Tenth Circuit considers creative FICA tax avoidance scheme

Article Abstract:

The 10th Circuit Court remanded a tax avoidance case, Hoerl & Associates v. United States, back to the district court for factual evidence of deferred compensation and risk of forfeiture. A married couple's wholly-owned professional corporation compensated each of them on a biennial basis, thus reducing their FICA payments to one salary per year. The district court ruled that compensation for one of the partners was deferred and therefore subject to a risk of forfeiture under IRC section 3121(v). Yearly FICA tax was ruled inappropriate because of the risk. The Circuit Court wanted more factual support of this decision because the IRS wants yearly FICA payments from both partners.

Tax planning, Social security taxes

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Express reservation of right to terminate top-hat plan held insufficient

Article Abstract:

The US Court of Appeals for the Third Circuit found in In re New Valley Corp. that the unilateral contract doctrine may be applicable to top-hat plan benefits despite the fact that the employer reserved the right to terminate the plan at any time. The Court ruled that plan benefits to be paid to retired employees might be considered vested because the retirees had fully performed the services that would earn them such benefits. The Court remanded to the bankruptcy to allow extrinsic evidence to be heard on the issue of the intent of the parties in entering into the agreements.

Compensation and benefits, Executives, Executive compensation, Retirement benefits

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FICA tax relief under 1978 Revenue Act section 530 is not available for hospital interns' refund claims

Article Abstract:

The US 8th Circuit Court of Appeals in Ahmed v. United States held that section 530 of the Revenue Act of 1978 applies to employers and that individuals must rely upon employers' suits to obtain relief. Several resident physicians sued for refunds of FICA withholding taxes for which their employer had already initiated litigation three years prior.

Tax Law, Public Finance Activities, Taxation, Laws, regulations and rules, Standing (Law), Tax refunds, Interns (Medicine), Medical interns, Withholding tax

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