What Everybody Ought To Know About Payroll Taxes

One of the most common errors small business owners make is neglecting to pay their payroll taxes. It is important the you as the business owner know when you payroll taxes need to be deposited and verify that they are being made. Even if you have a bookkeeper or accountant that you trust, the responsibility is ultimately yours.

The IRS website or your accountant can help you determine how often your payroll taxes must be deposited. Whether they are monthly or biweekly depends on the amount of your payroll. Many business owners make the mistake of paying other bills instead of paying payroll taxes. This is always a mistake, as basically, this is stealing. You are taking money from your employees (that should go to the IRS) and using it to pay your bills.

The IRS vigorously pursues employers who do not pay their payroll taxes. They will even close down your business if you cannot meet your payroll tax requirements.

Save your business money (in penalties and interest you would have to pay) and save yourself the hassles of the IRS potentially assessing a portion of that payroll liability to you personally. Be sure your payroll taxes are paid on time and your Form 941 and 940s are filed on time.

If you are behind in paying your payroll taxes and need someone to help you on the road to compliance, contact an Enrolled Agent.

Who Else Wants To Avoid A Tax Levy?

If you are one of thousands of tax payers who owe back taxes, you may be concerned about how to avoid a tax levy. The answer is simple, but few heed are willing to heed this advice.

• Do Not Ignore Notices You Receive From The IRS!

Many tax payers tend to ignore these if they feel they cannot pay the taxes due and hope the IRS will stop sending the letters. They even refuse to sign for letters that are sent certified mail, thinking that what they don't know won't hurt them. Wrong.

Yes, the letters may stop coming, but what will start coming instead are wage levies, bank levies and if you are self employed, levies to your clients or those who rent properties you own.

The simple way to prevent this from happening is to either call the IRS yourself or contact an Enrolled Agent. If you decide to call yourself, you need to be sure you are aware of all your rights so read up on the collection process and tax payer rights on the IRS website.

If you decide to call an Enrolled Agent, your representative will help you understand what you need to do and how much time you have to respond to prevent a levy from being issued. They will need to know what letters you have received and when those letters are dated.

It really is easy to stop the levies from happening, by being willing to work on taking care of your tax liability now. You may want to set up an Installment Agreement and pay over time, or you may find you can borrow to repay the liability in full. You may even find you cannot afford to make a payment at all and submit your financial information to be considered Currently Non Collectible. An Enrolled Agent can help you wade through the process and find the best option for you.

The Secret to Resolving Your Tax Debt Without a Tax Attorney

If you have tax debt with the IRS, you only need a tax attorney if you have to go to US Tax Court. If you simply need representation before the IRS, you need an Enrolled Agent. An Enrolled Agent has been recognized, by the IRS after passing rigorous exams administered by the IRS, as qualified to represent tax payers.

Once you have signed a limited Power of Attorney form, the Enrolled Agent will be able to talk to the IRS on your behalf. Your tax situation may be very complicated and having someone in your corner who is familiar with the IRS' processes and procedures can insure you find the best option for your particular situation.

A thorough review of your current financial situation will help the Enrolled Agent understand what options will or will not work for you. Many people hear the ads for "pennies on the dollar" resolution. An Enrolled Agent can help you determine if you qualify for this option (few tax payers actually qualify). Even if you do not qualify for that resolution option, an Enrolled Agent will find the best option for you.

Effectur is a company that employs Enrolled Agents to represent their clients before the IRS. While resolving your tax debt is not inexpensive, hiring an Enrolled Agent is certainly a less expensive alternative to a tax attorney and will ensure you have the inside track on what options are available for your situation.

Click on the Effectur icon to the left of this blog to get answers to your questions and find out how we can help provide you with peace of mind.

Form 940

If you have employees, then you are required to file an annual 940 form with the IRS. Some people confuse this form the the 941 form which you have to file by the end of the month following the end of each quarter.

From 940 is for your Federal Unemployment taxes. The amount you pay is usually reduced by the amount of State Unemployment taxes you pay each quarter to your state. You do not get to take this credit, however, if you have not paid those State Unemployment taxes by the time you file your 940.

Although Form 940 is only filed once a year (by Feb 28th), you do have to deposit the taxes quarterly. You must file them by the end of the month following then end of the quarter, if your balance do is $100 or more. If the balance is less than 100 you can wait until the next quarter in which the cumulative balance is 100.

Be sure when you do your calculations you only need to count the first 7,000 of wages for each person. You may have payroll software that does the calculations for you, but if you are a small business and do not, I always kept a worksheet showing my figures for each quarter.

Be sure when you complete your deposit Form 8109 to make your deposit, that you fill in the 940 oval so this amount will not go towards your 941 taxes. Also be sure you fill in the oval for the correct quarter.

If you do not make your payments or file your form timely, you will incur penalties and interest. If you need assistance in completing you payroll tax forms, contact an Enrolled Agent or other tax professional.

Tax Penalties

If you don't file and or pay your taxes by the 4/15 deadline, you will incur penalties and have to pay interest on the unpaid balances. You may not be aware just how expensive that can be.

The failure to file penalty is higher than the failure to pay penalty. The penalty for failure to file is 5% per month or part of a month for each month that the return is late.(not to exceed 25% of the unpaid taxes. If you file more than 60 days after the due date(or the extended due date), then the penalty is smaller of $135 or 100% of the tax due.

You may be eligible to have the penalties abated, if you can provide that you have reasonable cause(in the eyes of the IRS) for filing your return late. Usually this is for traumatic or tragic events that prevented you from being able to file on time. You must submit a letter to the IRS requesting this abatement and explaining and substantiating why you did not file on time.

The failure to pay penalty is 1/2 of 1% for each month or part of a month that the taxes remain unpaid. If you have both failure to file an failure to pay penalties, then the failure to file penalty is reduced by the amount of the failure to pay penalty. The minimum penalty stated above, still applies.

If you have an extension and did not full pay your taxes by the due date, as long as you paid at least 90% of the total tax due, you will not have a failure to pay penalty.

If you need help with your taxes, contact an Enrolled Agent or other tax professional.