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Posts Tagged ‘Tax’

Three Tips for Employers Outsourcing Their Payroll

November 1, 2011 2 comments

Three Tips for Employers Outsourcing Their Payroll Special Edition Tax Tip 2011-05, September 2, 2011 via IRS.GOV

Outsourcing payroll duties to third-party service providers can streamline business operations, but the IRS reminds employers that they are ultimately responsible for paying federal tax liabilities. Recent prosecutions of individuals and companies who – acting under the guise of a payroll service provider – have stolen funds intended for payment of employment taxes makes it important that employers who outsource payroll are aware of the following three tips from the IRS:

Employer Responsibility – The employer is ultimately responsible for the deposit and payment of federal tax liabilities. Even though you forward the tax payments to the third party to make the tax deposits, you – the employer – are the responsible party.If the third party fails to make the federal tax payments, the IRS may assess penalties and interest. The employer is liable for all taxes, penalties and interest due. The IRS can also hold you personally liable for certain unpaid federal taxes.

Correspondence – If there are any issues with an account, the IRS will send correspondence to the address of record. The IRS strongly suggests you do not change the address of record to that of the payroll service provider. That could limit your ability to stay informed of tax matters involving your business.

EFTPS  – Choose a payroll service provider that uses the Electronic Federal Tax Payment System. You can register on the EFTPS system to get your own PIN to verify the payments.The IRS web site – http://www.irs.gov has more information on the responsibilities of employers outsourcing payroll, payroll service providers and EFTPS.

via Three Tips for Employers Outsourcing Their Payroll.

for more information about online payroll services: www.netWorthPayroll.com

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Some taxpayers must wait until mid-February to file

WASHINGTON — Some taxpayers will have to wait to file until mid- to late February to file their returns because of late changes to the 2010 tax law passed by Congress in December.

The IRS said it needs more time to re-program its processing systems to take into account the new law. The agency plans to announce a more definitive filing date before then.

The IRS said taxpayers who will need to wait to file fit into three categories:

Taxpayers claiming itemized deductions on Schedule A. Itemized deductions include mortgage interest, charitable deductions, medical and dental expenses as well as state and local taxes. In addition, itemized deductions include the state and local general sales tax deduction extended in the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 enacted Dec. 17, which primarily benefits people living in areas without state and local income taxes and is claimed on Schedule A, Line 5. Because of late Congressional action to enact tax law changes, anyone who itemizes and files a Schedule A will need to wait to file until mid- to late February.

Taxpayers claiming the Higher Education Tuition and Fees Deduction. This deduction for parents and students — covering up to $4,000 of tuition and fees paid to a post-secondary institution — is claimed on Form 8917. However, the IRS emphasized that there will be no delays for millions of parents and students who claim other education credits, including the American Opportunity Tax Credit and Lifetime Learning Credit.

Taxpayers claiming the Educator Expense Deduction. This deduction is for kindergarten through grade 12 educators with out-of-pocket classroom expenses of up to $250. The educator expense deduction is claimed on Form 1040, Line 23, and Form 1040A, Line 16.

For taxpayers who must wait before filing, the delay will affect paper and electronic filers.

The IRS said people in the affected categories should start working on their tax returns, but not submit their returns until systems are ready to process the new tax law changes. A specific date of when systems are ready will be announced in the near future.

via Late tax breaks mean some must wait until mid-February to file :: WRAL.com.

1099-Misc Forms Explained

1099-Misc is a type of information return required by the IRS for income reporting purposes to track payments made to independent contractors. These are usually people who provide services to your business such as accounting, general construction contractors, service technicians, attorneys, landlords, etc. who are NOT employees of your business.   These payments may also include mileage reimbursements and materials provided.

According the IRS:

What is nonemployee compensation? If the following four conditions are met, you must generally report a payment as nonemployee compensation.

  • You made the payment to someone who is not your employee;
  • You made the payment for services in the course of your trade or business (including government agencies and nonprofit organizations);
  • You made the payment to an individual, partnership, estate, or, in some cases, a corporation; and
  • You made payments to the payee of at least $600 during the year.

The biggest challenge is making sure you know how to properly classify independent contractors and employees.   This will help avoid penalties for not withholding income tax from these payments if they are deemed to have been employees.

In order to determine tax payer status, ID information, and 1099 eligibility, you must obtain a FORM W-9 from each of your subcontract vendors.  It is a good policy to adopt that you do not issue payments to new vendors until you have their W-9 form on file.  That way, you will not be scrambling at year-end to get information such as their tax ID and address in order to process their 1099 forms or to know if they are exempt as a corporation.  1099 Forms are due to each recipient by January 31st and to the IRS (form 1096) by February 28th.

New Changes to the 1099-Misc Rules :

Few people are aware of new changes to the 1099 Rules that were passed with the Healthcare Reform Bill. Under the old rule, non-employee compensation for services that totaled more than $600 per year required having a 1099 form issued. Also, under the old rule Corporations were exempt so you wouldn’t have to issue a 1099 to PCs-R-Us, INC.  if they fixed your computer, for example.

The new rule states that beginning in 2012 payments that total $600 or more (at once or cumulative) made to ANYONE for ANYTHING, including corporations for services AND GOODS must be issued a 1099-misc form. You read that right! If you are a business, and you purchase more than $600 worth of supplies at Staples or Walmart, you will be required to issue them a 1099 form at year end.  There are currently attempts at repealing this provision which have so far, (as of this writing) have been unsuccessful.

The IRS has also created a new 1099-K form requirement which is already in effect for 2011.

There are actually many various 1099 forms for different types of payments and you should always consult with a qualified accountant or tax professional for specific help in this area for your business.  Feel free to contact us for more information.

IRS Urges Nonprofits to Continue to File e-Postcards

IRS Urges Nonprofits to Continue to File e-Postcards

Beginning in 2010, nonprofits that don’t file Form 990, Form 990-EZ, or Form 990-N with the IRS for three consecutive years automatically lose their tax-exempt status. These filings are due 5 ½ months after the end of nonprofits’ fiscal years (for example, May 17, 2010 for nonprofits with fiscal years ending December 31 and November 15, 2010 for those whose fiscal years end June 30). The IRS Commissioner issued a statement this week encouraging small nonprofits that missed the May 17 deadline to still file a Form 990-N (e-Postcard) as soon as possible. The IRS will try to work with nonprofits that file their e-Postcards late.

via N.C. Center for Nonprofits | Homepage.