April 15 is a huge deal each year since this is the deadline for filing and paying your annual income tax. This deadline should be treated as absolute! The government will have its due, they will have it on time, and there’s no way around it that doesn’t have serious consequences.

In past blog posts, we repeatedly stressed that filing early is always best. Any expert you ask will tell you the same thing. Yet, each year, around 25% of taxpayers wait until the last week, around 12 million file late, and another 7 million fail to file their taxes at all.

Deadline

It cannot be stressed enough – April 15, as mentioned, is the absolute deadliest deadline. Each year, accountants and other tax experts across the country get dozens of calls asking if they absolutely need to file by April 15. One such expert, Forbes’s Tony Nitti, puts it this way: “What has the IRS ever done to lead you to believe that they are in the business of making requests rather than demands?”

If you owe the IRS taxes this year, you need to file and pay your return by the deadline. If for any reason you cannot file your return by then, you still need to file for an extension, and you still need to pay an honest estimate of the taxes you owe, by the deadline.

Probably the only time you can file late without penalties is if you’re expecting a refund. Be absolutely certain however – if you make a mistake and find out you owe taxes, the same penalties will apply. Plus, why would you want to delay getting your money?

Penalties

As with most numbers we encounter when dealing with government, tax penalties and interest can be complicated. Late filing penalties are some of the heaviest the IRS can drop on your lap – at 5% of the taxes owed per month up to a maximum of 25%. In contrast, the late payment penalty is only at 0.5% of the taxes owed per month, again up to a maximum of 25%. If you’re late to file and pay, you’ll get hit with both penalties. Tax controversy lawyer Robert E. McKenzie does the math for us, showing that late filing and late payment penalties add up to over 75% of the tax owed per year.

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Exemptions

Believe it or not, 26 U.S. Code § 6651 actually provides an exemption from late penalties if your failure to pay “is due to reasonable cause and not due to willful neglect.” Reasonable cause is further described as “if the taxpayer exercised ordinary business care and prudence and was nevertheless unable to file the return within the prescribed time.”

Unfortunately, the code stops there, being quite vague and open to interpretation. For example, there was a case in the mid-80’s (U.S. vs. Boyle) involving the late payment of estate taxes. The respondent was assured by his lawyer that the taxes would be paid on time, but due to a clerical error, the taxes were paid three months late. The respondent argued that he “exercised ordinary business care and prudence” in arranging everything with the lawyer long before the deadline, and that it was reasonable for him to assume that the lawyer would take care of it. Ultimately, however, the courts ruled that “It requires no special training or effort on the taxpayer’s part to ascertain a deadline and ensure that it is met. That the attorney, as respondent’s agent was expected to attend to the matter does not relieve the principal of his duty to meet the deadline.”

For its part, the IRS lists a few examples of situations where the exemption may apply:

1. Death of the taxpayer or immediate family member, provided that the taxpayer had no one else to file the return
2. Taxpayer’s records were lost in a fire or other accident
3. Unavoidable absence or being unable to get the needed files
4. Being misinformed by the IRS itself

As you can see, you’ll probably (hopefully) never really be exempted from the penalties of filing or paying late, so it’s best to get things done early and properly. Spare yourself the headaches and trouble and let the professionals handle your taxes today! For help with all of your 2015 Michigan tax needs contact Hazzouri Accounting at 734-844-1614 or fill out our on-line contact form and we will be in touch shortly.

You can also learn more on our social media accounts:  Facebook fan page / Twitter Feed / Google+ Account

According to 60 Minutes, it is “the biggest tax scam around now,” tripling in the past three years. According to the Government Accountability Office (GAO), it has cheated U.S. taxpayers out of $5.2 billion in 2013 alone (the Treasury Department thinks it’s actually much more). How did they do it? They filed other people’s tax returns before they themselves did, basically stealing their tax refunds.

Although identity theft tax return fraud only really started in recent years, the terms “gone viral” and “epidemic proportions” have been used to describe this problem today. According to the IRS itself, they have stopped close to 15 million suspicious returns from 2011 to 2013, amounting to over $50 billion. According to CBS, over 565,000 cases of identity theft were resolved by IRS agents in 2013, three times the number of cases resolved the previous year. It took an average of almost a year to resolve the cases closed between August 2011 and July 2012.

These refunds also go to all sorts of places, including Bulgaria, Lithuania, Ireland, and Shanghai. In the U.S., Miami tops the list for identity theft tax fraud, partly because of a thriving underground community there, and partly because of the high number of retirees in the state. A big chunk of identities stolen belong to retirees, children, prisoners, and even people who have passed away.

Detroit is included in the list of top cities for identity theft tax fraud, along with Chicago, Atlanta, and Houston.

How It Works

Despite the many criticisms the IRS gets over the years, they’re actually pretty quick about sending tax refunds. They are generally required to send your refund within six weeks, but are usually able to send it within 1-3 weeks. Generally, you can file for your return as early as the end of January, all the way up to midnight of April 15. All you really need in order to file your return is your Social Security number and birth date. To detect fraud, the IRS needs to check your tax return against the W-2 your employer files. Employers have until March to file this, and this is first sent to the Social Security Administration before being forwarded to the IRS. All in all, the IRS can’t even begin checking tax returns against employers’ W-2’s until July.

The effectiveness of Kamagra tablet and its counterpart sildenafil price in india or sildenafil are the most recognized selections for treatment though these medicines and others with the same benefit do not really crush or even break all of them. Order buy cialis is very much smart decision and special care is taken to manufacture this medicine. Thus there is an increased blood supply to the penis causing firm erections. secretworldchronicle.com viagra online Parents opt to get their newborn baby’s spine checked immediately to check if there are any attractive discounts available for you. cialis tadalafil 10mg Now, unscrupulous people have discovered a way to take advantage of this wide window of opportunity. The first step is to get the Social Security Number (SSN) and other needed information of unsuspecting people. In the report by 60 Minutes mentioned earlier, a former scammer who had been caught and convicted revealed that it’s “very easy” to get the needed information from the likes of banks, medical offices, schools, or simply by people being careless about keeping their SSN private. Then, the fraudsters simply file tax returns for the stolen identities as early as they can. The people who had their identities stolen often don’t discover this until months later when they try to file their real tax return and are told by the IRS that they’ve already been filed.

How to Avoid It

First of all, you should be careful about giving out your Social Security Number (SSN) and other sensitive information. Even those who’ve protected this information have been victimized because they provided it to offices or clinics that turned around and sold it to scammers. It has become more and more important to provide sensitive information only to institutions with extensive track records and strict policies on keeping your data private.

The IRS is also providing an annual Identity Protection PIN (IP PIN) to ensure only the rightful person can file his or her tax return. However, it will probably take a lot more time for this to fully address the problem. While the IRS doubled the number of IP PINs issued for the second year in a row in 2013, it only amounted to 1.2 million out of more than 120 million taxpayers.

Filing your tax return as early as you can remains your best defense against identity theft tax return fraud. Hazzouri Accounting has over 15 years’ experience helping the Canton, MI and surrounding communities with all their Michigan tax needs. Being a local operation, we can ensure the safety of your information when handling and filing your IRS forms on top of affordable rates and quick service. Contact Hazzouri Accounting today at 734-844-1614 or fill out our contact form to get started on your tax return!

You can also find us on-line at our social media accounts:  Facebook fan page / Twitter Feed / Google+ Account

Successful entrepreneurs often have more willpower, independence, and individualism than others. But while these are seen as important success factors, those who are just starting out can end up having a “superman complex,” and trying to do everything themselves.

Business owners already have so many roles to play in the first place. Many start out thinking that they’ll just be selling a product, how hard could that be? Then they quickly realize that they need to pay the lawyer, the accountant, the marketing director, the human resources director, and many other different roles at different times. Established companies often have entire departments to handle each of these, but small business owners are often faced with the difficult choice between spending what little capital they have on outsourcing or saving that money and doing it themselves.

Spoiler alert: payroll is almost always one of the things you will want to outsource.

While other tasks are easy enough to learn and manage on top of actually running your business, payroll can be quite complex and tedious. It is also one aspect of your business that can have severe ramifications if mistakes are made. First of all, employees will leave or underperform if they are not paid enough or on time. Violations of minimum wage and other laws regulating pay will have severe legal consequences. The taxes, especially, can drown you in confusion and IRS penalties. Numerous forms for the different taxes, such as Form 940, Form 941, Form 1099 (and its many variants), the W-2 Form, and the W-4 Form are just some of the IRS forms you will usually have to deal with.

Aside from the specific tax types and rates that may apply (a topic that can be worth a whole other blog post), there are things to remember that may be unique to Michigan (information is from the official state website).

– All employers who are required to withhold federal income tax are also required to register for and withhold state income taxes.

– Those with companies located in a different state, but with employees working in Michigan, are also required to register for and withhold taxes in Michigan. They would have to create a “nexus” or a physical presence of the company in the state.

– For companies out of state with no nexus in-state, but have employees who are residents of Michigan, things get more complicated. Those located in Wisconsin, Indiana, Kentucky, Illinois, Ohio and Minnesota may voluntarily register for and withhold taxes in Michigan; otherwise, the employees are required to make estimated income tax payments directly to Michigan. Companies in all other states are only required to withhold that state’s withholding tax.
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– Non-profit organizations are all also required to withhold state income tax in Michigan.

– Businesses are required to send a copy of their Form 1099 to the Michigan Department of Treasury if state taxes were withheld. This is submitted along with any 1099-MISC forms at the same time as Form 165 (Annual Return for Sales, Use and Withholding Taxes).

– Specific cities also impose their own income tax, with their own corresponding city tax forms. These cities are Albion, Battle Creek, Big Rapids, Detroit, Flint, Grand Rapids, Grayling, Hamtramck, Highland Park, Hudson, Ionia, Jackson, Lansing, Lapeer, Muskegon, Muskegon Heights, Pontiac, Port Huron, Portland, Saginaw, Springfield and Walker.

This is just a general overview of payroll taxes. The situation can change depending on location, type of business, and even from one employee to the next. Sure, if you have a strong background in accounting and have studied the IRS Employer’s Tax Guide (it’s 67 pages long), you may be able to save some money and handle payroll yourself.

Because of all the complexity and risks involved with payroll and taxes, payroll service providers are growing in number and sophistication. There are companies that focus solely on handling others’ payrolls, going as far as “hiring” their clients’ employees themselves. Such services can be complicated, however, and quite expensive. Unless you’re running a large operation, hiring an experienced accounting firm that offers full payroll services can be much more cost effective.

Khaled Hazzouri is a Michigan CPA with over 16 years of expertise in helping local companies with all their accounting needs. Hazzouri Accounting offers complete payroll services for all your business payroll requirements. Contact us today at 734-844-1614 for more information.

You can also visit us on our social media accounts:  Facebook fan page / Twitter Feed / Google+ Account

“Whether you have one employee or 50, setting up a payroll system not only streamlines your ability to stay on top of your legal and regulatory responsibilities as an employer, but it can also save you time and help protect you from incurring costly Internal Revenue Service (IRS) penalties.”

This is how the U.S. Small Business Administration (SBA) summarizes payroll. This is the government agency whose slogan is to “aid, counsel, assist and protect, insofar as is possible, the interests of small business concerns.” So when they warn against legal responsibilities and IRS penalties, we’d better listen.

Employer Identification Number

First of all, you should get an Employer Identification Number (EIN) from the IRS. This can be done online. You can also take advantage of the Michigan Business One Stop online service to register online for Michigan taxes, Unemployment Insurance, and other permits that may apply to your specific type of business.

Classifying Employees

In hiring workers, a common problem of human resources departments and business owners is whether to classify them as employees or independent contractors. You are required to withhold taxes from your employees’ paychecks (more on this later). With contractors, however, you simply pay them the amount agreed and they are responsible for paying their own taxes. Improperly classifying an employee as a contractor and failing to withhold and pay their taxes will make you, the employer, liable for back taxes and penalties.

However, the distinction is often vague. Even the IRS admits that “there is no ‘magic’ or set number of factors that ‘makes’ the worker an employee or an independent contractor, and no one factor stands alone in making this determination.” Generally, the employer must take a look at the business relationship with each worker and determine the degree of control of the employer on the worker’s job, and conversely, the degree of independence the worker has in carrying out the job. Things to consider are how much control you have on how the worker does his or her job, whether you provide a regular salary and tools/supplies etc., and the type and length of contract, benefits provided, and the importance of the work as an aspect of the business.

Payment Schedule
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Another decision to be made beforehand is how often your employees will be paid. State laws vary, but in Michigan, this can be once a month, twice a month, every two weeks, every week, or more frequently. There are also time limits as to how long after the work is done you are required to pay the salary. Aside from the pay period, have clear systems set in place for tracking hours or days worked, paid time off, overtime pay, and deductions for health plan premiums, retirement funds, and taxes.

Find Out All Taxes That Need To Be Filed

The taxes, in particular, need precise accounting and attention to detail. As the employer, you are responsible for filing and submitting both employees’ income tax and payroll taxes. These usually include Social Security, Medicare, federal income tax, state taxes and insurance payments. You will also have to submit your own Social Security contribution and federal unemployment tax for each employee.

For bona fide employees, they must fill out the Federal Income Tax Withholding Form (W-4) and submit this to you upon employment. You will use these forms to determine, withhold, and pay the corresponding federal income tax for each employee. Employers are also required to keep complete records of each employee for at least three years after the employee leaves. These records should contain the name, address, birth date, job title, basic rate, hours worked (unless employed in executive, administrative or professional capacity), total wages paid each period, and itemized deduction and fringe benefits.

Get Help If Needed

Setting up and running a payroll system properly is one of the most important financial aspects of your business. The system should ensure that employees are paid fair wages for their work, which is mandated by law and keeps your workforce happy and productive. As you can see, however, setting up payroll can be quite complex and tedious, and any small mistake could result in hefty fines and penalties. There are many tools available, such as paycheck calculators and programs, that you can use to make things easier. However, if you’re like most business owners, you already have too much on your plate. Getting an experienced CPA to handle everything is your best option. Khaled Hazzouri has over 15 years’ experience helping businesses in Michigan with all their accounting and payroll needs. Contact us today at 734-844-1614 or fill out our contact form to set up an appointment.

We can also be reached through our social media accounts:  Facebook fan page / Twitter Feed / Google+ Account

The yearly filing of federal income tax is already one of the most bothersome aspects of life in today’s world. The government is already taking a chunk of your hard earned money, but on top of that, they seem intent on making the process so complex and confusing. As if that wasn’t enough, making a mistake could lead to stiff fines and even imprisonment. But fear not. If you missed the April 15 deadline (June 16 if you happen to be out of the country), you are definitely not alone. The IRS estimated that as many as 12 million individuals are late this year.

If you are one of the 12 million, the question now is what can you do to minimize penalties and get your taxes in as soon as possible. Well, it depends on your individual situation.

If You Are Owed a Refund

Let’s start with the good news. If you are due a refund this year, you will not be charged a penalty for filing late. However, you should be absolutely certain your computations are correct. If you find out too late that you actually need to pay taxes, you could end up paying a lot more than you otherwise would have.

In any case, there should be no reason not to claim your refund in the first place. In fact, there’s one very good reason not to let it stay with the government – if unclaimed after 3 years, they keep it.

If You Filed for an Extension

Perhaps you realized you would not make the deadline and filed for an extension. You will know that filing for an extension still has to be done by the April 15 deadline. Getting an extension gives you until October 15 to file your return. However, you still have to pay the taxes you owe by the April 15 deadline, or the closest possible estimation you can make. The extension is only to avoid late filing penalties. If you got an extension but failed to pay by April 15, you will still be subject to late payment penalties. Overall, the late payment penalty is a mere one-tenth of the late filing penalty. So if for any reason you are unable to pay on time, getting an extension can still help you avoid paying more than you need to.

If You Couldn’t Pay on Time or in Full

 
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Even if you could not pay the full amount you owe by the April deadline, you should still have filed your return (or filed an extension) AND paid as much as you could at the time. Also, if you don’t have the exact figures yet, try to estimate as best you can or use a tax calculator and make sure not to leave anything out. That way, your interest is computed only on the remaining unpaid amount. Overpaying is not a problem as this can be adjusted when you finally file your return.

You may also be allowed to pay in instalments, depending on how much you owe in taxes. If you owe less than $50,000 and can prove you can pay within a reasonable amount of time, say 5 years, you will probably be allowed an installment plan upon completing the necessary IRS forms. If you owe more than $50,000, the IRS will probably require more paperwork to prove that you will be able to pay within the requested timeframe.

If You Failed to File Your Taxes

Now, this is the worst case scenario. If you were somehow completely unable to file your return or file for an extension, you could end up paying as much as 25% more than the original amount owed. If you end up paying more than 60 days after the deadline, the penalty becomes a minimum of $135 or 100% of your owed amount, whichever is smaller.

As mentioned previously, you should always still file your return (or extension) by the April 15 deadline and pay as much of the amount owed by the same date. This is because the late filing penalty could be ten times as high as the late payment penalty.

Don’t Leave Money on The Table – Get The Help of a Professional

Khaled Hazzouri has built strong ties with the local community of Canton, MI and the surrounding areas. We have been helping individuals with their tax and accounting needs for more than 16 years. Call us at 734-844-1614 or use our online contact form, and we would be happy to answer all your questions.

You can also come find us on the web:  Facebook fan page / Twitter Feed / Google+ Account