September 29, 2008

Know Your Tax Responsibilities As An Employer

California employers can outsource some of their payroll and related tax duties to a third-party payroll service. They can help assure deposit requirements with federal and California state authorities and filing deadlines are met.

Los Angeles County, Santa Barbara County, Ventura County and Orange County California employers who outsource some or all of their payroll responsibilities should consider the following:

For the employer’s protection, employers should ask the payroll service provider if they have a fiduciary bond in place. This could protect the employer in the event of default.

If there are issues with an account, the IRS will send correspondence to the employer at the address of record. The IRS suggests that the employer does not change their address of record to that of the payroll service provider as it may significantly limit the employer’s ability to be informed of tax matters involving their business.

The employer is ultimately responsible for the deposit and payment of federal and California tax liabilities. Even though the third-party is making the deposits, the employer is the responsible party. If the third-party fails to make the federal tax payments, the IRS may assess penalties and interest on the employer’s account. The employer is liable for all taxes, penalties and interest due. The employer may also be held personally liable for certain unpaid federal taxes.

Employers should ensure that their service providers are using EFTPS (Electronic Federal Tax Payment System) so the employer can confirm payments made on their behalf. Everyone should use EFTPS and Treasury regulations require electronic payment for payroll taxes over $200,000 in a calendar year. EFTPS maintains a business’s payment history for 16 months and can be viewed on-line after enrollment. In addition, EFTPS allows employers to make any additional tax payments that their third-party provider is not making on their behalf such as estimated tax payments. The IRS recommends employers verify EFTPS payments as part of their bank account reconciliation process.

For payroll and other tax problems, contact Mitchell A. Port at (310) 559.5259.

September 12, 2008

Fix Your Tax Problem By Meeting With The IRS

IRS Taxpayer Assistance Centers (TAC) in California are your source for personal tax help when you believe your tax issue cannot be handled online or by phone, and you want face-to-face tax assistance.

The local California Taxpayer Assistance Center is a place where you can spread out your records and talk with an IRS representative across the counter. No appointment is necessary - just walk in. If you prefer, you may call a local number (see chart, below) to learn about available and alternate services, and to reschedule appointments with IRS personnel. If you have an ongoing, complex tax account problem or a special need, such as a disability, an appointment may be requested. All other issues will be handled without an appointment.

Continue reading "Fix Your Tax Problem By Meeting With The IRS" »

September 8, 2008

Small Business And Self-Employed One-Stop Resource

California small business owners now have access to reliable and authoritative information provided by the IRS by simply clicking here.

Select business topics using the IRS' A-Z listing, or by business type such as sole proprietor, corporation, etc. The IRS also provides links to major business subjects, such as Business Expenses, which provides a gateway to all related information on that subject.

Here is a list of some of the topics available to business entrepreneurs:

Business-related News
Keep abreast of the latest tax-related news that could affect your business.

Self-Employed Individuals
The basics on self-employment, filing requirements, and reporting responsibilities for independent contractors.

Business Expenses
Find out what qualifies as a deductible business expense, including depreciation.

Businesses with Employees
Guidance on tax-related responsibilities for an employer.

Small Business Forms and Publications
Download multiple small business and self-employed forms and publications.

Online Learning and Educational Products
Learn about business taxes on your own time, and at your own pace.

Employer ID Numbers (EINs)
Find out more on EINs or apply for one online.

Industries/Professions
Industry-specific information

Starting, Operating, or Closing a Business
Deductions, recordkeeping, accounting methods...

Filing and Paying Your Business Taxes
Information about how to pay your business taxes.

Electronic IRS: File, Pay.... and More
The IRS is making it easier than ever for you to conduct business with us electronically.

Filing Late and/or Paying Late
Before you decide not to file your tax return on time or not pay all of your taxes when they are due, consider this.

Independent Contractor (Self-Employed) or Employee?
It is critical that you, the employer, correctly determine whether the individuals providing services are employees or independent contractors. Generally, you must withhold income taxes, withhold and pay Social Security and Medicare taxes, and pay unemployment tax on wages paid to an employee. You do not generally have to withhold or pay any taxes on payments to independent contractors.

IRS Non-Retaliation Policy
IRS has a zero-tolerance policy for retaliation and has had a written non-retaliation policy in place since 1998.

Private Debt Collection Program
You've been contacted by a private collection agency concerning your overdue taxes. Now what? Click here for more.

Recursos para Pequeñas Empresas
Información y recursos para dueños de pequeños negocios. Infórmese sobre sus obligaciones tributarias.

Small Business Resources
This section offers links to a broad range of resources across federal and state agencies.

The Tax Gap
This page provides information on the tax gap and efforts to reduce it as outlined in news releases, statistics and technical fact sheets.

To discuss these and other topics with a business attorney in Los Angeles, call Mitchell A. Port at (310) 559-5259.

September 4, 2008

Choosing A Business Structure

The answer to the question “What structure makes the most sense?” depends on the individual circumstances of each California business owner.

The IRS provides a handy fact sheet giving business men and women in Los Angeles County, Orange County, Ventura County and Santa Barbara County a quick look at the differences between the most common forms of business entities.

The most common forms of businesses are:

Sole Proprietorships

Partnerships

Corporations

Limited Liability Companies (LLC)

Of all the choices you make when starting a California-based business, one of the most important is the type of legal organization you select for your company. This decision can affect how much you pay in taxes, the amount of paperwork your business is required to do, the personal liability you face and your ability to borrow money. Business formation is controlled by the law of the state where your business is organized.

While state law controls the formation of your business, federal tax law controls how your business is taxed. Federal tax law recognizes an additional business form, the Subchapter S Corporation.

All businesses must file an annual return. The form you use depends on how your business is organized. Sole proprietorships and corporations file an income tax return. Partnerships and S Corporations file an information return. For an LLC with at least two members, except for some businesses that are automatically classified as a corporation, it can choose to be classified for tax purposes as either a corporation or a partnership. A business with a single member can choose to be classified as either a corporation or disregarded as an entity separate from its owner, that is, a “disregarded entity.” As a disregarded entity the LLC will not file a separate return instead all the income or loss is reported by the single member/owner on its annual return.

The type of business entity you choose will depend on:

Liability

Taxation

Recordkeeping

For more on the IRS fact sheet, click here.

To discuss this with a business attorney, call Mitchell A. Port at (310) 559-5259.

September 1, 2008

Willful Failure To Pay Over Employee Payroll Taxes

A conviction for willful failure to pay over employee payroll taxes is affirmed where “willfulness” does not require the government to prove that a defendant had the ability to meet his tax obligations.

In a decision made on August 22, 2008 by the federal court of appeals covering California (the U.S. 9th Circuit Court of Appeals), the court stated:

This case illustrates the enduring truth of Ben Franklin’s sage observation that “nothing is certain but death and taxes.” It is an appeal from a conviction for willful failure to pay over employee payroll taxes, in violation of 26 U.S.C. § 7202. The defendant-appellant, Jack Easterday, sought an “ability to pay instruction” in order to contend to the jury that his failure to pay over the taxes he owed was not “willful,” because he had spent the money on other business expenses and therefore could not pay it to the government when it was due. The district court refused to give the instruction, and Easterday subsequently was convicted and sentenced to thirty months in prison.

Payroll tax problems can have serious consequences. Consult with a qualified tax attorney about your tax problem. Call Mitchell A. Port at (310) 559-5259.