Sometimes, keeping track of all the tax rules can be challenging. This is especially true if you’re not sure when your next payment will come in or how much money was earned during a specific period – but don’t worry! There’s an easy way to help prevent any headaches: make sure those requirements are met before taxes are due (and pay them later).
The IRS has announced new guidelines that may affect the payouts of executives and others in lucrative companies. The Dunlap case, TC Memo 2020-10 2/18/20, deals with an independent contractor who was receiving deferments from his employers’ plan but still owed self-employment tax when he retired later on down the line because those earnings were not treated as part-time wages like other types might have been under law previously – this news will no doubt create some stir among America’s workers!
The employer is supposed to make money available, but they never do. The team member has hope that one day their hard work will be rewarded with the payment he deserves!
The new case involved a team member who worked as a national sales director for Mary Kay cosmetics company. The taxpayer’s duties included recruitment of other employees and beauty consultants. Still, they were all treated by her employer (the well-known manufacturer) like independent contractors, so there was no need to include them on payroll taxes anyway!
The taxpayer was a top saleswoman for Mary Kay, but at age 65, she qualified to receive money from their “Family Security Program.” The payment came with strings attached – if you’re retiring, this is what’s expected of us! It wasn’t until 2006 that we realized these payments represented income that had never been reported on our taxes.
Mary Kay had maintained that FSP payments were exempt from self-employment tax when they went to retired national sales directors. However, in an opinion issued this week, the Tax Court ruled otherwise. It indicated that these amounts should be treated as coming from a nonqualified deferred compensation plan subject only to minimum taxes because of changes made during 2008 relating specifically to those types of plans – not just traditional ones but also any amended version created after October 3rd last year which complies with new standards set forth by law now rather than before then (when things differ depending upon where you live).
The Tax Court said that FSP “is intended to be a nonqualified deferred compensation arrangement… and shall be construed and interpreted following such intent.” The taxpayer argued this plan was not qualified because it lacked some essential features typically found in these projects. Still, her argument didn’t hold up under scrutiny from other regulations which apply specifically only towards employees– thus making them mute on points at hand since there wasn’t any disagreement about whether or not each national sales director falls into one category rather than another within IRS vocabulary (i..e., contractor vs. team member).
