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

Payroll is a crucial aspect of running any business, no matter if you have one employee or 100. Proper handling of payroll ensures that you get and keep quality personnel. It can also save you from unnecessary, hefty expenses and fines. After all, it costs much more to hire new employees than to keep existing ones – even with bonuses, raises, and other perks. There are also stiff penalties for improper collection, handling, and filing of payroll taxes. The IRS is continually exerting every effort to collect their due, with particular focus on collecting the proper employment taxes. The Employment Tax Research Project (ETRP) launched in 2010 is reviewing a sample of 6,000 businesses, with identified areas that will be subject to focused audits.

Set Up Your Payroll System Properly

To avoid headaches later on, it is crucial to plan and execute a solid payroll system at the get go. Decide on a pay schedule, keeping in mind that different states can have different requirements on this. In Michigan, employees must be paid at least once a month. This can be done more frequently, such as twice a month or every week. If your employees will be paid twice a month, wages for the first half of the month must be paid by the first day of the following month. Wages for the second half of the month must be paid by the 15^th of the following month. For more frequent pay schedules, wages must be paid within two weeks after the end of the work period.

The amount paid to each employee should, of course, be up to fair labor standards. You can use a paycheck calculator to determine the gross, net, and all deductions. The type of payment should also be considered. In Michigan, this should be either in cash, check (without fees or deductions upon cashing), direct deposit to employees’ account (with written consent from employee), debit card, payrolls card, or paycard.

Separation pay must be paid according to the same schedule mentioned above regardless of the manner of separation, except for workers engaged in hand harvesting whom must be paid within one working day.

Do the Paperwork

There is also, of course, the paperwork. You need to get an Employer Identification Number (EIN) even before hiring any employees. Once you do, have them fill up and submit to you their Federal Income Tax Withholding Form (W-4). In Michigan, W-4 forms need to be reported within 20 days of hiring, rehiring, or return to work to the New Hire Operations Center in Lansing, MI. W-2 forms and previously filed tax forms need to be kept in order. Michigan business owners are also required to furnish each employee with a pay stub listing the hours worked (unless executive, administrative or professional), gross wages, pay period, and itemized deductions. These records need to be kept for at least three years after the employee leaves your business.

 
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The difference between employees and contractors may seem trivial, but this affects your taxes a lot. This difference can therefore lead to even more stiff fines and legal liabilities.

Mind the Taxes

You are legally responsible for determining, withholding, reporting, and paying for the withholding tax of all your employees. This applies even if you hire someone else to handle payroll, so be careful whom you choose. Late payments or incorrect amounts will lead to interest and penalties. To illustrate this point, about 40% of small businesses pay an average of $845 a year in penalties. Official expenses, allowances, use of company assets and others may also be subject to tax. There are certain IRS forms that need to be filled up, submitted and filed on a regular basis.

The Federal Insurance Contributions Act (FICA) also requires you to withhold a certain rate from your employees’ pay for Social Security and Medicare. State Unemployment Insurance (SUI) also needs to be reported by the 25^th day of the month following the end of each quarter. For Michigan, the wage base is $9500, with rates ranging from 0.06% to 10.3%. There are payroll tax calculators that you can use to compute how much to withhold for each required deduction.

 How Hazzouri Accounting and Tax Services Can Help

As you can see, handling your business’s payroll properly is very important. Yet, it is not surprising that many aspiring entrepreneurs simply don’t realize what this entails. It often seems like yet another role a small business owner needs to fill, among many others. We at Hazzouri Accounting offer you our professional help. We believe that our relationship with the local communities of Canton, MI and the surrounding areas take top priority, and easing their burdens in making a living is our calling. Contact us today at 734-844-1614  for any questions or fill out our contact form and one of our friendly staff will call you.

We are also available 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

Taxes are a complicated matter for a vast majority of people. Mentioning mathematics or accounting alone will have most people fleeing – add taxes to the mix and things can get ugly. Unfortunately, as the saying goes, “nothing is certain but death and taxes”. There is no escaping the long arms of the IRS, but there is also some good news – with a little help, you could take advantage of significant tax breaks, minimizing the taxes you have to pay. These include provisions in tax laws, allowing for education benefits to help pay for the college education of your children, your spouse, or even yourself.

Tax Credits

Tax credits generally reduce the income taxes you have to pay. According to the IRS, “if the credit reduces your tax to less than zero, you may get a refund.” The American Opportunity Tax Credit (AOTC) can lower your taxes by a maximum of $2,500 per eligible student every year for the first four years of education. The Lifetime Learning Credit (LLC) is worth $2,000 per year for an unlimited number of years, and can be used even for graduate and professional degrees and “courses to acquire or improve job skills.” For the AOTC, your modified adjusted gross income or MAGI must be $80,000 or less ($160,000 or less for married couples filing jointly). For the LLC, your MAGI must be less than $62,000 ($124,000 for married couples filing jointly) for a partial credit and $52,000 ($104,000 for married couples filing jointly) or less for the full credit. Note, however, that you can only avail of either the AOTC or the LLC, but not both.

Tax Deductions

Tax deductions reduce the amount of your income that is subject to tax. You can deduct tuition and other qualified higher education expenses up to $4,000 per year. The MAGI ceiling for this is $80,000 ($160,000 for married couples).

Interest Deductions for Student Loans

If your MAGI is less than $75,000, you may be eligible for a deduction for the interest you pay on a student loan (up to $2,500). A student loan is a loan you took out solely to pay for education expenses, such as tuition, accommodations, books and other supplies, equipment, and important expenses such as transportation.

Tax-Free Savings Accounts

529 plans and Coverdell Education Savings Accounts (ESAs) allow your earnings and withdrawals to be tax-free when used to pay for qualified higher education expenses.
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529 plans, in particular, have no MAGI or age restrictions, and can allow you to contribute as much as $300,000 over the life of the account. It can also cover computer technology and equipment, internet access, and related services.

ESA’s, on the other hand, can be used to pay for eligible K-12 expenses, as well as post-secondary expenses. However, it is subject to an income ceiling of $110,000 ($220,000) and an annual contribution of $2,000 per child. The beneficiary must also be under 30 years old.

Government Bonds

Series EE Bonds and I Bonds, when redeemed to pay for a child’s tuition, are also exempt from taxes on the interest earned. Said bonds must be in your name or the name of you and your spouse, not in the name of your child. As of 2012, your MAGI should be smaller than $87,850 ($139,250).

Bottom Line

As you can see, you may be able to take advantage of several tax breaks for educational expenses or certain combinations thereof. In choosing which one/s to avail of, considerations include eligibility and determining which one/s can give you the highest returns overall. To make sure you don’t miss out on the maximum education tax breaks you are entitled to when saving for the future, get the help of an expert.

Khaled Hazzouri has over 16 years of expertise in helping people reduce their taxes to the minimum allowable under tax law. Hazzouri Accounting is based in Canton, MI and is committed to serving the local community and forming lasting relationships with our clients. Call us today at (734) 844-1614 or use our contact form and we will be happy to help you with all your taxation needs.

Stop by our social media accounts to join the conversation: Facebook / Twitter / Google+

In a previous post, we discussed How You Can Benefit From Early Tax Preparation and why getting an accountant is a great help. This time around, we will enumerate the different forms you should bring to your tax appointment with your accountant to avoid any mistakes, or having to go back if you forget any requirements. However, keep in mind that these are only suggestions – different people will have different requirements. Some may not need all of the items listed here, while others may need more items not covered here.

Personal Documents and Information

Bringing your previous tax returns with you will help us determine the exact figures for your situation, including anything you may have missed in terms of what you have to pay and deductions you may not be aware of. This is especially helpful if you are a new client, and even more so if you have already raised red flags at the IRS.

Your Social Security Number (SSN) will also be needed, and those of all your dependents as well as their full names. Any alimony paid or received, childcare records (including provider’s ID number), divorce decrees, form 8332, and any other related documents should also be included. If there are other adults in your household that earned money in the previous year, you should also bring estimates of the income each of them had received.

Other Sources of Income

These may include the following:

• Unemployment
• State tax refund
• Self-employment information, including income and expense records, asset information, and office-in-home information
• Rental income, including income and expense records and rental asset information
• Retirement income, such as pension, IRA, annuity, social security and RRB
• Interest and dividend income
• Income from sales of stock or other property, including dates of acquisition and records of your cost or other information regarding sold property
• Gambling income
• Healthcare reimbursements
• Jury duty
• Hobby income
• Prizes/awards
• Any others under 1099
• Employee Information (W-2)
• IRA Information, including the amount contributed, traditional IRA basis and the value of IRAs in past year/s.

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Itemized Deductions

Make a list of any deductions you may think of, including any of the following:

• Mortgage statements such as Form 1098
• State/local income or sales taxes paid (excluding withholding taxes)
• Real estate and personal property tax records
• Vehicle sales taxes paid
• HUD statement
• Cash and non-cash donations to schools and religious and other charitable organizations
• Medical expenses
• Mileage and gas, oil, car wash, licensing, parking and toll fees in the course of charitable, medical, and business purposes
• Investment-related expenses
• Tax preparation expenses
• Employment-related expenses
• Business rent expenses
• Moving expenses
• Dependent care expenses
• Higher education expenses
• Energy efficiency upgrades to your home
• Safe deposit box, cell phone, tools, dry cleaning, luggage, travel, meals and entertainment expenses

Any Damages from a Federally Declared Disaster

This includes the location you lived, worked, or had property in that was affected by the declared disaster. You will need records showing the losses and repair costs, insurance reimbursements or claims, and FEMA assistance information.

How Hazzouri Accounting Can Help:

Getting all of these documents and information together can be the single most difficult effort on your part in preparing your 2013 tax return. Hazzouri Accounting is affiliated with and/or certified by organizations such as the MACPA, Intuit, and AICPA to provide expert advice and assistance for your tax preparation in 2014.

As with every year, the majority of Americans will overpay on their 2013 taxes. With over 16 years of experience with Canton, MI taxes, and the surrounding area, Khaled Hazzouri can help you avoid any overlooked tax breaks. Filing as early as you can will put you at an advantage over the rest of the 1.8 million people in Wayne County alone serviced by only around 1500 accounting firms, and will also mean avoiding penalties and faster processing of any refunds. For more information, or to set up your tax appointment, please visit our website / Facebook fan page or call 734-844-1614 today.