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Payroll Taxes: Who’s Responsible?

November 19, 2019 by Admin

Keyboard with key for payrollAny 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.

Are you an individual or business owner who’s interested in lowering your tax burden? Call us at 631-474-2500 and ask to speak to a tax accountant now or request a consultation online and we’ll contact you.

Filed Under: Tax Articles

Traveling for Business and Pleasure — What’s Deductible?

October 23, 2019 by Admin

work related business outingBusiness owners who travel out of town on business sometimes like to extend their trips and take a little time to relax and see the sights. When a trip is partly for business and partly for pleasure, various expenses may still be deductible.

Domestic Travel

A self-employed individual whose trip is primarily for business may deduct the full cost of the travel itself (such as airfare or train fare) even though some of the trip is devoted to personal activities.1 Additionally, various other expenses allocable to business, such as lodging and 50% of meal costs incurred on the business days, are deductible.

If a trip is primarily for personal reasons, the entire cost of the travel is a nondeductible personal expense. However, expenses incurred while at the destination that are directly related to the taxpayer’s business may be deducted.

Foreign Travel

The deductibility rules for combined business/pleasure trips outside of the U.S. are a little more complicated in some respects. Even if the primary purpose of the trip is business, the cost of the travel itself generally has to be allocated, and only the business portion is deductible. However, no allocation has to be made — and the full travel cost is deductible — if:

  • The trip lasts for no more than seven consecutive days (excluding the day of departure but including the day of return); or
  • Personal days total less than 25% of the total days spent on the trip (including both the day of departure and the day of return); or
  • The taxpayer can establish that the opportunity to take a personal vacation was not a major consideration for the trip.
  • For these purposes, business days include days when business is conducted for only part of the day, days spent traveling to and from a business destination, and weekend days or holidays that fall between two business days.

As this brief overview suggests, with smart planning, self-employed business owners can maximize their write-offs for combined business/pleasure travel.

Are you an individual or business owner who’s interested in lowering your tax burden? Call Newton Sankey & Co. at 631-474-2500 and ask to speak to a tax accountant now or request a consultation online and we’ll contact you.

Source/Disclaimer:

1Under The Tax Cuts and Jobs Act of 2017, employees may no longer deduct unreimbursed employee business expenses as a miscellaneous deduction, effective with the 2018 tax year.

Filed Under: Tax Articles

Qualified Retirement Plans: Know the Rules

September 30, 2019 by Admin

older retired couple looking at their financialsPeriodically, the Internal Revenue Service issues a notice describing changes in its qualification requirements for retirement plans, including deadlines. Are you up to date? Click through to see the list of required amendments.

The IRS annually releases its Required Amendments (RA) list, which includes changes that individually designed retirement plans may need to make in order to remain qualified under the Internal Revenue Code. The most recent RA list was released via Notice 2017-72, which contains changes not only to the qualification requirements for individually designed plans but also to the deadline for amending the plans. There are two categories: Part A and Part B.

Part A: Likely Amendments

Part A consists of qualification changes that generally require amendments by most individually designed plans or most types of plans impacted by the change. Below are the two required changes for 2017:

Cash balance/hybrid plans must be amended to the extent necessary to comply with the IRS final rule pertaining to market rates of return and other applicable requirements. Published on November 16, 2015, the final rule covers plan years starting January 1, 2017, and thereafter.

Under the regulations, plan sponsors of defined benefit plans with above-market interest rates can now amend their plan so that it meets the market rate of return, without breaching anti-cutback rules. A cash balance plan is a type of defined benefit plan, though it also has characteristics of a defined contribution plan.

Eligible cooperative plans or eligible charity plans that were not subject to the benefit restrictions of IRC Section 436 must now meet those restrictions, effective January 1, 2017.

Ordinarily, if a defined benefit plan is underfunded by more than a specific percentage, the plan will have limited benefit options as a result. For instance, a plan sponsor cannot amend its defined benefit plan to increase benefits if the plan’s adjusted funding target attainment percentage is less than 80 percent.

Eligible cooperative plans or eligible charity plans that were excluded from those (and other) limitations under Section 436 in 2016 are now subject to them.

Part B: Unlikely Amendments

Part B of the RA list involves changes that the IRS does not expect to make for most plans. However, an amendment might be necessary if the plan has an unusual provision.

The RA list for 2017 has only one subject for Part B: partial annuity distribution for defined benefit pension plans, which indicates that in instances where a defined benefit plan allows benefits to be paid partly in the form of an annuity and partly as a single sum (bifurcated distributions), the plan must do so in a manner that complies with the § 417(e) regulations.

The IRS’s 2016 final regulations explain the different acceptable approaches for making bifurcated distributions for plan years starting January 1, 2017, and thereafter. You would need to amend your plan only if there’s an applicable provision.

Amendments to comply with Part A and Part B must be made by the final day of the second year following the release of the list — which would be December 31, 2019, for the 2017 list.

Are you an individual or business owner who’s interested in lowering your tax burden? Call Newton Sankey & Co. at 631-474-2500 and ask to speak to a tax accountant now or request a consultation online and we’ll contact you.

Filed Under: Tax Articles

Lock In Those Business Deductions

August 31, 2019 by Admin

Newton Sankey & Co - accountant workingIf you run a small business, you already have a full plate. The last thing you need is for the IRS to question any of your business expense deductions. But it could happen. And that’s why having records that prove your expenses is so important. Even deductions for routine business expenses could be disallowed if you don’t have appropriate records.

What Records Are Required?

Except in a few instances, the tax law does not require any special kind of records. You’re free to have a recordkeeping system that is suited to your business, as long as it clearly shows your expenses. In addition to books that allow you to track and summarize your business transactions, you should keep supporting documents, such as:

  • Canceled checks
  • Cash register receipts
  • Credit card sales slips
  • Invoices
  • Account statements

The rules are stricter for travel and transportation expenses. You should retain hotel bills or other documentary evidence (e.g., receipts, canceled checks) for each lodging expense and for any other expense of $75 or more. In addition, you should maintain a diary, log, or account book with the information described below.

  • Travel. Your records should show the cost of each separate expense for travel, lodging, and meals. For each trip, record your destination, the dates you left and returned, and the number of days spent on business. Also record the business purpose for the expense or the business benefit you gained or expected to gain. Incidental expenses, such as taxi fares, may be totaled in reasonable categories.
  • Transportation. As with travel, you should record the amount and date of each separate expense. Note your business destination and the business purpose for the expense. If you are deducting actual car expenses, you’ll need to record the cost of the car and the date you started using it for business (for depreciation purposes). If you drive the car for both business and personal purposes or claim the standard mileage rate, keep records of the mileage for each business use and the total miles driven during the year.

Don’t Mix Business and Personal Expenses

Things can get tangled if you intermingle business and personal expenses. You can avoid headaches by having a separate business bank account and credit card.

Call us at 631-474-2500 now to discuss how we can formulate an effective tax strategy for you or your business. You can also request your free consultation online.

Filed Under: Tax Articles

What Employers Should Know About Disability Coverage

July 30, 2019 by Admin

Newton Sankey & Co. - Business TaxThe world of disability coverage can be confusing for business owners. Click through to learn more about what disability coverage is, and what your options are as an employer.

As an employer, you want to offer fair coverage to all your valued employees. After all, if someone is injured or ill, you want to be sure they aren’t worrying about their job while they recover. That’s where several types of disability insurance as well as federal and state programs come into play. Each offers specific coverage for different reasons.

Short-Term and Long-Term Disability

Both short-term and long-term disability coverage refer to optional insurance policies offered to employees. Only employers can purchase short-term coverage, but anyone can buy long-term disability, and some employers offer it. Short-term coverage must be exhausted before long-term coverage kicks in and covers the rest of someone’s time out from work.

Most policies require that an employee’s personal, vacation and sick time are exhausted before short-term disability coverage begins. Short-term disability insurance typically covers several weeks of time off due to an accident or illness. After that, long-term covers the remainder. Long-term is usually a span of several months or more when someone is recovering from a serious illness or injury and cannot work.

Both short-term and long-term disability are considered optional insurance that many employers choose to offer as part of their benefits package. Short-term disability is paid for by the employer. Long-term may be paid in whole or part by the employer, employee or both.

Should You Offer Disability Benefits?

In the past, many companies paid entirely for disability benefits. These were included as part of an employee’s benefits package. Today, many companies are offering long-term disability as an optional benefit. Employees are either enrolled automatically and must opt out, or they can choose to enroll with weekly payroll deductions.

Offering long-term disability to your staff may be a smart idea. It’s an added perk that makes your company’s benefits package all the more attractive when wooing star candidates away from competitors, and it usually doesn’t cost much.

Call us at 631-474-2500 now to discuss how we can formulate an effective tax strategy for you or your business. You can also request your free consultation online.

Filed Under: Tax Articles

Not Using QuickBooks Online? What You’re Missing Out On

June 30, 2019 by Admin

Newton Sankey & Co. QuickBooksIf you dread every minute of the time you spend on accounting, you should know how QuickBooks Online can change your outlook.

How long would it take you to determine:

  • What your total expenses for this quarter are?
  • Whether or not your business is profitable as of today?
  • How much you’ve sold every month this year?
  • Which invoices are overdue?

If you’re using QuickBooks Online, you can get answers to all those questions—and more—in the time it takes you to sign on to the website.
That’s not an exaggeration. The first thing QuickBooks Online displays is what’s called its Dashboard. This is the site’s home page, which contains an array of charts and account balances that provide a quick overview of your finances. Click on an element here—say, a checking account balance—and you’ll be able to drill down and see the details behind it (in this case, an online account register). Click on the Expense graph, and a transaction report opens.

Your First Hours with QBO

QuickBooks Online is not one-size-fits-all. Its setup tools help you customize it to meet your own company’s needs.

QuickBooks Online works like other online productivity applications you may have used. It uses toolbars and buttons for navigation, drop-down lists and blank fields for data entry, and clickable links to open new related screens to trigger actions. Which is to say, the site is easy to use once you understand its structure. We can walk you through the early steps that are required, which involves tasks like: Using the provided setup tools to customize the site. Connecting QuickBooks Online to your bank and credit card company websites so you can work with transactions. Creating records for your customers, vendors, and the products and services you sell (you’ll be able to add new ones as your business grows). Learning about QuickBooks Online’s pre-built reports. Familiarizing yourself with the site’s workflow. Making the transition from your current accounting system.

How You’ll Benefit

Once you’re comfortable using QuickBooks Online, you’ll discover what millions of small businesses have already learned, that the site helps you:
Get paid faster. You can sign up with a payment processor to accept credit cards and direct bank withdrawals, which can speed up your customers’ responses to invoices. You’ll also be able to accept payments when you’re out of the office on your mobile devices.

Minimize errors. Once you enter data, QuickBooks Online remembers it. No more duplicate data entry that can cause costly mistakes.

Find any detail in seconds. QuickBooks Online has powerful search tools that allow you to find what you’re looking for quickly.
Better service customers. Because your customer profiles include transaction histories, you’ll be able to deal with questions and problems quickly and accurately.

Bill time as well as invoice products. QuickBooks Online supports sales of time-based services with capable time-tracking tools.

Improve your customers’ and vendors’ perception of you. Your business associates will know that you’re using state-of-the-art technology by the forms you share and the customer service you provide.

Save money and time. It does take some time to make the transition to QuickBooks Online. But you’ll quickly make that up with the hours you’ll save on accounting tasks, and be able to concentrate on tasks that improve your bottom line.

Be prepared to grow. Because all of your financial data is organized and easily accessible, you’ll be able to quickly generate reports that help you plan for a more profitable future. Banks and investors will need some of these if you decide to seek financing.

Mobile Access

Although you may do the bulk of your accounting work on your desktop or laptop, you’ll have access to many of the site’s features on your smartphone. Your home page displays both an abbreviated version of your browser-based dashboard and a list of recent transactions. You can view, edit, and build new customer, vendor, and product or service records. Snap a photo of a receipt to document an expense and look up or create invoices, estimates, and sales receipts. Record payments, view critical reports, and add notes. Of course, your mobile data is always synchronized with the site itself.

QuickBooks Online lets you do much of your accounting work when you’re away from the office with its mobile app.

Happy to Help

QuickBooks Online was designed for small businesspeople, not accountants. But it includes features that are best used in conjunction with our consulting services, like advanced reports, payroll, and the Chart of Accounts. In fact, the site makes it easy for us to have access to your data so we have the ability to monitor and troubleshoot.

We’ve helped countless sole proprietors and small businesses move their accounting operations to QuickBooks Online, and we’ve seen the difference it’s made in their productivity as well as their attitude toward financial management. Contact us, and we’ll be happy to do the same for you.

Social media posts

Still doing your accounting manually? You’re spending unnecessary hours and experiencing needless frustration. Talk to us about QuickBooks Online.

Did you know you can do much of your accounting work and accept customer payments on your smartphone? Let us introduce you to QuickBooks Online.

Are you often away from the office? QuickBooks Online lets you handle accounting tasks from anywhere there’s an internet connection. We can tell you how.

Does your manual accounting system make it hard to keep track of customers and inventory? QuickBooks Online can organize and manage both. Contact us.

Call Newton Sankey & Co. at 631-474-2500 to get started now or request your free consultation online.

Filed Under: QuickBooks

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