by Fresh Start Tax | May 14, 2014 | Tax Help
Understanding Employment Taxes, What You Need to Know
All Employers must deposit and report employment taxes.
You should see the Employment Tax Due Dates page for specific forms and due dates.
At the end of the year, you must prepare and file Form W-2, Wage and Tax Statement to report wages, tips and other compensation paid to an employee.
You should use Form W-3, Transmittal of Wage and Tax Statements to transmit Forms W-2 to the Social Security Administration.
Federal Income Tax
Employers generally must withhold federal income tax from employees’ wages.
To figure out how much tax to withhold, use the employee’s Form W-4 and withholding tables described in Publication 15, Employer’s Tax Guide.
Please Note: You must deposit your withholding.
The requirements for depositing, as explained in Publication 15, vary based on your business and the amount you withhold.
Social Security and Medicare Taxes
Employers generally must withhold part of social security and Medicare taxes from employees’ wages and you pay a matching amount yourself.
To figure out how much tax to withhold, use the employee’s Form W-4 and the methods described in Publication 15, Employer’s Tax Guide and Publication 15-A, Employer’s Supplemental Tax Guide.
You must deposit the wages you withhold. See requirements for depositing.
For 2013, the employee tax rate for social security increased to 6.2%. The social security wage base limit increased to $113,700.
Additional Medicare Tax
Beginning January 1, 2013, employers are responsible for withholding the 0.9% Additional Medicare Tax on an employee’s wages and compensation that exceeds a threshold amount based on the employee’s filing status.
You are required to begin withholding Additional Medicare Tax in the pay period in which it pays wages and compensation in excess of the threshold amount to an employee.
There is now no employer match for the Additional Medicare Tax.
Federal Unemployment (FUTA) Tax
Employers report and pay FUTA tax separately from Federal Income tax, and social security and Medicare taxes.
You pay FUTA tax only from your own funds.
Employees do not pay this tax or have it withheld from their pay. Refer to Publication 15, Employer’s Tax Guide and Publication 15-A, Employer’s Supplemental Tax Guide for more information on FUTA tax.
Self-Employment Tax
Self-Employment Tax (SE tax) is a social security and Medicare tax primarily for individuals who work for themselves.
It is similar to the social security and Medicare taxes withheld from the pay of most employees.
Employment Taxes, What You Need to Know, Former IRS
by Fresh Start Tax | May 14, 2014 | Tax Help
We defend taxpayers from Trust Fund Penalties.
Call us today for an initial free tax consultation and speak to a former IRS agent who is a true expert in the IRS trust fund penalty.
We can provide you with the best possible tax defense to avoid these trust fund penalties.
The IRS Trust Fund Recovery Penalty, What you Need to Know
To encourage prompt payment of withheld income and employment taxes, including social security taxes, railroad retirement taxes, or collected excise taxes, Congress passed a law that provides for the Trust Fund Penalty.
These taxes are called trust fund taxes because you actually hold the employee’s money in trust until you make a federal tax deposit in that amount.
In reality, they are not a tax.
The TFRP may apply to you if these unpaid trust fund taxes cannot be immediately collected from the business.
The business does not have to have stopped operating in order for the TFRP to be assessed.
Who Can Be Responsible for the Trust Fund Penalty
The TFRP may be assessed against any person who:
1. Is responsible for collecting or paying withheld income and employment taxes, or for paying collected excise taxes, and
2.Willfully fails to collect or pay them.
A responsible person is a person or group of people who has the duty to perform and the power to direct the collecting, accounting, and paying of trust fund taxes.
This person ma/can be:
- An officer or an employee of a corporation,
- A member or employee of a partnership,
- A corporate director or shareholder,
- A member of a board of trustees of a nonprofit organization,
- Another person with authority and control over funds to direct their disbursement,
- Another corporation or third party payer,
- Payroll Service Providers (PSP) ore responsible parties within a PSP
- Professional Employer Organizations (PEO) or
- Responsible parties within a PEO, or
- Responsible parties within the common law employer (client of PSP/PEO).
For willfulness to exist, the responsible person:
- Must have been, or should have been, aware of the outstanding taxes and
- Either intentionally disregarded the law or was plainly indifferent to its requirements (no evil intent or bad motive is required).
- Using available funds to pay other creditors when the business is unable to pay the employment taxes is an indication of willfulness.
How IRS proceeds
You may be asked by the IRS to complete an interview in order to determine the full scope of your duties and responsibilities. See Form 4180 on our website.
Responsibility is based on whether an individual exercised independent judgment with respect to the financial affairs of the business.
An employee is not a responsible person if the employee’s function was solely to pay the bills as directed by a superior, rather than to determine which creditors would or would not be paid.
Notice 784, Could You Be Personally Liable for Certain Unpaid Federal Taxes?, contains additional information regarding the TFRP.
How to Figure the TFRP Amount
The amount of the penalty is equal to the unpaid balance of the trust fund tax.
The penalty is computed based on:
- The unpaid income taxes withheld, plus
- The employee’s portion of the withheld FICA taxes.
For collected taxes, the penalty is based on the unpaid amount of collected excise taxes.
Assessing the TFRP
Determination
If the IRS determines that you are a responsible person, we will provide you a letter stating that we plan to assess the TFRP against you.
You have 60 days (75 days if this letter is addressed to you outside the United States) from the date of this letter to appeal our proposal.
The letter will explain your appeal rights. Refer to Publication 5, Your Appeal Rights and How to Prepare a Protest if You Don’t Agree (PDF), for a clear outline of the appeals process.
If you do not respond to our letter, we will assess the penalty against you and send you a Notice and Demand for Payment.
Big Caution
Once the IRS asserts the penalty, IRS can and will take collection action against your personal assets. For instance, we can file a federal tax lien or take levy or seizure action.
Call us today for a free initial tax consultation. Our firm defends against the trust fund penalties.
by steve | Sep 10, 2009 | Tax Help, Uncategorized
There is only one way to get IRS penalties and interest removed to lower your tax bill.
You must know the system to get IRS tax penalties abated or removed from the IRS.
As former IRS agents we know the system. you can go to our home page and look at abatements of penalties and interest for full detail on how to get IRS penalties removed.
If you have more than $25,000 worth of penalties and interest is best to hire a tax professional if you have under $25,000 in your penalties and interest please note the following:
5.1.15.1 (09-03-2008) From the Internal Revenue Service.
People have asked, where is the requirement found to abate penalties and interest?
It is found in the IRM. Here is the authority and law to do this.
Tax Abatements – Law and Regulations
1. According to the law and regulations, the Service has the authority to abate tax.
2. Law – Internal Revenue Code (IRC) 6404(a) provides (in part):
The Secretary is authorized to abate the unpaid portion of the assessment of any tax or any liability in respect thereof, which–is excessive in amount, or is assessed after the expiration of the period of limitation properly applicable thereto, or is erroneously or illegally assessed.
3. Regulations – Treasury Regulation 301.6404?1 provides (in part):
The district [area] director or the director of the regional service center [servicing campus] may abate any assessment, or unpaid portion thereof, if the assessment is in excess of the correct tax liability, if the assessment is made subsequent to the expiration of the period of limitations applicable thereto, or if the assessment has been erroneously or illegally made.
No claim for abatement may be filed with respect to income, estate, or gift tax.
Except in case of income, estate, or gift tax, if more than the correct amount of tax, interest, additional amount, addition to the tax, or assessable penalty is assessed but not paid to the district [area] director, the person against whom the assessment is made may file a claim for abatement of such overassessment. Each claim for abatement under this section shall be made on Form 843.
The Commissioner may issue uniform instructions to district [area] directors authorizing them, to the extent permitted in such instructions, to abate amounts the collection of which is not warranted because of the administration and collection costs.
Do not let an IRS agent tell you they cannot abate the penalties on cases. They will tell you this because they are lazy and do not want to file the paperwork. Show them you know of this authority.
We are very successful on abating penalties and interest when reasonable cause does exist.
by steve | Sep 10, 2009 | Tax Help, Uncategorized
There are generally two types of levies.
The IRS will send both of these levies out when working an open collection case.
The first type of levy is a wage garnishment levy.
The reason this levy is different is because it is a continuous levy.
It activates each and every paycheck period. It does not stop until the levy is released or until you quit.
The IRS by no means wants to take your paycheck each and every week, but does so because it has no choice until you get into compliance with their system.
The second type of levy is a bank or third party levy.
It takes effect only on the date, place, and time of service. It is a one time shot. To seize monies from this place again, the IRS must send out a new tax levy.
If you have received an IRS bank levy or wage garnishment, call us today and as a general rule within 24 hours of receiving your current financial statement and full documentation we can get your IRS bank levy and wage garnishment released in your case closed.
Please keep in mind all your tax returns will have to be up-to-date with the Internal Revenue Service.
IRS Bank Levy, Wage Garnishment Levy, What You Need to Know, Former IRS Agents, IRS Tax Experts
