Health Insurance Reimbursement Guidance for 2% Shareholders of S-Corps Still in Transitional Relief

I received this important little gem in today’s newsletter from the National Association of Tax Professionals

Guidance Not Yet Provided for 2% Shareholders

Employers are potentially subject to an excise tax for reimbursing or paying for individual health insurance policies, known as the $100 per day per employee penalty ($36,500 per year). According to Notice 2015-17, for two-percent shareholders (as defined in §1372(b)), transitional relief lasts through December 31, 2015, or until further guidance has been provided.

Since further guidance has not yet been provided, the health insurance reimbursement of two-percent shareholders can continue to be reported as such on the April Form 941 provided it meets the criteria set forth in Notice 2008-1.

Advice from a CPA Client – How to Break the News That They Owe

Today I’d like to share a short article from AICPA Insights written by a non-CPA, with advice on how to break the news to a client that they owe money.  The author, Adam Junkroski, points out, “Clients don’t always understand that you’ve saved them money even when they owe the IRS.”  So, how can you communicate this and alleviate some of their stress?

A summary of his advice:

1) Encourage your clients to plan for their taxes — check in with them once-a-quarter.
2) When discussing a return with a balance due, take a moment to review the steps you took to minimize their exposure.
3) Have a clear idea of what the client could have done differently in order to avoid a tax bill, and share that with them.
4) Remember that to the client, your pile of tax returns consists solely of theirs. Be patient, and don’t push them too hard to recognize otherwise.

I feel this is important information to share not just with my CPA, EA and other tax preparer colleagues, but also with my own clients.  Why?  So they can understand what we do to try to help them help themselves.  For example, I often don’t receive a response to my quarterly check-ins.  I sometimes get negative reactions even when I’ve gone through the steps I took and what they can do to minimize their exposure.  And, honestly — that I know they think their return is the only one.  It’s not.  I’ll try hard not to remind them of this, but I’d love the respect that comes from recognizing the stress I’m under at this time of year, and doing what they can to understand that the earlier they prepare, the better off we’re all going to be.

Source: Advice from a CPA Client – How to Break the News That They Owe – AICPA Insights

Is A Member’s Share Of LLC Income Subject to Self-Employment Tax?

My absolute favorite writer on the topic of taxes, Tony Nitti, has written the clearest and most informative article on the topic of LLC member income and its related tax issues that I’ve seen yet.  I’ve excerpted this one question and its answer as a summary, but if you prepare LLC returns or you are a member of an LLC, do yourself a favor and read the whole article.  It’s concise, explanatory, entertaining, and a treasure trove of info.

Q: So what does this mean? Is the distributive share of all LLC members now subject to self-employment tax?

A: I wouldn’t go that far. This ILM was specific to the taxpayer, but there are certainly lessons to be learned. If the LLC’s members provide significant services to the LLC, and it is those services that give rise to the majority of the LLC’s income, it is clear that the IRS is going to be prepared to argue that the LLC members are not limited partners for purposes of the exception from self-employment income found at IRC Section 1402(a)(13). You may want to have a strong defense ready to go, or else be prepared to have a hard conversation with your LLC member clients in the next few days explaining why income that has not been subject to self-employment income in the past is subject to self-employment tax on their most recent tax return.

Source: IRS: Partners’ Share Of LLC Income Is Subject to Self-Employment Tax – Forbes