Can’t File By April 17? Use Free File to Get a Six-Month Extension; E-Pay and Payment Agreement Options

Even though this is our HR Blog at CBS we understand how your HR professionals, in house and/or outsourced, must be active in and aware of all the pieces it takes to run a business.  For your HR department to truly support you as an employer they must understand all the facets the employer must take into consideration while running their business.   So as part of our HR blog this week Complete Business Solutions wants to remind taxpayers that quick and easy solutions are available through the IRS if they can’t file their returns or pay their taxes on time, and they can even request relief online.

This CBS blog contains more information about the Fresh Start Initiative from the IRS, but it also contains information on how you can easily file for an extension.  Links within this blog will take you to the multiple IRS pages where you can obtain more information or the forms or website you need to file an extension.     

The IRS says don’t panic. Tax-filing extensions are available to taxpayers who need more time to finish their returns. Remember, this is an extension of time to file; not an extension of time to pay. However, taxpayers who are having trouble paying what they owe usually qualify for payment plans and other relief. Last month, for example, the IRS, as part of its Fresh Start initiative announced penalty relief for unemployed taxpayers and self-employed individuals whose income has dropped.

Either way, taxpayers will avoid stiff penalties if they file either a regular income tax return or a request for a tax-filing extension by this year’s April 17 deadline. Taxpayers should file, even if they can’t pay the full amount due.

Here are further details on the options available.

More Time to File

People who haven’t finished filling out their return can get an automatic six-month extension. The fastest and easiest way to get the extra time is through the Free File link on IRS.gov . In a matter of minutes, anyone, regardless of income, can use this free service to electronically request an automatic tax-filing extension on Form 4868.

Filing this form gives taxpayers until Oct. 15 to file a return. To get the extension, taxpayers must estimate their tax liability on this form and should also pay any amount due.

By properly filing this form, a taxpayer will avoid the late-filing penalty, normally five percent per month based on the unpaid balance, which applies to returns filed after the deadline. In addition, any payment made with an extension request will reduce or eliminate interest and late-payment penalties that apply to payments made after April 17. The current interest rate  three percent per year, compounded daily, and the late-payment penalty is normally 0.5 percent per month.

Besides Free File, taxpayers can choose to request an extension through a paid tax preparer, using tax-preparation software or by filing a paper Form 4868, available on IRS.gov. Of the 10.5 million extension forms received by the IRS last year, about 4 million were filed electronically.

Some taxpayers get more time to file without having to ask for it. These include:

• Taxpayers abroad. U.S. citizens and resident aliens who live and work abroad, as well as members of the military on duty outside the U.S., have until June 15 to file. Tax payments are still due April 17.

• Members of the military and others serving in Iraq, Afghanistan or other combat zone localities. Typically, taxpayers can wait until at least 180 days after they leave the combat zone to file returns and pay any taxes due. For details, see Extensions of Deadlines in Publication 3 , Armed Forces Tax Guide.

• People affected by certain tornadoes, severe storms, floods and other recent natural disasters. Currently, parts of Indiana, Kentucky, Tennessee and West Virginia are covered by federal disaster declarations, and affected individuals and businesses in these areas have until May 31 to file and pay.

Easy Ways to E-Pay

Taxpayers with a balance due IRS now have several quick and easy ways to electronically pay what they owe. They include:

• Electronic Federal Tax Payment System (EFTPS). This free service gives taxpayers a safe and convenient way to pay individual and business taxes by phone or online. To enroll or for more information, call 800-316-6541 or visit www.eftps.gov.

• Electronic funds withdrawal. E-file and e-pay in a single step.

• Credit or debit card. Both paper and electronic filers can pay their taxes by phone or online through any of several authorized credit and debit card processors. Though the IRS does not charge a fee for this service, the card processors do. For taxpayers who itemize their deductions, these convenience fees can be claimed on Schedule A  Line 23.

Taxpayers who choose to pay by check or money order should make the payment out to the “United States Treasury.” Write “2011 Form 1040,” name, address, daytime phone number and Social Security number on the front of the check or money order. To help insure that the payment is credited promptly, also enclose a Form 1040-V payment voucher.

More Time to Pay

Taxpayers who have finished their returns should file by the regular April 17 deadline, even if they can’t pay the full amount due. In many cases, those struggling with unpaid taxes qualify for one of several relief programs, including those recently expanded under the IRS "Fresh Start" initiative. These include the following:

• Most people can set up a payment agreement with the IRS on line  in a matter of minutes. Those who owe $50,000 or less in combined tax, penalties and interest can use the Online Payment Agreement to set up a monthly payment agreement for up to six years. Taxpayers can choose this option even if they have not yet received a bill or notice from the IRS. Alternatively, taxpayers can request a payment agreement by filing Form 9465-FS. This form can be downloaded from IRS.gov and mailed along with a tax return, bill or notice.

• Most unemployed filers and self-employed individuals whose business income dropped substantially can apply for a six-month extension of time to pay. Eligible taxpayers will not be charged a late-payment penalty if they pay any tax, penalty and interest due by Oct. 15, 2012. Taxpayers qualify if they were unemployed for any 30-day period between Jan. 1, 2011 and April 17, 2012. Self-employed people qualify if their business income declined 25 percent or more in 2011, due to the economy. Income limits and other special rules apply. Apply using Form 1127-A.

• Some struggling taxpayers may qualify for an offer-in-compromise. This is an agreement between a taxpayer and the IRS that settles the taxpayer’s tax liabilities for less than the full amount owed. Generally, an offer will not be accepted if the IRS believes the liability can be paid in full as a lump sum or through a payment agreement. The IRS looks at the taxpayer’s income and assets to make a determination regarding the taxpayer’s ability to pay.

Details on all filing and payment options are on IRS.gov.

Complete Business Solutions can provide accounting and bookkeeping support that will give you a clear financial picture of your future. 

Contactus today and begin to work with professionals that can offer you a level of support you never thought you could afford!  We developed our packages to be an affordable alternative to small business owners struggling to take care of their bookkeeping on their own, or for those who can’t afford to hire a bookkeeper with advanced accounting and bookkeeping skills.  Or perhaps for those who have in house bookkeeping, we can provide a higher level of bookkeeping services, financial reporting, and consulting at a cost less than the cost of your in house bookkeeper.

Find Out If Your Small Business Qualifies For The Small Business Health Care Tax Credit

Business tax-filing deadlines are quickly approaching; the Internal Revenue Service has encouraged small employers that provide health insurance coverage to their employees to verify whether they qualify for the small business health care tax credit before it is too late for them to claim it. 

Complete Business Solutions has the information and resources designed to help small employers with issues just like this.  Let us help you determine if you qualify for the credit.

Small employers that pay at least half of the premiums for employee health insurance coverage under a qualifying arrangement may be eligible for this credit. The credit is specifically targeted to help small businesses and tax-exempt organizations provide health insurance for their employees.

Depending upon how they are structured, eligible small employers are likely subject to one of the following three tax-filing deadlines.

• March 15: Corporations that file on a calendar year basis.  The health care tax credit can be claimed as part of the general business credit when filing their corporate income tax return.
• April 17: Individuals have until April 17 to complete and file their returns. This includes Sole proprietors, as well as people who have business income reported to them —partners in partnerships, S corporation shareholders and beneficiaries of estates and trusts.
• May 15: Tax-exempt organizations that file on a calendar year basis.

Taxpayers who do not determine eligibility in time can consider obtaining an automatic tax-filing extension, which is usually for six months.

If your business has already filed and has found that they qualified in 2010 or 2011 it isn’t too late you can still claim the credit by filing an amended return for one or both years.

Maybe your businesses or tax-exempt organization had already locked into a health insurance plan structure and contributions but you have not had the opportunity to make adjustments to qualify for the credit for 2010 or 2011. It isn’t too late; you can still make the necessary changes to your health insurance plans so they qualify to claim the credit on 2012 returns. Eligible small employers can claim the credit for 2010 through 2013 and for two additional years beginning in 2014.

IRS related rules, credits, etc. are difficult to stay informed on.  Complete Business Solutions stays informed on the issues that affect our clients.  Contact us today and let us go to work for you!

Payroll Tax Cut Extended to the End of 2012

The IRS on February 23^rd gave official notice that the Social Security tax cut has been extended through the end of 2012.  Read the details below… 

The Internal Revenue Service today released revised Form 941 enabling employers to properly report the newly-extended payroll tax cut benefiting nearly 160 million workers.

Under the Middle Class Tax Relief and Job Creation Act of 2012, enacted yesterday, workers will continue to receive larger paychecks for the rest of this year based on a lower social security tax withholding rate of 4.2 percent, which is two percentage points less than the 6.2 percent rate in effect prior to 2011. This reduced rate, originally in effect for all of 2011, was extended through the end of February by the Temporary Payroll Tax Cut Continuation Act of 2011, enacted Dec. 23.

No action is required by workers to continue receiving the payroll tax cut. As before, the lower rate will have no effect on workers’ future Social Security benefits.  The reduction in revenues to the Social Security Trust Fund will be made up by transfers from the General Fund.

Self-employed individuals will also benefit from a comparable rate reduction in the social security portion of the self-employment tax from 12.4 percent to 10.4 percent. For 2012, the social security tax applies to the first $110,100 of wages and net self-employment income received by an individual.

The new law also repeals the two-percent recapture tax included in the December legislation that effectively capped at $18,350 the amount of wages eligible for the payroll tax cut. As a result, the now repealed recapture tax does not apply.

The IRS will issue additional guidance, as needed, to implement the newly-extended payroll tax cut, and any further updates will be posted on IRS.gov.

Need help with your payroll processing?  Visit our website for information on our services.

Bookkeeping and Administrative Tasks Outsourcing

What exactly is outsourcing and why does small and mid size business benefit from it financially?  Let me answer those questions and give you an introduction to some of the advantages.

It is the tendency of business owners, especially new and small-business owners, to assume they can and should handle all business functions in-house.  Especially when starting a new business they feel they can’t afford to pay for staff or services.  When in fact it is recommended by many business experts that new business owners as well as small and mid size business owners should outsource non-essential functions like bookkeeping and administrative tasks to let them focus on the functions they specialize in; important functions that will add value to their business and in turn their bottom line. 

Small and mid size business are discovering that outsourcing bookkeeping and administrative tasks saves payroll and overhead cost as well as being a giant step in freeing up their valuable time.  And the bonus to their company is that those outsourced functions are being performed by experts in their field.  It is often difficult to find and hire the right person with the required experience for any job but for functions as important as bookkeeping or your legal compliance requirements it can be very difficult or very expensive.  In addition the time to hire, train and manage an employee can take many hours that take the employer away from the important functions related to building or maintaining his business.  If the employer is doing these tasks with no employees and no experienced help the results are even more lost time. 

Some outsourcing companies claim as much as 65% savings over the cost of the annual salary of an employee they will be replacing with their outsourcing services.  Commonly quoted in business articles are savings closer to 50% of the annual salary when you factor in wages, benefits, taxes, and time spent in managing the employee; the savings to the employer is substantial.  Not to mention relieving the employer of worrying about tasks being completed when an employee is absent due to illness or perhaps vacation.  Outsourcing also eliminates the need to deal with possible personnel issues leading to disciplinary action, termination, or perhaps an employee chooses to end their employment with the business. 

Some have had bad experiences with outsourcing companies who do not provide the professional level of service that should be expected.  I can understand the frustration that these individuals have experienced.  I myself have had experience with being disappointed in the service the business I worked for received from an outsourcing company.  At CBS we knew we could offer professional personalized service for a much better value than some of the overpriced outsourcing companies out there.  We have extensive professional experience in the services that we offer and with our many years of experience it is our mission to offer our clients the best service available. 

For companies big enough to warrant the cost of a full time staff to handle all of their bookkeeping, administrative, and human resource needs outsourcing is not needed.  But outsourcing is a valuable financial tool available to small and mid size business to allow them to have the same professional experience handling their finances and personnel issues in a very affordable way.  In the end the advantages to outsourcing is savings of both time and money.