November 12, 2011

 

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I'm not the only one sending out email newsletters. I received one from accountants that provided the information below. Although the first item involves New York, I suspect that the tax liability issue is the same in many states - personal liability for sales tax collected and not paid over to the tax authority. One more reason to stay clear of LLC, partnerships, and doing business in your own name. My advice - your business entity should be a business corporation with a subchapter S election. Of course one other bit of advice - make sure you file your sales tax returns and pay the sales tax that you are obligated to collect.

Misclassified workers - employees or subcontractors - is a topic that we discuss from time to time. There may be a way to clean up your tax exposure. Talk to your CPA or tax lawyer about this. Do not try to handle this on your own.

Cell phones - make sure your accountant knows not to treat this as taxable to you.

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State Tax

NY Trims Personal Liability For Sales Tax

NY’s onerous law in which your personal assets could be taken to fulfill the sales tax obligations of the business is getting a small haircut. The latest in a series of technical memoranda on this issue¹ grants relief to limited partners of an LP and to LLC members with a less than 50% ownership interest and share in profits and losses. To qualify, you must show that your job responsibilities are not connected with complying with tax law. You must also agree to certain terms and conditions. Despite this change, the specter of personal liability continues to hang over general partners of any type of partnership; any partners of an LLP; and to LLC members with a 50% or more ownership interest or share in profits and losses.

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IRS Offers A Deal On Misclassified Workers

Businesses who want to be spared the strain of an audit over misclassified workers can look into a deal offered by the IRS. Under the Voluntary Classification Settlement Program (VCSP), businesses who treated workers incorrectly as nonemployees or independent contractors can settle this matter by paying a minimal amount to cover past payroll taxes. The amount will be about 1% of the wages paid to the worker in the past year. To be accepted into the VCSP, employers must have been consistently treating workers as nonemployees; have filed 1099s for those workers in the past 3 years; and not be under a worker classification audit by the IRS, Department Of Labor (DOL), or a state. If accepted, employers pay no interest or penalties and the IRS will not initiate payroll tax audits on these workers for any prior years. On a separate note, the DOL has begun sharing information with the IRS and about a dozen states in an aggressive crackdown on businesses that are improperly labeling workers.

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Employer-Provided Cell Phones Are Tax-Free

Employees are not required to pay tax for using employer-provided cell phones for personal or business purposes, according to recent IRS guidance. Going further, the Service does not require that you maintain records of the business use of the phone in order to enjoy the tax-free treatment.