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Payroll Taxes: Who’s Responsible?

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Payroll taxesAny business with employees must withhold money from its employees’ paychecks for income and employment taxes, including Social Security and Medicare taxes (known as Federal Insurance Contributions Act taxes, or FICA), and forward that money to the government. A business that knowingly or unknowingly fails to remit these withheld taxes in a timely manner will find itself in trouble with the IRS.

The IRS may levy a penalty, known as the trust fund recovery penalty, on individuals classified as “responsible persons.” The penalty is equal to 100% of the unpaid federal income and FICA taxes withheld from employees’ pay.

Who’s a Responsible Person?

Any person who is responsible for collecting, accounting for, and paying over withheld taxes and who willfully fails to remit those taxes to the IRS is a responsible person who can be liable for the trust fund recovery penalty. A company’s officers and employees in charge of accounting functions could fall into this category. However, the IRS will take the facts and circumstances of each individual case into consideration.

The IRS states that a responsible person may be:

  • An officer or an employee of a corporation
  • A member or employee of a partnership
  • A corporate director or shareholder
  • Another person with authority and control over funds to direct their disbursement
  • Another corporation or third-party payer
  • Payroll service providers
  • The IRS will target any person who has significant influence over whether certain bills or creditors should be paid or is responsible for day-to-day financial management.

Working With the IRS

If your responsibilities make you a “responsible person,” then you must make certain that all payroll taxes are being correctly withheld and remitted in a timely manner. Talk to a tax advisor if you need to know more about the requirements.

Give us a call at 702-515-4025 today to learn more, or request a free initial consultation online.

Business Auto Deductions: Two Ways to Calculate

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Tax Preparation Services by J W Enterprises LLCDo you drive your car for business purposes? The costs of operating and maintaining your vehicle are potentially deductible. Here are some guidelines.

Two Methods

The IRS provides two basic methods for computing deductions for the business use of an automobile.

Actual expense method. With the actual expense method, you deduct the actual costs of operation, including licenses, registration fees, garage rent, repairs, gas, oil, tolls, and insurance. Additionally, you may claim depreciation deductions (and/or elect expensing under Section 179). If the car is leased, you deduct your lease payments rather than depreciation. (Certain limits apply.)

Standard mileage rate. Alternatively, you may choose to use an IRS-provided standard mileage rate. With this method, you multiply the number of business miles you drive during the year by the applicable rate (58¢ per mile for 2019). When you use the standard mileage rate, you don’t separately deduct expenses such as gasoline, oil, insurance, repairs and maintenance, depreciation, or lease payments. However, business-related parking fees and tolls are separately deductible.

Which Should You Use?

Generally, you will want to use the method that produces the largest deduction. If your vehicle is costly to own and operate, the actual expense method may be more advantageous. Conversely, if your vehicle is fuel efficient and/or inexpensive, the simpler standard mileage rate method may be a better choice.

With either method, the IRS requires that you keep records that substantiate your business use of the car: the date, place, business purpose, and number of miles you travel. When you use the actual expense method, you’ll also need records substantiating the amount and date of car-related expenditures. You can avoid having to retain receipts by using the standard mileage rate.

If you decide to use the standard mileage rate for a car you own, you may switch to the actual expense method in a later year. However, you won’t be able to claim accelerated depreciation deductions for the car. With a leased car, you have less flexibility. If you choose the standard mileage rate the first year, you must use it for the entire lease period.

Personal and Business Use

If you use your car for both personal and business purposes, you must keep track of your mileage for each purpose. To figure the percentage of qualified business use, you divide the business mileage by the total mileage driven. Then multiply that percentage by your total expenses.

We invite you to request a consultation online now or call J W Enterprises, LLC at 702-515-4025 to learn more about how we can help you save money on your taxes.

Protecting Yourself from Tax Fraud

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We all know tax season is stressful, and January through April is the time to really buckle down, get tax forms in order, and try to get the best return possible. While help from tax preparers, online tax software, and the IRS is helpful during this time, there is the ever-looming threat of
identity theft while filing!

I discussed this topic briefly in my last blog post regarding data security, but I really want to make you aware of the different options that are readily available should you find out that someone has used your Social Security Number (SSN). With so much fraudulent activity happening during tax season—especially because many people turn to filing electronically—the
IRS itself is cracking down.

Tax fraud happens when someone uses a Social Security Number (SSN) that doesn’t belong to them, and they claim a refund. If this happens to you, and you realize you’re unable to file because a refund has been claimed using your SSN, the IRS is there to help.

First and foremost, if you choose to file electronically, you are required to submit a driver’s license number or an identification card number. This is required by the IRS in an effort to eliminate tax fraud.

Another way the IRS is clamping down on tax fraud is by encouraging tax preparers to encrypt data, so cybertheft is limited. The IRS even suggest that encryption should be made standard protocol for data security purposes. Data encryption, essentially, is translating data into a special format or code, so only people with access or a “key” are able to read the sensitive information.

“Protect Your Clients; Protect Yourself: Tax Security 101 is a awareness campaign spearheaded by the IRS. Tax tips and advice for individuals, businesses, and preparers is made easily accessible through this campaign. According to the IRS website, This campaign follows recommendations made by the Electronic Tax Administration Advisory (ETAAC), which noted
“Tax professionals ‘are at an increased risk’ of security vulnerability.

Full access to this campaign’s information, as well as a variety of other ways to avoid and take action against tax fraud, can be found at here.

—Jake

Client Data Security

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Keeping my clients’ personal information private is of the utmost importance to me. At JW Enterprises, I make sure each and every item of data is kept secure.

With everything being digitized these days, data security is a top priority. And recently, as I flipped through the pages of Tax Pro Monthly, I found an interesting and helpful article about ways tax accountants and professionals can protect our clients’ data.

I’ve decided to share with you a few different ways to safeguard sensitive client data. By following the information below, clients can trust tax professionals handling their personal and financial information with the most care possible.

Phishing:

Be aware of phishing scams. “Phishing” is when scammers send fraudulent information via digital communication platforms (i.e. email, text, etc.) in order to obtain sensitive information such as account passwords, credit card numbers, Social Security numbers, and the like. Never open an embedded link from an email, text, or website that you do not recognize.

Limit access:

The only person who should have access to client information is the tax professional handling the account.

Software:

Anti-virus, anti-spyware, firewall, drive encryption: this is all security software that helps keep information on computers protected. While PCs and Macs typically come with security software already installed, there is always the option to purchase further protection.

Be Aware:

Being aware of possible data theft is essential. A tax preparation professional or firm can potentially be a victim of theft if one of the following occur:

● Clients receive tax returns before they file
● Clients’ tax returns are rejected (this could mean their S.S.N has already been used to file)
● Clients receive tax information they did not request.

Should anything out of the ordinary happen while filing, it is essential to contact the IRS immediately.

EFIN/PTINs:

Tax professionals can receive weekly reports regarding the number of tax returns they’ve filed. To check, login to the IRS’s e-Service account and check your EFIN status. If the number of returns filed in the report does not match the real number you’ve filed, contact the IRS e-Help Desk.

While some of this may seem like common knowledge, it is essential to reiterate. Data safeguarding is also important should an individual or small business choose to file on their own using online tax software.

During tax season, a lot of data is being used to create the best return possible. Just remember: Be safe and protective of your valuable information.

—Jake

A Reason to Like Your Loans

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If you’re in the process of repaying student loans, trust that we feel your pain. They’re expensive, they’re tiresome, and they’re another bill in your pile of many.

Oftentimes, student loan debt is a heavy burden to bear. But, did you know that if you make less than $80,000 a year ($165,000 if filing jointly), you may qualify for a deduction on the interest you’ve paid toward student loans?

If you’re in the process of paying back student loans on a degree, certificate, or educational credential which you’ve received during your time taking credits at least part-time, you may qualify for this special tax deduction.

Again, not the entirety of your student loan repayment qualifies for a deduction. Rather, the portion of your payment that covers interest on your loans, if it is above $600, qualifies. This deduction can reduce your taxable income by up to $2,500.

Anyone that has paid more than $600 in interest in 2018 should receive a Form 1098-E (student loan interest tax form) from each of their lenders. If you think you have paid over $600 to interest on your loans and have not received a 1098-E by the end of January, contact your lender.

In order to claim this deduction, you must be legally obligated to pay the loan. If a parent claims you as a dependent and you both are obligated to pay back the loan, the deduction is allowable to whomever actually makes the payments monthly. Consult your parents if you are unsure about whether or not they claim you on their taxes.

If you are unsure whether or not you qualify for this student loan tax deduction overall, the IRS has a helpful tool for you: Click here, take the survey, and see if you qualify.

—Jake

Do You Run Your Own Small Business? Read This!

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The rise of e-commerce has created a rise in the amount of people looking for self-employment—and why not? Running an online store, marketplace, or business is an excellent way to make money, and in most cases, also do something you love.

Do you enjoy painting in your free time? Graphic design? Sewing? Writing? There are a ton of different platforms nowadays that allow you to monetize these things. Etsy, Amazon Stores, Ebay, blogs, or even social media platforms in one way or another are spaces to create, build, and earn some money!

So, you’ve started an online shop and you’re actually earning an income! What now? Well, that’s where I come in. As a financial advisor for small businesses, I am a firm believer in working for yourself while using your passions to build a strong financial future. With tax season in full-swing, I’d like to take time to inform you about your obligation as someone self-employed.

To determine whether or not you need to file self-employment tax (SE tax), you need to figure out net profit or net loss from your business (business income, less your business expenses). If you have self-employment income of $400 or above, you are required to file taxes!

Filing taxes on income earned from self-employment might be something that slips your mind, especially if you receive a W2 from a full-time employer, too. However, turning to a tax accountant for help while filing independently-earned income is very beneficial. As I’ve stated in previous blog posts, free, online tax software is very convenient. Unfortunately, this software is cookie-cutter, impersonal, and does not ask all underlying questions about what goes into the work you do. This is why turning to a tax accountant or tax professional is beneficial when it comes to filing for your small business.

If you run your own small business or online marketplace, I will gladly help go through all options for filing your 2018 taxes. Call 702-515-4025 today for your free consultation.

— Jake