The Internal Revenue Code prescribes minimum imputed interest rates and time-value-of-money factors applicable to certain loan transactions and estate planning techniques. These rates are tied formulaically to market interest rates. The Internal Revenue Service updates these rates monthly.
These are commonly applicable rates in effect for March 2017:
Short Term AFR (Loans with Terms <= 3 Years) 1.01%
Mid Term AFR (Loans with Terms > 3 Years and <= 9 Years) 2.05%
Long Term AFR (Loans with Terms >9 Years) 2.78%
7520 Rate (Used in many estate planning vehicles) 2.4%
Williams Parker shareholder Mike Wilson recently led a Williams Parker team in the representation of several affiliated taxpayers that were under a combined audit by the Internal Revenue Service (the “Service”) in connection with the taxpayers’ treatment of several thousand workers as partners, instead of as employees or independent contractors, for payroll tax purposes over multiple years. By characterizing their workers as partners, the taxpayers’ took the position that the workers’ compensation was not reportable on Form W-2 or subject to withholding or payroll tax obligations. Instead, the compensation was a guaranteed payment, reportable on the workers’ Schedule K-1, and subject to self-employment tax to be paid by the workers. Not surprisingly, the Service took a very aggressive position regarding the classification of the workers as partners, arguing they were properly characterized as employees. With an exposure for the taxpayers of approximately $16,000,000 of tax, interest, and penalties, Williams Parker was able to settle the four-year dispute with the Service for approximately 12 percent of such amount.
Recently, shareholder John Wagner sat down with the Sarasota Herald-Tribune to discuss business succession planning. In the following brief video, John addresses why and when business owners should consider succession planning and provides tips for getting started.