Tax News

CCH (cch.taxgroup.com) reports:

The IRS has issued final regulations that treat qualified subchapter S subsidiaries (QSubs) and single-owner eligible entities, currently considered disregarded entities, as separate entities for the purpose of federal employment tax and certain excise taxes. These regulations are effective August 16, 2007, and apply to wages paid on or after January 1, 2009, or, with respect to excise taxes, to liabilities imposed and actions first required or permitted in periods beginning on or after January 1, 2008.
Employment Taxes
The final regulations clarify that a disregarded entity is treated as a separate entity and as a corporation for purposes of federal employment tax, but continues to be disregarded for other federal tax purposes. The owner of a disregarded entity treated as a sole proprietorship is subject to self-employment taxes under the Self-Employment Contributions Act (SECA). Furthermore, the individual owner of a disregarded entity continues to be treated as self-employed for purposes of SECA taxes, and not as an employee of a disregarded entity for employment tax purposes. The employment tax provisions of the final regulations become effective January 1, 2009, so as to give employers sufficient time to modify their systems to comply with the new regulations. Disregarded entities and the owners of such entities may continue to use procedures permitted by Notice 99-6 for wages paid prior to January 1, 2009.
Excise Taxes
No comments were received and no public hearings were requested regarding the excise tax provisions; therefore, those provisions were adopted as proposed. Thus, an entity that is disregarded for other federal tax purposes is required to pay and report excise taxes, required and allowed to register with the IRS, and allowed to claim any credits (other than income tax credits), refunds and payments. Since a disregarded entity does not file an income tax return, the credit under Code Sec. 34 for certain uses of gasoline and special fuels is claimed on the owner's tax income tax return. Appropriate identification of the single-owner entity and its taxpayer identification number (TIN) is required. The excise tax provisions apply to periods beginning on or after January 1, 2008.
Notice 99-6, 1999-1 CB 321, is obsoleted as of January 1, 2009.
T.D. 9356, 2007FED ¶47,063
Other References:
Code Sec. 34
CCH Reference - 2007FED ¶4150A
Code Sec. 856
CCH Reference - 2007FED ¶26,512.305
Code Sec. 1361
CCH Reference - 2007FED ¶32,025D
CCH Reference - 2007FED ¶32,025H
Code Sec. 6109
CCH Reference - 2007FED ¶39,965.038
CCH Reference - 2007FED ¶39,965.135
Code Sec. 7701
CCH Reference - 2007FED ¶43,082
Tax Research Consultant
CCH Reference - TRC SCORP: 352.05
CCH Reference - TRC BUSEXP: 54,800
CCH Reference - TRC PAYROLL: 3,000