Under tax law, compensation can be deducted by a business only to the extent that it’s reasonable. Any unreasonable portion, if paid to a shareholder, isn’t deductible and may be taxed as a dividend. In one case, a U.S. Appeals Court found that a closely held construction company didn’t establish that the compensation paid to […]

In an estate tax case, a U.S. Court of Appeals found life insurance was taxable and properly valued. Two brothers, who were the sole shareholders of a corporation, had life insurance policies so that if one brother died, the other could use the proceeds to redeem his brother’s shares. After one brother died, the IRS […]

A recent report by the Joint Committee on Taxation, a nonpartisan committee of the U.S. Congress, discusses the definitions of “small business” for tax purposes. As the report states, there’s no one definition of a small business. Instead, several definitions apply depending on the context, various criteria and certain thresholds. Criteria include a business’s gross […]

A recent report from the Treasury Inspector General for Tax Administration (TIGTA) about IRS hiring provides some information about the size of the “tax gap.” The tax gap is the difference between the amount of tax owed for a tax year and the amount that’s actually paid on time and voluntarily. In the report, the […]

Individuals who travel for business may be eligible for tax deductions. The IRS defines a “business traveler” as an individual who travels away from home for longer than an ordinary day’s work and needs to sleep somewhere other than home to meet the demands of work while away. Deductible expenses must be ordinary and necessary. […]