December 27, 2012
The IRS continues to challenge S Corporation shareholders regarding proper methods for paying themselves. That said, it’s critical that your S Corporation structure is set up appropriately and that compensation is paid and reported correctly. For example, in a recent court appeal case, an attorney was slapped with penalties and interest after failing to remit payroll taxes for his corporation—even though compensation was reported on a 1099-MISC and individual income and social security taxes were paid. This is a good example of why S Corps must ensure that payments are reported as compensation by December 31, 2012, and that appropriate tax deposits are made and payroll tax returns are filed.
In recent years, the IRS has also instituted a payroll audit program for profitable S Corporations. The program flags income tax returns reporting little or no W-2 payroll wages. The IRS is identifying more of these cases and assessing additional taxes and substantial penalties. The penalty, over and above any unpaid Social Security (FICA) taxes, frequently exceeds an additional 50% of the total tax liability—even if you paid taxes when you filed your individual return. The core issues being identified by the IRS are negligence in paying Social Security tax and making bi-weekly or monthly payroll tax deposit payments.
Avoid being flagged by the IRS by following these tips:
Things to Avoid:
Things to Do:
Contact us at our office and speak with one of our professionals about what steps you can take to avoid a painful and extremely costly S Corporation payroll tax audit.
From our entire staff: Best wishes for a happy and safe holiday season!
Ah, the freedom of freelancing. You’re the boss, so you can set your hours, pick your clients and choose your projects. Plus, you’re solely responsible for paying your own taxes, at tax time and all year long—
Are employees at your business traveling again after months of virtual meetings? In Notice 2021-52, the IRS announced the fiscal 2022 “per diem” rates that became effective October 1, 2021. Taxpayers can use these rates to substantiate the amount of expenses for lodging, meals and incidental expenses when traveling away from home. (Taxpayers in the transportation industry can use a special transportation industry rate.)
Here are some of the key tax-related deadlines affecting businesses and other employers during the fourth quarter of 2021. Keep in mind that this list isn’t all-inclusive, so there may be additional deadlines that apply to you. Contact us to ensure you’re meeting all applicable deadlines and to learn more about the filing requirements.