deduction is the lessor of (1) the "combined qualified business income" of the taxpayer, or (2) 20% of the excess of taxable income over the sum of any net capital gain. The term "combined qualified business income" is then defined ...

A bedrock of IRS administrative practice has been the voluntary disclosure. Where an individual or business has not filed tax returns or believes they may have criminal tax exposure for prior actions, IRS procedures have long-sanctioned a form of "criminal tax amnesty" if the taxpayer voluntarily comes forward before being contacted by the IRS, discloses his tax misdeeds, fully cooperates to correct the back tax issues, and then becomes compliant going forward. In exchange for this "voluntary disclosure," while criminal tax prosecution may not be recommended, the taxpayer will ...

Aside from corporate tax reductions, one of the most important aspects of the new Tax Cuts and Jobs Act beginning this year is the new 20% deduction for "pass-through" businesses - i.e. businesses that are not corporations. With the corporate tax rate being reduced to a flat 21%, the 20% deduction for other forms of businesses was designed to give a reduction to these businesses approximating the lower corporate tax rate. However, this 20% deduction, found in new Internal Revenue Code § 199A, is saddled with exclusions, phase-outs, technical issues, and uncertainties so that many ...

Individuals who are the unfortunate subjects of federal criminal tax prosecution face prison terms, probation, fines, restrictions on travel and other punishment. Conviction of felony tax offenses results in certain Constitution rights being lost, such as the right to vote and bear arms.

As part of a conviction for federal criminal tax offenses, an individual will most likely also be sentenced to pay "restitution" to the federal government. Payment of restitution in a criminal tax case is designed to compensate the IRS for the loss caused by the defendant's wrongdoing.

In federal ...

Businesses that have employees must pay wages and salaries to their employees, and the employer must collect federal employee income taxes and the employee's share of social security (FICA) from these wages and salaries, add the employer's "matching share" of FICA, and then deposit these taxes with the IRS. The Employer must file a quarterly return with the IRS (Form 941) reporting all wages and salaries paid, all tax deposits made during the quarter, and pay any balance due with the quarterly return.

The Recession took a heavy toll on businesses throughout the country, with many ...

Congress enacted the new Section 199A 20% profit deduction for the owners of pass-through businesses, and which include Subchapter S corporations, LLCs, sole proprietorships, and even certain trusts. Section 199A is intended to provide a deduction to owners of these pass-through business entities who do not otherwise benefit from the new 21% flat tax Congress has given to corporations under the new tax law. While Section 199A is intended to benefit these generally smaller types of business entities and their owners, the new tax law is riddled with complexity and exceptions, and so ...

The IRS has issued Proposed Regulations now under the new Section 199A 20% profit deduction for pass-through entities. The Proposed Regulations provide important guidance on the definition of "Qualified Business Income" - which is the starting point for determining the amount of the deduction.

New Section 199A, adopted by Congress under the Tax Cuts and Jobs Act (TCJA) and effective January 1, 2018, provides a 20% deduction for pass-through businesses - i.e. businesses that are not corporations. With the corporate tax rate under the TCJA being reduced to a flat 21%, the 20 ...

On August 8^th, the IRS released its much-awaited Proposed Regulations on the new Section 199A 20% profit deduction for pass-through businesses. The new deduction applies to essentially all types of businesses other than C corporations, and was created under the 2017 Tax Cuts and Jobs Act. Individuals can begin claiming the deduction on their upcoming 2018 tax returns. The Proposed Regulations issued by the IRS, and released through Announcement IR-2018-162, provide important guidance to taxpayers and tax practitioners alike on this new federal income tax deduction.

The ...

The Internal Revenue Service today issued its much-anticipated Proposed Regulations on the new Section 199A 20% deduction for owners of pass-through business entities. This important deduction was created under the 2017 Tax Cuts and Jobs Act, the most significant tax reform legislation in over 30 years.

The Proposed Regulations, embodied primarily in Proposed Treasury Regulations § 1.199A-1 through 6, were announced by the IRS in Announcement IR-2018-162, and are available through the IRS website, www.irs.gov. The IRS issued a related Announcement IR-2018-164, and which ...

South Carolina imposes a sales tax on the retail sale of tangible personal property in the state. South Carolina also charges a separate and related "use tax" on retail purchases of tangible personal property outside of South Carolina, which is then brought into South Carolina for "use, storage, or consumption". Many South Carolinians may be aware of our state's sales tax, but are unaware, or simply do not understand, the state's companion "use tax". The South Carolina Department of Revenue, in SC Revenue Ruling #18-9, issued June 1, 2018 (and effective July 1, 2018), has now provided ...

South Carolina has some of the highest business property taxes in the Southeast. The state generally taxes land, buildings, machinery and equipment, and furniture and fixtures, but does not tax inventory, pollution control equipment, intellectual property, and other assets.

To reduce the effect of its high business property tax rates, and to make the state a more competitive environment for business, South Carolina offers a property tax incentive and tax savings for manufacturers, and certain other businesses, investing at least $2.5 million over a five year period in the state ...

Where a business does not pay its federal employment and/or unemployment taxes, and continues in operation, the IRS will utilize administrative measures, including tax liens and levies, to collect the unpaid taxes. Administrative measures alone, however, may often not prevent a business from operating and also paying its back taxes. In these instances, the IRS has increasingly gone to the courts, and is now more frequently requesting injunctive relief against these businesses in order to prevent the business from operating and where it may further accrue federal ...

On April 11, 2018, the South Carolina House of Representatives passed House Bill 3684, which will allow the South Carolina Department of Revenue (SCDOR or DOR) to centralize state tax lien filings. State tax lien filings are currently filed with local county recording offices throughout the state. The new bill, if adopted by the South Carolina General Assembly, would simplify the state tax lien filing process by implementing a centralized system of filing and indexing tax liens, and which would also accessible to the public online through the Internet. State tax liens would no longer ...

The IRS recently announced it will be shutting down its successful Offshore Voluntary Disclosure Program (OVDP) for unreported foreign bank accounts and income. The program will end September 28, 2018. Under the OVDP, first started in 2009, over 50,000 individuals have come forward to report previously unreported foreign bank accounts and income. The IRS reports it has raised over $11 billion in taxes, penalties and interest through the OVDP.

The U.S. income tax system is perhaps the most expansive in the world. U.S. citizens and permanent residents must report their worldwide ...

Under the Tax Cuts and Jobs Act, Congress is now offering a new 20% deduction for "pass-through" businesses - i.e. businesses that are not corporations. With the corporate tax rate being reduced under the new law to a flat 21%, the 20% deduction for other forms of businesses was designed to give a reduction to these businesses approximating the lower corporate tax rate. If applicable, the 20% deduction can be claimed by the owners of S corporations, partnerships, sole proprietorships, and even the beneficiaries of trusts. These are business entities that do not pay income tax at the ...

Aside from corporate tax reductions, one of the most important aspects of the new Tax Cuts and Jobs Act beginning this year is the new 20% deduction for “pass-thru” businesses – i.e. businesses that are not corporations.  With the corporate tax rate being reduced to a flat 21%, the 20% deduction for other forms of businesses was designed to give a reduction to these businesses approximating the lower corporate tax rate.  However, this 20% deduction, found in new Internal Revenue Code § 199A, is saddled with exclusions, phase-outs, technical issues, and uncertainties so that many ...

Section 530 Relief

Employers that have workers which the employer classifies as "independent contractors" (Form 1099) risk having these workers reclassified by the IRS as employees. This is a major audit area for the IRS. If the IRS does audit an employer, and reclassifies "contractors" as "employees" this will subject the employer to substantial federal employment tax liabilities, penalties, and interest, and the employer will also be required to treat the "reclassified" contractors as employees going forward.

If an employer is audited by the IRS, the IRS will generally find ...

IRS Voluntary Worker Classification Settlement Program

Employers that have workers which the employer classifies as "independent contractors" (Form 1099) risk having these workers reclassified by the IRS as employees. This classification is a major audit area for the IRS. If the IRS does audit an employer and reclassifies "contractors" as "employees" this will subject the employer to substantial federal employment tax liabilities, penalties, and interest. The employer will also be required to treat the "reclassified" contractors as employees going forward.

If an employer ...

South Carolina assesses a recording fee on deeds to real property. The South Carolina deed recording fee is imposed for "the privilege of recording a deed," and is based on the transfer of real property from one person or business entity to another. The fee is generally imposed on the grantor of the real property, although the grantee may be secondarily liable for the fee. There are specific instances where the grantee, and not the grantor, is directly accountable.

This fee is composed of two fees - a state fee of $1.30 for every $500, or fractional part of $500, of the real property's value ...

IRS Form SS-8 Determinations of Employee Status

Employers that have workers which the employer classifies as "independent contractors" (Form 1099) risk having these workers reclassified by the IRS as "employees." This determination is a major audit area for the IRS. If the IRS does audit an employer and reclassifies "contractors" as "employees" this will subject the employer to substantial federal employment tax liabilities, penalties, and interest. The employer will also be required to treat the "reclassified" contractors as employees going forward.

A worker treated by an ...

Employers that pay wages and other forms of compensation to their employees must comply with federal tax return filing and payment/deposit requirement. Employers that receive services from non-employee contractors and which make payments to these contractors must also separately report these payments. The IRS imposes penalties on employers who fail to timely meet their filing requirements, as well as penalties and interest for not making timely tax deposits and/or payments to the IRS.

1. Penalties

Forms 941 and 940

• Subject to limited "reasonable cause" exceptions, the failure to ...

Employers that pay wages and other forms of compensation to their employees must comply with federal tax return filing and payment/deposit requirement. Employers that receive services from non-employee contractors and make payments to these contractors must also separately report these payments.

1. Federal Employment Tax - Form 941

a. Employers are required to collect federal employee income withholding taxes and the employee's share of Federal Insurance Contributions Act taxes (FICA), from wages paid to employees, match the employee's share of FICA, and deposit these ...

The IRS investigates criminal violations of federal tax laws, including tax evasion, tax fraud, and not filing tax returns. Many people do not realize that simply not filing a tax return when it is due is a crime under federal law.

The IRS analyzes criminal violations of federal tax laws through its "Criminal Investigation Division," or "CID." CID agents are referred to as "Special Agents."

The CID examines individuals and businesses for potential criminal tax violations. CID receives information about possible criminal tax violations from a broad range of sources, including ...

The United States has a voluntary tax reporting system. Once a tax return is filed, however, the IRS will seek to verify that filed tax returns comply with the tax laws. To achieve this, an IRS audit ("examination") must take place. There are different types of IRS audits.

The most common type of IRS audit is a "correspondence audit" conducted entirely through the mail. Most correspondence audits are initiated by the IRS computer system, which receives income information for individuals reported to the IRS by third parties (e.g., Form W-2 wages/salaries from employers; Form 1099 ...

If an individual or business owes but has not paid federal taxes, the IRS will make efforts to collect these taxes. The IRS will first send a series of notices requesting payment, but if the taxpayer does not respond to the IRS and make arrangements to pay the taxes, the IRS will then begin "enforced collection measures." The most common measures used by the IRS to collect taxes are (1) the "levy" (or garnishment), where the IRS notifies an employer to take taxes out of an employee or a worker's paycheck and send this money to the IRS; and (2) the bank account levy or seizure where the IRS simply ...

Married couples may file a joint federal income tax return together, reporting their joint income and expenses. The benefit of a joint return is that the overall tax rate may often be lower. However, if a joint return is filed, each of the spouses is fully and individually liable for all taxes that are required to be paid.

Married couples may also elect, instead, to separately file their own returns. The downside is the tax rate for each separately-filing spouse may be higher, but each spouse is only liable for his or her own taxes - and not the taxes of the other spouse.

If a joint tax return is ...

Businesses that have employees and pay wages and salaries must withhold federal employee income taxes and the employee's share of federal employment taxes (FICA) from these wages and salaries. The employer must "match" the employee's FICA share, and these three components then become the employer's "federal tax deposit," which the employer must electronically pay to the IRS periodically. The frequency of when federal tax deposits must be made by an employer varies (weekly, bi-monthly, monthly, etc.) depending on the amount of these federal "payroll" taxes that are due.

The ...

Where an individual or business owes IRS taxes, Congress has given the IRS a tax lien against all the assets of the taxpayer. The lien covers real estate, homes, furniture, cars, investments, and nearly everything an individual may own. The IRS tax lien also covers all the assets of a business that owes taxes.

The IRS will also record a notice of this tax lien against a taxpayer, typically in the county where deeds are maintained. Once the notice of the tax lien is recorded, most counties publish the lien recording electronically and this information then "goes out to the world." The ...

Where individuals and businesses owe IRS taxes, the IRS has a settlement program where it can legally accept less than what is owed. Known as an "Offer in Compromise," Congress has given the IRS the authority to "compromise" and reduce a tax debt owed to it, but only under very specific terms. The IRS does not have other programs or alternatives where it can accept less tax than what is owed - only the Offer in Compromise.

The IRS Offer in Compromise program has been in effect for many years, but the program has changed. Many individuals and businesses file their own Offers in Compromise with ...

If an individual or business owes federal taxes and does not have the current ability to pay these taxes, the IRS can consider placing the account into "currently not collectible" (CNC) status. If placed in CNC status, a taxpayer is not required to make a current payment on the unpaid taxes to the IRS, and the IRS will also not "levy" or "garnish" wages or seize bank accounts while an account is in CNC status.

Before the IRS will consider placing a taxpayer's account into CNC status, the individual or business must be up-to-date or "current" with the filing of their required tax returns, and ...

If an individual or business owes federal taxes and does not have the current ability to pay these taxes, the IRS can "seller-finance" and offer a payment plan with the taxpayer. The primary benefit of a payment plan is that it provides a clear agreement with the IRS on how much is to be paid and over what time period. Also, and as an inducement to enter into a payment plan with the IRS, the IRS will reduce the amount of penalties that will be due. The IRS will not "levy" or "garnish" wages or seize bank accounts while a payment plan is in effect.

Before the IRS will consider a payment plan for back ...

The United States has a voluntary income tax reporting system. U.S. citizens, permanent residents, and businesses here must annually file income tax returns with the IRS, reporting their "worldwide income," deductions, and their "net taxable income," and pay income taxes to the IRS based on this amount. The rate of tax is "progressive;" that is, it increases as taxable income goes up. There is a minimum level of income for which an annual tax return is not required to be filed and which varies on filing status. For example, in 2016 for a single (unmarried) taxpayer, the individual must ...

Many individuals and businesses owe taxes to the IRS, or they have not filed their tax returns or both. While the IRS may be the most powerful creditor in the world, there are solutions. This is Part I of a series addressing the most common issues faced by taxpayers owing taxes, and what can be done. The following is a list of each blog topic, and which also includes topics on IRS Tax Audits, and also IRS Criminal Tax Investigations, as this is where tax debts with the IRS can often arise as well:

• Unfiled Tax Returns (Part II)
• Payment Plans (Part III)
• Currently Not Collectible Status (Part IV)

The U.S. Department of Commerce, Bureau of Economic Analysis (BEA), conducts mandatory surveys to collect information on direct investment. There are three (3) specific surveys which track "out-bound" foreign investment: a quarterly survey, an annual survey, and a 5-year benchmark survey. The purpose of the quarterly survey is to report positions and transactions between a U.S. reporter and its foreign affiliates. The purpose of the annual survey is to report annual financial and operating data of the U.S. reporter and its foreign affiliates. The benchmark surveys are ...

The U.S. Department of Commerce, Bureau of Economic Analysis (BEA), conducts mandatory surveys to collect information on direct investment. There are three (3) specific surveys which track "out-bound" foreign investment, a quarterly survey, an annual survey, and a 5-year benchmark survey. The purpose of the quarterly survey is to report positions and transactions between a U.S. reporter and its foreign affiliates. The purpose of the annual survey is to report annual financial and operating data of the U.S. reporter and its foreign affiliates. The benchmark surveys are ...

The U.S. Department of Commerce, Bureau of Economic Analysis (BEA), conducts mandatory surveys to collect information on direct investment. There are three (3) specific surveys which track "out-bound" foreign investment: a quarterly survey, an annual survey, and a 5-year benchmark survey. The purpose of the quarterly survey is to report positions and transactions between a U.S. reporter and its foreign affiliates. The purpose of the annual survey is to report annual financial and operating data of the U.S. reporter and its foreign affiliates. The benchmark surveys are ...

The U.S. Department of Commerce, Bureau of Economic Analysis (BEA), conducts seven (7) mandatory surveys to collect information on direct investment. These seven surveys consist of an initial survey for any new direct investment and then applicable quarterly, annually, and within 5-year benchmark surveys.

The initial five blog posts in this series summarized the applicable reporting and survey requirements for foreign investment into the United States. The next blog posts in this series now focus on the reporting and survey requirements where U.S. companies make "out-bound ...

The U.S. Department of Commerce, Bureau of Economic Analysis (BEA), conducts seven (7) mandatory surveys to collect information on direct investment. These seven surveys consist of an initial survey for any new in-bound direct investment, and then applicable quarterly, annual, and 5-year benchmark surveys. The purpose of the new foreign direct investment survey is to capture new investment transactions when a foreign direct investment relationship is created. The purpose of the quarterly survey is to report positions and transactions between a U.S. affiliate and its foreign ...

The U.S. Department of Commerce, Bureau of Economic Analysis (BEA), conducts seven (7) mandatory surveys to collect information on direct investment. These seven surveys consist of an initial survey for any new in-bound direct investment, and then applicable quarterly, annual, and 5-year benchmark surveys. The purpose of the new foreign direct investment survey is to capture new investment transactions when a foreign direct investment relationship is created. The purpose of the quarterly survey is to report positions and transactions between a U.S. affiliate and its foreign ...

The U.S. Department of Commerce, Bureau of Economic Analysis (BEA), conducts seven (7) mandatory surveys to collect information on direct investment. These seven surveys consist of an initial survey for any new in-bound direct investment, and then applicable quarterly, annual, and 5-year benchmark surveys. The purpose of the new foreign direct investment survey is to capture new investment transactions when a foreign direct investment relationship is created. The purpose of the quarterly survey is to report positions and transactions between a U.S. affiliate and its foreign ...

If South Carolina property taxes are not timely paid, the county Assessor must assess a late-payment penalty. However, the county Treasurer is given authority to waive an assessed late payment penalty if a taxpayer can actually show the property taxes were timely paid. This late-payment waiver by the county Treasurer is discretionary, and generally not subject to appeal; however, if a taxpayer alleges error by the county in its assessment of a late-payment penalty, the taxpayer is then entitled to an administrative hearing through a county committee, consisting of the county ...

The U.S. Department of Commerce, Bureau of Economic Analysis (BEA), conducts seven (7) mandatory surveys to collect information on direct investment. These seven surveys consist of an initial survey for any new in-bound direct investment, and then applicable quarterly, annual, and 5-year benchmark surveys. The purpose of the new foreign direct investment survey is to capture new investment transactions when a foreign direct investment relationship is created. The purpose of the quarterly survey is to report positions and transactions between a U.S. affiliate and its foreign ...

Businesses making investments in the United States, directly or indirectly, are required to report this investment to the United States government. This "in-bound" investment is reported to the United States Department of Commerce, through its Bureau of Economic Analysis (BEA). This is the first in a series of posts on the subject.

The BEA promotes a better understanding of the U.S. economy by preparing official economic statistics. These statistics provide accurate and relevant economic information that helps gauge the performance of the U.S. economy and the role of the U.S. in ...

South Carolina's gas tax is one of the lowest in the country. The result is the deplorable condition of the state's highway system and roads. South Carolina is a conservative state, politically, and any tax increase, gas or otherwise, is often seen as political suicide for our state's elected officials.

Due to a groundswell of outcry, however, from residents, businesses, and even now from public officials, the state is about to pass major legislation to fund much-needed road improvements, and with the funding to be from a variety of new "fees" (note the aversion to referencing anything ...

When an individual or business owes federal taxes, a lien arises in favor of the IRS in all property of the delinquent taxpayer. The IRS will often file a notice of this tax lien - a Notice of Federal Tax Lien or "NFTL" - in the state offices where the taxpayer resides or has property. The IRS generally uses IRS Form 668(Y), Notice of Federal Tax Lien, for this purpose. If the taxpayer is able to fully pay all the taxes owed to the IRS, the IRS will then issue a "Release" of the NFTL. The IRS is also authorized to "Discharge" its tax lien in specific property of a taxpayer (but otherwise retaining its ...

If an individual or business owes unpaid income taxes to the IRS, or to a state, federal bankruptcy laws may provide relief for some, if not all, of these taxes. Generally applicable to "older" federal and state income taxes, if a taxpayer has filed timely tax returns for a tax period, the due date of which, including extensions, is more than 3 years from the date a bankruptcy petition is filed; if the tax return is filed late, at least 2 years have elapsed since the filing of the late return and the filing of the bankruptcy petition; and, where the IRS has made an "assessment" of the tax owed, at ...

If an individual or business owes South Carolina taxes, and does not have the present ability to pay off this state tax debt, the South Carolina Department of Revenue is authorized to enter into payment plans with taxpayers to pay these back taxes. Even with a payment plan, DOR may still file tax liens protectively against a taxpayer and his property, and which will remain recorded during the time the payment plan is in effect and until all back taxes are paid. SCDOR also has the power to seize assets of a taxpayer who has not paid state taxes, including bank accounts, and to levy (garnish) a ...

All U.S. citizens and permanent residents are required to annually file a U.S. income tax return reporting their worldwide income from all sources. Additionally, U.S. citizens and permanent who have an interest in or signatory authority over foreign bank and financial accounts holding $10,000 or more at any time during the year must independently identify and report these interests to the U.S. Department of Treasury's Financial Crimes Enforcement Network ("FinCEN"). This annual disclosure must be filed electronically using Form 114, Report of Foreign Bank and Financial ...

South Carolina offers a wide variety of economic development incentives to businesses seeking to locate or expand in the state. This incentive array focuses on certain types of businesses the state wishes to attract. One such business is the warehouse and distribution facility.

Like all states, the State of South Carolina, and its local government bodies (counties and cities), impose a number of different taxes on businesses, including a state income tax, sales and use taxes, property taxes, and local business license taxes. The South Carolina General Assembly and local ...

Businesses seeking to locate or expand operations in South Carolina may be eligible for one or more types of grant funding through the State of South Carolina. Grants are designed to be a reimbursement mechanism, where the state will reimburse the business for certain project-related costs (e.g. land, buildings, roads, and infrastructure).  The state often funds the grant to the local county government in which the project is located, and the applicable county government then administers the grant for the business.

Grant funding is discretionary, and may be in addition to, or in lieu ...

Once the South Carolina Department of Revenue (SCDOR) completes an audit of a taxpayer, if there are any proposed adjustments and additional taxes SCDOR seeks, it will issue to the taxpayer a proposed notice of assessment with an examination report. A taxpayer then has 90 days to administratively protest/appeal the proposed assessment within SCDOR.

SCDOR formerly had an "appeals" audit function. This appeals audit function was abolished by SCDOR, however, and appeals/protests of proposed audit assessments now simply go back to the auditor, and to the auditor's supervisor.

If a ...

When someone owes the IRS taxes, as a result of not paying the tax shown as due on a tax return or where the IRS audits and imposes additional taxes owed, the IRS will "assess" this tax liability, and with penalties and interest. The term "assess" or "assessment" simply means the IRS has recorded the taxes as a legal liability of a taxpayer. Once the IRS assesses a tax liability against a taxpayer, the IRS then proceeds to collect it.

The IRS has developed a series of "collection notices" sent to taxpayers in its efforts to collect assessed federal taxes. These notices are generated now by the ...