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Treasury Issues Regulations Clarifying that Partners Providing Services to a Disregarded Entity Owned by the Partnership are Treated as Self-Employed

The U.S. Treasury Department recently issued proposed and temporary regulations clarifying that partners of a partnership providing services to a disregarded entity that is owned by the partnership are treated as self-employed, and not employees of the disregarded entity. Under current treasury regulations, a disregarded entity may be treated as a corporation for employment tax and employee benefit plan purposes, provided that the rule doesn?ÇÖt apply to the single owner that operates the disregarded entity as a sole proprietorship. In response to certain practitioners interpreting the regulation to permit partners to be treated as employees of the disregarded entity and allowing such partners to participate in a disregarded entity?ÇÖs tax-favored employee benefit plans, the Treasury Department issued these regulations to clarify that if a partnership is the owner of a disregarded entity, the partners of such partnership are subject to the same self-employment tax rules as if they directly owned… Continue Reading

September 2022
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