Payroll Tax Issues
The IRS has simplified the deposit rules for small businesses. Beginning January 1, 2006, certain small businesses will no longer need to make quarterly payroll tax deposits. Under the new rules, small businesses can make their payroll tax payments annually if they have less than $1,000 due. Eligible employers file Form 944 (Employer’s Annual Federal Tax Return) with their tax payment once a year. This will reduce the paperwork and cash flow requirements for almost a million small businesses. And when you reduce the filing requirements, you reduce the chance for errors and the resulting penalties by the IRS. The IRS sent letters to these employers in February 2006. If you didn’t receive notification but believe you are eligible, contact the IRS at 1-800-829-0115 by April 1. 2006.
Employers with less than $2,500 in quarterly employment tax liability may remit Federal Employment Tax Payments with their Quarterly Form 941 (Employer's Quarterly Federal Tax Return) instead of depositing them at an authorized financial institution. Businesses with $2,500 or more of employment taxes must still make deposits to an authorized financial institution.
If you would like assistance with your tax planning or filing, please contact our office. We are here to help with all your tax and business concerns.
Please Note New Address for Remitting Form 941: The IRS, once again, has changed the address for remitting Form 941 (Employer's Quarterly Federal Tax Return) The new addresses are provided below:
|Return with Payment
Internal Revenue Service
P.O. Box 105703
Atlanta, GA 30348-5703
|Return w/o Payment
Internal Revenue Service
Cincinnati, OH 45999-0005
THE EMPLOYEE VS. INDEPENDENT CONTRACTOR ISSUE
Many business people see advantages in retaining contract labor rather than hiring additional employees. Among other considerations, the business avoids payroll taxes, insurance, and benefit costs. However, the IRS has focused its attention on the employee vs. independent contractor issue, and has developed guidelines to determine whether work is in fact contract labor. The status of workers is often reviewed during audit procedures. Failing such an audit may result in fines and additional employment taxes.
A list of work characteristics called the "20 Common Law Factors" helps define contract work by trying to pinpoint which party actually controls the work. Call us if you'd like to discuss these work characteristics.
ELECTRONIC TAX FILING
The IRS' Electronic Federal Tax Payment System (EFTPS) was designed to make electronic payment of all federal deposits easier on everyone and to eliminate deposit coupons and check writing. Businesses with an aggregate federal tax deposit of $200,000 or more are required to use EFTPS. Smaller businesses can transition to EFTPS at their own pace. Check with us about your current responsibilities under the EFTPS system.
Click here for more information on Payroll Taxes
Return to Business Tax Planning