Tax Talk - The 20/20 tax resolution blog

Using the Internet as a tool to start or run your business can be both frustrating and enlightening at the same time.  The information you need is all out there, but it needs to be corralled into to some sort of order to be truly useful.  Fortunately,  we at 20/20 Tax Resolution have come across what you’ve been looking for in one place that will help you find almost anything for your business regarding your legal requirements and assist you in locating the necessary government services from federal (IRS), state, and local agencies.

Business.gov is an official site of the U.S. Small Business Association that has information on everything from business plan assistance to business law to incorporating your business, and a great deal more.

One tool we find particularly useful for our clients is the State and Local Resources page where all there are step-by-step instructions for complying with state and local regulations in your state.  Just click on your state and all the respective information will be available in one place.

According to Business.gov, every business needs one or more federal, state or local licenses or permits to operate. Licenses can range from a basic operating license to very specific permits,

Regulations vary by industry, state and locality, so it’s very important to understand the licensing rules where your business is located. Not complying with licensing and permitting regulations can lead to expensive fines and put your business at serious risk.

Therefore, the Business.gov Permit Me tool is extremely helpful to ensure that all the licenses, permits, and registrations needed to run your business are accounted for.

This is just the tip of the iceberg with the information provided on Business.gov and other Internet resources. It can be challenging on the Internet to compile all the information needed to run your business in one place, but we think Business.gov is a solid place to start.

Please remember that if you have any questions regarding your tax compliance issues or any tax liability situations, we are available to assist you in anyway we can.  Please contact us at 20/20 Tax Resolution so we can be an additional resource for you.

From time to time the IRS delivers some tax tips to us that we’d like to share with you.  This one is exceptionally timely with the April 15^th tax deadline approaching.  Please be sure to contact us at 20/20 Tax Resolution if you have any questions.

Will you be making a payment with your federal tax return this year? If so, here are 10 important things the IRS wants you to know about making tax payments correctly.

1.  Never send cash!

 2.  If you file electronically, you can file and pay in a single step by authorizing an electronic funds withdrawal via tax preparation software or a tax professional.

 3.  Whether you file a paper return or electronically, you can pay by phone or online using a credit or debit card.

 4.  Electronic payment options provide an alternative to paying taxes or user fees by check or money order. You can make payments 24 hours a day, seven days a week. Visit IRS.gov and search e-pay, or refer to Publication 3611, e-File Electronic Payments for more details.

 5.  If you itemize, you may be able to deduct the convenience fee charged for paying individual income taxes with a credit or debit card as a miscellaneous itemized deduction on Form 1040, Schedule A, Itemized Deductions. The deduction is subject to the 2 percent limit.

 6.  Enclose your payment with your return but do not staple it to the form.

 7.  If you pay by check or money order, make sure it is payable to the “United States Treasury.”

 8.  Always provide your correct name, address, Social Security number listed first on the tax form, daytime telephone number, tax year and form number on the front of your check or money order.

 9.  Complete and include Form 1040-V, Payment Voucher, when sending your payment to the IRS. This will help the IRS process your payment accurately and efficiently.

 10.  For more information, call 800-829-4477 for TeleTax Topic 158, Ensuring   Proper Credit of Payments. You can also find out more in Publication 17, Your Federal Income Tax and Form 1040-V, both available at IRS.gov

The current economic downturn was tough on many businesses in 2009.  The IRS’s 2009 collection statistics, which were released in January, bear this out.  In 2009, the IRS collected $48.9 billion, which represents a 13 percent decrease in collections from 2008 when the IRS collected $56.4 billion.  Although the amount collected in 2009 decreased, the level of enforced collection actually increased.  The number of liens issued by the IRS increased approximately 25 percent from 768,168 in 2008 to 965,618 in 2009.  Likewise, the number of levies issued by the IRS increased approximately 32 percent from 2,631,038 in 2008 to 4,478,181 in 2009.

As the effects of the economic downturn were felt by everyone, it appears the number of businesses and individuals that fell out of compliance with the IRS increased.  However, the ability to repay those liabilities decreased, despite the increase in enforced collection.  It is likely that the number of taxpayers owing money to the IRS and the number of liens filed in response will remain high and may even continue to increase through 2010.

It seems like everyone is trying to tap into the social media lifeline these days.  Even the historically drab and sterile IRS is getting in on the act.  The Service recently launched a YouTube channel and podcasts on Itunes with the intention of presenting tax advice to its viewers.

The videos highlight the $8,000 first-time homebuyer’s credit for those who purchase a house this year, the sales or excise tax deduction on new car purchases and the expanded credits for education and energy conservation.

After reviewing the videos it’s apparent that the provided information is helpful and applicable to a broad base of taxpayers.  For example, included is a video on using the IRS Withholding Calculator. Many workers received the Making Work Pay tax credit in April through their tax withholding at work. However, people who have more than one job or working spouses should double-check their withholding to ensure neither too much nor too little is being withheld. Taxpayers can utilize the IRS calculator to help determine if they need to make adjustments to their withholdings or not.

It’s commendable that the IRS is reaching out to taxpayers using the newer social media avenues such as YouTube, but the jury is still out on the efficacy of this outreach.  After almost two months, there are a measly 315 subscribers and 32,543 channel views.  While this could be the start of a new, albeit unlikely, hip IRS it’s more likely that no matter how much promotion goes into their channel—the same drab IRS communication methods will remain.  Therefore, only time will answer the lingering question: Is this social media venture a step in the right direction for the IRS or a waste of time and resources?

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.