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The Critical Small Business Tax Obligation You Must Never Ever Ignore – Payroll Taxes PART Three

July 8, 2021 Kevin Kenealy delinquent payroll taxes, payroll taxes Comments Off on The Critical Small Business Tax Obligation You Must Never Ever Ignore – Payroll Taxes PART Three
he Critical Small Business Tax Obligation You Must Never Ever Ignore – Payroll Taxes PART Three by The Payroll Compoany 505-944-0105

Keeping up with the numerous commitments for federal, state, and local taxes is one of the many challenges that small-business owners must deal with. While most company owners hire a CPA or a tax specialist to deal with tax-related matters, it is crucial for those who are ultimately responsible for all tax responsibilities (the business owner) to fully comprehend the tax system. Because at the end of the day, it is the owner who will be held civilly (and potentially criminally) liable if the business fails to comply with tax obligations or if there is any wrongdoing. Therefore, it behooves you as a small business owner to know as much as possible about your tax obligations, even if you use the services of other tax professionals.

This article will concentrate on the business owner’s responsibilities in terms of payroll taxes and tax-related obligations that you must never ignore as a small business owner.

State Taxes

Most states employ tables that are identical to federal tax tables, which you may find by visiting your state’s website’s tax section or calling the Small Business Administration. In states where there are no state income taxes, such as Alaska, Texas, Wyoming, Florida, and Washington, you do not need to deduct state taxes. Other instances include states like Arizona, where personal income taxes are a fixed percentage of federal taxes, and Pennsylvania, where state taxes are a fixed percentage of gross wages.

FICA

The Federal Insurance Contributions Act (FICA) is federal legislation that mandates that companies deduct Social Security and Medicare taxes from employee pay. It also mandates that both the employer and the employee pay half of the FICA tax.

Employees pay a flat rate of 6.2 percent for social security and 1.45 percent for Medicare, while employers pay a single flat rate of 6.2 percent and 1.45 percent, respectively, for a total FICA tax rate of 15.3 percent (12.4 percent for Social Security and 2.9 percent for Medicare). Individuals who work for themselves are liable for paying the entire 15.3 percent tax.

FICA taxes are unchanged by the number of withholding exemptions filed by the employee, unlike state and federal taxes. Therefore, to establish how much you must withhold and pay as an employer, just multiply an employee’s gross wage payment by the applicable tax rate.

The Social Security tax, often known as the Social Security wage base, will only apply to the first $142,800 of income in 2021.

Every year, the wage base is updated for inflation. There is no income cap for the Medicare tax.

FUTA

Unemployment taxes, often known as FUTA, are a type of tax that the employer primarily pays. If any of the following apply to you, you must pay unemployment taxes:

a) You pay at least $1,500 in salaries per quarter.

b) For at least 20 weeks in a calendar year, you have at least one employee on any given day, regardless of whether the weeks are consecutive.

For 2020, the FUTA tax rate is 6.0 percent, and it is applied to each employee’s first $7,000 in salary. You can, however, claim credits against your total FUTA tax to account for state unemployment taxes paid. For example, if you pay your state unemployment taxes on time, you are eligible for a 5.4 percent credit, thus lowering your FUTA tax rate to 0.6 percent.

In Closing

Payroll taxes can be complicated to calculate, and it’s critical to deliver payments on time to avoid penalties and late fees. Payments for federal taxes can be done online through the Electronic Federal Tax Payment System (EFTPS) or at banks that are authorized to take federal payments. If you choose the latter approach, each transaction should be documented by Form 8109, which you may get from the IRS by calling 1-800-829-4933 or visiting their website.

Income and FICA taxes are normally deposited semi-weekly or monthly, and FUTA taxes are usually paid quarterly. At the conclusion of each year, the IRS normally sends a notification to business owners outlining which method to employ for the following year.

The day on which a deposit is made determines its timeliness. A mailed deposit received after the due date will, however, be deemed timely if you can prove it was mailed at least two days prior to the due date. Visit http://www.irs.gov/ or call the IRS live helpline for businesses at 1-800-829-4933 to learn more about small-business payroll responsibilities.


The Critical Small Business Tax Obligation You Must Never Ever Ignore – Payroll Taxes PART Two

July 7, 2021 Kevin Kenealy delinquent payroll taxes, payroll taxes Comments Off on The Critical Small Business Tax Obligation You Must Never Ever Ignore – Payroll Taxes PART Two ,
The Critical Small Business Tax Obligation You Must Never Ever Ignore – Payroll Taxes PART Two by The Payroll Company 505-944-0105
.

Keeping up with the numerous commitments for federal, state, and local taxes is one of the many challenges that small-business owners must deal with. While most company owners hire a CPA or a tax specialist to deal with tax-related matters, it is crucial for those who are ultimately responsible for all tax responsibilities (the business owner) to fully comprehend the tax system. Because at the end of the day, it is the owner who will be held civilly (and potentially criminally) liable if the business fails to comply with tax obligations or if there is any wrongdoing. Therefore, it behooves you as a small business owner to know as much as possible about your tax obligations, even if you use the services of other tax professionals.

This article will concentrate on the business owner’s responsibilities in terms of payroll taxes and tax-related obligations that you must never ignore as a small business owner.

The Financial Test

This assessment examines an employer’s level of control over the financial aspects of the business. In many industries, a worker’s identity as an independent contractor is bolstered by having extensive control over work materials.

The availability of services is one way to tell the difference between an independent contractor and an employee. For example, an employee cannot advertise services unless they are working outside the firm, whereas as an independent contractor because they are not connected to one company.

The Relationship Test

This test examines how the employer and employee view their relationship. For example, the worker is an independent contractor if the relationship between the employer and the employee is expected to remain until the end of a project or for a set period of time. The worker, on the other hand, is a taxable employee if the relationship has no or few restrictions.

Taxable Wages Defined

Salary, bonuses, and gifts are all examples of taxable wages for services rendered. Some forms of payment, such as travel or food reimbursements for business, are not considered taxable wages. Employees must validate expenditures through receipts or expense reports in order for them to be nontaxable. They must also be needed, reasonable, and relevant to the business.

How to Calculate Withholding

After you’ve determined which employees are taxable and which wages are taxable, you’ll need to figure out how much you need to deduct for federal, state, and local taxes, as well as FUTA and FICA.

Federal Taxes

For the applicable period, federal income taxes must be withheld from every paycheck. Employers can utilize the IRS’s salary bracket tables or percentage tables to figure out how much to withhold.

The salary bracket tables are divided into five payroll periods (daily, weekly, bi-weekly, semi-monthly, and monthly). Owners choose the appropriate pay period and salary bracket for their employees, then move across the table to the column that displays the amount of claimed exemptions to determine withholding amounts.

The percentage tables are broken down by marital status and are accessible for eight different payroll periods (daily, weekly, bi-weekly, semi-monthly, monthly, quarterly, semi-annually, and annually). Employers begin by deducting the value of claimed exemptions from salaries. Then they check for the withholding amount depending on the wage bracket in the table that corresponds to the employee’s marital status.

It is your obligation as a business owner to examine the two sets of tables and pick which one is the best fit for your company. In terms of payroll intervals, percentage tables are more inclusive. Therefore if you have a situation where various employees are paid at different payroll periods, the percentage table should be your first pick. If your workers are paid quarterly, for instance, the percentage tables are better than the wage bracket tables. Request Publications 15 and 15-A.2 from the IRS or go to http://www.irs.gov/ to obtain these tables.

In Closing

Payroll taxes can be complicated to calculate, and it’s critical to deliver payments on time to avoid penalties and late fees. Payments for federal taxes can be done online through the Electronic Federal Tax Payment System (EFTPS) or at banks that are authorized to take federal payments. If you choose the latter approach, each transaction should be documented by Form 8109, which you may get from the IRS by calling 1-800-829-4933 or visiting their website.

Income and FICA taxes are normally deposited semi-weekly or monthly, and FUTA taxes are usually paid quarterly. At the conclusion of each year, the IRS normally sends a notification to business owners outlining which method to employ for the following year.

The day on which a deposit is made determines its timeliness. A mailed deposit received after the due date will, however, be deemed timely if you can prove it was mailed at least two days prior to the due date. Visit http://www.irs.gov/ or call the IRS live helpline for businesses at 1-800-829-4933 to learn more about small-business payroll responsibilities.


The BIG IRS Problems Associated with Delinquent Payroll Taxes – Part Two

April 27, 2019 Kevin Kenealy delinquent payroll taxes Comments Off on The BIG IRS Problems Associated with Delinquent Payroll Taxes – Part Two
Big IRS Problems Associated with Delinquent Payroll Taxes - Part Two

Skipping payment of your payroll taxes is like poking the lion at the zoo through the bars. Eventually the lion, or in this case the IRS, is going to bite the stick or you. Correct withholding of payroll taxes from employee paychecks is a legal mandate for all employers in the United States. Employees logically count employers to hold the money taken out of their check for payroll taxes and then send it on time to the Internal Revenue Service. The IRS also counts on receiving those funds and it has severe penalties in place for companies that don’t comply with law and send the funds that have been set aside. The bottom line for the IRS when it comes to payroll taxes is if the funds held aside for payroll taxes are delinquent for 1 year or more, they will most likely see it as tax evasion and come after you with criminal charges.

Trust Fund Recovery
Civil Penalties

Responsible parties identified by the IRS can be personally charged
with the Trust Fund Recovery Penalty for unpaid payroll taxes. Responsible
parties are charged with the mandate to payroll tax deposits on time. This is
accomplished by collecting the taxes due, holding them in a trust account then
paying the directly to the IRS. The Trust Fund Recovery Penalty is severe. It
is equal to 100% of the payroll taxes due, plus and any penalties and interest.
 Let’s say there’s a total of $8,000 due
including penalties and interest. If IRS charges the Trust Fund Recovery Penalty
to a business, any and all responsible parties will be personally responsible
to pay a total amount of $16,000.

Past Due Penalties Assessed
as a Crime

Payroll taxes that go unpaid can be assessed by the IRS as tax
evasion. If this turns out to be the case, a responsible person may have to pay
up to a maximum fine of $500,000, go to prison for 5 years and be required to
pay the taxes, interest and penalties still due, including the Trust Fund
Recovery Penalty.

The Lessons for Employers to be Learned About Delinquent Payroll Taxes

Payroll taxes must be paid on time. Responsible parties with
the duty to pay payroll taxes face severe penalties and potentially even
criminal consequences for unpaid payroll taxes.


The BIG IRS Problems Associated with Delinquent Payroll Taxes – Part One

April 23, 2019 Kevin Kenealy delinquent payroll taxes Comments Off on The BIG IRS Problems Associated with Delinquent Payroll Taxes – Part One

Skipping payment of your payroll taxes is like poking the lion at the zoo through the bars. Eventually the lion, or in this case the IRS, is going to bite the stick or you. Correct withholding of payroll taxes from employee paychecks is a legal mandate for all employers in the United States. Employees logically count employers to hold the money taken out of their check for payroll taxes and then send it on time to the Internal Revenue Service. The IRS also counts on receiving those funds and it has severe penalties in place for companies that don’t comply with law and send the funds that have been set aside. The bottom line for the IRS when it comes to payroll taxes is if the funds held aside for payroll taxes are delinquent for 1 year or more, they will most likely see it as tax evasion and come after you with criminal charges.

Internal Revenue
Service Deadlines for Payroll Tax Deposits

The breakdown for filing IRS Form 941 is as follows: Employers
owing $1,000 or less are required to mail IRS Form 941, Employer’s Federal Tax
Return each quarter. The envelope containing the return requires a post mark of
Apr. 30, July 31, Oct. 31 and Jan. 31, depending on the quarter. Employers who
paid payroll taxes of $50,000 or less for the year before are required to file
Form 941 each month. Employers who paid in excess of $50,000 or more for the
year before are required to file form 941 for taxes owed twice a month. It is
mandated taxes owed have to be via the IRS’ Electronic Federal Tax Payment
System no later than 4 days after the payroll date.

Internal Revenue
Service Delinquent Payment Notices

The Lesson for Employers to be Learned About Delinquent Payroll Taxes

When payroll taxes are late, if you filed form 941, the first thing to happen is the IRS will send you a bill for the taxes due.  The bill will indicate the taxes due plus penalties and interest.  The IRS will send you an invoice for payroll taxes due if you did not file the quarterly return that was due.  The IRS will begin collection activity if no response or payment is made regarding its 2nd late payment invoice for payroll taxes due. The IRS has the legal authority to seize business assets, inventory, accounts receivables and even business bank accounts to collect past due payroll taxes.

The Lesson for
Employers to be Learned About Delinquent Payroll Taxes

Payroll taxes must be paid on time. Responsible parties with
the duty to pay payroll taxes face severe penalties and potentially even
criminal consequences for unpaid payroll taxes.


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