Articles Posted in Payroll Tax Audit

Employment Taxes

If you have your own business, there is plenty going on all the time. In addition to taking care of your customers, you have to take care of your employees. Payroll can be very difficult with the many scenarios, and that can lead to an employment tax problem. Don’t feel like you are alone though as 941 payroll tax problems are extremely common when it comes to the IRS and what they have to look into.

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IRS tax problems can make your life a complete mess. Tax debt can cause never-ending strain and may also break marriages or even break families. Individuals facing IRS troubles should instantly seek tax help from a qualified tax relief professional to avoid drastic circumstances.

The IRS website is obviously the most comprehensive resource available. You can find all the tax forms, publications, instructions, frequently asked questions as well as resources for individuals, organizations, non-profits and all the other entities subject to tax under the United States laws. If you need any sort of help, documentation or information, the IRS webpage is the place to go.

Download any form from the webpage and you will immediately have the idea how exhausting it can be to fill a form without making even a minor mistake. Unfortunately, the smallest of mistakes can ruin your case and your request will be rejected no matter if you qualify for the IRS tax relief. This clearly illustrates you should seek professional help to get the best possible resolution for your tax problems.

The foremost thing you need to understand is that every individual faces a unique tax problem thus needs a unique solution and there is no one-size-fits-all formula to get rid of IRS tax issues. Furthermore, you must start taking steps to solve the problem as soon as you recognize it because delays will only infuriate the issues.

To get the best outcome, the plan is simple: identify your problem, choose an appropriate solution, complete the necessary paperwork and keep communicating with the IRS until you get all your problems solved. However, each step involved in the process, from pinpointing your issue to getting results, needs technical knowledge and specialized expertise.

IRS revenue agents and officers are pretty punitive because of the nature of their job. For many people this reason alone is enough to hire a tax relief professional instead of facing bullying demands by the IRS employees. When you hire a tax professional i.e. enrolled agent, CPA or tax attorney, you will be represented by your tax expert before the IRS. The expertise and experience of the tax resolution expert not only mean you should sit relaxed but also you can expect the best possible results.

How to Research Roni Deutch and other Tax Resolution Companies

Today I’m going to teach you a lesson. This lesson uses Roni Deutch as an example of what to look for when you’re in the market for a tax resolution company to help with your tax problems. Personally, I have nothing against Roni Deutch. Like a lot of other companies, Roni Deutch just happens to be in the same business as I am and that business is offering tax relief to individuals and companies who have tax problems including tax audits, unfiled tax returns, wage garnishment issues, payroll tax problems, IRS tax liens and other problems with the IRS.

Get to know the BBB

But that is pretty much where our similarities end. You see, unlike my company which has an “A+” rating from the Better Business Bureau (BBB), Roni Deutch has a rating of “F”. Now I don’t want to single out this company because during my many years in the tax relief business, I’ve seen a lot of my competitors end up at the bottom of the BBB rating scale. But unlike those tax resolution companies, I’ve been able to keep my business at or near the top of the BBB’s rating scale during those years in business.

Does this mean my business is better than Roni Deutch’s business?
Whether something is better or worse than something else is always a matter of opinion, and I’m not here to judge. What I am here to do is point out all of the information you can find on a tax resolution company before you enter into a contract with that company. Learning everything you can about the companies that offer help for your tax problems may be the single, most important step in the entire tax resolution process. Yet, many people skip this step.

It’s true!

I want people to stop doing this because it’s really not that hard. A lot of the information you can find on practically any company is free, including the information that’s reported by the BBB. And much of the information is reliable, especially information published by the BBB.

Using Roni Deutch again as an example, the BBB reports that 305 complaints have been filed against this tax resolution company. Among the complaints are 84 service issues, 80 issues involving a refund or exchange, 41 customer service issues, 38 contract issues, and more. The BBB also reports that the California Attorney General’s office has filed an action against Roni Deutch, allegedly for making untrue or misleading statements.

With so much valuable information about Roni Deutch and other tax resolution companies available on a single web site, I encourage everyone seeking tax debt relief or IRS tax audit representation, to check the BBB first before proceeding any further.

I hope you’ve enjoyed today’s lesson!

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Employment and Payroll Tax Audit & Examination:
The IRS announced its plan to audit the first 6,000 employment tax audits and small business will be their audit target. The IRS will start examining 2,000 companies every year over the next 3 years.

The IRS will utilize its audit findings to target a select group of businesses and aggressively audit their payroll tax and refine estimates to close the tax gap. IRS audit agents are specially trained to audit employment and payroll tax for the audited businesses.

Colleges and Universities Tax Audits:
The IRS will audit 400 Colleges and Universities this year. The IRS is looking for unrelated business income to focus its examination at. The IRS suspects that many universities aren’t paying taxes on income from unrelated activities to their tax-exempt status, for example: stadium advertising, gym memberships, and executive pay.

Contractors with unpaid back taxes:
The IRS is cracking down hard on contractors with unpaid back taxes. The current Obama administration is developing new regulations to prevent federal contractors from receiving any government contracts as long as they owe back tax debt. In 2008, procedures were in place to prevent any contractor from bidding on government contacts if they owed $3,000 or more in tax liens and or tax judgments to the IRS.

The Revenue Service is also eyeing projects that use rehabilitation credit. IRS Agents have spotted developers claiming the 20% income tax credit on the cost of renovating certified historic buildings before they have the necessary documentation from the National Park Service to certify that the subject project is in fact historic in nature. The IRS will crack down on developers who are performing Historic structure renovations.

Employers with unpaid FICA on tips:
The IRS is sending out bills to employers such as restaurants and hotels to collect on unpaid FICA on unreported tips using data they collected from form 4137 which employees use to report tip income that they didn’t disclose to their employers. The IRS is sending letters to these employers instructing them to include their calculated amount on their next scheduled payroll deposit. Employers who comply will avoid any penalties and interest on the back taxes. The IRS is also revising the 4137 form to include the employer’s EIN number.

Mike Habib EA actively represents taxpayers in audits and examination before all administrative levels of the IRS. Don’t compromise on your representation, contact us today.

Get your free audit consultation by calling 1-877-788-2937.

Solve Your 941 Payroll Tax Problems

It’s fairly common for businesses – no matter what size – to struggle with some sort of 941 tax issue or another. Even companies that use good payroll software to sort out their entire payroll related taxes are still prone to errors. The IRS implements strict guidelines when it comes to filing and paying payroll taxes in a timely manner. Are you a business owner with 941 payroll tax problems? It’s going to be difficult to obtain tax relief if you have been found guilty of deliberately failing to meet your obligations.

Late filing and payment

Late payment of payroll taxes causes your business to incur penalties and additional fees, which can be a huge problem especially if your business is already contending with cash flow issues to begin with. Small businesses, for instance, rarely have ample capital to run their operations, so when unexpected fees like these come up, cash flow is compromised.

The issue gets worse if you fail to file your payroll returns on time, as you’re incurring penalties for that error as well. Each monthly delay on filing can cost you 5% of your whole tax debt – and that doesn’t include other penalties resulting from late payments. Tax help usually comes in to negotiate these fees but unless you get it from a reliable and licensed professional, you wouldn’t be able to get anywhere as far as tax relief is concerned.

Trust fund recovery penalty

As an employer, it is your responsibility to deduct federal tax dues from your employees’ paychecks and pay it to the IRS on time. Failure to do so will result in a 100% penalty and enforced collection on the responsible person, the owner of the business or an officer of the corporation. The IRS can also put a levy on your company’s assets, including bank accounts and receivables until you pay for the payroll tax debt.

Handling payroll tax errors

The best ways to avoid payroll tax problems is to timely file and pay your taxes. Make sure that your payroll is current. You may want to source this work to a professional so you make sure that all the payroll taxes and withholdings are properly accounted for.

It’s natural to make mistakes. To avoid messy payroll tax problems, you want to review your records every year and be on the lookout for these errors. Doing so will help you handle discrepancies as they come instead of tackling all of them two to three years later, when errors have gotten out of hand.

Know your rights!

In order to get the best tax relief possible, it is important for you to know what your rights are. The IRS will then assess you penalties according to your willfulness – that is, your awareness that a lapse in payment has taken place. It pays to have a tax professional with you so you can assess whether or not you’re eligible for certain tax relief help options such as installment payments, offer in compromise, and other alternatives.

Solve your payroll tax problems now

Mike Habib can offer reliable tax relief help. Contact him through this website to obtain a free consult and assess your options.

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No More Tax Problems in 2009

Mike Habib, EA

Here is a New Year resolution you can’t afford to ignore… No more tax problems!! Yes, you can get rid of your tax problems in 2009.

You can solve your tax problems and get tax relief through our tax resolution services. You can finally get a fresh start by getting rid of your looming tax problem.

Are you asking yourself … if I have tax problems whom should I contact?

You have many options to settle your tax account and move on with your life. Here are some options that should entice you to get your life in order:

  • Offer In Compromise: an offer in compromise, OIC, will usually be accepted by the taxing authority to resolve your tax problem if the amount offered to settle your tax problem is equal or exceed the taxpayer’s Reasonable Collection Potential, RCP. The IRS, or the State, or the Sales Tax Agency determines RCP by using the financial analysis tools like the 433-A for individuals and 433-B for business entities.

  • Installment Agreement: paying the tax amount through a negotiated installment agreement is a common way to resolve your tax problem. You should seek our professional tax advice, as the taxing authority will usually request a large monthly payment, while our firm will work on attaining an installment agreement that is reasonable and you can live with without causing a financial and economic hardship on you and your family.

  • Currently Non Collectible – CNC Currently Non Collectible – CNC is accomplished when the IRS holds off an individual or business taxpayer’s account from active enforcement collection efforts. There are specific rules and requirements that a taxpayer must meet before a CNC status be accomplished. The IRS would not pursue enforcement collection activity against the taxpayer and possibly the statute of limitations on the entire tax liability will run.

It makes far more sense, and will probably be less costly in the long run, to resolve your tax problem with the IRS now, rather than dealing with the potential embarrassment and financial burden of having your employer garnish and levy your wages / paycheck or the IRS freezes and levy your bank accounts.

The IRS released tax records on their most famous tax problem cases that imprisoned Al Capone, they inadvertently nabbed the Governor of New York allegedly spending tens of thousands of dollars for what they least expected. From Will Smith, to Wesley Snipes to Nicolas Cage IRS audits and collection activities are on the rise, and is expected to continue in 2009 and for many years to come!

Tax problems do not go away by themselves… Take action today by contacting Mike Habib, EA directly at 1-877-78-TAXES or CLICK HERE

As an IRS licensed Enrolled Agent (EA) specializing in Tax Relief and Tax Resolution Services, I can represent individuals and businesses in all of the following states, counties, and metro cities, Alabama Alaska Arizona Arkansas California Colorado Connecticut Delaware Florida Georgia Hawaii Idaho Illinois Indiana Iowa Kansas Kentucky Louisiana Maine Maryland Massachusetts Michigan Minnesota Mississippi Missouri Montana Nebraska Nevada New Hampshire New Jersey New Mexico New York North Carolina North Dakota Ohio Oklahoma Oregon Pennsylvania Puerto Rico Rhode Island South Carolina South Dakota Tennessee Texas Utah Vermont Virginia Washington D.C. West Virginia Wisconsin Wyoming. AL AK AZ AR CA CO CT DE DC FL GA HI ID IL IN IA KS KY LA ME MD MA MI MN MS MO MT NE NV NH NJ NM NY NC ND OH OK OR PA RI SC SD TN TX UT VT VA WA WV WI WY New York, Los Angeles, Orange County, Riverside, San Bernardino, San Francisco, Ventura, Lancaster, Palmdale, Santa Barbara, Chicago, Washington D. C., Silicon Valley, Philadelphia, Boston, Detroit, Dallas, Houston, Atlanta, Miami, Seattle, Phoenix, Minneapolis, Cleveland, San Diego, St Louis, Denver, San Juan, Tampa, Pittsburgh, Portland, Cincinnati, Sacramento, Kansas City, Milwaukee, Orlando, Indianapolis, San Antonio, Norfolk & VB, Las Vegas, Columbus, Charlotte, New Orleans, Salt Lake City, Greensboro, Austin, Nashville, Providence, Raleigh, Hartford, Buffalo, Memphis, West Palm Beach, Jacksonville, Rochester, Grand Rapids, Reno, Oklahoma City, Louisville, Richmond, Greenville, Dayton, Fresno, Birmingham, Honolulu, Albany, Tucson, Tulsa, Tempe, Syracuse, Omaha, Albuquerque, Knoxville, El Paso, Bakersfield, Allentown, Harrisburg, Scranton, Toledo, Baton Rouge, Youngstown, Springfield, Sarasota, Little Rock, Orlando, McAllen, Stockton, Charleston, Wichita, Mobile, Columbia, Colorado Springs, Fort Wayne, Daytona Beach, Lakeland, Johnson City, Lexington, Augusta, Melbourne, Lancaster, Chattanooga, Des Moines, Kalamazoo, Lansing, Modesto, Fort Myers, Jackson, Boise, Billings, Madison, Spokane, Montgomery, and Pensacola

Capital contributions did not restore or increase shareholders’ tax bases in loans to S corporations Nathel, (2008) 131 TC No. 17

Mike Habib, EA

The Tax Court has held that taxpayers’ capital contributions to S corporations did not constitute income to the S corporations and that the contributions did not restore or increase their tax bases in their loans to the S corporations.

Background. Generally, under Code Sec. 1367 a shareholder’s tax bases in the stock in, and in the loans to, an S corporation are adjusted to reflect the shareholder’s share of income, losses, deductions, and credits of the S corporation as calculated under Code Sec. 1366(a)(1). Under Code Sec. 1367(a)(1), a shareholder’s tax basis in his S corporation stock is increased by, among other things, the shareholder’s share of the S corporation’s income items (including tax-exempt income). Under Code Sec. 1367(a)(2), a shareholder’s tax basis in his S corporation stock is decreased (but not below zero) by, among other things, the shareholder’s share of losses and deductions. If a shareholder’s tax basis in his stock in an S corporation is reduced to zero by his share of the losses of the S corporation, any further share of the S corporation’s losses decreases, but not below zero, the shareholder’s tax basis in outstanding loans the shareholder has made to the S corporation. (Code Sec. 1367(b)(2)(A), Reg. § 1.1367-2(b)(1)) Thus, a shareholder’s tax basis in loans the shareholder has made to an S corporation may be lower than their face amount or zero because of downward adjustments in such basis caused by losses of the S corporation that are passed through to the shareholder. (Code Sec. 1367(b)(2)(A))

Facts. In calculating ordinary income relating to $1,622,050 in loan payments received from two S corporations, for purposes of Code Sec. 1366(a)(1), brothers Ira and Sheldon Nathel treated $1,437,248 in capital contributions they made to the S corporations as income to the S corporations and as restoring or increasing under Code Sec. 1367(b)(2)(B), their tax bases in loans that they previously had made to the S corporations. Ira and Sheldon then used the restored or increased tax bases in the loans they made to the S corporations to offset ordinary income that otherwise would have been reportable by them on their receipt from the S corporations of the $1,622,050 loan payments.

On audit, IRS determined that Ira’s and Sheldon’s $1,437,248 capital contributions were not to be treated as restoring or increasing their tax bases in their loans to the S corporations but as increasing their tax bases in their stock in the S corporations, resulting in additional ordinary income being charged to them on receipt of the S corporation loan payments.

Court’s conclusion. The Tax Court held that for purposes of Code Sec. 1366(a)(1), Ira and Sheldon’s $1,437,248 capital contributions to the S corporations did not constitute income to the S corporations and that under Code Sec. 1367(b)(2)(B), Ira and Sheldon’s capital contributions did not restore or increase their tax bases in their loans to the S corporations.

The Court reasoned that by attempting to treat their capital contributions to the S corporations as income to the S corporations, Ira and Sheldon in effect sought to undermine three cardinal and longstanding principles of the tax law: (1) that a shareholder’s contributions to the capital of a corporation increase the basis of the shareholder’s stock in the corporation; (2) that equity (i.e., a shareholder’s contribution to the capital of a corporation) and debt (i.e., a shareholder’s loan to the corporation) are distinguishable and are treated differently by both the Code and the courts; and (3) that contributions to the capital of a corporation do not constitute income to the corporation.

For S Corporation Tax Help, For S Corporation Tax Audit, For S Corporation Back Taxes Help CLICK HERE

IT company owes nearly $1.7 million in back wages due to H-1B Visa Program violations [DOL ESA News Release, 10/30/08]:

Mike Habib, EA

An information technology (IT) company has agreed to pay $1,683,584 in back wages to 343 non-immigrant workers after a Department of Labor (DOL) investigation found that the company had violated the H-1B visa provisions of the Immigration and Nationality Act.

The H-1B program permits employers to temporarily hire foreign workers for jobs in the U.S. in professional occupations, such as computer programmers, engineers, physicians, and teachers. H-1B workers must be paid at least the same wage rate that is paid to U.S. workers who perform the same type of work, or the prevailing wage rate in the area of intended employment. From March 2005 through March 2007, employees hired by the IT company were not paid the minimum amount of wages that are required under the H-1B program.

The company also charged new H-1B workers training fees ranging from $1,000 to $2,500, which is in violation of the law.

Roundup of recent employment tax rulings

Mike Habib, EA

There have been several recent rulings issued in the employment tax area. Here is a summary:

Joint employment. A federal district court has ruled that a property management company was the joint employer of leasing consultants who worked out of the management company’s call center through three different staffing agencies. As a result, the management company owed the leasing consultants overtime under the Fair Labor Standards Act (FLSA). In issuing its ruling, the district court said that the management company maintained significant control over the working conditions of the leased employees. The district court noted that although the staffing agencies provided the management company with workers, it was the management company which determined the amount it would pay, including overtime, and the total number of hours that the employees could work. The management company provided the workspace and equipment. In addition, the management company could reject any of the agency employees it did not want at its facility. In addition, the leased employees were under the management company’s control and direction and were treated exactly like the management company’s contract employees performing the same job [Bastian v. Apartment Investment and Management Company, DC IL, Dkt No. 07 C 2069, 10/21/08].

Family Medical Leave Act. A federal district court has denied summary judgment to an employer that terminated an employee due to excess absenteeism. An absentee rate above a certain level was grounds for dismissal. The employee claimed that her rate would not have been above this level if her employer had factored her FMLA leave into the computation [Dickinson v. St. Cloud Hospital, DC MN, Dkt. No 07-3346 ADM/RLE, 10/20/08].

FICA tip credit. IRS Chief Counsel has concluded that the IRC §45B credit (also known as the FICA tip credit) may be claimed by an employer on its income tax return in the year (current tax year) that the IRS issued a notice and demand for payment of the FICA taxes from the employer, even though that was not the year (previous tax year) in which the unreported tips were received by the employee. The employee had failed to report the tips to his employer in the previous tax year. The employer in the current tax year received a notice and demand for the employer share of FICA taxes from the IRS. Chief Counsel concluded that for purposes of the credit, the tip amounts are deemed to be paid on the date on which the IRS notice and demand for the employer portion of the FICA tax is made to the employer [Chief Counsel Advice 200845052].

Trust fund recovery penalty. A federal appeals court has ruled that the president of a day care facility’s board of directors was a responsible person liable for the IRC §6672(a) trust fund penalty. Under IRC §6672(a), when an employer fails to properly pay over its payroll taxes, the IRS can seek to collect a penalty equal to 100% of the unpaid taxes from a “responsible person,” i.e., a person who: (1) is responsible for collecting, accounting for, and paying over payroll taxes; and (2) willfully fails to perform this responsibility. In this ruling, the president played an active role in various aspects of the day care facility’s operation and could have ensured that it paid its taxes, but chose instead not to exert any authority over these business affairs. Further, he didn’t qualify for the protection from the penalty given voluntary board members under IRC §6672(a) [Jefferson v. U.S., CA 7, 102 AFTR 2d 2008-6572, 10/8/08].

Calculation of disability benefits. A federal appeals court has ruled that per diem payments that an employer made to an employee should have been classified as “wages” for purposes of calculating benefits under the Longshore and Harbor Workers’ Compensation Act. On June 10, 2002, Otis Pearley injured his back in the course of his employment with B&D Contracting. From June 2002 through January 2006, Pearley received $241.52 per week in temporary disability benefits from B&D. The company specifically excluded its per diem payments to Pearley in the calculation of his benefits rate. Pearley challenged the amount of these payments before a Department of Labor administrative law judge (ALJ). The ALJ concluded that B&D should have included Pearley’s per diem payments as wages for purposes of calculating his average weekly wage. Accordingly, the ALJ calculated Pearley’s average weekly wage as $761.98, with a corresponding benefits rate of $507.98. The Benefits Review Board (BRB) agreed with the ALJ’s ruling. The U.S. Court of Appeals for the Fifth Circuit has now denied any further review of the BRB decision [B&D Contracting v. Pearley, CA5, Dkt. No. 07-60495, 11/6/08].

Timely reminder for small businesses to steer clear of trouble on payroll tax and retirement plan contributions IRS Employee Plan News (Fall 2008)

In these trying times, with cash scarce and credit hard to find, a small business might be tempted to “temporarily” use money it deducts for taxes and retirement plan contributions from employees’ wages. The Fall 2008 issue of IRS’s Employee Plans News [http://www.irs.gov/pub/irs-tege/fall08.pdf] suggests that practitioners remind clients that failing to remit payroll taxes and retirement plan contributions in a timely manner not only would violate an employer’s legal obligation, but also could subject them to heavy penalties.

Payroll taxes. IRS suggests that small business employers be reminded that when they deduct income and Social Security taxes from employees’ wages, the money is not theirs to use, even for a short period of time. Deducted amounts must be remitted, along with their portion of payroll taxes, by the next scheduled Federal Tax Deposit deadline. An employer that doesn’t deposit the money on time could be hit with:

  • penalties for making late deposits and for not depositing the proper amount; and
  • penalties for failing to file returns and pay taxes when due, for filing false returns, and for submitting bad checks.

The rate of these penalties increases with each passing day until deposits are made. Interest is also charged on the total unpaid tax and the penalty. These penalties and interest can add up quickly and lead to even bigger financial troubles for noncompliant businesses.

Observation: Perhaps the most compelling argument to make is that a company owner could be personally on the hook for unpaid payroll tax. Under Code Sec. 6672, when an employer fails to properly pay over its payroll taxes, IRS can seek to collect a penalty equal to 100% of the unpaid taxes from any “responsible person,” i.e., a person who (1) is responsible for collecting, accounting for and paying over payroll taxes and (2) willfully fails to perform this responsibility.

Employee elective deferrals. Businesses that maintain a retirement plan and allow employees to make elective deferrals might be tempted to “borrow” money they deduct from employees’ pay for plan contributions to pay other business expenses. IRS stresses that employers have fiduciary obligations under the Employee Retirement Income Security Act of 1974 (ERISA) to deposit the deducted amounts as soon as those amounts can be segregated from their own general assets, but no later than the 15th business day of the month immediately after the month in which they withheld the contributions. Under a proposed Dept. of Labor rule, plans with fewer than 100 participants are treated as meeting this deposit rule if such contributions are transferred to the plan within 7 business days from the date those amounts would otherwise have been payable to the employee in cash.