IRS Issues Rules on Self-Employment Taxes for Partners

The Internal Revenue Service has released final and temporary regulations on the self-employment tax treatment of partners in a partnership that owns a disregarded entity and whether they can participate in employee benefit plans.The regulations take effect Wednesday. The Tax Code states that, except as otherwise provided, a business entity that has a single owner and is not a corporation is disregarded as an entity separate from its owner, thus making it a “disregarded entity.” However, the Tax Code also says a disregarded entity is treated as a corporation for purposes of employment taxes. Therefore, the disregarded entity, rather than the owner, is considered to be the employer of the entity’s employees for purposes of employment taxes.

For more information on how this may affect you contact Neikirk, Mahoney, & Smith at 502-896-2999