Payroll Services Blog

We're all aware that our economy isn't going through a great moment right now and that's why many people may have some financial issues. If you believe you may have trouble paying your tax bill, for instance, you should contact the IRS immediately to expose your case and see how they can help you. There are steps available that may be helpful for you during these hard times.

Below, you'll find some "What if" scenarios and the possible tax impact in each of them:

"What if I lose my job?"

The loss of a job may create new tax issues. Severance pay and unemployment compensation are taxable. Payments for any accumulated vacation or sick time also are taxable. What you can do to avoid this situation is to ensure that enough taxes are withheld from these payments or make estimated tax payments to avoid a big bill at tax time. Just so you know, public assistance and food stamps are not taxable.

"What if I can't pay my taxes?"

First thing that you should do is to NOT PANIC! If you can't make the full payment when taxes are due, you should still file your return by the deadline and pay as much as you can to avoid penalties and interest. You should also contact the IRS at 1-800-829-1040 to see what your options are and how they can help you with this situation. Some of the options they may give you are a short-term extension, an installment agreement or an offer in compromise. In some cases, they may be able to waive the penalties.

"What if I lose my home through foreclosure?"

Under the Mortgage Forgiveness Debt Relief Act of 2007, taxpayers generally can exclude income from the discharge of debt on their principal residence or mortgage restructuring. This exception does not apply to second homes or vacation homes. In some cases, you may be able to file an amended tax return for previous tax years.

Remember that 10dollarpayroll.com can assist you and give you extra information about these situations and some other that may occur.

We'll post more "What if" for you to see if you're going through a similar situation and how to solve this.

The IRS has issued the revised payroll tax form that most employers will be eligible for that they can use to claim the special payroll tax exemption that applies to many employees hired during 2010.

This was created to enforce employers the need to hire new employees and retain them aswell. The payroll tax exemption was created by the Hiring Incentive to Restore Employment (HIRE) Act assigned by President Obama on March 18.

This is how it works: Employers who have hired employees during this year (Feb 2010 to Jan 2011) may qualify for a 6.2 percent payroll tax deduction on the share of Social Security tax on wages paid to these employees after March 18. This, however, will not have any effect on the employees' future Social Security benefits. This means that the employee's 6.2 percent share of Social Security tax and the employee's and employer shares of Medicare tax still applies.

How to claim this benefit?

In the Form 941, revised for use beginning with the second calendar quarter of 2010, will be filed by most employers claiming the payroll tax exemption for wages paid to qualified employees. The HIRE Act does not allow employers to claim the exemption for wages paid in the first quarter but provides for a credit in the second quarter. The instructions for the new Form 941 explain how this credit for wages paid from March 19 through March 31 can be claimed on the second quarter return.

The HIRE Act requires that employers get a signed statement from each eligible new hire, certifying under penalties of perjury, that he or she was not employed for more than 40 hours during the 60 days before beginning employment with that employer. Employers can use new Form W-11, Hiring Incentives to Restore Employment (HIRE) Act Employee Affidavit, to meet this requirement.

Businesses, agricultural employers, tax-exempt organizations, tribal governments and public colleges and universities all qualify to claim the payroll tax exemption for eligible newly-hired employees. Household employers and federal, state and local government employers, other than public colleges and universities, are not eligible.

If you would like to get more information about this new benefit, don't hesitate to contac 10dollarpayroll.com and we'll be more than happy to explain to you how this works and the steps that you need to follow to ensure that you qualify.

Sometimes when we check our mailbox we come across a notice sent from the IRS. Our immediate reaction is to be surprised, worried and we start asking ourselved why we have received that.

Below you can find 8 things you need to know if you have to go through this situation.

1 - Don't panic! Sometimes this letters are just generic and they don't have a specific purpose. Open it up to see what they are sending to you.

2 - There are many reasons why they are contacting you, such as payment of taxes, notify you of changes to your account, or request additional information. Whatever it is, it's going to be for a very specific issue.

3 - Each letter includes specific information as to what steps to follow to get the issue fixed.

4 - If what you receive is a correction notice, you should review the correspondence and compare it with the information on your return.

5 - If you agree with the correction shown on the notice, then there's no need to reply unless there's a pending payment or the notice is asking you to reply.

6 - In the case that you don't agree with the correction made, then it's very important that you take the time to reply to them. You should send a written statement of why you disagree with them and don't forget to include the documentation that proves the fact that you are right along with the bottom part of the notice. Mail the information to the IRS address shown in the upper left-hand corner of the notice. Allow at least 30 days for a response.

7 - For most of the corrections there's no need to contact them by phone, unless you have a specific question or you need someone to guide you during the process. Don't forget to have a copy of the notice and your tax report in front of you at the time of calling to answer any questions they may ask.

8 - It's very important that you keep a copy of everything that you sent to the IRS or received to back you up in case something gets missing.

As you can see, there's no need to worry too much about this notices because they always have a solution. To avoid any kind of notices you should file your forms on time, make all the tax payments requested and have all your information updated. If you keep in mind these things, it will mostly rare that you received a notice from the IRS.

If you happen to receive one, just follow the steps above or contact www.10dollarpayroll.com so we can help you with your taxes and payroll needs.

On March 18, 2010 a new Hiring Tax Credit was signed into law.

Major provisions of the bill are as follows:

• Payroll tax exemption that will save employers 6.2% of any new hire's wages in 2010 who has been unemployed for at least 60 days up to a maximum amount of $6,621.

• $1,000 tax credit for workers held more than 52 weeks

Qualifications: To qualify for the hiring tax credit, the new law requires that the employer get a statement from each eligible new hire certifying that he or she was unemployed during the 60 days before beginning work or, alternatively, worked less than a total of 40 hours for someone else during the 60-day period. The IRS is currently developing a form employees can use to make the required statement. Household employers cannot claim this new tax benefit.

Employers claim the payroll tax benefit on the federal employment tax return they file, usually quarterly, with the IRS. Eligible employers will be able to claim the new tax incentive on their revised employment tax form for the second quarter of 2010. If you do payroll with the help of www.10DollarPayroll.com then all the forms and compliance with this area will be done automatically for you.

Other Provisions of the Bill:

• small businesses can immediately write off their taxes for capital investments and purchases of new equipment made in 2010 from $125,000 to $250,000

"Scams" is a word that it's small in size but it's been used a lot lately. There are a lot of known scams going around the world, and one of those types is the Tax Scams.

In the IRS website there are a lot of educational materials, but we would like to emphasize those that seem to be more common.

Since shortly after the federal income tax was enacted in 1913, some individuals and groups have encouraged others not to comply with the law starting the Anti-Tax Law Scheme. Some of the false arguments that they claim are:

1- There's no Internal Revenue Code that imposes taxes.
2- Only "Individuals" are required to pay taxes.
3- Code Section 861 limits taxable income to certain sources which do not apply to most U.S. citizens
4- The government can assess taxes only against people who files returns.

These claims are obviously false but if we're not informed on all the regulations that are current, we can easily fall for something like this.

Another common tax scam is the Abusive Home-Based Business Scheme. The scam is very dangerous because it manipulates and misinterprets tax laws. One of the most dangerous things about this is that it claims taxpayers can deduct most or all of their personal expenses as business expenses. This is FALSE, but it's very easy to fall for this, and if we make that mistake the results could be repayment of taxes owed with interest and penalties, and possibly imprisonment and fines. Remember that even innocent taxpayers involved in these schemes can face a staggering amount of back interest and penalties. If you have fallen for this, you should correct any improper tax returns filing.

Having a CPA working with you can help you see how the tax laws are and what steps need to be followed if we happen to be in some kind of trouble. In the next posting, we will include more Tax schemes that you need to pay attention to.

It doesn't matter what kind of business you run, you always should have the knowledge of how the tax calendar is setup. This year, for example, has been an uncommon one for many reasons. The Reinvestment Act and the American Recovery Act have introduced new tax provisions that affect directly small businesses, and that's why if you have the proper knowledge, you will know exactly how to act in this situations.

The good thing about having the knowledge of the Tax Calendar is that you will know exactly all the critical dates and it also explains fully all the details of each due date.

The theme of this year is "gardening" since it seems like the IRS wants us to "cultivate and grow" our businesses. If we think about it, it's a very good theme for this year because after going through 2009 and all the changes that happened for businesses, having to "cultivate and grow" your business could mean a "new beginning".

To view the 2010 Tax Calendar online, click here.

The IRS website has a lot of information that could be helpful for different situations that you might encounter along the way, but also keep in mind that having a payroll company to your disposition can also ease some of the burdens that a business may bring along. It's common that we make mistakes because we didn't know the proper way to accomplish a task, and that's why having a payroll company working with you will be a helpful thing.

If you are considering buying a new car for 2010, it will be in your best interest to take advantage of the tax break that ends on December 31st and probably will not be around at all in 2010.

The way it works is that if you buy an eligible new vehicule before December 31st, you can deduct the state or local sales or excise taxes they paid on the first $49,500 of the purchase price. Some of the eligible motor vehicles include passenger vehicules, light trucks, motorcycles, and motor homes.

Individuals that itemize and those that take the standard deduction can benefit from this tax break. If you live in a state that doesn´t have sales tax, other taxes or fees, you can qualify if they are assessed on the purchase of the vehicle and are based on the vehicle's sales price or as a per unit fee.

If you would like to take part of this benefit, this is what you should do:

1- Complete Schedule L and attach it to Form 1040 or Form 1040A. This will increase the standard deduction by the allowable amount of state or local sales or excise taxes paid on the purchase of the new vehicle.

2- Check the box on line 40b on Form 1040 or line 24b on Form 1040A. The reason of this is because individuals who itemize should include the allowable amount of state or local sales or excise taxes from the purchase of the vehicle on Form 1040, Schedule A.

As you can see, it doesn´t take a lot of work from your part but it will surely make a difference financially. Sometimes we don´t take advantage of deals like this because we just don´t know about them. I´m sure that if we would take the time to do a little research to find out more benefits like this one, we would most likely be saving a lot of money every year.

It should be one of our most important priorities to research for benefits that will help us save money in things we do often. Having a payroll company assist you in this area may be exactly what you need. A payroll company is capable of finding ways to help you save money because they have all of the resources needed available for you.

Remember: If we don´t worry about our own finances, I can assure you that nobody else will be looking on ways to save you money.

Around February 2010, The IRS is planning to start an Employment Tax National Research Project. They haven´t done this for at least 25 years, so it´s more likely that many changes may occurr due to this.

Business practices regarding employment tax issues may have changed a lot since the last study that was done in the 80´s, and that´s the main reason why they felt the need to update this area.

The results will allow them to gauge more accurately the extent to which businesses properly comply with employment tax law and related reporting requirements. When they are done, this information will help the them select and audit future employment tax returns with the greatest compliance risk.
The 2 main reasons why the are conducting this are:

1-To secure statistically valid information for computing the Employment Tax Gap.

2-To determine compliance characteristics so IRS can focus on the most noncompliant employment tax areas.

The way this will work is that the IRS will select 2,000 taxpayers each year for the next three years, all randomly. Taxpayers will receive notices describing the NRP process and this process is similar to those used in recent NRP studies for individuals and Form 1120S corporations.

Employers should have all of their records available to expedite these examinations. A payroll company can assist you in making sure that you have all the required information to conduct this examinations. If you get to be one of the "lucky" 2000 taxpayers that they will randmoly choose, you want to make sure that you´re all prepared and they won´t take you by surprise.

If you feel that you might not be ready yet, don´t hesitate and contact a payroll company to start getting all of your records ready to be examined. You still have until February 2010 to be ready, so technically, you still have time. This process may take you a little while and that´s why we recommend you to start getting ready right away, if you haven´t yet.

In a speech delivered on 12/08/2009 at the Brookings Institution in Washington, Obama indicated "I believe it's worthwhile to create a tax incentive to encourage small businesses to add and keep employees, and I'm going to work with Congress to pass one,"

One option may include a temporary payroll tax holiday for employers. A payroll tax holiday would temporarily waive the 12.4% tax levied on workers' first $106,800 of wages. This would save employers half of that or 6.20%. A tax holiday would especially benefit business owners and sole proprietors, because they foot the full 12.4% tax bill. It would also put more cash in the hands of business owners, which lawmakers hope would be used to hire additional workers.

These changes in the tax law may become overwhelming for businesses. Also businesses would not want to miss any new tax breaks that might suddenly come through from the IRS. A payroll service can help you with all your payroll processing needs and make sure all the new tax laws are correctly and timely applied.

Another option is to boost investments. Investors who buy stock, if they hold the stock for at least five years, they can skip paying capital gains tax on a portion of their profits. The Recovery Act boosted that exclusion to 75% for investments made in 2010 and most of 2009.

President Obama called Tuesday for increasing that exclusion to 100% for a one-year period. The hope is that investors will take advantage of the window to plow more capital into small companies, even though they won't be able to take advantage of their tax breaks for at least five years.

The White House also proposed extending two other Recovery Act tax provisions, one that allows small businesses to expense up to $250,000 worth of qualified capital investments and another that accelerates the rate at which businesses can deduct capital expenditures.

Continue reading "Obama's New Payroll Tax Breaks for Small Businesses" »

Organization is the key to succeed in any area of a business. It's something that applies to all the sections, from the information desk to the CEO office. It might seem like organization wouldn't affect so much a business, but if we pay close attention to everything that happens in a business, we'll see that Organization is the key for success.

When we're referring to payroll activities, in particular, we can see that until the employee receives the check in his/her hand or the money in his/her bank account, there are many steps that take place.

Some businesses do their payroll activities using a third party service, but even then, there are many things that the business has to accomplish in order to have this task done. When setting up their account for the first time, they need to have their entire employee's information ready to be accessed, because a single mistake can make a big difference. After this operation is completed, the employer has to access the system every time they need to run payroll, and have the hours that their employees have worked all organized and ready to be entered in the system. In the last step they just process the payroll, print the checks and paystubs and hand them to their employees.

It might seem like this process looks fairly easy, and it is, but without the proper organization, even the simplest process could become tedious and complicated. Having all the employees in your business trained the right way to accomplish their tasks in the most efficient way takes time, but the end results are worth the investment in time and money that was applied.

A payroll service can help you with all your payroll needs and also work with you to solve any organizing issues your business may have.