December 1, 2009 by April Leave a Comment

New Crackdown on Employment Taxes

The IRS announced that it has teamed up with 29 states (with others joining soon) to crack down on employment tax violations. The primary focus is on which workers should be treated as independent contractors and which should be classified as employees. These agreements are part of the IRS’s Questionable Employment Tax Practice (QETP) initiative, which will provide a centralized, uniform means for the IRS and state employment affairs to exchange data, thereby leveraging resources and encouraging businesses to comply with federal and state employment tax requirements.

Caution: It is a common misconception that someone working part-time or earning less than $600 per year should be classified as an independent contractor. In fact, part-time status and the number of hours worked are generally not factors that determine whether a worker is an employee or independent contractor. Determining the correct result can be very tricky. Usually the outcome depends on control. If the business has control over its workers to such an extent that it can control what will be done and how it will be done, that generally means that the workers are employees, and payroll taxes and worker’s compensation must be paid by the employer.

Warning: If a company is treating a person as an independent contractor, but that person believes they are an employee, that worker can file Form 8919, Uncollected Social Security and Medicare Tax on Wages, with the IRS. In this case, the worker only has to pay the employee’s share of employment taxes; however, if the company is treating this worker’s payroll improperly, it is responsible for the employer’s share of the taxes, plus penalty. Employers can also get in trouble if an independent contractor files for unemployment, telling the state that he or she believes they are an employee. In that case, a state could share such information with the IRS, indicating that the contractor might, in fact, be an employee.

Note: Employers think they save money by treating people as independent contractors, but beware. If an independent contractor gets hurt on the job, he or she is not covered by worker’s compensation. The company could be on the hook for a major legal liability. The general consensus is that treating someone as an employee is generally safer, for a whole host of reasons.

Determining worker status and filing and paying employment taxes can be a complex process. If you are a business owner who needs assistance, you should immediately call to discuss your particular situation.

Please contact us for further information:
Info@MyBusinessPartner.us
480-503-8904

Please feel free to forward this information to business associates who might benefit from this information.

October 13, 2009 by April Leave a Comment

My Business Partner Merger

My Business Partner LLC is excited to announce the merger with Accounting 101 LLC! Nicole A. Rose brings her experience and skill along with her firm under our wing beginning October 15th, 2009. She comes to us with over 15 years in public and private accounting experience ranging from the hospitality industry to Real Estate and Construction. Raised in Pekin, Illinois she transplanted to Arizona in 2004 with her husband’s job transfer and has made this her home. She is a mother of two boys, Seth (6-1/2) and Noah (4-1/2), enjoys watching them grow and develop and in the small amount of spare time she has remaining is an avid reader. Her focus at the firm will be internal administration and Senior Accountant. You can welcome her at Nicole@MyBusinessPartner.us.

September 15, 2009 by April Leave a Comment

Businesses Beware: Surrounding States Want Their Share of Your Tax Dollars

In today’s difficult economic environment, almost every state is looking for ways to increase revenues. One popular idea most states are pursuing is to aggressively seek revenue from out-of-state companies. The technique that states employ is to argue that out-of-state companies have nexus. Nexus means that an out-of-state company has some “connection” to that state, even though it might seem insignificant, that allows a state to subject the company to its tax laws. The biggest concern is that if a company has not been filing in a state for years for sales tax, as an example, income tax or franchise taxes for all prior years, plus interest and penalties, could be due. It is also important to note that states are now sharing more information. For example, many states have signed on to a more streamlined sales tax initiative program. There are many factors that could create this dreaded nexus, and we will touch on just a few.

Employees & Independent Contractors

One factor that can create nexus is whether you have employees working in another state, such as salespersons or independent contractors that sell goods in that state. Even having employees install or supervise installation of equipment in a state can create a nexus issue. Having employees in the state even for a short duration or short project will not avoid the issue of creating nexus.

Crossing State Lines with a Company Truck

It is possible that you do not create nexus by shipping goods by common carrier. However, even if you only occasionally deliver goods across state lines using your vehicles, nexus could be created. Aggressive states have agents on their border pulling over out-of-state trucks and, in certain cases, have even seized the vehicle and cargo.

What Should You Do?

If you are concerned with possible exposure and liability, there are steps to be taken. First, consider having a nexus study done by our firm to determine your possible exposure to taxes and penalties. Second, our firm can anonymously contact these states on behalf of your company and negotiate voluntary disclosure agreements.