MISSED TAX DEADLINE – APRIL 17, 2012 – OPTIONS AND HELP FOR TAXPAYERS

The last date to file your tax returns was April 17, 2012 and if you missed the deadline here are some options that might help you:

1. File your taxes ASAP- If you owe taxes files your taxes right away. The longer you wait to file your taxes the more you have to pay the IRS in interest and penalties. So, to avoid the high fees the sooner the IRS receives the return the better
2. EFILE your taxes – To make sure the IRS receives your tax filing soon, EFILE your taxes which can be done till October 15, 2012
3. File your return for free – If your income was less than $57,000 you can qualify to file your return for free through IRS Free File. For taxpayers who earn more than $57,000 and can file their own tax returns, you can use the Free fillable forms on IRS' website which allows you to do basic math calculations to complete your taxes.
4. Pay the most you can of your taxes – For taxpayers who owe the IRS, it is wise if you can pay as much as possible even though it is less than what you owe. After you pay the most, apply for Installment Agreement for the remaining balance. Taxpayers who file and pay late have to pay a penalty and interest. This will keep your tax penalty low.
5. Installment Agreement – Taxpayers who owe money and cannot afford to pay the full amount at once, can request a payment agreement with the IRS. You can file by mail using form 9465 or you can do it online on irs.gov in the IRS Online Payment Agreement Application section. Although, the installment agreement will not waive the interest charges you owe but the IRS can reduce the interest and penalty charges if there was a reasonable cause associated with low payment.
6. You may be due a Refund - You may be due a Refund from the IRS even if your income in below the normal filing requirements due the amounts withheld from your wages, quarterly estimated payments or due to special credits. For taxpayers who are due a Refund, you will not be charged any interest and late payment penalties but can forfeit your refund if you do not file your return within three years.

Form 1040X – A Band-Aid for Incorrect Form 1040.

Form 1040X – A Band-Aid for Incorrect Form 1040.

Last minute tax filing stress, lack of information or plain oversight causes taxpayers to flounder on their Form 1040. But it’s okay to make mistakes, provided you correct them in time, within 3 years, in this case.

IRS gives you a chance to correct your tax filing mistakes on Form 1040X. Form 1040X will be your new tax return. It can be used to

·         Correct forms 1040, 1040A, 1040EZ, 1040NR, or 1040NR-EZ.

·         Make certain elections after the prescribed deadline.

·         Change amounts previously adjusted by the IRS.

·         Make a claim for a carryback due to loss or unused credit.

Explain your mistakes:

The IRS needs to know why you are filing Form 1040X. The possible answers could be you received another W-2 after filing the return, forgot to claim child tax credit, forgot to claim a tuition and fees deduction, changed your filing status, did not add sales tax on your new car etc. Part III of Form 1040X gives you the chance to explain your mistake.

How to file:

All schedules and forms should be attached to Form 1040X in the order of the “attachment sequence no.” shown in the upper right corner of the schedule or form. IF there are supporting documents, they should be arranged in the same order as they were in the last return.

If you owe tax, enclose your check or money order in the envelope with the amended return.

Amended Tax returns cannot be e-filed. They have to be mailed in. If you are filing Form 1040X:

1.       In response to IRS notice, mail it to the address shown in the notice.

2.       Received reimbursement for a hurricane-related loss, mail it to Department of the Treasury, Internal Revenue Service Center Austin TX 73301-0255.

3.       With Form 1040NR or 1040NR-EZ, mail it to Department of the Treasury, Internal Revenue Service Center Austin TX 73301-0215.

Fact:

In 2010, the reported national average of time burden was 7 hrs, and cost was $100 per 1040X taxpayer.

Filing 1099-Misc for Independent Contractors

Small business owners guide to Independent Contractor taxes.

Many a times, small business owners hire outside contractors to work on a temporary, short-term, peripheral tasks. IRS defines them as owners or contractors who provide services to other businesses. Some examples include janitorial service, website developers, tax consultants, interior decorators etc.

Independent contractors are external consultants or subcontractors who are not on your company’s payroll. They are just paid the amount mutually agreed upon. No FICA taxes (social security and Medicare taxes) are withheld from payments and you do not file their taxes.

However, you cannot, still, sit back and relax after cutting out that check!

You are required to issue a Form 1099-Misc to the contractor by the end of January each year. It includes information on the compensation paid in the previous calendar year. Make sure that all independent contractors have given you a signed form W-9, that provides taxpayer ID (TIN). If they do not provide you with a valid taxpayer id (TIN), be prepared for Backup withholding.

Anatomy of a 1099-Misc

The 1099-Misc has 5 vital parts, each with its own significance:

·         Part 1 is called copy A, is sent to the IRS.

·         Part 2 is called copy 1, is sent to the state tax dept.

·         Part 3 is called copy B, is sent to the recipient.

·         Part 4 is called copy 2, is for the recipient to file.

·         Part 5 is called copy C, your copy.

 

Printed or Electronic?

If you have more than 249 vendors for whom you must file 1099-misc forms, IRS regulations require that you submit the forms electronically, go green!

However, if you file printed Form 1099-Misc with the IRS, you might as well use some more paper and also file Form 1096 (Annual Summary and Transmittal of US information returns). Form 1096 is the summary of information from all 1099 forms.

Threshold values for 1099 contractors:

Do you really need to file 1099-MISC?

If the vendor is paid less than $600, you really do not have to file 1099-Misc.

Also, according to William Perez, Guide to Tax Planning, you do not need to file 1099-Misc for payments made by credit card or other third-party processor.

Here are some more guidelines to filing 1099-Misc:

File Form 1099-Misc for each person to whom you have paid:

1. At least $10 in royalties or broker payments in lieu of dividends or tax exempt interest.

2. At least $600 in rents, services, prizes, awards or other income payments, medical, health care payments.

3. Any fishing boat proceeds.

4. Direct sales of at least $5000 of consumer products to buyer for resale.

5. Accrued wages, vacation pay, and other compensation paid to an estate or beneficiary after the date of death of a deceased employee.

6. At least $600 in remuneration to independent contractors.

7. At least $600 in remuneration to directors.

8. From whom you withheld any federal income tax under the backup withholding rules regardless of the amount of the payment.

In case, you decide to employ any of the wonderful people who worked for you as independent contractors, and have them work exclusively for you, refer my earlier post:

Employers Guide to Payroll taxes

Tax Preparation Business: Employers Guide to Payroll Taxes

Checking on your Payroll Provider

Outsourced Payroll, but did you check on your Payroll Providers?

The easiest way to do payroll, quite frankly is to sign up with a third party payroll provider, even if you have an accountant. In addition to processing your employees’ paychecks on time, your federal tax liabilities and state tax liabilities are paid as part of the service.

Behind the scenes…

Filing the right forms

To stay in compliance, at the end of each quarter your payroll provider will file your federal and state payroll tax forms with the appropriate agencies. A separate Form 941 is filed for each quarter. The first quarter is January through March. The second quarter is April through June. The third quarter is July through September. The fourth quarter is October through December.  Form 941 is generally due by the last day of the month following the end of the quarter. For example, wages you pay during the first quarter, January through March, must generally be reported on Form 941 by April 30th.

In addition to 941 Federal and Quarterly state forms, the yearly forms that are required to be filed are:

1.       944 Federal: To reduce the burden on small business taxpayers, IRS allows employers with small payrolls (liability < $1,000), including government employers to file an annual Form 944.

2.       W-2 and W-3

3.       940 Federal

4.       Annual State Reconciliations

The copies of these forms, that your payroll provider files, should be available to you by May 5, August 5, November  5, February  5 and March 5 of the respective quarter.

Depositing the taxes

The payroll providers withdraw money from your bank account to pay the appropriate Federal or State government agency.

·         If tax liability < $2,500 per quarter, deposit tax with return filing.

·         If tax liability > $2,500 per quarter, deposit tax according to the deposit schedule i.e. monthly or semiweekly.

Beginning January 1, 2011, all deposits must be made by electronic funds transfer using the Electronic Federal Tax Payment System (EFTPS). Late deposits are subject to penalties.

You should verify with the Payroll provider if they support payment of the local payroll taxes, workers compensation on your behalf, because these payments are the responsibility of the employer.

Visit http://www.maximtaxservices.com/services.html to find out the latest offerings in payroll services from Maxim Tax Services.