Employment Taxation

Employment taxation covers the Federal Code and regulations as they address the payroll and payroll related taxes. From the application process to the filing of reports, this section explains this in great detail.

Owner Compensation in an S-Corporation

Owner Compensation

One of the tax attributes of an S-Corporation over other forms of tax entities is the ability to reduce the overall tax obligation.  Naturally the lower the overall tax requirement the more profit generated for the owner(s).  The S-Corporation allows an owner to reduce their tax responsibility via the compensation package assigned to the owner.

Simple Retirement Plan – Section 408(p)

Simple Retirement Plan

There are several different retirement plans available to the small business owner.  But no plan offers so many advantages to small business as the Simple retirement plan.  The positive attributes include: 1) Easiest to understand, 2) Least amount of paperwork, 3) No compliance reporting and 4) Plenty of flexibility.  If you are in business and have less than 25 employees, this is your best option to include a great benefit for your employees.  This article describes this form of a retirement plan and Section 408 of the Internal Revenue Code, identifies the advantages, and concludes with a comprehensive example.  In addition, I explain how to fill out the proper document to begin the plan.

This is a plan within an allowed set of plans under Section 408 of the Internal Revenue Code.  All of us have heard of Section 401(k) plan.  The Internal Revenue Code dedicates Sections 401 through 408 to codifying retirement plans.  Within Section 408 are the easier to understand retirement plans.  They include Simplified Employee Plans (SEPs), Salary Reduction Simplified Employee Plans (SARSEPs) and the Savings Incentive Match Plan for Employees (SIMPLE).  Section 408(p) addresses the SIMPLE.

The 1099 Subcontractor

1099 Subcontractor

The Internal Revenue Service promulgates rules and regulations concerning the employment status of workers.  In general, workers are classed as W-2 employees and certain tests must be met to have the worker classed as a 1099 subcontractor.  All 1099 subcontractors should be issued a Form 1099 in January of each year for the prior calendar year of services.  This article describes the general tests that must be met for the worker to be considered a 1099 subcontractor.

Time for Those W-2’s

W-2's

For us accountants January brings the greatest payroll function of the year; printing the year end payroll reports.  These include the W-2’s, W-3 and Form 940.  They all must tie to the combined total of the quarterly 941 reports and the deposits made to the Internal Revenue Service.

FUTA – An Explanation to the Federal Unemployment Tax Act

FUTA

Federal Unemployment Tax Act or FUTA for short is a part of the Internal Revenue Code and is an employer tax on wages paid to employees.  It is used to fund unemployment benefits.  The tax is paid on the first $7,000 of wages paid to every employee.  It is reported via Form 940 https://businessecon.org/resources/ .  The Form must be filed and all taxes paid by January 31, 2019.

Form 941 – The Basics

form 941

Form 941 is the employer’s quarterly federal tax return.  It reports how much federal income taxes were withheld; Social Security taxes and Medicare taxes that are due and how much was paid in deposits to the Internal Revenue Service.  The report is filed every three months for each of the four calendar quarters.

Year-End Preparation

W-2's

I dread January of every year. I have to spend so much time preparing the year-end payroll reports prior to the January 31 deadline. Not only must your quarterly’s and monthly’s tie together, but it has to match the general ledger at year-end.

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