Archive for the ‘Taxes’ Category

  • S Corp Employment Taxes … Read more

    “Tax Bill Would Benefit Small Businesses — and Burden Some, Too” — New York Times, You’re the Boss Blog…

    “Many S corporation owner-employees — especially those engaged in professional services like law and accounting — avoid self-employment taxes for Medicare and Social Security by paying themselves a small salary, or no salary at all, and collecting their income instead as corporate profits. (The profits of an S corporation, and their tax burden, are passed through to the shareholders.) Under the proposal, the Senate is now considering, these shareholders would have to pay employment taxes on all the income they earn through it, not just on compensation.”

    2010.06.21 / no responses / Category: In the News, Taxes

  • The Tax Man Cometh … or Not

    A new study says tax audits of big businesses are on the decline. Since 2005, the number of hours the IRS devoted to audits of the largest companies fell 33 percent, while the hours spent auditing small businesses increased 30.4 percent and rose 12.6 percent for midsize businesses. In the same period, the number of I.R.S. audits of large corporations fell to 3,675 from 4,693, a decrease of 21.7 percent.

    Read more here.

    2010.04.13 / no responses / Category: Taxes

  • State Tax Collection Efforts Getting More Aggressive

    As this article highlights, it’s getting harder and harder for people to avoid the Tax Man. Many states now have greater access to data warehouses and IT systems that compile detailed information from a variety of sources… real estate transactions, traffic tickets, etc., and they are aggressively acting upon it, initiating more investigations and audits. As well, more employers are being forced to be more vigilant when it comes to accurately withholding state taxes for employees who work in multiple states. “There’s 50 states out there and 50 different laws,” said Nola Wills, senior vice president and chief compliance officer at Harbor America, a financial services company near Houston. “It’s difficult for a small business to have all the information and resources to know that. In most cases their C.P.A. doesn’t know that, either.” Payday Resources can help navigate this tax collection maze. Contact us today to learn more.

    2010.03.27 / no responses / Category: Products, Taxes

  • Tax Compliance Matters

    According to a U.S. Government study (PDF), nearly 84% of all tax liabilities are collected each year through voluntary compliance. This figure, however, leaves some $345 billion in taxes going unpaid, further whittled down to $290 billion after enforcement and late penalties are eventually applied.

    As of late 2007, non-payment of employer-based federal payroll taxes represented over $58 billion (PDF) (including penalties and interest) spread across some 1.6 million businesses. Of that amount, 70 percent of all unpaid payroll taxes are owed by businesses with more than a year (4 tax quarters) of unpaid payroll taxes, and over a quarter of unpaid payroll taxes were owed by businesses that accumulated tax debt for more than 3 years (12 tax quarters).

    Needless to say, the government — in particular the Internal Revenue Service (IRS) — is all about closing the so-called Tax Gap. Max Baucus, Chairman of the Senate Finance Committee, has set a voluntary compliance goal of 90% by 2017.

    The IRS classifies noncompliance in three ways:

    1)      Nonfiling (not filing required returns on time… represents 8% of gross Tax Gap)

    2)      Underreporting (not reporting one’s full tax liability on a timely filed return… represents 82% of gross Tax Gap)

    3)      Underpayment (not timely paying the full amount of tax reported on a timely return… represents 10% of gross Tax Gap)

    The IRS assigns a higher priority to collecting employment taxes than income taxes. Payroll taxes are considered a trust tax, which means that it’s the employer’s responsibility to collect federal withholding taxes and the employee portion of matching taxes (FICA) and pass this on to the IRS. Because it’s considered a trust tax, the IRS views non-payment of payroll taxes as “theft” and the IRS investigative process is accelerated. IRS penalties from delinquent payroll taxes can add up to 33% plus interest in just a few weeks after you have filed payroll tax returns (941) past the due date and have yet to pay. Moreover, it is much more difficult to negotiate a tax settlement as the IRS typically does not make a decision to pursue a case on whether a business can survive. Offer-In-Compromise (OIC) settlements for payroll tax problems often are rejected because the IRS may assume that the business is worth more than the tax debt owed, a reason to reject the offer — standing to gain repayment (quicker, fuller) if a company files for bankruptcy; in 2007, nationally, 46,000 OIC settlements were submitted with only 12,000 accepted.

    2009.10.05 / no responses / Category: Taxes

  • Client Tax ID Switch

    For newly leased (or co-employed) clients of ours, it is important that existing Tax IDs be deactivated and switched over to our Tax IDs. State taxing authorities need to be notified promptly to prevent downstream reporting issues — delinquency notices being sent in error for monies that, in fact, have been collected and paid on behalf of new clients and their employees but under Payday’s Tax ID numbers.

    Two forms in particular need to be completed:

    the 2L form (unemployment insurance tax);
    the TC-69C (state tax withholding).

    PDR staff will help ensure this process is completed in a timely manner by requesting appropriate company information at time of sign-up.

    2009.10.01 / no responses / Category: Helpful Tips, Taxes