Lowrance Law, LLC

Yesterday I attended the live broadcast of a legal education program put on by the American Bar Association discussing the IRS Employment Tax National Research Project. As part of this project, the IRS intends to audit 6,000 businesses, both small and large, per year between 2010 and 2013. Part of what the IRS will be examining in these audits is the classification of employees; namely, whether they are classified as employees or independent contractors. If the IRS determines that a business is misclassifying an employee, tax liabilities and penalties can be severe.

To avoid controversy, an employer must take the steps to determine whether their workers fall into the category of an independent contractor or an employee. This process is often very complex and involves analysis of work procedures and corporate organization, along with examination of banking records and other criteria. While such a distinction is often case-specific, the general guideline is that a worker is considered an employee if the employer has the right to control the worker regarding what job is performed and how it is performed. Whether this right is exercised is irrelevant.

If you operate under the assumption that you are working with independent contractors rather than employees, and therefore do not have to withhold federal income and payroll taxes, it is important to remember to send a Form 1099 for the contractor to file. If the IRS does audit your business and determines that you are working with employees rather than independent contractors, filing Form 1099s could mean your company is entitled to the statutory safe harbor provided by section 530 of the Revenue Act of 1978.

Now that the IRS is enacting its Employment Tax National Research Project, it is more important than ever to make sure your company is up to date with the filing status of its workers. Failure to remain up to date with stricter IRS policy could result in tax liabilities.

If you are notified of an IRS audit or you want to discuss your employment practices, please don’t hesitate to contact me for further information:

Bill Lowrance, (703) 506-1600, lowrancelaw@gmail.com


See updated post at first page of Blog.

There are of course benefits to filing a joint tax return with your spouse: eligibility for tax deductions and lower tax rates come to mind. However, there can be severe repercussions that come from filing jointly, and those occur when items are improperly reported on or when income is even omitted from the tax return. If the IRS determines there are erroneous items in your return, such as unreported income or incorrect deductions, and you and your spouse have filed jointly, then both of you will be held responsible for the liabilities.

However, situations arise where one spouse may not have known about the erroneous items, or may have been coerced into signing for them. To combat such situations, the IRS created Innocent Spouse Relief. Provided you meet the qualifications, Innocent Spouse Relief allows you to be relieved of the consequences arising from a fraudulent return.

1. You and your spouse filed jointly
2. On the return, there is an erroneous item that is your spouse’s fault
3. You can prove that when you signed the return, you held no knowledge of the erroneous item
4. The circumstance shows it would be unfair to hold you accountable

On the IRS website there is a tool for determining if you are eligible for Innocent Spouse Relief. It can be found here.

If your spouse has embezzled their income, or attempted to defraud the IRS without your knowledge in any other way, even if you signed a joint tax return together, you can avoid the penalties. Provided you meet the qualifications of Innocent Spouse Relief, by filing Form 8857 you will begin the process of detaching yourself from the liabilities. Keep in mind that the IRS requires this form to be filed within two years after they attempt to collect the tax.

Contact me for more information on your options:
Bill Lowrance. (703) 506-1600. LowranceLaw.com


Still Time To Report UBS — Foreign Bank Accounts

June 20, 2010

There are many reports in the news media about the latest Swiss efforts to turn over formeraly “secret” Swiss UBS bank account to the IRS. The Boston Globe: “Swiss lawmakers yesterday ended a standoff and approved the bank’s settlement with the United States, clearing the way for the names to be transmitted to tax authorities […]

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