1. Dworken, Hillman, LaMorte & Sterczala, P.C.
December 2016 Issue In this issue:
• Partner versus Employee
in the eyes of the IRS
• Take Note of these Filing
Deadline Changes
Now!
Being GREEN = Emailing future issues!
Please send your current email address to Lynn at lynnb@dhls.com
(Addresses of colleagues friends are also welcome.)
continued on page 2
continued on page 2
Partner versus Employee in the eyes of the IRS
By Robert Vieira
nd Taxes
Employment
Benefits
Bookkeeping
Services
Non Profit
Partnerships are formed when two or more people
agree to combine knowledge, labor, assets, and/or
money for the purpose of lessening the risk to the
partners by sharing the profits and losses. As a reminder,
most LLC’s are taxed as partnerships, so LLC members
are treated as partners for tax purposes.
As with many partnerships, they start out with just
friends or colleagues and the partners do the majority
of the work, from running the partnership to doing the
bookkeeping. As the business grows and becomes more
profitable, partners may decide to take on employees
so they can spend their time running the business and
making it grow.
Now that the partnership is employing people, the
partners may want to reward the employee a percentage
of the partnership for equity-oriented compensation or
other various reasons, like retaining or attracting em-
ployees. Maybe you’re the partner and want to be treated
as an employee because the services you provide would
normally be expected from an employee.
There is no issue with giving an employee a percentage
of your partnership. The problem comes into play as
soon as that employee receives a percentage of the
partnership; at that point, the employee is no longer
considered an employee and is now treated as a
partner. Similarly, a partner cannot be treated as an
employee. In the eyes of the Internal Revenue Service,
an individual cannot be both an employee and a partner
in that partnership. You can be one or the other, but not
both. No matter how small the percentage is, a partner
with a .001% ownership that partner cannot be treated
In 2017, there will major changes to some of the tax
filing deadlines for 2016 fiscal calendar year-end.
These changes will affect most non-individual tax
return filing dates. If you have questions as to other
tax filings that you file, please contact us to see if you
will be affected.
The reason for the changes, according to the
American Institute of CPAs (AICPA), is to:
• improve the accuracy of tax and information returns
by allowing corporations and individuals to file using
current data from flow-through returns that have
already been filed rather than relying on estimates;
• better facilitate the flow of information between
taxpayers (i.e., corporations, partnerships, and
individuals);
as an employee. The reason is that the IRS has a no de
minimis exception. The same rule applies to a partner
in a partnership with a disregarded entity. A partner
cannot be an employee of the disregarded single-
member LLC (SMLLC).
When a partner is being treated as an employee, the
partnership opens itself up to major tax consequences
with the IRS and state tax agencies. In this case, the
Take Note of these
Filing Deadline Changes
By Robert Vieira
Accounting
and Auditing
International
Taxes
Valuation and
Litigation
Taxes
Employment
Benefits
Advisory
Services
Health Care Personal
Finances
Bookkeeping
Services
Non Profit
Real Estate

2. Dworken, Hillman, LaMorte Sterczala, P.C.
Certified Public Accountants / Business Consultants
Four Corporate Drive, Suite 488, Shelton, CT 06484
(203) 929-3535 • www.dhls.com
2
continued from page 1
Partner versus Employee in
the eyes of the IRS
individual is probably going to
receive a Form K-1 and a Form
W-2. With that being said, the partner
is probably going to have self-
employment taxes listed on their
K-1 and will have FICA, FUTA and
state tax withholdings taken out of
their W-2 as long as they didn’t opt
out of having taxes withheld. This
will cause the individual to have
FICA, FUTA and state taxes to be un-
derpaid or overpaid and the partner-
ship can risk having their cafeteria
benefit plan disqualified. If you are
a business that takes advantage of
the Qualified Production Activities
Deduction, this could be miscalculated
because the deduction is limited to
50% of Form W-2 wages.
The IRS makes it very simple, if you
are a partner you cannot be treated
as an employee and if you give
an employee a percentage of the
partnership that employee cannot
be considered an employee any
longer no matter how small the
percentage of ownership is. There
is talk that the IRS may change its
stance on this issue, but until the
IRS can find a way to prevent abuses
of allowing employee treatment in
certain cases, the rule will stand. If
there are any updates on this matter
we will keep you informed.
Anytime you are thinking about
changing the ownership of your
partnership it’s always a good idea to
contact your tax professional to make
sure it is not going to have any tax
implications. If you have any questions,
please contact us at 203-929-3535.
continued from page 1
Take Note of these Filing
Deadline Changes
• reduce the need for extended
and amended corporate and
individual tax returns.
The tax returns and extensions that
did not change are the Individual tax
return Form 1040, S-Corporation
Form 1120S and Employee Ben-
efit Plan Form 5500. The returns
and extensions that did change are
Corporate Form 1120 and Partnership
Form 1065.
The new IRS filing deadlines
switches the due dates for Forms
1120 and 1065 as follows:
• Corporate Form 1120 will now
be due 3 ½ months after year end
(April 15). Note: S-Corporation
Form 1120S return and extension
timing did not change.
• Partnership Form 1065 will now
be due 2 ½ months after year end
(March 15).
• Extended due date for calen-
dar year-end (12/31) will still be
September 15 for calendar
year ends.
Since we are dealing with the gov-
ernment and taxes, there are, of
course, exceptions to the new
changes. For Corporate Form 1120
filers with fiscal year ending June
30, the filing change will not apply
until tax years beginning after 2025,
except for the extension time pe-
riod. Starting in 2016, the extended
due date will be seven months from
the due date which means if you file
an extension it will be due 4/15/2018.
Other key filing dates to be changed
include:
• FinCEN Form 114 (Foreign
Bank Account Reporting) will
now be due April 15 and a six
month extension (to October
15) will be allowed. This form is
currently due June 30, with no
extension period.
• States are mostly following the
federal changes but with some
states there are some quirks
to be aware of. For example,
New York State C-Corp tax
return will bedueApril15thbutthe
Mandatory First Installment (MFI)
of Estimated Tax is due March
15th. So it would be a good idea to
review the filing dates for the
states you file in.
• Form W-2 and Form 1099 will
be due to the taxpayer as they
have been in the past but the
IRS copy must be signed, post-
marked and sent to the IRS by
January 31 to avoid any late fil-
ing penalties.
ForclientsofourFirm,wehaveproce-
dures in place to track these changes
and you will be notified by our per-
sonnel to remind you of these new
due dates. If you have any questions
about these changes, a federal filing
deadline you don’t see listed or a state,
please contact us at 203-929-3535.

3. Dworken, Hillman, LaMorte Sterczala, P.C.
Certified Public Accountants / Business Consultants
Four Corporate Drive, Suite 488, Shelton, CT 06484
(203) 929-3535 • www.dhls.com
3
DHLS Family News
Eventsm
• A heartfelt DHLS welcome to Erica Nadal,
of Ansonia, who just joined the Firm as a
Bookkeeping Professional in the Accounting
and Auditing Department.
• Our Thanksgiving Food Drive was a big
success this year as we were able to
donate 14 boxes of non-perishable items to
needy families in our area. And, from cash
donated, we were able to support the Denis
Olson Lifeline Fund, which helps families
who need immediate assistance to keep
essential utilities like heat and electricity.
• The partners and staff of DHLS generously
donated holiday gifts for eight families
this holiday season through New Reach’s
annualAdopt-A-Familyprogramthatprovides
gifts to needy clients. For most, including
hundreds of children, these are the only gifts
they will receive.
• Jen Bull and Bill Lesko competed in the
Pequot Runners Thanksgiving Day Race
this year, an event that raises thousands of
dollars to support local charities, including
Fairfield Community Services, Domestic
Violence Crisis Center, Westport EMS, the
Keystone Club and many more.

4. Dworken, Hillman, LaMorte Sterczala, P.C.
Certified Public Accountants / Business Consultants
Four Corporate Drive, Suite 488, Shelton, CT 06484
(203) 929-3535 • www.dhls.com
For more information on how we at DHLS
can help with these and other tax planning and financial opportunities,
please contact your tax specialist at 203-929-3535,
or visit our website at www.dhls.com.
Accounting
and Auditing
International
Taxes
Valuation and
Litigation
Taxes
Employment
Benefits
Advisory
Services
Health Care Personal
Finances
Bookkeeping
Services
Non Profit
Accounting
and Auditing
International
Taxes
Valuation and
Litigation
Taxes
Employment
Benefits
Advisory
Services
Health Care Personal
Finances
Bookkeeping
Services
Non Profit
Accounting
and Auditing
International
Taxes
Valuation and
Litigation
Taxes
Employment
Benefits
Advisory
Services
Health Care Personal
Finances
Bookkeeping
Services
Non Profit
Accounting
and Auditing
International
Taxes
Valuation and
Litigation
Taxes
Employment
Benefits
Advisory
Services
Health Care Personal
Finances
Bookkeeping
Services
Non Profit
Accounting
and Auditing
International
Taxes
Valuation and
Litigation
Taxes
Em
Be
Advisory
Services
Health Care Personal
Finances
Bookkeeping
Services
Real Estate
Accounting
and Auditing
International
Taxes
Valuation and
Litigation
Taxes
Employment
Benefits
Advisory
Services
Health Care Personal
Finances
Bookkeeping
Services
Non Profit
Real Estate
Accounting
and Auditing
International
Taxes
Valuation and
Litigation
Taxes
Employment
Benefits
Advisory
Services
Health Care Personal
Finances
Bookkeeping
Services
Non Profit
Accounting
and Auditing
International
Taxes
Valuation and
Litigation
Taxes
Advisory
Services
Health Care Personal
Finances
Bookkeeping
Services
Real Estate
Accounting
and Auditing
Int
Tax
Advisory
Services
Hea
Real Estate
Accounting
and Auditing
International
Taxes
Valuation and
Litigation
Taxes
Employment
Benefits
Advisory
Services
Health Care Personal
Finances
Bookkeeping
Services
Non Profit
Real Estate
Taxes
Employment
Benefits
Bookkeeping
Services
Non Profit
Taxes Fraud Interna-
tional
Taxes
Advisory
Services
Health Care Personal
Finances
Bookkeep-
ing Ser-
Accounting
and Audit-
Employee
Benefits
Non Profit Valuation
and Litiga-
Real Estate