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Archive for May, 2012

The IRS continues to feast on S firms that pay very low salaries to owners

May 31st, 2012

In many cases, S firm owners take low salaries so they can receive the bulk of the corporation’s profits as dividends, which are not subject to payroll taxes. IRS and the courts balk at this practice. In a recent case, the CPA took a $24,000 salary in a year when this share of the S firm’s profits was around $200,000. A district court agreed with the IRS that his pay was unreasonably low and ruled that the dividends are properly reclassified as salary and are hit with payroll taxes.

Means Test– Expenses– Household Size

May 30th, 2012

In determining “household size” for the purpose of calculating the debtors’ allowable expenses under the means test, two courts adopted the “economic unit” approach, rather than either the “heads on bed” approach or the dependency test of the IRS. See In re Gaboury, 2011 WL 5833972, and In re Johnson, 2011 WL 5902883. Another court employed the “dependent” approach. See In re Coates, 2011 WL 5419676.

Dischargeability of debts–Tax Debt

May 29th, 2012

Taking a position that even the IRS has disavowed, the Fifth Circuit Court of Appeals held that, under the hanging paragraph added to Code §523(a), which states that, “[f]or purposes of this subsection, the term ‘return’ means a return that satisfies the requirements of applicable nonbankruptcy law (including applicable filing requirements),” a late-filed return does not constitute a “return” because “applicable filing requirements” include the deadline for filing a timely return. The only exception under the hanging paragraph is a “return prepared pursuant to section 6020(a) of the Internal Revenue Code of 1986, or similar State or local law, or a written stipulation to a judgment or a final order entered by a nonbankruptcy tribunal.” This means that a debt arising under an untimely-filed federal or state tax return will never be dischargeable, unless the safe harbor provided by 26 U.S.C. §6020(a) or a similar state provision applies, because the debt will be treated as if no return was ever filed, and such a debt is nondischargeable under § 523(a)(1)(B)(i). While the case involved a state tax return, and the court’s opinion is written in that context, the language of the hanging paragraph makes no distinction between federal and state returns, and the court’s holding can not be limited on that basis.

Ineligibility of Chapter 13 debtor for discharge does not preclude a plan that permits stripping off wholly-unsecured junior residential mortgages

May 25th, 2012

“Chapter 20” was curtailed by BAPCPA, but it remains vitality for the purpose of lien stripping. The Bankruptcy Appellate Panel holds that the Bankruptcy Code allows a debtor to follow a Chapter 7 with a Chapter 13 in which he proposes to strip wholly unsecured junior liens from his residence. Debtor’s ineligibility for discharge does not bar such lien avoidance; the avoidance will be effective when debtor completes plan payments. The panel further holds that debtor must treat the holders of the avoided liens as general unsecured claimants.

Ten Things You Need to Know About the 2012 IRS Nationwide Tax Forums

May 24th, 2012

The 2012 IRS Nationwide Tax Forums are three-day events presented by IRS experts and partner organizations that offer up-to-date information on federal and state tax issues. Tax professionals that take advantage of early registration will receive a significant discount on the registration fee. Keep in mind that the early registration period closes two weeks prior to each forum.

Here are 10 things Enrolled Agents, Certified Public Accountants, Certified Financial Planners, Registered Tax Return Preparers and other tax professionals need to know about the 2012 IRS Nationwide Tax Forums.

1. Forums are held June through August in Orlando, Atlanta, San Diego, Las Vegas, Chicago and New York.

2. Those who sign up early can qualify for discounted registration fee. Pre-registration ends two weeks prior to the start of each forum.

Location Forum Pre-Registration Deadline
Orlando June 19-20 June 6
Atlanta July 10–12 June 26
San Diego July 17-19 July 3
Las Vegas July 31- August 2 July 17
Chicago August 21-23 August 2
New York August 28 – August 30 August 14

 

3. Forums offer an opportunity to receive up to 18 continuing education credits through a variety of training seminars and workshops.

4. Forums will offer 43 separate seminars and workshops on valuable and relevant tax topics.

5. Forums will also feature a two-day expo with representatives from the IRS as well as other tax, financial, and business communities offering their products, services, and expertise.

6. Visit with IRS Oversight Board representatives and offer your comments on various IRS initiatives and programs.

7. Tax professionals attending a forum can bring their toughest unresolved cases to meet with IRS personnel who may be able to help.

8. Registering for a tax forum is easy! Register by internet, fax or mail.

9. For more information or to register visit www.irstaxforum.com.

10. Follow us on Twitter @IRStaxpros to get the latest IRS news and guidance for tax professionals. Or “like” us at www.Facebook.com/IRSTaxForums.

Municipal Red Light Camera Ordinance Was Not Unconstitutional

May 22nd, 2012

Mary Nottebrok received a notice of violation of public safety from the City of Creve Coeur with photographs of the vehicle owned by her traveling through and intersection within the city while the electric light signal was red. The notice, which had been signed by a city police officer, notified her that the penalty was a $100 fine, due within 30 days, and that because the violation was a non-moving violation, no points would be assessed against her driver’s license. The notice further stated that if she failed to pay or contest the violation based on one of the exceptions contained in the ordinance, she would receive a notice to appear in court. When she failed to pay the find or contest it, she was issued a notice to appear in municipal court.
Nottebrok filed a motion to dismiss; the municipal court denied this motion and assessed a fine of $100. Nottebrok then filed an application for trail de novo and another motion to dismiss before the St. Louis County Associate Circuit Court. That court also denied the motion to dismiss and imposed a fine of $100. Nottebrok appealed and the Missouri Court of Appeals for the Eastern District affirmed in City of Creve Coeur v. Nottebrok.

“[V]iolations of municipal ordinances are civil matters but, because of the quasi-criminal nature of an ordinance, are subject to the criminal standard of proof beyond a reasonable doubt.” City of Dexter v. McClain, 345 S.W.3d 883 (Mo. App. S.D. 2011)….Under Missouri law, violations of municipal ordinances shall be heard and determined only before divisions of the circuit court. Section 479.010 RSMo Cum. Supp. 2007.
“Under both the federal and state constitutions, the fundamental requirement of due process is the opportunity to be heard at a meaningful time and in a meaningful manner.” [Jamison v. State Dept. of Social Services, Div. of Family Services, 218 S.W.3d 399, 405 (Mo. Banc 2007)]. However, civil ordinances “need not provide the heightened procedural protections required by the Fifth, Sixth, and Eighth Amendments of the U.S. Constitution. “Mills v. City of Springfield, WL 32567208*12 (W.D. Mo. 2010).
“The purpose of police power is to promote the public health, safety and welfare.” St. Charles County v. St. Charles Sign & Electric Company, Inc., 237 S.W.3d 272, 275 (Mo. App. E.D. 2007)…. Although a city’s police power is not unlimited, it is very broad. St. Charles Sign & Electric, 237 S.W.3d at 275…”The test of whether an ordinance is fairly referable to a legitimate exercise of police power is whether the express requirements of the ordinance have a substantial and rational relationship to the health, safety, peace, comfort, and general welfare of the inhabitants of the municipality.” Bezayiff [v. City of St. Louis, 963 S.W.2d 225, 229 (Mo. App. E.D. 1997)].
“The burden is on the party contesting the ordinance to negate every conceivable basis which might support it.” Id. If reasonable minds might differ as to whether a particular ordinance is substantially related to the protection of the general health, safety, or welfare of the public, then the issue must be decided in favor of the ordinance. Id.

Here, the ordinance “was properly enacted pursuant to the City’s police power for regulating public safety and did not violate Missouri law.” It “is similar to the ordinance at issue in City of Kansas City v. Hertz Corp., 499 S.W.2d 499 (Mo. 1973.).” “Consistent with the Supreme Court’s reasoning in Hertz, Missouri law provides that a municipal ordinance can impose liability on a vehicle owner if another parks or operates the vehicle in violation of the ordinance.”
Here, the photographs on the ticket clearly showed the vehicle’s license plate number and the make and model of the vehicle, which were registered to [Nottebrok]. [Nottebrok’s] liability for violation of [the ordinance] was predicated on her status as owner of the vehicle regardless of whether she was the driver of the vehicle at the time the violation occurred unless one of the ordinance’s exceptions applied.
“Municipalities may enact ordinances that create additional rules of the road or traffic regulations that meet their needs and traffic conditions as long as the ordinance’s provisions are consistent with and do not conflict with state law. Sections 304.120.2 and .3.” Under the plain language of the ordinance, a violation of it is classified as a non-moving violation. The ordinance “did not prohibit ‘running a red light;’ rather [the] ordinance prohibited the presence of a vehicle in an intersection when the traffic control signal for that intersection was emitting a steady red signal for the direction of travel….” “The City intended to impose liability on a vehicle owner for a violation of the ordinance, and that violation was a non-moving infraction for which no points would be assessed.” Thus, the ordinance does not violate Missouri statutes that require the assessment of points against a driver’s license for moving violations.