Do You Have Employees or Contractors?

    Employee, contractor, tomato, tomatho, potato, potatho, let's call the whole thing off!  Okay, so it sounds a lot cuter when Fred Astaire and Ginger Rogers do this, but we have a lot of our clients that seem to get employees and contractors confused.  And some of them do this because they want to avoid paperwork, taxes, overtime, and other headaches that can come with having employees.  This becomes an issue, with the IRS, since they have reason to believe that not all contractors pay their taxes appropriately.

    However, it is not up to the employer to choose one over the other.  The general rule is that an individual is an independent contractor if the payer has the right to control or direct only the result of the work and not what will be done and how it will be done. The earnings of a person who is working as an independent contractor are subject to Self-Employment Tax and they have to take care of that personally.

Below are the general characteristics of employees and independent contractors:

Independent Contractor ·         Free from direction and control ·         Has necessary skills and training to complete job ·         Has a business location ·         Performs services for multiple customers ·         Sets own hours ·         Determines own price for contracted services ·         Not eligible for employee benefits ·         Provides equipment and tools used to complete job ·         Supplies materials needed to do job ·         Personally liable for errors and/or accidents ·         Files self-employment taxes ·         Has right to hire and fire workers ·         Must legally complete each contract

Employee ·         Means and manner of work are (or can be) controlled by employer ·         May be trained by employer to perform job ·         May work at employer’s business location ·         Works for one employer, may serve that employer’s customers ·         Hours set by employer ·         Accepts wage, salary, or commission determined by the employer ·         Employer may provide and control equipment and tools ·         Employer may purchase materials and supplies ·         Employer liable for employee errors and/or accidents ·         Is hired and can be fired by employer ·         May quit working for an employer at any time ·         Employer may require specific attire to be worn while at work such as a uniform or shirts with company logo

So if looks like a duck, waddles like a duck, and quacks like a duck, don’t call it a contractor.  To avoid these types of issues give a us call or email.

Entrepreneurs are Not Fully Utilizing Their Accounting Tools

   We have received client's books every way conceivable.  We have gotten several old shoe boxes full of receipts, paper bags full of invoices, and even a laundry basket full of laundry (maybe that one was not accounting related though.)

  

  While we are always very, very, very happy to take these piles of paper and make accounting magic with them, we still strongly advise clients to start taking advantage of accounting software and apps.

From, (http://www.godaddy.com/news/article/small-business-owners-not-taking-advantage-of-technologies-that-save-time-money-during-tax-time.aspx)

  This survey reveals some of the issues we are referring to:

•Almost half (46 percent) of small business owners reported they do not work with an accountant.

•Of those small business owners who do work with an accountant, 47 percent see their accountant once a year at tax time or only when they have a question or need help.

•In the last 12 months, nearly a quarter of small business owners said they had lost track of whether a customer has paid them or not, or could see it happening in the future.

•32 percent of small business owners do not set aside money throughout the year to pay income taxes.

•12 percent of small business owners have no idea how much they will owe in income taxes, while 74 percent reported that they usually know the “ballpark” of what they owe, while just 15 percent know exactly how much they owe.

   By using accounting software like QuickBooks and Peachtree or using apps like Wave or Freshbooks, an entrepreneur can see can keep track of who owes them money, know how much they will owe in taxes, and sleep better at night in general.

   Give us a call or email for any suggestions to help your business start taking advantage of one of these tools or even provide you the training (QuickBooks specifically) to make it happen.

Sheldon, from the Big Bang Theory, knows that CPA's are the life of the party!

CPA, CPA, CPA

What to do if You Get a Notice from the IRS

IRS Summertime Tax Tip 2014-01, July 2, 2014

Each year the IRS mails millions of notices. Here’s what you should do if you receive a notice from the IRS:

1. Don’t ignore it. You can respond to most IRS notices quickly and easily. And it’s important that you reply promptly.
   
2. IRS notices usually deal with a specific issue about your tax return or tax account. For example, it may say the IRS has corrected an error on your tax return. Or it may ask you for more information.
   
3. Read it carefully and follow the instructions about what you need to do.
   
4. If it says that the IRS corrected your tax return, review the information in the notice and compare it to your tax return.
   
   If you agree, you don’t need to reply unless a payment is due.
   
   If you don’t agree, it’s important that you respond to the IRS. Write a letter that explains why you don’t agree. Make sure to include information and any documents you want the IRS to consider. Include the bottom tear-off portion of the notice with your letter. Mail your reply to the IRS at the address shown in the lower left part of the notice. Allow at least 30 days for a response from the IRS.
5. You can handle most notices without calling or visiting the IRS. If you do have questions, call the phone number in the upper right corner of the notice. Make sure you have a copy of your tax return and the notice with you when you call.
    
6. Keep copies of any notices you get from the IRS.
   
7. Don’t fall for phone and phishing email scams that use the IRS as a lure. The IRS first contacts people about unpaid taxes by mail – not by phone. The IRS does not contact taxpayers by email, text or social media about their tax return or tax account.

For more on this topic visit IRS.gov. Click on ‘Responding to a Notice’ at the bottom left of the home page. Also see Publication 594, The IRS Collection Process. You can get it on IRS.gov or call 800-TAX-FORM (800-829-3676) to get it by mail.

Additional IRS Resources:

• Tax Topic 651 - Notices – What to Do
• Tax Topic 652 - Notice of Underreported Income – CP-2000
• Tax Topic 653 - IRS Notices and Bills, Penalties and Interest Charges