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Payroll regulations and payroll taxes, small business tax  

Starting a payroll
Understanding deductions ,    taxation of employee benefits,
   cafeteria plan administration,    workers compensation,
   tipped employees


Payroll and payroll tax regulations
Current year rates & limits,   W2 checklists,  W4, I-9,
   Reasonable Wages,  Union Reporting, Employee
   organizers


Independent Contractors
 Who gets a 1099, Workers compensation for contractors
    printing 1099's, W9

Payroll Services
What triggers a PR audit
Employee self evaluation
Tax for Individuals
Business Taxes

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Understanding Payroll deductions the nuts and bolts of Payroll


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Starting a payroll:
A payroll checklist that will help you identify what more you need to learn about preparing payroll. You need Adobe Acrobat Reader software view and download this document.  If you do not have Acrobat Reader installed, click here to access the software from Adobe. Top
New to payroll preparation?
First step is to let the IRS know you have a payroll by ordering form 8109 (tax deposit coupons).  Call the IRS at 800-829-1040.
Next is to let the State know you have a payroll by completing the registering form for your state:  http://payroll.intuit.com/support/compliance/
http://www.irs.gov    download and read
Pub. 15: Circular E, Employer's Tax Guide
Pub. 15A: Employer's Supplemental Tax Guide
Pub. 15B: Employer's Tax Guide to Fringe Benefits
IRS Payroll Tax Filing Requirements

 
State(s) payroll and sales tax websites: Find your State's website -  look up payroll tax rates, limits, regulations, filing requirements.
Who will the IRS seek unpaid
payroll taxes from?
Under Code section 6672 (mandating an employer to withhold federal income and social security taxes), if an employer fails to remit payroll taxes, the IRS can seek to collect these taxes (plus a 100% penalty) from the Individual considered the Responsible person. This person is
1. responsible for collecting, accounting for and paying payroll taxes
2. willfully fails to collect or pay them

A responsible person  is someone who has the duty to perform and the power to direct the collecting, accounting, and paying of trust fund taxes. This person may be:
an officer or an employee of a corporation, a member or employee of a partnership, a corporate director or shareholder, a member of a board of trustees of a nonprofit organization, another person with authority and control over funds to direct their disbursement, or another corporation.

You could be deemed a responsible person if you have the power to make a decision to pay or not to pay payroll taxes. The courts take a broad view over this actual authority and in some court cases, accountants in management have been deemed responsible.  

In the court case Oppliger v. United States, CA8, 107 AFTR 2d ¶2011-631, 3/29/11.
The courts still held the business owners responsible despite their claim that their accountant had embezzled funds which deprived them of the opportunity to make informed decisions.

Moral of the story? - If you are a responsible person make sure that the forms are filed and the taxes are being paid.  Make sure when you do sign a payroll tax return, that the return is indeed mailed! Make sure that the IRS has a mailing address on file that will not be intercepted by employees who could be capable of embezzling funds. They will notify you very soon after the quarter end if payment has not been made. And

If you are not the person who makes the financial decisions regarding who gets paid, then do not sign the payroll tax returns, leave that task to the person who is making those decisions. 

Minimum wage: For all 50 states. The rule is the employer must pay the  higher of federal or the state minimum wage.  Click here for federal minimum wage           Top
Who Gets Overtime?:

 

Under the FairPay rules, workers earning less than $23,660 per year  (or $455 per week) are guaranteed overtime protection. Click here for QBalance Article. The effective date of the new regulations is August 23, 2004.
This site also includes a list of occupations that qualify for exemption from OT pay. Be sure to read all the fine print!   Anyone not falling under the exemptions below must be paid overtime rates for hours worked in excess of 40 hours.
  • executive exemption
  • administrative exemption
  • professional exemption
  • creative professional exemption
  • computer employee exemption
  • outside sales exemption
  • highly compensated exemption

Overtime - 1.5 or double time?

What is considered an overtime hour and what rate should be paid?

What records must be kept for tracking hours
The FLSA requires employers to keep records on wages, hours, and other items, as specified in DOL recordkeeping regulations.   With respect to an employee subject to the minimum wage provisions or both the minimum wage and overtime pay provisions, the following records must be kept:

1. personal information, including employee’s name, home address, occupation, sex, and birth date if under 19 years of age;
2. hour and day when workweek begins;
3. total hours worked each workday and each workweek;
4. total daily or weekly straight-time earnings;
5. regular hourly pay rate for any week when overtime is worked;
6. total overtime pay for the workweek;
7. deductions from or additions to wages;
8. total wages paid each pay period; and
9. date of payment and pay period covered.

Records required for exempt employees differ from those for nonexempt workers. Special information is required for homeworkers, for employees working under uncommon pay arrangements, for employees to whom lodging or other facilities are furnished, and for employees receiving remedial education.

Interns- can they work for free? Interns are entitled to minimum wage and overtime rules unless you follow these six tips, click here to learn more
W4 Form  - Fill in PDF Form:

 

Publication 919

Form W-4 Assistant:
Guides your employees through the
completion of this form.

 

Verify Employees’ Social Security & Numbers and Names in Payroll Records with the Social Security Administration.  A free service that will save the payroll department hassles that come with filing incorrect information at year end. Verification can be requested on any worker for whom a W-2 will be prepared — a current employee, former employee, or new employee after a commitment to hire has been made.

Low volume requests can be made by phone 800-772-6270.  Higher volume requests can be sent on a paper list, diskette, or magnetic tape. In each case, SSA verifies the employer’s identity first, then compares four items from the employer’s records (employee name – SSN – date of birth – sex) with SSA’s master files.

Publication guide for employees to use - worksheets that will help your employees fill out the W4 form so their withholdings will be accurate. Great Guide for handing out to employees who complain about tax withholdings on their W2
******************************* 
Exempt W-4s expire once a year. Employers are legally required to notify affected employees about the pending expiration of their W-4s and to change the withholding status if a new, valid W-4 claiming exempt is not received.

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Form I-9: I9 form  Have each new hire complete an I9 form and keep with employee file. I 9 forms must be filled out for all employees, both US citizens and foreign born must complete.  The Employment Eligibility Verification Form for all new hires   

Back in June 2010, the  US immigrations and customs department released an initiative to hold employers accountable for hiring illegal aliens (see objective 3.2 in pdf attached)
In fact the NY time reported in the start of these audits back in 2009.
So be sure to obtain I-9 forms, keep them all together in 1 binder for current employees, and
another binder for terminated employees.  Be sure to log in the expiration date of any documents that have an expiration date and verify the new documents before the old expire.
You only get 3 business days to turn over the I-9 documents if audited, so be sure not to overlook this reporting requirement.

SIC Codes: Are you filling out a government form, here is a listing of SIC codes so frequently requested on government filings .Top
HIRE credit Steps to take to make QuickBooks include the credit when calculating your 941 payment

  
QuickBooks Support
that fills the gaps!

Are you using QuickBooks and need a mentor to get you through the first year of  Enhanced Do-it-yourself payroll?
Call 800-216-0763 for a demonstration on how we can help! See how we can help

 

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Understanding payroll deductions:

When you write a payroll check, payroll taxes must be paid. If  the company does not pay them, the IRS and the State can go after the personal assets of whomever signs the payroll tax returns (if filed) or the officers of the company. If cash flow is a problem in your company,  be sure to write payroll checks from a separate payroll account and transfer to the payroll account each payday an amount equal to the  gross salaries/wages plus 10% of the gross wages to cover the employer's share of payroll tax.  This will ensure enough is available to pay the taxman his due. 

Click here,  and when you arrive at the web page use their search window and type type "payroll tax" as the key word search term.  Lots of articles on payroll deductions & employees to give you enough background to ask  the right questions for your business.  Payroll rules do change regularly, so be sure to talk to your accountant to make sure the information you are reading applies to the latest tax regulations. 
  Top

Health insurance -S Corp owners: Correct method of reporting health and fringe benefits in S Corp owners W-2 at year end:
Detailed instructions on how to include the insurance premiums on the S Corp owners W2

 IRS administrative guidelines plus
BONUS:How to set up using QuickBooks Payroll Items.

Garnishments: The amount you can garnish is limited to a % of the employee's disposable pay. To learn more about the limits and what the definition of disposable pay available to be garnished visit
http://www.dol.gov/compliance/guide/garnish.htm
Taxable Employee Benefits:

Some Fringe benefits are taxable- you
need to know how to value those benefits.

Education reimbursement programs,
Group term life, Dependent care,
Adoption Programs, Employee use of
company vehicle, Moving expense
reimbursement, De Minimis fringe
benefits - all have regulations on
how to include in an employees W2 form.
Easy to read publication on when an expense reimbursement or a fringe benefit should be included in the employees wages (W2) Taxable fringe Benefit Guide

Download publication15B from
http://www.irs.gov  Employers tax guide to fringe benefits.  Hint- in the IRS search box type "15B pdf" This publication describes what is included in W-2 as wages subject to income taxes and social security taxes. Common fringe benefits that must be considered for payroll tax purposes are:
Employee (and owner) use of company vehicle - be sure to scroll down on this page to the cents per mile versus lease value rules
Cafeteria plans - (also known as flex-plans) Good news for small business. For cafeteria plans, educational assistance programs, or an adoption assistance programs, no longer are required to file Form 5500 (unless you are required to file because of pension rules)  making these plan much more affordable (no more professional fees!)  and providing tax savings to both the employer and employee!  See instructions for form 5500 for details.
Cafeteria plans (flex plans) are a great way to save tax dollars for the employer and employee. Also see frequently asked questions about cafeteria plans.  Usually set up to Include pretax health insurance premiums, you will find other benefits included as well::
Dependent care assistance - dependent care plans
Group term life
Per Diem Expense reimbursements to employees- what amount must be included in the W2
 
Cafeteria Plan Administration - While the annual filing of form 5500 is no longer required, there are some documents that must be in place and some recordkeeping required. Learn about a  Do-It-Yourself Cafeteria Plan that is easy to implement -click on the image for FastFlex.

  how cafeteria administration works

Employee Reimbursed Travel Expenses As a payroll administrator, it is very important to understand what is acceptable documentation for reimbursing employees for travel expenses. Consequences of not following regulations means your employee may be taxed on the reimbursement or worse - the employer is disallowed a deduction for a valid business expense!
Click here for an article that does a brilliant job of making you aware of the tax issues
IRS article on reimbursed expenses

Publication 15 - details - starts on page 11 Employee business expense reimbursements
Workers Compensation: If your business has a payroll (files payroll tax returns), it is required by law to have workers compensation insurance for all employees including the owner (if the owner gets a W-2). Reconcile Gross Wages from the Employment Tax Returns to the Workers' Compensation Wage Base.  To reduce workers compensation premiums,  provide the insurance auditor with a  reconciliation of the total gross wages for the policy year (from the 941's) adjusted for wage exclusions by type and employee involved.  Wage exclusions might exclude overtime pay, omitted wages above statutory maximums, excludible compensation, and contract labor charges. Learn more about saving money in workers compensation premiums using QuickBooks by clicking here.
Miscellaneous Payroll Deductions Deductions for health insurance, employee loans or any deduction at all other than payroll taxes, must be authorized by the employee in writing.
Who is subject to OSHA regulations?: Your legal obligations to provide a safe work environment for your employees arise primarily from a federal law known as the Occupational Safety and Health Act (OSH Act). OSHA was enacted in 1970 to address the uneven patchwork of state laws regarding workplace safety, and to respond to the growing number of serious injuries and deaths occurring in the workplace. All businesses have a duty to comply with some general rules CCH Toolkit has several pages devoted to educating the Human Resource Newbie to what business is subject and what are OSHA regulations.

2013  FICA Tax Limit, 401K,
IRA, mileage & more:
Wage, pension, mileage and retiree social security  limits.
Tipped Employees: In many States you may pay a tipped employee less than the minimum wage. Your employees who receive tips of $20 or more in a calendar month, while working for you, are required to report to you the total amount of tips they receive. They must give you written reports by the tenth of the following month. Employees who receive tips of less than $20 in a calendar month are not required to report their tips. But keep in mind that you MUST report tips in the paycheck that at least equal minimum wage. If the employee does not receive enough tips to bring his/her wage up to minimum wage, the employer MUST fund the difference with a higher hourly rate.   Employees can use Form 4070A, Employee's Daily Record of Tips, to keep a daily record of their tips and Form 4070, Employee's Report of Tips to Employer, to report their tips to you. Both of these forms are in Publication 1244, Employee's Daily Record of Tips and Report to Employer.

If you operate a large food or beverage establishment where tipping is customary and you normally employ more than ten people on a typical business day, you must file Form 8027, Employer's Annual Information Return of Tips Income and Allocated Tips, each calendar year. If the total tips reported by all employees are less than 8 percent of your gross receipts, you must allocate the difference among the employees who received tips. The allocation may be based on each employee's share of gross receipts or share of total hours worked, or on a written agreement between you and your employees. Show the amount allocated in Box 8, Allocated Tips, of the employee's Form W–2. Do not withhold income, Social Security or Medicare taxes on allocated tips.

If you are required to allocate tips, your employees must continue to report all tips to you, and you must use the amounts they report to figure payroll taxes.

Sound like too much paperwork?  There is a simpler program available if in the prior year your gross receipts from sale of food or beverage at least 20% sales were paid for by Credit Card and these credit card sales reflected a tip which was also charged.  Credit card sales with charged tips will help you and the IRS determine the appropriate tipped  % to report. Learn more about how to participate in this program named " ATIP" Attributed Tip Income Program.
visit the IRS for More info

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Learn how to prepare payroll

The Payroll Toolkit
 
$ 27.96
Nuts and Bolts Techniques to Help You Better Understand and Manage Your Payroll
           by Timothy Carse, Jeffrey Slater

          
Quarterly Checklist FUTA
 
940 Checklist  Use this form quarterly to determine the amount of your 940 payroll tax deposit. No more over or underpaying
You need Adobe Acrobat Reader software view and download this document.  If you do not have Acrobat Reader installed, click here to access the software from Adobe.   Top
File form 941 Quarterly Once registered with the IRS as an employer, you will receive in the mail form 941 which must be submitted by the 31st day of the month following the quarter end.  You may file the 941 by mail ( click here to download form 941)  or you may tele-file (over the phone) form 941 if you fall under the following qualifications:

Businesses that receive the special 941TeleFile Instructions and Tax Record as part of their Form 941 Tax Package and who meet the qualifications in the instructions.
  • Are a monthly schedule depositor for the entire quarter;
  • Have not changed your business name, address or Employer Identification Number (EIN) during the previous quarter;
  • Must have a break even, overpayment (to be applied to the next quarter), or balance due return (can be direct debit);
  • Are not a seasonal employer;
  • Have no schedules or attachments (if you are required to file a Schedule B you are not eligible to use 941TeleFile);
  • Only have fractions of cents adjustments; and
  • Want to claim Advance Earned Income Credit (AEIC) payments. (Optional)

It is now possible to E-file form 941 using QuickBooks Payroll services.

Made a mistake on a 941?  Now it is easy to make a correction. Visit www.irs.gov
and download Form 941X.  


Quarterly  Checklist
State unemployment
State Unemployment Worksheet For all states, if you have difficulty understanding how to calculate the amount of wage to include in the employer's quarterly tax report, try out this worksheet.  Includes helpful tips on creating a weeks worked report, adjustment of payroll liability check and set-up of unemployment tax rates in QuickBooks

NJ927 2013 & NJ927 2014 for New Jersey Employers.  No more over or underpaying!  Complete this worksheet before completing the quarterly payroll tax filing (State unemployment form). 

You need Adobe Acrobat Reader software view and download this document.  If you do not have Acrobat Reader installed, click here to access the software from Adobe. Top

Year End Checklist W-2 Checklist  Complete this worksheet to spot errors ... before the IRS does!
More payroll checklists below

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W2 checklist -federal  YEAREND

Download our free W2 Checklist.  Eliminate IRS notices and penalties by making sure your quarterly  941 forms (payroll tax filing)  agree to the W 2 forms filed at year end. To be completed before printing the W2 forms and before filing the 4th quarter 941payroll tax filing.

W 2 state checklist  YEAREND

Complete this worksheet to insure accurate year end tax filing for  the W2 & W 3.

Guide to preparing W2 forms in QuickBooks

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Reasonable wages S Corporation (S corp) dividends (distributions),  officer loans,
and what is a reasonable wage for the owner , officer.
Union Benefit Reports and Certified Payroll Save time, increase accuracy!  A solution for reporting Certified Payroll Reports, EEOC/Work Utilization tracking reports, Benefit Reporting, AIA format billing, and the generation
Payroll Services  
Considering a payroll service? The pros and cons of outsourcing payroll   Top
QuickBooks Payroll QuickBooks Enhanced Payroll

Understanding Payroll deductions - the nuts and bolts of Payroll
Want to learn about payroll and payroll tax preparation? See how we can help

Other Resources Become a member of Accountantsworld.com  to receive a daily e-mail full of tax and finance articles and an occasional Payroll article that is very good. State regulations regarding Direct Deposit of employees paycheck into a bank. Top
Payroll Deduction Calculator Get the correct deductions or gross up a net paycheck
See also QuickBooks Payroll Tips
See also Employee & Human Resources for human resource/employee tools
Simple, Sep Plans, & 401 K Plans Learn more about choosing, setting up pensions for small business employees  
When must you deposit employee withholdings for 401K, SEP, or Simple pension plans? Withholdings from payroll for pension contributions should be funded by the employer within seven (7) business days after the payroll check date. That means you need to deposit 401K, SEP or Simple IRA deductions within seven business days after the payroll check date.  This regulation has been in force since October 2010. Click here for a copy of the Department of Labor regulation.
Compensation limits for benefits valuation
Pension benefits-Highly compensated employee   $115,000 2013,   $115,000 2012
Pension benefits - Key employee   $165,000  2013,  $165,000 2012
 
Dos and Don'ts- Employees
      with disabilities
Employment Checklist For Hiring Persons With Disabilities  (may not be a complete list)
American Disabilities Act Small business Guide
Additional requirements when hiring a non resident alien or H-1B employee This may not be a complete list so be sure to check with your CPA
1. Withholding taxes and rules on Aliens employed in the USA
2. List of all fact sheets on H-1B requirements at the DOL including:
    Record keeping requirements for a H-1B employer

    Rules regarding an H-1B workers deductions from gross pay
    Benefits that should be offered to an H-1B worker
What are payroll cards? Direct deposit of paychecks into employees bank accounts saves large employers quite a bit on processing payroll checks, distributing payroll checks and handling uncleared or lost payroll checks. A payroll card is an alternative to Direct Deposit for employees who do not have a bank account.  The cost savings is about 1/2 the savings of a direct deposit check.  Click Here for a full article (21 pages of easy to read material describing all aspects of payroll cards)
Independent Contractors  - help to determine who gets a 1099
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Independent contractors

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The more common 1099-Misc payments are for business expense payments for services and and rents totaling over $600 per payee per year when the payee is operating as an unincorporated entity.  Take note that payments for products to unincorporated entities DO NOT require a 1099.  Examples of unincorporated entities are sole proprietorships, partnerships and LLCs.  Corporate entities are required to have the designator  Inc., Corp, PC, or PA follow the company name. By requesting a completed form W-9 (see below) from your vendor you will have all the information necessary to complete the 1099 at the end of the year. 

Examples of the types of expenses that require 1099's

  • Payments for rents for office space including amounts paid to you for home office space, storage space, and machine rental require a 1099 to be sent. 
  • Examples of services include subcontractors, commissions, consultants, cleaning services, professional fees, referral  fees, and temporary help.
  • Interest or dividends payments to unincorporated entities also require a 1099 but the reporting limit is reduced from $600 to $10 per payee per year. 
  • Take note that payments to owners of S Corporations are not dividends.  They are "distributions" and do not fall within the 1099 reporting guidelines. 

Exceptions- regardless of the amount and including incorporated entities all payments of the following are reportable on a 1099-misc

  • Payments to crew-members by owners or operators of fishing boats including payments of proceed from sale of catch.
  • Gross Proceeds paid to attorneys


There is no list available that you can go to in order to determine if you should treat a person as an independent contractor or an employee.

        IRS website - Who is an independent contractor vs. Employee
Pamphlet on Independent contractor vs employee

       Every case is unique and must be considered with its own list of circumstances.  You can research common law (case law that you can read to help make a determination¹) but the IRS has recently developed a form that you can complete and mail in for help making the correct determination. The Form SS-8 is a terrific tool to help you understand what the IRS will look at in making the determination.  In fact it is so thorough that you will most likely be able to make your own determination by the time you are through completing it.

Form SS-8, Determination of Worker Status for Purposes of Federal Employment Taxes and Income Tax Withholding .can be completed and sent to the IRS . This form looks at who has financial control, behavioral control, and the relationship of the worker and the company.  There is also a section on service providers and salespersons which indicates that this is an area that the IRS believes is not  being handled correctly.  Every accounting department should download and read this form to gain a better understanding of how the IRS makes the determination.

Form 8919.  New form beginning in 2007 where a worker can alert the IRS that he/she was incorrectly treated as a 1099 consultant rather and as an employee.  This form will permit the worker to "NOT PAY" the employers share of social security and medicare tax.  This form will be reviewed by the IRS to determine if the worker made a correct assessment or if the employer should receive an employment tax audit. This could be the beginning of an increase in employer tax audits by the IRS. 

The introduction of the SS-8, Form 8919, new announcements by the IRS that 29 state workforce agencies have now entered into agreements to share the results of employment tax examinations, and increased IRS audit  budgets,   means that it would be prudent for all businesses to review their policies to determine if indeed, any current independent contractors should become employees.

For comprehensive training on who can be classified as an independent contractor, download the PDF training guide for Auditors used by the IRS to train their employees on who is an independent contractor vs employee

¹ Court cases:
Employment Tax case citations:
Common law employee:
Orion Contracting Trust v. Commissioner, T.C. Memo 2006-211.
Kumpel v. Commissioner, T.C. Memo 2003-265.
Ronald McLEan E. Video v. Commissioner, T.C. Memo 2003-13.
Weber v. Commissioner, 103 T.C. 378 (1994), aff’d, 60 F.3d 1104 (4th Cir. 1995).
Nationwide Mutual Insurance Co. v. Darden, 503 U.S. 318 (1992).
Corporate officer as employee:
Joseph M. Grey Public Accountant, P.C. v. Commissioner, 119 T.C. 121 (2002); aff’d in unpublished opinion, 93 Fed. Appx. 473, 93 AFTR2d 2004-1626 (3d Cir. 2004); cert. denied sub nom. Nu-Look, 125 S.Ct. 60 (2004).
Nu-Look Design, Inc. v. Commissioner, T.C. Memo 2003-52, aff’d, 356 F.3d 290 (3d Cir. 2004), cert. denied, 125 S.Ct. 60 (2004).
Spicer Accounting, Inc. v. United States, 918 F.2d 90 (9th Cir. 1990).

 IRS  brief article, facts to consider when classifying a person as an independent contractor & further resources to determine who gets a 1099. Below are some general guidelines be sure to clarify with your tax advisor

Workers Compensation audit and the independent contractor- read this for audit savings!

The States are also interested in employers correctly classifying workers as employees. They are looking to collect the proportionate share of unemployment taxes on these earnings.  Your state may use a different set of rules for classification. Take a look at New Jersey's 3 tests used to determine independent subcontractor status, it is easy to read and will shed more light in helping you come to the right conclusion.

 

More about how to prepare a 1099  using  QuickBooks

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Workers compensation premiums paid for subcontract work performed Insurance companies will bill your business additional workers compensation premiums for vendors/contractors that do not already have a workers compensation policy.

The premium is chargeable  on the labor portion only. If you do hire independent contractors that provide a service. Be sure the invoice from the independent contractor allocates the charge between material and labor.  Set up a policy to record these bills in  QuickBooks using subaccounts of the account "subcontractors"
Set-up an account " Labor-Subcontractors" -subaccount of Subcontractor
Set-up an account "Material-Subcontractors"- subaccount of Subcontractors

Allocate each bill that is from a subcontractor who cannot provide a certificate of insurance using the above accounts.  In the memo field describe the work completed.  This will provide the insurance auditor with the information to charge a premium based on the type of work performed rather than assigning your companies highest risk rate (the standard applicable rate to subcontractors)

Printing 1099 forms Prepare and print form 1099 in QuickBooks
W-9 W-9  Provide to your subcontractor to obtain Tax ID information.  Will speed the preparation of form 1099 at the end of the year.   Top
EFTPS Trouble? What to do when an error occurs with an EFTPS transaction.   Call EFTPS  1-800-316-6541.  You must notify EFTPS within 90 days after you receive the first bank account statment on which the problem or error happened.  When you call you will need the name and tax ID number of the primary taxpayer, describe the error and give the dollar amount of the error. YOu mush also send the complaint in writeed to EFTPS Customer Service, PO Box 173788, Denver, CO 80217-3788.  They can take up to 45 days to investigate the issue.

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Payroll Audits
What can triggers  IRS or State department of labor payroll audit?
  • Failure to pay 941 and 940 timely
  • Late filing or incorrect payroll tax forms filed
  • Complaints by disgruntled ex-employees
  • Issuing a 1099 to an individual that does not receive 1099's from any other customers and who may report the 1099 amounts as wages on their tax return rather than as self-employed income
  • W-2's and 1099's issued to the same individual in same year.
  • Missing Social Security numbers from filings. Always obtain a W-4 and I-9 for employee's and a W-9 from any vendor/sub that supplies a service that does not have an INC, Corp, PC or PA at the end of its name.
  • Industries or businesses that have a high rate incorrectly classifying individuals as 1099 recipients rather than as W2 employee status.  For example, contractors that employ casual labor or per diem labor, or marketing organizations that employ independent sales representatives. Be sure to obtain a certificate of insurance from each of your independent contractors which will help support your claim of non-employee status.
  • Department of labor audits may focus on whether an employee  was properly classified as exempt employee's (not eligible for 1 1/2 hourly rate for overtime pay). If an employee's classification changes during the year from exempt to non-exempt, the classification is retroactive to the 1st of the year and overtime premium must be paid from January 1st.  Keep a job description for each employee to support the exempt status of the job.  Keep time sheet records for all employees.
Employee Reviews
Employee's can self evaluate and contribute their input to the annual review process by completing this questionnaire about performance, cost effectiveness, attitude, responsibility, ideas, image, teamwork, attendance and personal development:

 

 

 

 

 

 

 

 

 

Employees are required to demonstrate professional behavior in their jobs, your self evaluation
will be the starting block in our discussions to help you identify what you are doing right and what areas could be improved:
Rate the quality of your work and the information that is produced?
Are you putting forth your best?
Do you carry out your job in a cost-effective manner?
Do you do all that you can to work smarter?
Do you attempt to be more productive with fewer errors?  and still finish assignments timely?
Do you go all out  to complete job-functions in a timely manner?
Do you have a positive mindset toward  personal, department, and company goals, and does it show in your actions, feelings, and thoughts or is  your glass always half empty?
Do you enjoy coming to work?
Are you thoughtful and considerate toward co-workers? 
Do you refrain from gossiping about co-workers?
Do you  work to encourage better attitudes?
Do you display company loyalty?
To what extent do you take responsibility for you job?
Do you take on challenge and look for additional responsibilities?
Do you work well on your own and under supervision?
To what extent have you offered original ideas and recommendations for improvement?
Do you recommend better ways of doing things?
How have you contributed to solving or preventing problems,  what  do you do  to  try to avoid problems?
Do you keep an open line of communication?
To what extent have you displayed a high-quality image in my appearance, language, personal hygiene, and working environment?
How do you rate your contribution to groups/company performance?
Are you aware of department goals?
Do you add value to your team and communicate with team members effectively?
To what extent do you keep others informed to prevent problems from occurring?
Do you promote lines of communication between accounting and other departments?
Do you share information?
Do you speak up at meetings and let your opinions be known?
How willingly do you jump in to share the responsibility of getting the work done?
Do you voluntarily assist others to achieve results?
Do you complete work accurately and thoroughly and work toward a smooth flow of information throughout the company?
Are you present and on time for work? How often are you late to work, leave early, stretch
       lunches or breaks, or chit chat with co-workers?
Does your attitude show you recognize that your absence or tardiness causes inconvenience and hardship for co-workers?
Do you take classes to expand your knowledge?
Do you improve your  job performance by applying what I have learned?
Do you seek out information about our industry?
Review these personality types and select all that may have regularly or occasionally surfaced since your last review and describe the impact of the behavior and why it is unproductive or undesirable and describe what steps you can take to reduce or eliminate a reoccurrence:
a. The office bully or dictator-  pushy and uses fear tactics to control a co-worker
b. The procrastinator- the individual who is a master as to why a task or project is not yet started
c. The grouch - does your personal problems come through in moody and grouchy behavior
d. The last to arrive-first to leave
e. The mediocre performer - do only the minimum on every assignment doing just enough to keep your job, but not enough to contribute to the growth of the company.
f. The Needy - one who looks fro constant attention, reassurance and feedback
g. The backstabber or mudslinger
h. The Chronic Complainer
i. The substance abuser
Motivating Employees - does not
always require an increase in wages
Each week, choose employees from each department to have dinner or or do an activity with members of management
Give a party for the employees at the boss's home, tasty restaurant or office.
Hand out free car wash coupons from a local car wash
Ask your key employees if they could make a change about their position, what change (s) would they be?
Create a  bulletin board "wall of fame" - tacking photographs and listing the accomplishments of an employee and what steps they took for achieving their goal. Post weekly. 
Provide a free meal. Bring in breakfast or lunch for everyone, have a Pizza party.
Implement a mentorship program which allows employees with special skill sets or experience to help others
   in the company achieve. 
Allow casual dress code on Fridays. Also reward achiever's with casual dress bonus days.
Make sure your employee has everything they need to do their jobs well. It can be frustrating to a key
   employee when they have to  struggle to do the job because they don't have have the right computer
   program or because they must make do with inferior or problematic equipment.
Give out tickets to movies or sporting or musical events
Ask you key employees what they liked best about previous positions and why.
Hold an employee picnic, with  enjoyable events that all employees can participate in
Give each employee a chance to spearhead and lead a special project.
Create awards for specific achievements
Ask your key employees what you can do to make their job more rewarding.
Have your employees post ideas that may save the company money.  Be sure to give recognition to the employee or group of employees that came up with the idea.
Employees take pride in their Job Title - ask your employee what an appropriate job title should be
Take a day and offer to do an employee's least favorite task
Remember employees on their birthday with a Cake and a gift card.
Ask your key employees what they would miss if they were to become financially independent and not need to work any longer.
Since the recession started, employees are expected to produce more and management is under pressure to
show better results.  Since this is new "Normal", it is important to make sure that burden is shared equally. Employees will be LESS disenchanted if everyone is working equally as hard.
Carve out one of the best parking spots and give the spot to the "employee of the week"
Ask you key employees if there is anything you can do to support their career goals.
Have a room in the office that is strictly for relaxation with a TV and maybe a Wii game.
Have a job exchange day, and be sure that the managers participate
Allow employees to work a flexible schedule (when appropriate, taking into consideration the business's needs)
Reward employees with a short work day ( let them leave 1/2 hour early)
Provide additional paid time off - one or two days more per year will be appreciated.
Give exceptional employees a greater title in the company.
Training - provide training that will help employees better understand their job, their technology, the company's
   customer base, and sales / customer service training.  Bring in consultants who will introduce new ideas to
   employees to help them expand their own "outside the box" thinking skills.
Recognize through praise or other means when an employee has made a significant contribution or has improved. 
Don't micromanage your employees- allow them to use their experience and discretion to complete tasks and  identify solutions that will improve productivity and profitability. Encourage them to share so that others will be as motivated to do the same.  Seek out their input, employees will feel they are valued. When their input is not implemented, take the time to explain why, so they can learn.
Take the time to train your employees for the next step up.  There may not be a position in your organization at this time, but your employees will appreciate that you care about them and will care more about your business.
Set expectations and goals.  When an employee meets both or works hard to achieve, recognize that effort.
Treat all your employees fairly (no favorites) and get to know your employees, noone will expend beyond minimum effort for a boss that is perceived to "not care"

The more often an employee receives praise or recognition or gratitude, the greater the satisfaction the employee will have with his job which translates to greater productivity.

Employee Morale expenses or Meals to employees- De Minimus frige benefits ( code 132 ) and code section 119  allow the employer to spend money on these types of expenses without being limited to the 50% meals and entertainment exclusion.  When bringing in meals for parties, make sure  more than 1/2 of the employees are fed, and you are sure to get the full deduction.
Nice article on meals and entertainment - what is deductible

Firing an employee:
 Checklist
  • Confirm employees current address
  • Ask Employee to return all company owned equipment/property
    Computers, cell phone, tools
  • Disable or forward employee email account
  • Remove employee name from phone list/website/directories
  • Remove user rights to computer/phone/voicemail
  • Collect business cards, nameplate/badges, uniforms
  • Update employee records as to reasons for termination
  • Collect employee handbook, customer lists
  • Collect final employee expense reports
  • Ask if employee has any company information at home or on computers owned personally
  • Determine when wages must be paid following termination (laws vary by state)
  • Determine if deductions are needed for unpaid loans, wage overpayment
  • How much vacation pay has the employee earned. What is the company
    policy for paying unused vacation pay. Confirm that this policy meets
    with State labor laws
  • Determine continuance of Health Care Coverage and notify the insurance company
  • If employee had check signing privileges, contact bank


Tax for Business

Learn how to prepare payroll

The Payroll Toolkit
 
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Nuts and Bolts Techniques to Help You Better Understand and Manage Your Payroll
           by Timothy Carse, Jeffrey Slater

          
All About Payroll All you need to know about payroll
Have a Tax Question Tax-sites.com lists resources by topic on basic business tax issues  Top
Tax Calculators by Turbotax Quicken/TurboTax site has a few dynamite calculators including a "deduction finder", "self-employment calculator",  "estate tax estimator" and lots of information about opportunities to save and save on taxes             Top
Understanding Taxes Read  Publication 17, "Your Federal Income Tax,"  a free, 280-page overview of common tax issues that covers everything from stock sales to student loans to business expenses.  Copies are available at the IRS Web site at www.irs.gov under the "Forms & Pubs" section or order a copy by calling 800-827-3676  (Update annually as tax laws do change)  Top
What permits/license must your
business apply for
Easy tool to see what licenses and permits your small business is subject too.
http://www.sba.gov/content/search-business-licenses-and-permits
Individual tax Articles, websites for personal taxes  Top
C Corporation tax rates For United States both State and Federal rates  Top
Sales tax rates A list of sales tax rates by state-  Localities may also charge sales tax on top of the state tax rate.  This list does not provide the detailed rate by locality, it does include a column for maximum sales tax rate which is a combination rate of state and the highest local rate.
See also QuickBooks Payroll Tips
See also Employee & Human Resources for human resource/employee tools
Tax Research on the web www.irs.gov
www.taxalmanac.com
www.legalbitstream.com
thomas.loc.gov

Get answers on the internet - groups discussing payroll
http://bb.payroll-taxes.com
http://www.ioma.com/?qbalance
http://www.americanpayroll.org/salc.html   online seminars
Research payroll taxes at http://payroll-taxes.com    Top
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