Michigan Tax Law Articles, Blog & Documents | Foster Swift

How Much is “Too Much”? Understanding Reasonable Compensation for Business Owners

Michael C. Zahrt, Zachary W. Miller (Summer Associate) — Tue, 07 Jul 2026 09:00:01 -0400

For owners of closely held businesses, compensation planning is more than just a business decision—it’s a tax strategy that can invite IRS scrutiny and the recharacterization of compensation if not handled carefully.

Why Compensation Matters

The tax rules allow businesses to deduct “reasonable” compensation paid to employees, including owner-employees. But when compensation is considered too high, the IRS can reclassify the excess as a dividend. This creates a mixed result: the individual may benefit from lower dividend tax rates, but the company loses a valuable ...

Understanding 1099 Reporting Obligations: Key FAQs for Corporations and Brokers

Nicholas J. Stock II — Tue, 17 Feb 2026 09:00:02 -0500

Certain payments constituting income require the payor to prepare, furnish, and file certain information statements and returns, both to the payee and to IRS, even when the payor is not the taxpayer whose income is being reported. These returns typically aid the recipient payee in calculating and reporting income in the relevant year and help IRS to identify unreported or underreported income by creating two potential sources of information, which should generally be consistent.

Most of the time, determining the appropriate 1099 or similar form is straightforward. Reporting ...

Tax Folks Update: Key Compliance Obligations for Brokers and Taxpayers Under Form 1099-DA

Nicholas J. Stock II — Fri, 30 Jan 2026 09:00:03 -0500

Brokers and their investor customers in digital assets should prepare, and tax professionals should prepare to assist, with reporting proceeds from certain digital asset transactions. See IRS FS-2025-06, Sept. 25, 2025.

The statements reflecting information reported on Form 1099-DA will differ from other information statements taxpayers receive because most of these statements will not provide basis information regarding a taxpayer’s digital asset transaction(s) for the 2025 tax year.

Taxpayers will need to calculate their basis before filing their 2025 tax return. For ...

Navigating IRS Scrutiny: Ensuring Compliance for Tax-Exempt Entities

Jennifer B. Van Regenmorter, Michael C. Zahrt — Mon, 05 May 2025 09:00:04 -0400

Healthcare executives are advised to consider the significance of a ruling issued in 2024 by the Internal Revenue Service (IRS) which revoked the tax-exempt status of a non-profit organization. In Private Letter Ruling* 202437007, the IRS determined that a non-profit organization had failed the “operational test” and revoked its tax-exempt status.

The entity in question had indicated no charitable activities or related expenses, leading the IRS to conclude that the organization was not operating exclusively for tax-exempt purposes.

See the full article here.

Tax Court Decision Highlights the Risks of Sending Your Tax Documents to the IRS Via Regular U.S. Mail

Fri, 27 Mar 2020 09:00:05 -0400

For businesses and individuals, preparing tax-related documents required by the Internal Revenue Service (IRS) or United States Tax Court can be a complex process, often requiring the assistance of outside advisors such as attorneys and accountants. As a recent case in the Tax Court demonstrates, the last, seemingly simple step in the process—filing a tax document —should not be taken lightly. Indeed, all of the analysis and number-crunching that goes into a tax document could be for naught if a document isn’t delivered before the relevant deadline.

IRC §108 – Income from Discharge of Indebtedness

Scott H. Hogan — Thu, 09 Jan 2020 09:00:06 -0500

Section 61 of the Internal Revenue Code establishes that all income, from whatever source derived, is included in gross income. If the income arises from a sale or exchange of property that is not a capital asset or property used in a trade or business then it is taxed as ordinary income.