Thursday, November 12, 2020
Manoj Viswanathan (UC-Hastings), Lower-Income Tax Planning, 2020 U. Ill. L. Rev. 195:
Tax planning is generally criticized by scholars as inefficient; that is, imposing welfare-reducing costs by incentivizing transactions with few non-tax economic benefits. This Article argues that this view is unacceptably narrow and makes the original claim that tax planning by lower-income taxpayers is often welfare-enhancing and should, as a normative matter, be encouraged. As such, various parties, including the IRS, law school clinics, legal academics, and tax practitioners should actively strategize to reduce the transaction costs currently hindering lower-income tax planning. This Article then applies that mandate to a specific cohort of lower-income taxpayers—drivers working in the sharing economy—and proposes a strategy through which these taxpayers can take advantage of both existing tax laws and the § 199A qualified business income deduction of the recently enacted Tax Cuts and Jobs Act.
By judiciously operating their rideshare activities through S-corporations, rather than as sole proprietors, rideshare drivers can obtain significant tax savings.