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Can a corporation be an individual for tax purposes?

The debate over whether a corporate entity can be considered an individual can be considered a taxpayer has garnered a great deal of debate. Generally, speaking, corporations are not individuals for tax purposes. While there may be worthy circumstances for an exception to this rule, corporate entities routinely lose such arguments.

A recent example was chronicled in an accountingtoday.com report. The IRS issued a tax levy onto a small Oklahoma nursing home for failing to pay its quarterly taxes. The nursing home was located in a rural community of less than 3,000 residents and had a limited operating budget. It contested the levy, claiming that it would create economic hardship given that it was already experiencing substantial financial difficulty. 

The hospital demonstrated that it had not received more than $300,000 in promised funds from Medicaid, Medicare insurance and other private payments. However, the tax court reasoned that the economic hardship exception only applied to individuals who would not be able to pay their reasonable living expenses.

 

The story is particularly applicable to small businesses and closely held corporations who do not have legal departments to dispute tax issues that could affect their businesses for years to come. Having a skilled tax attorney can help in avoiding situations that put a corporation’s viability at risk and negotiating favorable resolutions for those subject to tax levies.

 

Most importantly, a seasoned tax lawyer can make the most of a corporation’s due process rights so that all available defenses can be exercised.

 

The preceding is not legal advice. 

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