New Year, New Payroll Company!

Kick off the new year with a great payroll company! At Accounting Works, we offer competitive pricing and specialize in local customer service. Visit rvapayroll.com to find out how we can improve your payroll services.

9 Avoidable Payroll Mistakes

Engaging employees allows your company to function and grow. But doing so puts employer responsibilities on your shoulders. Running afoul of these responsibilities can trigger penalties, and failing to take advantage of opportunities can cost you taxes, both of which can hurt your bottom line. Here are 10 payroll mistakes to avoid.

Payroll Mistakes to Avoid
Small Business Trends |  Nov 2, 2017  |  By Barbara Weltman

Giving Comp Time
When your non-exempt employees (generally hourly workers) work more than 40 hours in a workweek, you owe them time and a half. You can’t sidestep this obligation by giving them comp time (allowing them to take off the overtime hours worked). Doing so violates the federal Fair Labor Standards Act (FLSA).

Classifying Workers Improperly
If workers are your employees, you owe payroll taxes on their wages and taxable benefits. You can’t avoid these taxes by labeling workers as independent contractors if they truly are employees. Doing so can result in serious tax penalties as well as penalties from other federal and state agencies.  Check IRS guidance on worker classification.

Delaying Last Paycheck
When you terminate a worker or he or she quits, you owe a final payment. While federal law doesn’t require that you pay the worker immediately, state law may. Review the rules in your state. Violating these rules can result in penalties or even legal action.

Reimbursing Travel and Entertainment Under a Non-accountable Plan
If you reimburse employees for the cost of traveling or entertaining on company business, you may be incurring needless employment taxes if you don’t arrange the reimbursement properly. If they simply ask for reimbursement and you pay it, the reimbursement is taxable to them and subject to payroll taxes. If, however, you adopt an “accountable plan,” the reimbursement isn’t taxable to them and you don’t owe payroll taxes; you deduct the T&E expenses. To be an accountable plan, you need to follow IRS guidelines.

Paying Creditors Before the Government
If you’re experiencing a cash crunch, be sure to put the IRS at the top of your list. If you choose to pay the landlord or other creditors instead of first paying payroll taxes, you can become personally liable for all of these outstanding taxes, even if your business is incorporated or a limited liability company. Make payroll taxes a priority so you don’t trigger a trust fund recovery penalty.

Ignoring Unemployment Claims
When a worker leaves the company, he or she may apply for unemployment compensation. If the departure is voluntary, or the worker was terminated for serious misconduct (e.g., sexual harassment of a co-worker, being intoxicated on the job, stealing from the company), he or she isn’t entitled to unemployment compensation. If you fail to challenge erroneous claims, you may needlessly be paying higher state unemployment tax. Check with your state about how to challenge a worker’s erroneous claim for benefits.

Being a Bad Record Keeper
The law requires you to maintain payroll records and make them available to the IRS under certain circumstances. Usually, you must keep records for at least four years. These records include time sheets or other records of hours worked, expense accounts, copies of W-2s and I-9s, accident reports, and any other relevant payroll information.

Failing to Have New Employees Complete Form 8850
You can tell by looking at a new employee whether he or she is from a targeted group that would entitle you to claim the work opportunity credit. Have each new worker complete Form 8850, an IRS form. It is used to pre-screen workers for purposes of the credit. The form must be submitted to your state employment security agency (SESA) no later than the 28th calendar day after the date the member of a targeted group begins working for you. If you don’t, you can’t take the work opportunity credit even if you’d otherwise be entitled to it.

Missing Employment Posters
You are required to display posters for certain federal and state employment laws. If you fail to do so, you can be penalized. The amount depends on the type of poster that’s required to be displayed. Find the federal posters you need from the DOL’s Poster Advisor. Your state labor department can tell you which state law posters to use. Don’t pay an outside company for them. Download required posters from government websites.

Tax Planning Options for Year-End

Here are some great options for individuals looking to maximize their year-end tax planning!

With 2018 Fast Approaching, It's Time for Some Year-End Tax Planning Tips 

By Amy Neifeld Shkedy and Rebecca Rosenberger Smolen | November 02, 2017

As we approach the end of 2017, it’s a great time to start thinking about year-end tax planning issues. Rather than wait until the end of December, getting a head start on planning can improve your chances of concluding matters by Dec. 31. Here are some options that we suggest you consider before the end of 2017 to enable you to start 2018 in the best wealth planning shape possible:

• Annual Exclusion Gifts. Each individual can make a cumulative annual gift tax exclusion gift of $14,000 per donee during 2017, without using any portion of his federal estate and gift tax exemption. This annual gift tax exclusion amount is set to increase for the first time since 2013 to $15,000 in 2018. The federal estate and gift tax exemption is also set to increase from $5.49 million per individual this year, to $5.6 million in 2018 (allowing a married couple to shield $11.2 million from federal estate and gift taxes). Annual exclusion gifts can be made outright, through 529 Plan benefits (education savings accounts), or in special qualifying trust structures. For those still considering such gifts, it may be worthwhile to plan for 2017 and 2018 at the same time (noting the $1,000 increase in the exclusion amount for 2018), keeping in mind that gifts for 2018 can be made effective as of Jan. 1.
• Accelerate Deductions. Prepay deductible expenses due in January (including state and local income tax estimated payments which may not be due until January).
• Loss Harvesting. Harvest tax deductible losses to offset taxable gains for 2017. However, be mindful of the 30 day wash sale rule of Internal Revenue Code Section 1091, which could disqualify a deduction of the capital loss if the same, or substantially identical, security is purchased within 30 days after selling at a loss.
• Required Minimum Distributions. For those who have reached their required beginning date or who hold inherited IRA accounts, be sure to take your required minimum distribution for 2017 from your traditional IRA or qualified plan account by Dec. 31. Note that taxpayers who are 70 ½ or older are able to transfer up to $100,000 from an IRA (other than an inherited IRA) directly to a qualifying charity (a charitable rollover) in partial or full satisfaction of their required minimum distribution for 2017. This IRA charitable rollover law, which had formerly been a temporary measure, was passed permanently as of Dec. 18, 2015, by its inclusion in the Protecting Americans from Tax Hikes (PATH) Act of 2015.
• Qualified Retirement Plan Establishment. Business owners who are considering funding a new retirement plan have the opportunity to establish a qualified retirement plan by the end of the year but defer the decision about the funding amount (and the actual contribution) until later during 2018 (contributions can generally be delayed until at least Sept. 15). The limitation for tax deductible contributions for 2017 is $54,000 per participant for defined contribution plans (or up to $60,000 when including the $6,000 catch-up contribution for a participant who has reached the age of 50). Next year this cap will be increased to $55,000 (or $61,000 when including the $6,000 catch-up).
• Roth IRA Conversion. Convert a traditional IRA to a Roth IRA to take advantage of lower brackets or absorb excess deductions. All or any portion of the converted amount can be recharacterized to a traditional IRA on or before Oct. 15, 2018.
• Basis Step-Up Planning. For individuals who have funded “grantor” trusts for their families, year-end is a good time to consider swapping back low basis assets (e.g., appreciated stock) for high basis assets (e.g., cash) to help make tax reporting after the swap cleaner (rather than switch tax identification numbers in the middle of a tax year). It’s better to own the lower basis assets at death because of the opportunity for a basis step-up to fair market value under Internal Revenue Code Section 1014.
• Charitable Giving. If you are in a high income year, consider “prepaying” future charitable contributions to generate current income tax deductions. This can be accomplished simply by increasing the contributions to your favorite charities, in general, or you can defer the receipt by the charitable organizations you wish to benefit (or even defer the decision as to which ones to benefit) by contributing to a donor advised fund, a private foundation, charitable lead trust or charitable remainder trust or purchasing a charitable gift annuity.  Both the charitable gift annuity and charitable remainder trust options allow you to retain an income stream for life and defer the transfer of the remaining funds to the charity until after your death.
• IRAs and HSAs. While you technically have until April 15, 2018 to fund your Individual Retirement Account and Health Savings Account for 2017, it’s always a good idea to start planning for such funding at year end. Consider helping your children (to the extent that they have earned income) to fund tax favored Roth IRAs if at all possible. The maximum contributions for IRAs for both 2017 and 2018 is $5,500 ($6,500 for those who have reached the age of 50). The maximum family contribution for an HSA in 2017 is $6,750 (or $3,400 for individuals), with an extra $1,000 available for those who have reached the age of 55. For 2018, the maximum family contribution will increase to $6,900 (or $3,450 for individuals).
• Trust Income Tax Planning. While a trustee will generally have until 65 days after the end of the tax year to shift trust taxable income to a beneficiary, it’s worthwhile to monitor the issue at year end to get a jump start on evaluating the issue. This is becoming a more consequential issue with the Medicare tax imposed at 3.8 percent and the extra 5 percent tax which is imposed on dividends and capital gains at the higher brackets (which are reached pretty quickly for a trust).
• Estate Plan Review. Although it’s not necessarily year-end sensitive, the end of the year is a great time to review your estate plan to see if changes might be in order (whether because of changes in the tax law, your wealth, your chosen fiduciaries, or objects of your bounty). If you don’t review it at year-end, you might never review it before it’s too late, since you may not have any advance notice of the actual deadline.

Rebecca Rosenberger Smolen and Amy Neifeld Shkedy are members and co-founders of Bala Law Group. They focus their practices on tax and estate planning.

To view the original blog visit Law.com