Tax Talk - The 20/20 tax resolution blog

Confused if you are required to make Federal Tax Deposits (FTDs)?  Not sure when to make your FTDs?  Have you missed your FTD deadlines and are not sure what to do? 

If you’re a business owner or responsible for making deposits, let us help you make sense of the wild world of FTDS.  There’s a lot of information here so grab a chair and a pen and let’s begin–

A:  What are FTDs and who must make deposits?

FTDs reported on Form 941 are made up of the income, Social Security and Medicare taxes withheld from your employees’ salaries (also known as Trust Fund Taxes), and the employer matching half of the Social Security and Medicare Taxes (also known as FICA.)  FTDs reported on Form 940 are paid by the employer to provide for unemployment compensation to workers who have lost their jobs.  All employers who file Form 941 Returns with $2,500 or more tax due per quarter or Form 940 Returns with over $500 tax due per quarter must make deposits during the quarter rather than simply paying the tax with the return. 

B:  When to make FTDs?

This can be a little tricky.  It is our advice to err on the side of caution and make them sooner rather than later to avoid any penalties.  You can always make deposits the same date you pay your employees to ensure all deposits are made timely.  To calculate the IRS Form 941 deposit due dates there are several categories your business may fit into.  First, if you are a new employer and have never filed 941 returns, you are a monthly schedule depositor for the first calendar year of your business unless you are a special exception to the rule (if you accumulate a tax liability of $100,000 or more, you must make a deposit the following business day). Monthly schedule depositors should deposit taxes from all of their paydays in a month by the 15th of the next month.

If your total taxes on Form 941 are $2,500 or more, you’ll then need to determine if you’ll make either monthly schedule deposits or semiweekly schedule deposits by referring to this four-quarter Lookback Period. 

For Form 940 deposits, make the deposit by the last day of the first month after the quarter ends. 

C: How to make deposits?

FTDs can be made a variety of different ways.  We recommend utilizing the Electronic Federal Tax Payment System (EFTPS).  This is a free on-line service (www.eftps.gov) that allows employers to track all payments, ensure no typographical errors are made, and it is available 24 hours a day, seven days a week.  EFTPS Customer Service may also be contacted at 800-555-4477.

Taxpayers still have the option of making FTDs via Form 8190, Federal Tax Deposit Coupons. These coupons must be ordered directly from the IRS at 800-829-1040 or at your Local Taxpayer Assistance Center.  Please note that these coupons are only for current taxes, not for delinquent taxes.

That wraps up our summary of FTDs.  For more information consult Publication 15, Circular E, Employer’s Tax Guide, Publication 966, Electronic Choices for Paying All Your Federal Taxes, www.irs.gov, or your tax professional.

Many businesses get behind on tax deposits and end up in the agressive IRS collections process.  If this pertains to you, please know that you are not alone.  There are a myriad of options to resolve your collection account.  It’s best to consult with a professional to allow you the time to continue focusing on operating your business with the knowledge that you are being properly represented before the IRS.

20/20 Tax Resolution’s Assistant Associates spent a day at the Elitch Gardens theme park as way to say thanks for all their hard work.   We are proud of them and appreciate everything they do to ensure that we are successful in resolving our client’s tax liabilities.

**Tax consultant David F. Miles, EA of 20/20 Tax Resolution wants to remind you that if you owe tax associated with your social security number you will not receive a stimulus check.  The stimulus payment will be offset and credited to the back tax liability.  Business owners whose only tax debt resides with the company should still receieve a stimulus payment. ** 

Wondering where to put that extra cash? Before you buy a flat screen, try these suggestions and improve your long-term financial well-being.

Question: I’m thinking of using my stimulus check to make my home more energy efficient. Do you think this is wise choice, and do you have suggestions for other ways to use this extra money? -D.D.

Answer: I’m glad you asked because in a rare display of bureaucratic efficiency, it appears the federal government is actually getting those economic stimulus payments out ahead of schedule.

Which means two things:

First, you may find yourself on the receiving end of a check or direct deposit from the IRS of anywhere from $300 to $1,200 (plus a possible $300 per qualifying child) sooner than you think, if indeed you haven’t gotten the payment already. (The IRS Web site has a calculator that estimates your payment.)

Second, it means that people in the more than 130 million American households eligible for these payments will soon be asking themselves much the same question you pose: What should I do with this little windfall?

Well, the honchos down Washington - not mention the nation’s retailers - are hoping you’ll quickly spend this manna from DC and in so doing, rejuvenate the flagging economy. And if that’s what you’ve decided to do with this extra cash - or, given the rising price of food and other living expenses, that’s what you have to do with it - fine.

But if you’re in a position to do otherwise, I don’t think it would be unpatriotic to use this money to improve your financial prospects.

Certainly your idea of using the stimulus rebate to boost the energy efficiency of your home in the face of increasingly burdensome energy costs can be one way to both spend and invest your money, although I caution you that there are also plenty of people out there touting all sorts of energy-saving home improvements and products that may take decades to generate a decent return.

Keep in mind that the extent to which those savings enhance your financial security depends on what you do with the extra cash. If lower utility bills allow you to increase your contributions to a 401(k), that’s great. If the savings end up going to more lattes, then I’d say the long-term benefit is more tenuous.

So if you’re looking to really turn this bonus of sorts to your financial advantage, I’d be more inclined to consider moves where the payoff is more direct and easily quantified. Here are some suggestions.

Pay down debt. It’s no secret that a rising tide of borrowing helped fuel the last economic boom - and contributed to its demise. So if you went a little crazy during the good years and piled on too much credit-card, home-equity or other debt, this rebate check could be a good way to lighten the load.

To get the biggest bang for your loan-repayment buck, start with debt that carries the highest rate (most likely credit cards, which charge an average rate of 12%) and then move on to lower-rate loans.

Of course, this move will pay off even more if you keep your debt under control once you’ve pared it down. You can then apply the money that used to go toward repaying loans to one of options below.

Build an emergency reserve. With the economy flagging and it looking more and more like we’re sliding into recession, it’s even more important than usual to have a cushion of ready cash equal to three months’ of living expenses that can help tide you over a layoff or other financial setback. If you don’t have such a reserve, your stimulus payment can be your first step to building one.

Remember, this is money you have to depend on in a pinch, so you want to keep it in a secure place where it won’t get hammered if the financial markets head south. For the most part, that means keeping it in a short-term bank CD or a money-market fund run by a well-known investment firm. You can check out CD rates and compare yields on money-market funds on sites like Bankrate.com.

Invest it. If you’ve got your debt under control and have a decent emergency fund, then why not use this government grant of sorts to either start an investing program or add to one you already have? You don’t have to do anything fancy. Indeed, given the recent experience of how supposedly sophisticated investors got tripped up by securities backed by subprime debt, I think simpler is better.

There are no guarantees, of course, but if you stick with a mix of low-cost mutual funds with solid track records like the ones you’ll find on our Money 70 list of recommended funds, you should do just fine.

Invest it in an IRA. As long as you’re investing your check, why not consider investing it in an IRA and improve your retirement prospects at the same time? And assuming you qualify you can also get a nice tax deduction (if you do a traditional IRA) or enjoy tax-free withdrawals down the road (if you opt for a Roth IRA).

And you may be able to cash in on another tax bennie. If your income falls below certain thresholds, the Saver’s Credit program can provide a tax credit of up to 50% of your contribution to an IRA or other retirement accounts up to a maximum credit of $1,000 for singles or $2,000 for married couples. And yes, this credit is in addition to the regular tax benefits IRAs and other retirement accounts offer.

Finally, at the risk of sounding preachy, I’ll throw out one more idea. If your finances are pretty solid, you might want to consider donating a portion of this money that you weren’t expecting (at least not until recently) to a charity or a cause that you feel deserves your support. That may not improve your financial well being like the others I’ve suggested, but you may collect dividends in other ways.

Written by Walter Updegrave for CNNMoney.com

Habitat for Humanity International is a nonprofit organization that seeks to eliminate poverty housing and homelessness from the world. HFHI has built more than 250,000 houses around the globe, providing more than 1 million people in more than 3,000 communities with safe, decent, affordable shelter. We wanted to contribute to this noble cause so we have been partnering with HFHI for the past two years to build houses in Denver and its surrounding cities. Since the beginning of our partnership, over 60 employees have volunteered their time and, as always, it’s been a tremendously rewarding experience to see our hard work come to fruition to provide shelter for families in the area.

Working with HFHI has allowed us to be involved and active in the community while also providing our company and employees an opportunity to give back to those in need. We are extremely proud of our continued relationship with HFHI and look forward to upcoming opportunities to partner with the organization this Fall.

12/13/07 was the big day. We gathered the entire company together to unveil our new 20/20 campaign—our new logo, photography, collateral materials, and TV spot, which was to launch a few days later in Denver, Minneapolis and Seattle. Our employees arrived back at their desks to find 20/20-branded coffee mugs, T-shirts, mouse pads, the new collateral materials, and of course, beer! That’s when the real celebrating began. Since the launch of our campaign, we’ve been able to help more people and businesses than ever before.