Payroll regulations and payroll taxes, small business tax  

Payroll Tools, rates / forms
Understanding Payroll deductions the nuts and bolts of Payroll

Will Prepare
payroll tax returns


Getting Started Payroll Guide - click here

Does not prepare    
 PR tax returns     

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. 

• 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.

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
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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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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.

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

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

• 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.  

NJ927 2015 & NJ927 2016 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

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

Guide to preparing W2 forms in QuickBooks

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

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

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

Order QuickBooks  1099's here

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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)

• 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.

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

• 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