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Mike Thrift

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11 минути четене

The Section 1375 Sting Tax: How Former C Corps Pay 21% on Passive Income and Lose Their S Election After Three Years

Section 1375 imposes a flat 21% sting tax on S corporations that carry C-corp earnings and profits when passive investment income exceeds 25% of gross receipts, and three consecutive years over that threshold terminates the S election automatically. This guide walks through the excess net passive income formula, the three-year cliff under Section 1362(d)(3), and three planning moves to defuse exposure before year-end.

Mike Thrift

s-corpc-corptax-planning
10 минути четене

The Section 1375 Sting Tax: How S Corporations Trigger the 21% Passive Income Tax and a Three-Year Termination Cliff

The Section 1375 sting tax hits an S corporation with a 21% corporate-level tax when it has C-corporation E&P and passive investment income above 25% of gross receipts; three consecutive years of that combination terminates the S election. This guide shows who is exposed, how excess net passive income is calculated, and how to defuse the trap.

Mike Thrift

taxs-corporations-corp
12 минути четене

Section 530 Safe Harbor: How Businesses Survive IRS Worker Reclassification Audits

Section 530 of the Revenue Act of 1978 blocks the IRS from assessing back payroll taxes on reclassified 1099 workers if a business proves reasonable basis, substantive consistency, and reporting consistency. Revenue Procedure 2025-10 now requires examiners to consider the relief first and sets 25% / 10-year thresholds for the industry-practice safe harbor.

Mike Thrift

tax-compliancepayrollaudit
12 минути четене

Section 6751(b) Supervisory Approval: The Procedural Defense That Can Erase IRS Penalties

Section 6751(b) requires a real IRS supervisor to personally approve penalties in writing before assessment. A working guide to using Chai, the Graev trilogy, and the December 2024 final regulations to defeat accuracy-related, fraud, and information-return penalties — which penalties qualify, what documents to demand, and how to raise the argument at Appeals before paying for Tax Court.

Mike Thrift

taxtax-compliancecompliance
14 минути четене

Section 707(a)(2)(B) Disguised Sale Rules: How LLC Members Contribute Property and Take Cash Without Triggering a Taxable Sale

Section 707(a)(2)(B) recharacterizes paired property contributions and cash distributions to LLC members as taxable sales when they occur within two years. A walkthrough of the two-prong test, the rebuttable two-year presumption, the four regulatory exceptions, debt-financed distribution mechanics, and the Form 8275 disclosure that keeps partners out of audit trouble.

Mike Thrift

partnershipsllcreal-estate
14 минути четене

Section 7508A Disaster Tax Relief: How FEMA-Declared County Residents Get Postponed Deadlines, Coordinate With Form 4868, and Decide on a Prior-Year Casualty Loss

Section 7508A lets the IRS postpone almost any tax-related deadline by up to one year after a federally declared disaster. This guide explains who qualifies as an affected taxpayer, how postponement interacts with Form 4868, what happens to penalties already accruing, and when to elect a prior-year casualty loss under Section 165(i).

Mike Thrift

taxtax-deadlinestax-planning
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