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The New California Willful Misclassification Of Independent Contractor Law Is Essential Information For All Employers Part 2

January 12, 2012 By

Previously, the first part of this article was posted, going into detail about the new California Willful Misclassification Law of Independent Contractors and how it will effect companies. From a tax resolution perspective, it can have extreme consequences in regards to payroll taxes and the trust fund recovery penalty. Here is the second part of the article that continues the analysis.

The Spotlight Is On California Employers

The Spotlight Is On California Employers

Part 2 — There are so many California employers who have misclassified their workers as “independent contractors” to avoid the costs and expenses associated with payroll, overtime pay, workers’ compensation insurance, disability, and other traditional employee benefits and protections. In California, the state agency most involved with determining whether an employee is misclassified as an independent contractor is the Employment Development Department (EDD). Looking to fill the state coffers, the EDD is allowed to go back three years and seek reimbursement for unpaid payroll taxes, unemployment insurance, disability insurance, workers’ compensation insurance, and to assess both fines and penalties for violations of various California Labor Code violations

The failure to pay a terminated employee all wages due and owing in a timely fashion can subject an employer to a penalty of up to 30 times the employee’s daily wage without regard to the actual amounts of unpaid wages. Needless to say, when a worker is misclassified it is a given that the payroll taxes have not been paid. Employers who fail to pay for unemployment insurance benefits and/or state disability insurance benefits are not only required to pay the amounts not withheld, but may also be assessed a 10% penalty and interest on the unpaid contributions. 

California employers should know that it does not matter that a worker signed an independent contractor agreement, or was paid as an independent contractor. Both the California Labor Commissioner and the courts will look behind any such purported agreement and examine the underlying nature of the relationship to determine whether the worker was misclassified.

Payroll Tax Liability In California Is Intensifying

Payroll Tax Liability In California Is Intensifying

California employers are strongly urged to review their employment practices. Misclassifying employees as independent contractors can have devastating consequences for your business. In an investigation, the California Employment Development Department focuses on the right of the principal to control the manner, mode, method and means of performing the actual job. The investigation is extensive and includes these five questions:

  1. Doe the employee have a separate occupation or business?
  2. Does the employee providing the service supply their own tools and the place of work?
  3. Is the service performed an isolated event or continuous in nature?
  4. Is the employee paid by the hour or by the job?
  5. What is the extent of actual control exercised by the principal over the manner and means of performing the services?

California payroll tax audits often lead to a finding of payroll tax fraud by the EDD. This may happen if an employer pays workers in cash over a number of years, and fails to file Forms 1099 or makes other attempts to conceal the existence of those workers. If a corporate taxpayer cannot pay the California employment taxes it owes, the EDD may hold corporate officers and stockholders who willfully fail to pay California payroll taxes personally responsible. Unlike the IRS trust fund recovery penalty for federal payroll taxes, responsible officers and shareholders will be held responsible not only for the trust fund portion of the California payroll taxes, but the entire amount of the California State employment taxes including all interest and penalties.

 

 

Filed Under: California Tax Relief, Payroll Tax Problems, Tax Planning, Tax Resolution Services Tagged With: , , , ,

Unexpected Payroll Tax Problems Arise As A Result Of New Homeland Security & ICE Enforcement Policies

December 2, 2010 By

United States Immigration and Customs Enforcement (ICE), the largest investigative agency in the Department of Homeland Security is taking federal enforcement of immigration and hiring policies to the next level, resulting in financial trouble and sudden payroll tax problems for a multitude of employers across the country. Recently, the owners of Hi-Tech Trucking and SeaLands Food were sentenced to 18 months jail and 2 years probation on top of forfeiting $1.2 million. In October 2010, retailer Abercrombie and Fitch was fined $1.1 million for technology-related deficiencies in its electronic I-9 verification system. In San Diego, the federal government is seeking to seize the property of a bakery owner who has been charged with hiring illegal immigrants.

ICE Enforcement of Hiring Policies Leads To Payroll Tax Probelms

ICE Focus On Employers Leads To Payroll Tax Problems

Although the fines, seizures and jail sentences were in relation to immigration and hiring violations, the Tax Resolution Institute (TRI) recognizes the financial pressure these changes have put on employers. Challenging economic times combined with an increased government focus on employers as the scapegoats can result in sudden tax difficulties Fixing violations and revamping hiring policies can lead an employer to borrow from the Trust Fund to cover unexpected costs.

The problem is that not depositing your payroll taxes is a potential death sentence for a business, resulting in bigger problems with the Internal Revenue Service like the Trust Fund Recovery Penalty. By becoming compliant with Homeland Security, an employer can create a whole new set of payroll tax problems. In business, it is never wise to steal from Peter in order to pay Paul. If this is what happened to you and your company, contact the Tax Resolution Institute today.

Robbing Peter (IRS) To Pay Paul (ICE)

Robbing Peter (IRS) To Pay Paul (ICE)

The revised enforcement approach by Immigration Customs Enforcement (ICE) has been in effect since July 2009 after John Morton, assistant secretary of U.S. Immigration Customs Enforcement, announced a change in strategy with a focus on employers. This revised strategy includes utilizing Notices of Inspection that allow enforcement agents to inspect immigration documentation, including I-9s. This shift in strategy echoes the words of Homeland Security Secretary Janet Napolitano, who in January of 2009 stated, “You really have to look at the demand side for illegal labor and go after the employers as strongly and as effectively as you can.”

Since this announcement, more than 2,500 employers have received Notices of Inspection and had their paperwork audited. From these audits, over $35.7 million in fines and penalties have been levied against employers. It is not difficult to envision how such steep penalties could result in delinquent payroll tax problems as an employer steals from Peter to pay Paul. The Tax Resolution Institute is ready to help companies who have been placed in such jeopardy by the pressures of policy changes. If you have a payroll tax problem because you have dipped into the Trust Fund for any reason and you need help, contact the Tax Resolution Institute today.

Filed Under: Payroll Tax Problems, Tax Resolution Services Tagged With: , , , , ,

Tax Resolution Bailout As New York Brokerage House In Manhattan Accumulates Massive IRS Payroll Tax Debt

October 1, 2010 By

In a bailout of completely different proportions from the Wall Street recession bailouts, a New York Brokerage House in Manhattan received a tax resolution type of bailout after accumulating massive IRS payroll tax debt. When times got tough and profits were squeezed dry, the human resources managers of the brokerage house dipped into the IRS Trust Fund to cover expenses.

Believing the tide would turn in the stock market, they were overwhelmed when the economic downturn continued to deepen. Rather than paying back the trust fund debt and covering the past payroll taxes, they continued to make the same mistake, turning an IRS tax crisis into what could have been a full blown payroll tax disaster as the Trust Fund Recovery Penalty came close to sinking the brokerage house.

New York City Payroll Tax Debt In Manhattan

New York City Payroll Tax Debt In Manhattan

Luckily, before a serious payroll tax debt problem became an all-out economic for whom the bell tolls, the principal owners and investors at the brokerage house came to the Tax Resolution Institute for help. By taking action before the IRS axe fell and they were caught in the vise of the 100% Trust Fund Recovery Penalty, they were able to find a new kind of bailout — a tax resolution bailout not from the federal government, but from the tax experts at the Tax Resolution Institute. By negotiating with the IRS Revenue Officers to avoid potential crippling actions through the negotiation of a deal that covered the owed amount, but wiped away the compounded interest and Trust Fund Recovery Penalty.

Tax Resolution Services Bailout Of Wall Street Firm

Tax Resolution Services Bailout Of Wall Street Firm

When a company fails to pay Payroll Taxes, they suddenly have to deal with the largest and most powerful collection agency in the world. In many Payroll Tax cases, the Internal Revenue Service employs what are defined as Cascading Penalties. A Cascading Penalty means that if the brokerage house in Manhattan only missed a single Payroll Tax deposit, and then make all remaining deposits on time, the IRS still applies the next week’s deposit to the missed deposit and continues to apply payments going forward.

Failure to file a return on time can incur penalties of 5% per month to a maximum of 25%. Add that to other penalties, along with the compounded interest, the New York brokerage house suddenly had a tremendous tax debt that could bankrupt a once thriving Wall Street firm. Payroll tax problems can sink a once thriving business and need to be addressed immediately.

IF YOU HAVE A PAYROLL TAX PROBLEM IN ANY OF THE BOROUGHS OF NEW YORK CITY, FROM MANHATTAN TO BROOKLYN, CONTACT THE TAX RESOLUTION INSTITUTE — CALL TOLL FREE (877) 829-8370 FOR A FREE CONSULTATION!

Filed Under: Payroll Tax Problems, Tax Resolution Services Tagged With: , , , , ,

5 Key Points Regarding Payroll Taxes For Business Owners in San Francisco, San Jose, and Silicon Valley

July 12, 2010 By

As the Northern California economy slowly comes back from the recent downturn and business starts picking up, it is essential that business owners in Northern California are aware of five essential points in regards to the IRS and payroll taxes. Since San Francisco, San Jose and Silicon Valley have traditionally been the high tech business centers of Northern California, they were hit the hardest by the recession. If a business cut corners when it came to paying their payroll taxes in the form of the trust fund, there are five points that are essential to know. Since the Revenue Officers at the IRS is increasing their focus on payroll tax compliance, knowing this key information could help your business avoid an audit or, even worse, a federal criminal investigation.

1)  Due to the 100% Trust Fund Recovery Penalty, Payroll Tax penalties Increase at a rapid rate.  Beyond the 100% Trust Fund Recovery Penalty which can bankrupt a business on its own, the IRS also apply three additional penalties — failure to file, failure to deposit, and the failure to pay. Even if you plan to pay but are just two weeks behind, these penalties will kick into action, adding up to over 33% of your original bill.

Unpaid Payroll Taxes Threaten Business Owners

Unpaid Payroll Taxes Threaten Business Owners

2)  The failure to file and the failure to pay your Payroll taxes can be classified as federal crimes. If the IRS believe you intentionally avoided your payroll tax responsibility as a business owner, consciously used the Trust Fund to cover your own bills and deems it necessary, both the Criminal Investigations Unit and the Department of Justice can be called on and the case taken to the next jurisdictional level.

3)  Small to mid-sized businesses are the most likely targets of Payroll tax audits by IRS Revenue Officers. Why is this the case? Simply because it has been proven that small to mid-sized businesses are the biggest sources of uncollected payroll taxes. Even mid-sized businesses are in better shape than the small business owner. With a small business with limited resources, the IRS is more likely to be able to resolve and close the case. As the largest collection agency in the world, the heart of their business is to close cases.

Silicon Valley Hit Hard By The Recession

Silicon Valley Hit Hard By The Recession

4)  The IRS can come after a business owner individually for outstanding payroll tax debts. Once again, this is another reason why small businesses are targeted. If you own a small high tech company that was hit hard by the recession and you are a start-up, you are considered a prime candidate by the IRS for a payroll tax audit. As a result, the Tax Resolution Institute understands how many companies in Silicon Valley, San Jose and San Francisco could be facing serious payroll tax problems in this tough economy.

5)  Let’s be clear and simple on this point — No matter what the situation, no matter what the circumstances, borrowing from payroll taxes, using the trust fund to cover any external costs whatsoever, is against the law. The money collected from employees to pay their share of federal withheld tax, FICA and Medicare (Social Security) does not belong to the business and must be accounted for and paid to the government. You are not borrowing from your company; rather you are seen as someone who is stealing from the federal government. Owing back payroll taxes is serious business. This is why the trust fund recovery penalty is a 100% penalty.

The Tax Resolution Institute understands how hard many small to mid-sized companies in Northern California were hit by the recent recession. If your company made the mistake of using the Trust Fund to cover your debts and failed to properly cover your payroll tax debts to the IRS, please contact us right away. We have worked with companies in San Jose, San Francisco and Silicon Valley, and we know how to find real tax resolution for a payroll tax crisis.

Filed Under: Tax Relief Tagged With: , , , ,

Payroll Tax Problems On the Rise For New Jersey Business Owners From Newark To Atlantic City

July 6, 2010 By

As New Jersey continues to face a challenging economic crisis and wealthy taxpayers abandon the state to avoid rising taxes, New Jersey business owners find themselves treading dangerous waters. From the big city streets of Newark to the casino-run boardwalks of Atlantic City, traditional avenues of revenue are drying up and profits are harder and harder to come by. As a result, when faced with a monetary crisis and lacking funds to cover the usual bills, business owners are choosing more and more to cut corners when it comes to paying their payroll taxes.

Payroll Taxes and the Trust Fund Recovery Penalty

Payroll Taxes and the Trust Fund Recovery Penalty

By failing to cover the trust fund and ensure that the Internal Revenue Service receives the money it is owed, New Jersey business owners across the state are placing their futures in real jeopardy. If you own a small to medium-sized business in New Jersey and you are having payroll tax crisis, the Tax Resolution Institute can help you find the tax relief you need to save your business. We have helped multiple business clients in New Jersey that have been facing major problems with both the IRS and the New Jersey Department of Taxation.

Whether it was the owner of several gaming arcades in Atlantic City who had lost a fair sum when several of his video games were vandalized or a small catering business in Newark that saw its profits vanish almost overnight with the onset of the recession, the Tax Resolution Institute provided the tax relief needed to avoid the final closing of the doors. The Atlantic City Arcade Owner did not realize that the Trust Fund Recovery Penalty was a 100% Penalty when he decided to use his employee’s trust fund to cover repair costs.

Atlantic City Business Owner in Need of Payroll Tax Relief

Atlantic City Business Owner in Need of Payroll Tax Relief

The Atlantic City businessman figured his decision was justified because he was the victim of a criminal attack. However, as the largest collection agency in the world, the IRS does not care what happens to you beyond their jurisdiction. All they care about is being paid what they are owed. Luckily, the Atlantic City business owner came to TRI and his penalty was negotiated down to just the actual Trust Fund amount originally owed.

When the recession hit, the well-regarded Newark catering business that specializes in weddings saw its business evaporate overnight. Although a majority of its workers were part-time, it maintained a permanent staff and still was responsible for the Trust Fund payments for both the full-time and part-time workers. The Newark business owner chose to use the Trust Fund money to buy supplies that were needed for upcoming weddings. After the payments for the catering jobs, she believed the Trust Fund could be paid back in full.

The Payroll Tax Crisis of New Jersey Wedding Caterers in Newark

The Payroll Tax Crisis of New Jersey Wedding Caterers in Newark

When two out of the three weddings fell through, the Newark catering company owner was caught holding the bag for both the supplies and the Trust Fund Recovery Penalty. Like the Atlantic City business owner, she called the Tax Resolution Institute, and we helped keep her business in business. If you are a business owner in New Jersey and you are experiencing a serious payroll tax problem, the Tax Resolution Institute is your positive answer for real tax relief.

Filed Under: Payroll Tax Problems, Tax Relief Tagged With: , , , , , , ,

A Shifting Economy In Las Vegas Results In Payroll Tax Problems For A Growing Business

July 2, 2010 By

As the Las Vegas economy shifted from full-speed ahead to a downturn reflecting the overall economy, numerous business owners found themselves in financial difficulty. A client of the Tax Resolution Institute with a number of small business ventures found himself with serious payroll tax problems. Originally the owner of a small motel on the outskirts of the main strip, the client had expanded his business to include a theme restaurant and a novelty store during the recent boom.

Las-Vegas-And-Payroll-Tax-ProblemsWhen hard times arrived, the client chose to rob Peter to pay Paul by using the Trust Fund from his employee’s Federal Payroll Tax Withholdings to cover business costs. He figured he had plenty of time to make up the difference when the time came to actually deposit the payroll taxes with the Internal Revenue Service. Unfortunately, other financial problems arose, and the business owner found himself unable to cover the funds owed. With the IRS enforcing payroll tax cases with real severity and the Trust Fund Recovery Penalty, known at the 100% penalty, being so extreme, the business owner found himself in dire straits. When he contacted the Tax Resolution Institute, it looked likely that his payroll tax debts would lead to the closing of his business ventures and eventual bankruptcy.

Mind you, even if the business owner had ended up declaring bankruptcy, the trust fund amount he owed in the payroll tax case would not have been dischargeable. Trust Funds Recovery Cases are so severe because bankruptcy does not apply as a protection. Once you have taken money owed by your employees from the Internal Revenue Service and the Federal Government, there is no easy way to avoid paying it back in full. When the Trust Fund Recovery Penalty and the Interest Compounded are added to the total, it often leads to the end of many viable business ventures. Luckily, our client in Las Vegas came to the Tax Resolution Institute before his payroll tax problem turned into a fatal catastrophe for his business ventures. By being able to take action quickly and knowing the ins and outs of the Internal Revenue Service, the tax experts at TRI can provide our clients who have either payroll tax problems or income tax problems with true and effective tax relief.

Payroll-Taxes—Stealing-From-Peter-To-Pay-PaulPeter Stephan effectively negotiated with the Internal Revenue Service to reduce the amount owed to the actual existing Trust Fund. Raising funds from the equity in his business ventures, our Las Vegas client was able to put together the funds to cover everything he owed. Like any collection agency, the focus of the IRS is to close cases and get the base amount owed recovered.

When the Tax Resolution institute offered to have the client pay that amount in full, the rest of the penalty and interest was waived so the case could be closed. Rather than having to close his doors, our client merely chose to sell off the novelty store, keeping his theme restaurant and his motel open and profitable. Without question, his mistaken choice to use his employee’s Trust Fund to cover his bills could have led to disaster. Thank to his decision to reach out for help, a bad decision did not grow into a fatal blow for his company.

Since Nevada has no state tax, many business owners in Las Vegas and Laughlin, Reno and Carson City, make the mistake of taking a casual approach towards their Federal payroll taxes. Such an approach is nothing less than deadly when it comes to the future success of any business venture. If the downturn in the Nevada economy has led to serious payroll tax problems, if you have taken from Peter to pay Paul, then please contact the Tax Resolution Institute, and we can help you to find the tax relief that you need to ensure the future viability of your business.

Filed Under: Tax Relief Tagged With: , , , , , , ,

San Jose Executive With Payroll Tax Problems Calls TRI Before His 4180 Interview To Determine Responsibility

June 18, 2010 By

At a San Jose High Tech Firm in Silicon Valley that was hit hard by the recession, a Director of Operations found himself with serious federal payroll tax problems. He had been called in by the IRS for a 4180 interview which determines who is responsible for the Trust Fund portion of unpaid payroll taxes. Since the IRS demands that the entire Trust Fund portion of back payroll taxes be paid, there is no escaping the debt by the party made responsible for the Trust Fund. As a result, it is essential that if you have a serious payroll tax problem, you contact the Tax Resolution Institute prior to the 4180 Interview. By arguing that the Director of Operations did not exercise “willful intent” with regard to his company’s unpaid payroll taxes, Peter Stephan was able to have the San Jose Executive removed as a “responsible person”.

San Jose Executive And The Danger of Payroll Taxes

San Jose Executive And The Danger of Payroll Taxes

The last action you ever want to take is to attend a Trust Fund Penalty interview without professional qualified representation by your side. Not only do you need to be prepared for such an interview, you need Peter Stephan and the trusted expertise and long-term experience of the Tax Resolution Institute guiding you through this potential minefield. A single misstep can lead to you being personally responsible for paying a potentially large sum of money that is extremely hard to abate.

You must remember that the IRS only has three years to assess “responsible persons” for a Trust Fund Penalty. As a result, the IRS Revenue Officers are relentless and lack the flexibility they often show in other types of Income Tax cases. Since they are so strict and determined when it comes to Unpaid Payroll Taxes, the IRS Revenue Agents attempt to include as many people as possible when determining who is a “responsible person” and attempt maximize the amount considered to be the “Trust Fund” portion of the taxes, penalties, and interest owed. Keep in mind that Trust Fund Recovery Penalties are not dischargeable through bankruptcy. Once you are held liable for the debt, escape is near impossible.

IRS 4180 Interview And Trust Fund Responsibility

IRS 4180 Interview And Trust Fund Responsibility

The outcome for the San Jose Executive could have been a disaster. The effects of the recession on the company he worked for and the mistaken choices made by the decision makers could have resulted in the end of his financial security and future economic viability. Although he was one of several executives on the Bank Signature Card for the company, he was not the responsible party when it came to the Trust Fund Recovery. By contacting Peter Stephan and the Tax Resolution Institute before his 4180 Interview and not after, he was able to ensure that a bad situation did not become worse. Payroll Tax and Trust Fund Recovery cases are a definite challenge, and no easy solutions are ever guaranteed. However, if you contact Peter Stephan before your 4180 Interview and not after, you could find real tax relief like the San Jose Operations Director and free yourself from the responsibility for the Trust Fund Recovery.

Filed Under: Payroll Tax Problems, Tax Relief Tagged With: , , , , ,

Tax Resolution Expert Markwei Boye Analyzes Income Tax and Payroll Tax Problems in Detroit & Michigan

June 4, 2010 By

As the recession continues to hit both American taxpayers and companies, the Tax Resolution Institute is talking with tax experts around the country about rising income tax problems and payroll tax difficulties. By contacting tax professionals with valuable information, TRI will increase the value of this ongoing blog by providing you with the edge you need in these challenging times. To start this series, our first discussion was with Markwei Boye, a respected Enrolled Agent from Detroit who recently started a Tax Resolution Service Blog to address these rising concerns.

Tax Resolution Specialist Markwei Boye

Tax Resolution Specialist Markwei Boye

With a Masters in Business Administration (MBA) from Wayne State University, Markwei Boye is a member of the Registered Financial Planning Institute, National Association of Enrolled Agents, National Association of Tax Professionals and National Society of Accountants. An Adjunct professor at Cornerstone University School of Business, Markwei Boye is the founder and owner of Smart Business International PLLC, which was established in Detroit in 1995 as a small business accounting and tax-consulting firm.

With the American auto industry in crisis, the city of Detroit and, to an even greater extent, the state of Michigan have been hit hard by the recessionary economy. Boye explains that his company has been receiving calls left and right from former automobile workers in tax crisis. Many of the workers in the auto plants agreed to a buyout plan when the plants closed. Unfortunately, most ended up spending all of the money without taking into consideration their future tax bill. Today, they find themselves unemployed with no job prospects, and they cannot pay their income tax bill. In addition, many of these American workers have lost their homes.

Like the Tax Resolution Institute, Markwei Boye offers these people a variety of effective tax solutions. “Many taxpayers do not realize that just about everything is negotiable with the IRS,” said Boye. “We can help substantially reduce your back tax debt with an affordable payment plan. We have years of experience submitting Offers in Compromise to obtain a final settlement of all taxes, penalties and interest.” If the individual is completely tapped out and an Offer in Compromise is not an option, Boye has the tax account classified with the IRS as Code 53, otherwise known as Currently Not Collectible.

Payroll Tax Problems Darken Detroit

Payroll Tax Problems Darken Detroit

In terms of payroll tax problems, Markwei Boye has seen a sharp rise in Detroit and Michigan as a whole. The majority of the companies are tied to the automotive industry. Since the plants have been shut down, tons of subsidiary businesses that relied on the success of the auto industry have been thrown into crisis. Once these companies started having financial difficulties, they went into panic mode and cut corners when it came to covering the trust fund of their payroll taxes. As the Tax Resolution Institute has expressed in the past, cutting these corners is often a death-knell for a company.

Since most of the companies Boye works with have already gone under, he focuses on working with the IRS to no longer make them responsible parties for the matching portion of the Trust Fund. When asked if the IRS has become more aggressive and difficult in terms of Payroll taxes, Boye explains that most IRS Revenue Officers just want to collect the Trust Fund and close a case. Instead of being more aggressive, the IRS is often more reasonable, willing to waive the penalties and interest in order to settle a case.

Markwei Boye explains that whenever he tells an IRS Revenue Officer that he is calling about a client in Michigan, they immediately become more reasonable. Recognizing the recessionary crisis brought on by the automobile industry, the IRS is willing to compromise. The problem is that a majority of taxpayers with income tax problems and companies with payroll tax problems take what Markwei Boye calls the Ostrich approach. They stick their head in the sand and hope the problem magically will go away. But the IRS and tax problems never just go away. They only get worse unless they are properly handled by a tax professional like the tax experts at the Tax Resolution Institute.

Filed Under: Income Tax Problems, Payroll Tax Problems, Tax Relief Tagged With: , , , , , , , , , , ,

Expansion of the Enterprise Zone in the San Fernando Valley Generates Unexpected Payroll Tax Problems

May 25, 2010 By

When California officials approved the request by Los Angeles to expand the city’s “enterprise zone” in the San Fernando Valley, they failed to foretell the challenges of business growth in a down economy. As new and existing businesses receive tax breaks, they can expand too quickly, leading to sudden financial challenges and payroll tax problems. Although supportive of business growth, the Tax Resolution Institute warns businesses to go slow upon receiving tax breaks in a down economy.

San Fernando Valley Enterprise Zone Leads To Both New Tax Breaks and Payroll TaxProblems

San Fernando Valley Enterprise Zone Leads To Both New Tax Breaks and Payroll TaxProblems

When financial pressure rises in a recession, a company will often make the mistake of stealing from Peter to pay Paul by withholding their mandatory Payroll Tax payments and holding on to the employee Trust Fund. Rarely a criminal act, the belief by the business owner is that they will make up the payments that they have missed in the future. Since the Trust Fund Recovery Penalty of the IRS is 100% of the Trust Fund, such illegal acts can lead to the closing of the doors of a once successful business. Although expanding and building on existing businesses is important, it is essential not to allow a government stimulus package to foster undue optimism. Rather, the Tax Resolution Institute recommends a careful and balanced approach to financial management and tax planning.

The California Enterprise Zone Program targets economically distressed areas, providing tax breaks and other incentives to attract new businesses and foster job creation. Under the program, firms can earn state tax credits for hiring additional employees, receive sales tax credits on purchases of $20 million per year of machinery, receive preference on state contracts and receive a 35% cut in city utility rates for five years. The expansion area includes portions of Chatsworth, Canoga Park, the Van Nuys Airport area, Woodland Hills and the northeast Valley.

William Roberts, director of the San Fernando Valley Economic Research Center, supports the idea of enterprise zones. However, in a recessionary economy, encouraging job creation can lead to other problems for struggling companies. Roberts believes that the problem is, “…when you get down to the fine print, how much freedom you have. That’s really where the meat of how well it works is going to show up.”

Enterprise Zone in Woodland Hills and the Possibility of Payroll Tax Problems

Enterprise Zone in Woodland Hills and the Possibility of Payroll Tax Problems

Bruce Ackerman, president of the Valley Economic Alliance, disagrees, estimating that several hundred jobs have been saved in the east value by helping distressed companies: “This is a coup for the Valley. With the economy softening and their opportunities to relocate elsewhere, there will be a great opportunity for them to keep their companies in the area and an incentive for them to grow.”

Companies in the zone will also get sales and tax income credits for buying machinery or equipment as well as faster expensing of equipment. Interest on loans will be decreased and they will get priority bidding on state contracts. “Any time you’re giving a business an incentive to move to an area, it happens, and it works,” said Stuart Waldman, president of the Valley Industry and Commerce Association. “If somebody is looking at moving to Burbank or an area without an enterprise and an area with enterprise, they’re going to move where they can get the best bang for their buck.” Clearly such trends had been happening. The Woodland Hills business district, which is home to a large number of finance, insurance and real estate companies, was particularly affected as those industries posted a 10 percent drop since 2008, according to the American Community Survey by the U.S. Census Bureau.

California Enterprise Zones in a Recessionary Economy

California Enterprise Zones in a Recessionary Economy

The Tax Resolution Institute Agrees with Bruce Ackerman when he explains that the expansion of the Enterprise Zone “…gives us the ability to retain existing businesses that may be considering moving from the Valley and enhances our ability to attract new businesses from outside of the state.” At the same time, with Payroll Tax cases rising, both the IRS and California Employment Development Department are  going after delinquent payroll taxes with a renewed focus, businesses that receive tax breaks must be careful to expand with a plan based in careful financial management and tax planning.

Filed Under: Payroll Tax Problems, Tax Relief Tagged With: , , , , , , , , ,

Patent Lawyer in Century City Fails To Pay Payroll Taxes and Income Taxes After Million Dollar Settlement

April 27, 2010 By

To begin with, the Tax Resolution Institute respects the privacy of our clients. As a result, certain details have been changed and specific information in regards to this piece has been obscured in order to maintain anonymity. A major patent lawyer in Century City found himself in major tax trouble with the Internal revenue Service after winning a huge settlement for a client inventor.

Century City Lawyer in Tax Crisis

Century City Lawyer in Tax Crisis

Since the settlement was delivered at the beginning of the summer, the patent lawyer figured he had plenty of time to cover his income taxes and the unpaid payroll taxes due on his percentage of the settlement. When tax time came around, he realized he could not cover the taxes on account of major cash outlays and a subsequent downturn in the economy. Caught in a bind with his income taxes pending and the 100% Trust Fund Recovery Penalty doubling the amount due in regards to the payroll taxes, the patent lawyer desperately needed help. His huge windfall suddenly had become a horrible nightmare. Luckily, reaching out to the tax experts at the Tax Resolution Institute, he was able to obtain constructive and positive tax relief.

The Tax Bill of a Patent Lawyer

The Tax Bill of a Patent Lawyer

Before we discuss the tax relief provided, let’s take a more in-depth look at some of the details of the case. Working in post-production in the film industry, the client had been directly involved in the invention of certain new special effects technology. When his so-called partners hijacked his stake in the invention, the inventor turned to the patent lawyer in Century City, a commercial and residential district in Los Angeles, California.

Threatened with a lengthy travel, the corporate partners offered a multi-million dollar settlement in exchange for proprietary rights to the technology. Following the advice of the patent lawyer, the inventor took the settlement and walked away a multi-millionaire. For his efforts, the patent lawyer was paid handsomely, receiving a healthy percentage of the settlement.

Since it was still early in the year and major legal deals were in the works, the patent lawyer did not worry about paying his taxes. Since the settlement went directly to his own private corporation, he also was responsible to pay his payroll taxes as well. Rather than make these payments, he invested the money in major home and office renovations. In addition, right before the economy went sour, he made some risky investments that ultimately did not pay off. As a result, when tax time came around, the patent lawyer found himself in a real bind.

No Money for Income Taxes

No Money for Income Taxes

Although lawyers tend to be eagle-eyed when it comes to the intricacies of the law, they often seem a bit blind when it comes to paying their taxes, both from the perspective of income taxes and payroll taxes. When they receive major settlements, they fail to set the money aside to cover their tax bills. Always believing that more money is coming down the pike, they invest and spend without making tax safety and financial security a top priority. As a direct result, they find themselves in terrible financial binds come tax time, and many lawyers come to the tax experts at the Tax Resolution Institute for help.

When the patent lawyer came to the Tax Resolution Institute, we focused on handling the payroll tax problem first. After negotiating with the IRS Revenue Officer, TRI made sure the entire amount owed was paid without the burden of the penalties and the interest. In terms of the income tax, there simply was not enough cash leftover for the patent lawyer to cover that part of his tax bill.

In response, the Tax Resolution Institute negotiated a reasonable Installment Agreement that avoided the burden of tax liens or future asset seizures. Instead, the Patent Lawyer from Century City is paying off his delinquent tax debt and hopefully making sure that lightning does not strike twice. Then again, if the lightning means another huge settlement, he will walk in the fate storm with metal rod in hand. In this case, the lightning implies not making the same mistake twice and making sure all of his future tax bills are well covered.

If you are a lawyer or business owner in Century City and you are having a trouble paying your income taxes or covering the payroll taxes of your company, contact the Tax Resolution Institute. There is a solution if the action is taken and the idea of help from a tax professional is turned into a working reality.

Filed Under: Delinquent Tax Debts, Income Tax Problems, Payroll Tax Problems, Tax Relief Tagged With: , , , , , , , , , , ,
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