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Archive for the ‘Taxes’ Category

For many Americans, the 2005 tax season will tax the nerves, take a lot of time and maybe cost a bundle, too.

Happily, there are ways to make doing taxes a lot faster, stress free and, possibly, cost free.

This is all possible because a tax industry maverick has broken down the barrier to free tax preparation. Customers can now e-file their returns without charge through www.TaxACT.com as well as prepare and print them for free.

A number of good reasons exist for filing your taxes online, including these:

1. It’s faster. The software is designed in an easy-to-understand Q&A format. It asks intelligent questions in plain English and sorts out the tax code so that you don’t have to.

2. It’s easier than preparing your taxes by hand. There’s no more erasing or whiting out. TaxACT asks smart questions based on previous answers. Users can also start their return and then save it to pick up again days or weeks later. How convenient.

3. You’ll make fewer mistakes. Many programs flag mistakes and incomplete information (including TaxACT).

4. It’s less costly. Filing returns online is less expensive than using an accountant. The software can be affordable and even free in the case of TaxACT Standard. Some taxpayers can file online for free at the IRS Web site, but ALL taxpayers can electronically file online for free at TaxACT.com.

5. Faster refunds. The average return time for e-filers is less than two weeks, whereas it can be months if you mail returns in.
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Americans are speaking out against a proposal by the Federal Communications Commission (FCC) that could raise millions of people’s phone bills. The proposal by FCC Chairman Kevin Martin has to do with a tax called the Universal Service Fund (USF).

The USF tax was established to help ensure that low-income and rural consumers have access to affordable phone services. Currently, USF money is collected on a “pay-for-what-you-use” system; a tax based on how much interstate long distance a person uses. The less a person uses long distance, the less he or she pays.

However, the FCC is proposing a monthly flat fee instead. The proposed monthly flat fee would apply to all phone numbers and other connections, regardless of how few interstate long-distance calls are made. That could raise taxes on 43 million U.S. households by more than $700 million.

Callers in California, Florida, Illinois, Maryland, Massachusetts, Michigan, Minnesota, New York, Ohio, Pennsylvania, Texas and Virginia stand to be the biggest losers. Taxpayers in 10 of those 12 states-all but Texas and Minnesota-already pay more in federal USF taxes than their states get back for schools, hospitals and rural connectivity. Under the proposed FCC plan, that disparity would grow even wider. The most conservative estimate of the proposed plan-where the USF fee would shift from the current structure to a flat $1 fee, per phone line, per month-indicates that 11 of the 12 states would end up paying more into the USF than they currently do.
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As an employer, you must pay employment taxes if you have employees. Fail to pay and the IRS will rain all over your parade.

Penalties

If you have employees, you absolutely must deduct and withhold various taxes from the paychecks of your employees. Since you are deducting money from the employee’s paycheck, you are handling their funds. This fact is very important to the IRS and it places great emphasis on any failure to deposit employment taxes.

If you fail to pay employment taxes, you will be subject to a 100 percent penalty. Yes, 100 percent. Known as the “trust fund recovery penalty”, the penalty is assessed against the person responsible for paying the taxes, not the entity. The person can be the owner, corporate officer or other “responsible person.” In short, a business entity is not going to protect you from the wrath of the IRS.

Late Payments

Cash flow crunches are an inevitable event for practically every business. So, what happens if you make a late payment for employment taxes. Unless you can show a reasonable reason for the delay, the IRS is going to penalize you.
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If you have employees, you are responsible for paying a variety of taxes at the federal, state, and local levels. You must also withhold certain taxes from the paychecks of your employees. So, what are employment taxes?

Employment taxes include the following.

1. Federal income tax withholding

2. Social Security and Medicare taxes

3. Federal unemployment tax (FUTA).

Federal Income Taxes/Social Security and Medicare Taxes

You generally must withhold federal income tax from wages paid to an employee. Form W-4 is used to determine the specific amount, although most payroll services or your accountant will do this for you.

Social security and Medicare taxes pay for benefits that workers and families receive under the Federal Insurance Contributions Act (FICA). Social security tax pays for benefits for the retired, survivors, and disability insurance distribution provisions of FICA. Medicare tax pays for benefits under the medical care provisions of FICA. As an employer, you must withhold a percentage of these taxes from employee and match the withholding amount.
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