The hiring of the first employee in your company is an important milestone for many small businesses, which is seen by the entrepreneur as a sign of growth and prosperity. Typically, it’s not expecting to herald countless frustrating hours spent on payroll and determining your payroll tax liability.
If you are an employer, it is essential that you pay payroll tax. The Internal Revenue Service says it is missing $ 12 billion in payroll taxes annually. She has become aggressive in her tactics of collecting this income.
As an employer, you have to pay these taxes; there is no getting around it. It is your responsibility to pay all income tax contributions.
The IRS will collect your payroll tax or they will take over your business with the help of tax consultants in NYC, confiscate your assets, and prosecute you about your personal tax.
IRS fines for missing income tax payments are instant and the penalties add up quickly. The IRS may use garnishments against your bookkeepers in NYC as one of the collection methods for missed payroll tax payments.
The IRS is particularly vigilant about small businesses. In the past, many small businesses thought that they could get away with ignoring these taxes more easily than large businesses. The IRS has recognized this and is now wary of businesses large and small. They are one of the IRS’s biggest compliance problems.
Who pays the NYC Payroll Tax, me or my Employee?
There are two different types of payroll obligations and taxes given by tax accountant NYC. Those that your employee pays but you are responsible for and those that you pay and are responsible for. It is crucial that you, as the employer, are responsible (liable) for the proper collection and payment of payroll tax in any case, and this responsibility must be taken seriously.
Payroll taxes cannot be waive in the event of bankruptcy. Your Uncle Sam is the last bill collector you want to get in the way.
Offsetting your income tax is illegal. You cannot use your employees’ withheld funds for anything other than paying the IRS. If you are caught doing this, you risk losing your business, your wealth, and your freedom. Employers are often jailed for being caught doing this type of violation.
There is no other method of settling income tax disputes other than paying. The IRS can shut down your business and confiscate your assets if you fail to pay payroll tax, and no court order is require.
Regardless of your company structure, you can be personally held responsible for unpaid income taxes. From the largest CEO to the smallest shareholder, you can be held personally liable if your Business Licensing Services NYC fails to pay payroll tax.
The IRS can impose the Trust Fund Recovery Penalty. The money you take for payroll taxes is from your employees. So you technically hold this money in trust to hand over to the IRS on behalf of your employees. The “Trust Fund Recovery Penalty” will be apply to your company if you fail to deliver this tax money on time.
Which Income Taxes am I Responsible for?
Federal withholding is the single largest deduction from the paycheck for most of us. It is the employer’s responsibility to use the W-4 to calculate how much to deduct from the employee’s check and remit to the federal government.
FICA stands for Federal Insurance Contributions Act tax and essentially means Social Security and Medicare. The theory behind these taxes is that these are share equally between employer and employee; 6.2% of payrolls for Social Security and 1.45% for Medicare. In addition, payrolls that are subject to Social Security (but not Medicare) tax are capped by a Social Security payroll base that is $ 106,800 for 2010 but is adjusted for inflation annually. This means that the maximum annual social security amount in 2010 is $ 6,621.10 each for employers and employees.
FUTA stands for Federal Unemployment Tax Act and is a tax that must be paid by the employer; typically 0.8% of the first $ 7,000 of income.
State and Local Taxes, as the name suggests, vary greatly from state to state. In general, every state charges SUTA, or state unemployment, and provides a withholding for state taxes.
Who do I have to Pay NYC payroll Tax For?
Payroll is a chore. It’s complicating, time-consuming, creates potentially devastating liability and creates cash flow problems for the company. So why not just bypass it? In the past, it was fashionable to refer to employees who work for you as independent contractors, pay them the money, and simply issue a 1099-MISC at the end of the year. Not only have you gained a ton of valuable time that you can use productively.
The clerk, uh, an independent contractor is also happy because he can take the whole check home with him without all of the onerous taxes and withholdings being deduct from his check. It’s a win-win situation, right? Well, guess again, Buckaroo. The tax office has long been on the trail of this ploy and recently launched a campaign against employers, uh, contractors who fail to properly classify those they hire.
Who is an Independent Contractor?
There are no clear lines or safe havens to determine when it is safe to actually consider a worker an independent contractor or employee, but the mind has to do with control over the worker’s time and services. Do you tell the worker when and where to be? Why do you demand the exclusivity of their services or do you have them work certain hours so that it would be difficult to work for someone else?
Do you pay them a constant amount over a longer period of time, at constant intervals? These are all factors that, in the eyes of the tax office, could mean that your employee is really an employee masquerading as an independent contractor.
All of this does not mean that you should convert the independent contractor into an employee immediately, but you do need to be clear about the IRS’s position on this matter and be wary of the potential consequences should you be audite.
Which Remuneration is Subject to NYC Payroll Tax?
Employee remuneration can take several forms and have many different names. Whether you call it payrolls, salaries, commissions, bonuses or something else is irrelevant for determining the payroll tax due; As a rule of thumb, if someone is compensating for their time or efforts, then it is likely to be subject to payroll tax. Some of the specific exceptions provided by the law are vacation pay, reimbursement of expenses, employee benefits, and prizes or gifts.
The Trust Fund Recovery Penalty is calculate at 100%. In other words, if you have $ 5,000 in unpaid income tax, the trust fund recovery payment will be assess at $ 5,000 in addition to the $ 5,000 you owe. The Trust Fund Recovery Penalty doubles your income tax liability.
If you find yourself in trouble with payroll tax, you need to turn to a tax resolution specialist quickly. You contact them in a timely manner. They may be able to help you pay your payroll tax to this day. Avoid the Trust Fund Recovery Penalty.
If you employ someone, you must deduct income tax from your salary. These taxes must be pay through IRS. Oftentimes, you may not know exactly how much to take. Sometimes you may fail to pay them to the IRA after moving in. The IRS takes this very seriously and there are severe penalties for such neglect. Always keep up to date with your payroll tax obligations. Chintamani Abhyankar gives useful advice.