2015 is almost over but there are still some ways to make the best of your tax situation before New Year’s is here. Spoiler-number 6 is the most important!
1. Do your 2015 bookkeeping now. If you aren’t current with your bookkeeping, now is a great time to catch up. You can’t know what your tax situation looks like if you don’t know what your income – or loss – is for the year.
2. Run bonus payroll. If your company is sitting on some cash consider running a bonus payroll. Didn’t make those quarterly estimated tax payments? Put all or part of the bonus to federal withholding to help catch up what you owe.
3. Set up a retirement plan. If you own a small business there are some easy ways to put away money for retirement. SEP and Simple IRAs make a lot of sense for micro and small business owners. There aren’t a lot of paperwork headaches or complicated filings required, and the contributions are tax deducible to the business. This is another good move if your company has some cash at the end of the year.
4. Buy equipment. On the fence about purchasing a computer or other office equipment? Take advantage of Section 179 and fully deduct big ticket items (aka fixed assets) in 2015, even if you only have them for a few days. Right now the deduction is limited to $25,000 but congress might change this.
5. Spend some money. Buy supplies and other business related items now for next year. Spend the money now and take the deduction now.
6. Find a fantastic CPA to work with. CPAs can do so much more than prepare tax returns! My firm offers a wide range of services such as bookkeeping, contract controller and CFO, financial modeling, and more. Take a look at my packages and services. Contact me for a free consultation!
Usually when you work with a payroll company, the last thing you expect is for them to not send your tax payments into the IRS. Unfortunately, in a recent court case, when a payroll company declared bankruptcy, that is exactly what happened.
In this particular case, when the payroll company went under it held client funds that were supposed to be paid to the IRS. Some clients received IRS notices that they still owed money while others never received those notices because they went straight to the payroll company. The bankrupt payroll company told some clients it was an IRS error. Regardless, the clients’ money was gone- and they still owed the taxes.
To reduce the risk of something like this happening to you, follow these steps:
Hire reputable payroll companies. I work with www.zenpayroll.com.
Don’t allow the payroll company to sign your tax returns. Confirm that the payroll company deposited your tax payments and filed your returns.
Don’t let IRS correspondence be sent to the payroll company.
Request tax account transcripts from the IRS on a regular basis.
Payroll taxes is one area the IRS is not sympathetic or forgiving about. Companies are always responsible for their taxes and the tax courts agree.
When companies are hiring there is often a question of whether they are bringing on contractors or employees. Sometimes it is easy to figure out, like when you use an outsourcing company or a subcontractor. Other times it can be more difficult to determine, such as hiring a remote employee or a sales representative.
The IRS asks some questions when determining if someone is a contractor or an employee:
Does the company control what the worker does and how the worker does his job? For example, do you tell the worker he has to work from 9-5, or can he work whenever is convenient to him?
Are the business aspects of the worker’s cob controlled by the company? This can include how you pay the worker, if you reimburse expenses, if you supply tools, etc.
Are there written contracts or employee-type benefits? This can include pension plans, insurance, vacation pay, etc.
There are consequences for miscategorizing employees as contractors. If you are paying workers as contractors when they should be employees, you can be responsible for payroll taxes. Late fees and penalties for missed payroll taxes can be very steep, and the IRS takes this very seriously.
There is no set rule for answering the contractor vs. employee question. Consider the entire relationship, make sure you consider the degree of control involved (what will be done and how it will be done), and make sure you document the decision in case the IRS questions you.
If you have questions about contractors vs. employees or payroll issues, please contact me.
Look out restaurants. As of January 1, 2014 automatic tips for servers will need to be included in payroll. That means reporting tips as wages and paying payroll taxes. That also means more tax expenses to restaurants and servers will need to wait longer to receive those hard earned dollars. Read more here.