Archive for the ‘Starting a New Business’ Category

Here’s What You Need to Prepare for to Make VCs Say Yes

Monday, March 24th, 2014

Most business adages say that a vision that goes beyond 20/20 and a passion that is forever burning are enough to propel you to success. You’re in danger if you take this too seriously. You need money. While bootstrapping is a popular option among many businesspeople, it doesn’t apply to those whose products, services, and business models require large funding.

Every startup seeking financial backing faces the similar problem: pitching to a venture capitalist. Depending on the industry you’re in, a venture capitalist uses a unique set of criteria that will gauge if the entirety of your plan is worthy of funding. Here are some of the things you need to consider heavily before giving that big pitch. (more…)

Small Businesses May be Subject to Increased Payroll Audits

Tuesday, October 15th, 2013

Authored By: Sheri Lewis, Staff Accountant, has worked at Cook Martin Poulson since November 2011. She recently received her Master of Accounting Degree and is in the process of taking the CPA exams.

A recent study conducted by the Treasury Inspector General for Tax Administration (Employers Do Not Always Follow Internal Revenue Service Worker Determination Rulings; June 14, 2013. Reference Number: 2013-30-058) called for the IRS to provide better follow-up to ensure small employers are complying with worker classification ruling. Better follow-up translates to more payroll audits. The study indicated that only 17% of employers appeared to comply with the “employee” worker classification rulings that resulted from the filing of Form SS-8 (Determination of Worker Status for Federal Employment Taxes and Income Tax Withholding). Filing a Form SS-8 requesting a “worker status” determination means the business or the worker is asking the IRS to establish if the services provided to the firm are those of an employee or an independent contractor. Receiving the determination from the IRS can be a relatively long process. The crackdown, in part, may be intended to increase tax revenue by assessing back payroll taxes and penalties.

Unfortunately, there is no clear cut way to determine whether or not a worker is an employee or an independent contractor. There are three general guidelines that outline the factors the IRS considers in making a worker classification. The guidelines are summarized as follows:

1. Degree of Control: To what extent does the employer have the ability to direct how, what, when and where the worker performs his duties?
2. Financial Opportunities: How is the worker paid? Are expenses reimbursed? Is the pay a set or regular amount? Does the worker provide his own tools and/or supplies?
3. Relationship Type: Is the position permanent or temporary? Is there a written contract? Can the worker pursue other means of obtaining income? What benefits does the employer provide?

The classification of an employee or independent contractor can had significant tax consequences for all involved. Employers must withhold income taxes, withhold and pay Social Security and Medicare taxes, and pay unemployment tax on wages paid to an employee. Employers do not have to withhold or pay any taxes on payments to independent contractors. Independent contractors must pay the full share of Social Security and Medicare taxes themselves. The study showed that an employer, on average, can save around $3,700 annually per worker with a salary of $43,000 if the worker is classified as an independent contractor. This savings potential can unduly influence some small business owners to misclassify workers as independent contractors. Additionally, employers are trying to contend with the new health care law requirement to provide health insurance if they have 50 or more employees. The Wall Street Journal reports that studies have shown that local businesses misclassify workers anywhere from 10% to more than 60% of workers as independent contractors (WSJ, Payroll Audits Put Small Employers on Edge, March 13, 2013 by Angus Loten). Ironically, due to the lack of a clear definition as to what constitutes an employee or independent contractor, many employers are unsure if they are complying with the worker classification rules until they have a payroll audit.

Are You Ready to Hire Employees?

Tuesday, April 30th, 2013

Authored By: Inken Christensen, Bookkeeper Logan office

When a business finds it necessary to hire employees it is important to make sure all the required information about those employees is gathered and the appropriate forms are completed. The employer should make sure they have the complete forms before it is time to issue the new employee’s first paycheck. Many businesses have the new employee fill out the employment forms as a part of their orientation and training on the first day of employment. In Utah, there are three forms that an employee needs to complete and submit to the employer. Those forms are the W-4, the Utah new hire form, and the I-9.

Form W-4 – Employee’s Withholding Allowance Certificate:

The purpose of this form is to notify the employer of the employees exemption allowances so that the employer can withhold the correct amount of federal and state income tax from the employees paycheck. The new employee reports their full name and address, their marital status, and most importantly, their social security number. The individual answers a series of questions in a worksheet format to arrive at the number of allowances they should claim. The employer either enters the allowances in their accounting system or uses the number of allowances and the withholding tables to calculate the amount of federal income tax to be withheld from the paycheck. This form is kept on file by the employer and is NOT submitted to the Internal Revenue Service. It is suggested that this form also be completed at the beginning of each calendar year, particularly if the employee has had any personal or financial changes. This form is available at www.irs.gov

Utah New Hire Registry Reporting Form:

The new hire form is required by federal law. The main purpose of this form is to aid states in identifying individuals who owe child support. The employer can complete this form using the information gathered on the Form W-4 (above). The employer information is reported at the top of the form including the business name, address and employer identification number (EIN). The new employee’s information is reported next, also including name, address and Social Security Number (SSN) and date of hire. This form must be submitted to the state either by mail, fax or online within 20 days of the employee’s first day of work or the employer is subject to a $25 penalty for each missing new hire form. Should an employee take a leave of absence, the employer should submit a new form within 20 days of the date the employee begins to work again. The form is available at https://jobs.utah.gov/UI/Employer/Public/TaxForms.aspx

Form I-9, Employment Eligibility Verification:

The Form I-9 is required by federal law and is used to verify an employee’s identity and to verify that they are authorized to work in the United States. Both the employer and the employee complete this form. The employee must also present various documents to the employer to support their identity and establish their employment authorization. According to the USCIS website, “the employer must examine the employment eligibility and identity document(s) an employee presents to determine whether the document(s) reasonably appear to be genuine and to relate to the employee and record the document information on the Form I-9.” The documentation provided by the employee must be original and unexpired. The list of allowable documentation is included with the Form I-9. Many employers photo copy and attach the items of documentation presented by the employee. The I-9 Form is NOT submitted but retained by the employer “for either 3 years after the date of hire or 1 year after the date employment ended, whichever is later”. Google “Form I-9” to find a copy of the form.

It is imperative that the employer gather these forms within the first few days of hiring a new employee. Doing so will ensure that the employer is in compliance with employment laws and also that the employer has the information they will need to file subsequent payroll reports, including federal employment returns, state withholding returns, unemployment reports and the year-end W-2s.

If you need help finding the forms or have any questions, please contact us at one of our locations.

Employer Provided Cell Phones

Monday, January 7th, 2013

Authored By: Nathan Shields, CPA, Senior Accountant. Nathan has been with the firm 5 years and works in both tax services and financial statement services.

Many employers provide cell phones to their employees for various reasons. Depending on the reason the cell phone is provided, will determine if the employee needs to include the cost of the cell phone in their income. If the employer provides the cell phone primarily for non compensatory business reasons, then the phone is not included in the employee’s income.

If the employer needs to contact the employee at all times for work related emergencies, or if the employer requires the employee be available to speak with clients at all times when the employee is away from the office, or if the employee needs to speak with clients in different time zones outside the normal work day would be examples of reasons that the cell phone is provided for non compensatory reasons.

If cell phones are provided to boost morale, to attract a prospective employee, or to furnish additional compensation, then the cell phone would not be provided primarily for non compensatory purposes, and would need to be included in the employee’s income.

The IRS has also determined that if the cell phone is provided for non compensatory purposes, then the personal use of the cell phone is considered a de minimis fringe benefit. This means that the employee can use the employer provided cell phone for personal use, and is not required to include any of the cost of the cell phone in their income.

Electronic Federal Tax Payment System (EFTPS) is the way of the future for all tax deposits.

Tuesday, January 25th, 2011

Authored by: Jared Erickson, MAcc, Jared is an accountant in the Logan office of Cook Martin Poulson, PC.  He specializes in new business setup, federal and state payroll taxation, workers compensation, individual and business taxation.

Do you make personal estimated tax payments throughout the year?

Does your business make payroll deposits?

Electronic Federal Tax Payment System (EFTPS) might be just the system for you.  EFTPS is a free service provided by the US Treasury that enables both individual and business taxpayers to make any federal tax payment over the internet or phone, 24 hours a day, 365 days per year.

Did you know that EFTPS will let you schedule your tax payments up to 365 days in advance for individuals and up to 120 days in advance for businesses?  How convenient!  Need to cancel or change a scheduled payment amount?  No problem!

You can enroll in EFTPS at www.eftps.gov or by calling 1-800-555-4477 for businesses or 1-800-316-6541 for individuals.  Be sure to have your bank account# and routing# available during the enrollment.

Many business owners may already be pre-enrolled in EFTPS.  If so, you received a letter from EFTPS with your new PIN#.  Follow the instructions on the letter to activate the pre-enrollment.  Once enrolled in EFTPS, you will receive a PIN# and Password.  You’ll need these numbers (along with your EIN or SS#) each time you use the EFTPS system.  In addition, to letting you schedule payments in advance; EFTPS gives you confirmation of each payment and keeps a record of all your past payments.  Just remember, submit your EFTPS payment by 8pm ET the day prior to your tax payment due date.

Please see http://www.irs.gov/pub/irs-pdf/p966.pdf (IRS publication 966) or give us a call for more details or help with enrollment.

 

quoteCook Martin Poulson amended my taxes and got me several thousand dollars in a refund.quote

Rob Corcoran
Influence Real Estate

Utah Accountant and CPA

Cook Martin Poulson – Utah CPA Firm with Accounting Awesomeness.

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CMP’s Logan Accountants conveniently provide Proactive Income Tax and other services for individuals living in Northern Utah and Southern Idaho, and our Salt Lake City Accountants also specialize in Income Tax and Business Bookkeeping in Salt Lake City and the Greater Wasatch Front.

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