Business and Payroll Tax Help

January 2, 2024

Having business or payroll tax issues? Get Help.

Business Tax Issues

Are all your tax obligations being met as a business owner? Are you delinquent in paying these quarterly? Valley Tax Law can take control of your tax problems, and negotiating a resolution with the IRS.

There are two types of “Payroll Tax” business owners must pay:

  • 1) Withholding Taxes – Employers are required by law to withhold a certain portion of an employee’s income and match some of these contribution as well. The income is withheld to pay for a variety of things such as federal income taxes, Social Security, and Medicare taxes. In many states like California, the employer must also withhold city and state tax amounts from the employee’s paycheck.
  • 2) Pay-As-You-Go (PAYG) or Pay-As-You-Earn (PAYE) Taxes – PAYG and PAYE payroll taxes are a business expense paid by the employer. They are directly related to the costs of employing an hourly or salaried worker.

What is FICA?

Social Security and Medicare tax are also referred to their official name as the Federal Insurance Contributions Act (FICA).The employee must pay this tax in every paycheck, and the employer must provide an equal amount. Failure to submit your company’s quarterly federal taxes will bring aggressive action from the IRS, threatening the possible loss of your business.

Applicable Unemployment Taxes

Unaware to many, the employer must pay both state and federal taxes for Unemployment Benefits of each employee. These are respectively known as the Federal Unemployment Tax Act (FUTA) and the State Unemployment Tax Act (SUTA). These taxes protect the employee if they lose their job, allowing them to draw unemployment income.

Understanding Where the Money Goes After You Pay

Federal taxes are applied directly to your Medicare and Social Security benefits. While you do not see these benefits presently, you will when you reach retirement age or if you become disabled. With each pay period your employer withholds a certain amount of your income for Social Security and Medicare. They are required by law to make a matching contribution on your behalf. These Social Security payments accumulate for you to draw upon when you retire.

Understanding Forms and Paperwork

It is extremely important for an employer to keep accurate, updated information. If any of this information is incorrect, it can result in errors and serious problems with the federal government. Delaying repayment on these charges will only result in escalating penalties and fines. It is imperative that you have a competent tax professional on your side.

Other federal taxes withheld are used to fund such things as:

  • Employer’s Federal Taxes
  • Defense Funding
  • Military and Law Enforcement
  • Foreign Affairs and Community Improvement Development Projects

Your Responsibilities as a Business Owner

Taking care of payroll taxes is the responsibility of every employer. Businesses are legally bound to withhold state and federal income tax, Social Security, and Medicare taxes from the paycheck of each individual employee. Businesses are required by law to match Social Security and Medicare taxes as well as pay state and federal unemployment tax for each employee.

If you as a business owner do not understand the complexities of this process, you are not alone. Many business owners are in the exact same boat, and we have helped them to become compliant again, and allowed them to focus on running their company instead of dealing with the government.

We can do this for you too.

Responsibilities of a Business Owner

Your business must have each employee complete a W-4 form at the time of hire and have it on file. This form is used to determine the amount of the payroll tax withheld from an employee’s paycheck. In addition, many states use the W-4 to compute state tax withholding amount.

The federal tax information concerns employee Social Security and Medicare which is also known as the Federal Insurance Contributions Act (FICA). This provides funding for retirees, disabled individuals and the minor children of a decedent. The amount of social security that a person will receive upon retirement is directly proportion to the amount a person earns.

Responsibilities for Withholding

By law FICA tax must be withheld from an employee’s paycheck. If an employer fails to do this, they will be subject to a Trust Fund Recovery Penalty from the IRS. This penalty is imposed on employers or individuals who have been determined to be responsible for the violation. The allotted penalty is one hundred percent of the federal or state payroll tax owed, in addition to multiple fines. The employer must pay a matching amount of FICA tax on each employee.

How to File

There are four different payroll tax forms that apply to federal payroll tax and employee withholding. An IRS tax attorney will know which ones to use for your business. You must file and pay these quarterly taxes to the U.S. Department of Treasury to ensure that, in the event one of your employees becomes disabled or unemployed, they are able to utilize their benefits.

Federal and State Unemployment Tax (FUTA)

By law each employer must also pay federal and state business taxes in order to provide a fund for unemployment compensation insurance for their workers. This is called Federal and State Unemployment Tax (FUTA). The income base for FUTA is $7000, with the employer being legally responsible for only the first $7000 being paid to an unemployed worker.

As long as you as a business owner continue to pay federal and state income tax, you have nothing to worry about. However, if for some reason you run into a problem that hinders your ability to pay, you must get professional tax help.

The In’s and Out’s of Business Taxes

How the Government Tracks Businesses

As a business owner, you may be familiar with payroll tax withholding and your responsibility to withhold and file federal, state and local taxes for your employees. However, prior to establishing a business or hiring an employee, you must secure an employer identification number (EIN). This will allow the government to track your business and ensure that you are filing your quarterly taxes on time.

How These Apply to Small Business Subcontract Work

Small businesses that subcontract work are not required to file federal payroll taxes for people who work on an independent basis. That is why some smaller businesses find subcontracting a viable option. But, should the status of the employee ever change, this would require the employer to make payroll and taxation amendments to reflect this change. Your IRS tax attorney can make this transition smoother for you and alleviate any payroll tax problem. If you mistakenly file the wrong federal tax information on an employee, this will create a federal payroll tax problem. Your business will experience dire financial difficulties as a result. Again this is reason enough to enlist the assistance of a qualified tax attorney to circumvent any misunderstandings or problems.

Business Compliance with IRS Withholding Regulations

There are several things employers must do to make sure they are in compliance with federal and state laws. They are required by law to withhold a certain percentage of an employee’s wages and to match that contribution. As of 2007, this rate was approximately 6.2 %, according to Social Security tax regulations. The Medicare tax rate was 1.45% of employee income. Again the employer is legally bound to pay a matching amount.

What Is a 940 Tax Form?

If you are not familiar with an IRS 940 tax form, you need a qualified expert to explain it to you in detail. As a business owner, if you do not completely understand this form, it can cause you expense problems. The 940 tax form requires a business to make unemployment payments for its employees. Failing to file these forms with the IRS can lead to having you company shut down and possibly even having criminal charges filed against you.

Form 940: Unemployment Payment Reporting Form

A firm like ours can help you understand the process of filing an IRS 940 tax form and can assist you with the filing of any possible late tax returns as well. An IRS 940 form must be filed for domestic household employees, farming or agricultural employees and all business employees. No one is exempt from the requirement of employers to pay unemployment payments for each employee. It is the law.

Because of the complexities of the IRS 940 tax laws, many employers find it very confusing. The tax code and regulations can vary depending on your type of business. Tax attorneys know and understand each of these laws and how they will apply to your business. It is very important for you as a business owner to be aware of your responsibilities and to keep accurate records on all of your employees. Without this information, you may find yourself having a complex and difficult employer payroll tax problem.

AKA: Annual Unemployment Tax Return

Even though the prospect of filing taxes is never a pleasant experience, a tax attorney can take the headache out of doing this. The IRS 940 tax form is also known as the annual unemployment tax return. Your business is responsible for reporting to the government all taxes paid for each employee. Failure to do this will result in a payroll tax problem, for which you will have to seek employer payroll tax help. This is where your tax attorney will come into play and can prove to be useful.

According to the federal code, the taxation will apply to the first $7,000 paid on behalf of each employee. This tax provides payments to a worker who has become displaced or unemployed. It is a important obligation for businesses to file quarterly IRS 940 tax forms. This may be the only source of income for the person who has been laid off or fired from a job. The government cracks down on businesses that do not comply with the laws surrounding this tax.

What Is a 941 Tax Form?

An IRS 941 tax form is used to report payroll information to the IRS. Employers are required by law to withhold a percentage of employee wages for taxation purposes. These amounts are for Federal, Social Security and Medicare taxes. These taxes withheld from employees payroll checks are applied to pay tax liabilities at the end of the year.

Help With Your Form 941

The 941 Forms are used to report things such as:

  • Payroll Taxes on a Quarterly Basis
  • Social Security Adjustments
  • Sick Pay
  • Tips
  • Group Life Insurance
  • Previous Quarters Adjustment to any Payroll Taxes

If this information is foreign to you, a qualified tax professional may be able to make more sense of it. Feel free to give us a call if you have any questions.

How to Use a Form 941

It is a tax form used by an employer on a quarterly basis. The employer would NOT use the form to report back withholding, back income tax with-holdings, or any item non-payroll related such as pension, 401K, or gambling income. This tax form is used specifically for payroll reporting.

Quarterly Reporting Requirements

Employers are required to report and pay for 941 tax, four times per year. Failure by an employer to submit and pay the quarterly taxes will result in IRS fines and penalties which accrue quite rapidly. Even a small business with one or two employees is subject to the same process. If you have questions, need payroll tax assistance or have a payroll tax problem, help is available. Hiring an IRS tax attorney will take the headache out of filing this information. A qualified IRS tax attorney can help you avoid late filing which can result in irreversible financial damages. The IRS has complex tax laws and codes regarding form 941. Trying to understand them is difficult. Serious problems with 941 taxes are no laughing matter.

What to do If you have failed to file

If your business is experiencing financial difficulties, you may find yourself falling behind on your federal obligations. Occasional even a very successful business man may simply neglect to file their quarterly reports. Fortunately there are companies like us available to facilitate your payroll tax problems. If your business has not filed the required tax forms and you owe outstanding 941 taxes, you will encounter a serious payroll tax problem.

How to Qualify for a Reduced Amount

If you cannot pay your IRS 941 taxes, you may even qualify for a reduction of the amount you owe. We deal with cases like this all the time, and can negotiate with the government for you, perhaps reducing your tax debt significantly. If a reduced settlement can be reached, you may even be able to pay off your outstanding business taxes in one lump sum. If not, there is the alternative of an installment agreement (also known as a payment plan), allowing you to make affordable monthly payments to eliminate your tax debt.

Avoiding Unnecessary Criminal Prosecution

The government has recently begun to be more aggressive in pursuit and prosecution business owners who fail to file their 941 taxes on time. They are extremely serious about businesses complying with the tax laws. They will be more receptive to someone who has a specialist working with them to resolve their business tax problems. If you have questions about Gold IRA Rollovers, IRAs, contact the IRA specialists at Quest IRA.