TAXLITIGATOR – Tax Controversy (Civil & Criminal) Report

Social security and Medicare tax is based on wages paid employees under Internal Revenue Code (IRC) § 3101 and “net earnings from self-employment” under IRC § 1401.  “Net earnings from self-employment” is defined in IRC § 1402 and includes an individual partner’s “distributive share … of income or loss” of the partnership.  Section 1402 contains enumerated exclusions.  In 1976, Congress added subsection (a)(13) to § 1402, which reads:

(13) there shall be excluded the distributive share of any item of income or loss of a limited partner, as such, other than guaranteed payments described in section 707(c) to that partner for services actually rendered to or on behalf of the partnership to the extent that those payments are established to be in the nature of remuneration for those services.

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Robert S. Horwitz is a Principal at Hochman Salkin Toscher Perez P.C., former Chair of the Taxation Section, California Lawyers’ Association, a Fellow of the American College of Tax Counsel, a former Assistant United States Attorney and a former Trial Attorney, United States Department of Justice Tax Division.  He represents clients throughout the United States and elsewhere involving federal and state administrative civil tax disputes and tax litigation as well as defending clients in criminal tax investigations and prosecutions. In 2022 the Tax Section of the California Lawyers Association awarded him the Joanne M. Garvey Award for lifetime achievement in and contributions to the field of tax law. Additional information is available at http://www.taxlitigator.com.

For more information, please contact Robert S. Horwitz at horwitz@taxlitigator.com