5 Key Employer Payroll Tax Responsibilities

5 Key Employer Payroll Tax Responsibilities

Employers generate a payroll report by calculating the gross monthly wages plus statutory and voluntary payroll amounts to get the net pay. They also have certain responsibilities concerning payroll taxes, and understanding these responsibilities prevents business owners from getting on the wrong side of the law or being held personally accountable under IRS section 6672. Here are the five main employer responsibilities for payroll taxes.

1. Statutory Payroll Deductions

The law requires employers to withhold payroll taxes from an employee’s paycheck. Some of the payroll tax deductions include:

• Federal income tax
• Social security tax
• Medicare tax
• State income tax
• Local taxes like city, county, unemployment insurance, and state disability

2. Voluntary Payroll Deduction

The law also requires employers to withhold voluntary payroll taxes from an employee’s paycheck if he or she allows the deduction. These deductions are for the various benefits that an employee has subscribed to. Some of the common voluntary payroll deductions are:

• Life insurance
• Health insurance
• Retirement plans
• Stock purchase plans

3. Funds for Payroll Taxes

Employers are supposed to set aside funds for payroll taxes. These funds include employee and employer portions of Medicare, social security, unemployment compensation, and workers’ compensation.

4. Remittance of Payroll Taxes

The duty of withholding taxes is not complete until the taxes are channeled to the appropriate tax agencies. For instance, Medicare, social security, and federal income taxes should be remitted to the IRS. Employers should also report tax liabilities to their employees and the right authorities in accordance with the law.

5. Preparation of Financial Reports

Another crucial role in the fulfillment of payroll tax obligations is the preparation of reconciliation reports, filing tax returns, and accounting for payroll expenses through financial reports. Some of these reports should be provided to the appropriate local, state, and federal agencies.

An employer should set up an efficient payroll system that helps them meet their payroll tax obligations. Understanding the main payroll deductions is one way for an employer to ensure that their payroll system is valid.

If you’re a business owner with unpaid employment taxes in San Diego and are worried the IRS will hold you personally accountable and possibly assess an IRS 100 percent penalty or place an IRS lien on your personal property, we can help. We’ve been serving San Diego residents and business owners for over two decades and help clients find the relief they need before tax problems get worse. Reach out to us today at (844) 780-1100 and schedule a free consultation.

What to Do If the IRS Places a Lien on Your Home

What to Do If the IRS Places a Lien on Your Home

There are many penalties taxpayers will face if they do not pay their taxes due promptly, including IRS wage levies or garnishment. If you are past due on federal taxes and you own or have a mortgage on your home, the IRS can place a lien on the property, making it difficult to refinance the home or sell it, among other things.

When the IRS Can File a Lien

The IRS typically won’t place liens on property unless the amount owed is over $5,000. Of course, this can vary from one situation to the next. Ultimately, the IRS will decide that it might be too difficult to collect the amount due within the legal statute of limitations (10 years), which will result in a lien. A lien can only be filed once the liability has been assessed and the taxpayer has been notified of the amount due. If the debt is not paid within 10 days of notice, the IRS can then file for a tax lien.

What a Lien on Your Home Means

A tax lien doesn’t mean you have to sell your property or give it to the government. It simply means that if you do want to sell the Internal Revenue Service can take a portion of the proceeds. If you attempt to refinance, they may also make it difficult to qualify until the tax debt is settled.

What Should You Do?

If you have been hit with a tax lien on your home, don’t panic. This isn’t as dire as it sounds, and you do have options. You should contact a tax attorney in San Diego to assist you through the process for the best chances of a successful outcome. Then, you will need to decide how to handle resolving the debt. Some options include:

– Paying your tax bill in full
– Setting up an installment plan with the IRS
– Selling the property to pay the debt
– Requesting a lien subordination and refinancing to pay the debt

Your best option is to work with a professional tax lawyer or CPA who specializes in tax law to determine the right course of action and get rid of the lien against your home as quickly as possible. For more information on tax liens or help appealing an IRS decision, reach out to R.A. Michael & Associates at (844) 780-1100. Tax relief begins here.

Your Tax Audits FAQs Answered

Your Tax Audits FAQs Answered

An IRS audit is scary, but it’s not the end of the world. The key to getting through the audit process is to consult a CPA in San Diego who can help you. Here are some frequently asked questions about audits that you may find helpful as this process gets underway.

How are returns chosen for audit?

The IRS runs tax returns through a computer algorithm that comes up with a score known as the DIF score. This score is simply the result of statistical analysis and is not a sign that there is, in fact, any problem with your return.

Do I have to go to the IRS office to deal with this?

Probably not. Many times the IRS conducts audits via mail, simply asking you to send documentation. If you are asked to appear in person, you can often give your CPA power-of-attorney, allowing him or her to appear in your place.

What paperwork must I provide?

You will be asked to furnish certain documents to the IRS and you should. Do not, however, bring auditors more paperwork than requested. This sometimes invites more questions.

I am working with an auditor but haven’t heard from him for some time. What do I do?

Nothing. It is up to the IRS to complete your audit and they have a limited time frame in which to do so. If your file gets buried on someone’s desk, it could work to your benefit. Never call the IRS and remind them to proceed with your audit. No news is good news.

Will the IRS take my house?

This is a common concern but very rare occurrence. The IRS needs a court order to place a tax lien on your home, and you will have an opportunity to argue against this course of action. Vacation homes and investment properties are fair game, but the IRS is discouraged from seizing a taxpayer’s primary residence.
If you’ve received an IRS Audit Letter, turn to R.A Michael & Associates, Inc. We’ve been helping taxpayers for over two decades resolve a wide range of tax issues, from IRS unpaid employment taxes to property liens. Call (844) 780-1100 and schedule a complimentary consultation today.

How a Tax Lien Affects Credit

How a Tax Lien Affects Credit

If you fail to pay your taxes promptly, the IRS can slap you with a tax lien. A lien is a legal claim to all of a taxpayer’s assets for the sum that the taxpayer owes the government, and it extends priority rights against other IRS liens people may have against their assets. On top of putting your assets at risk, a tax lien is also included in your credit files and other public records like bankruptcies and judgments.

Tax Liens and Credit Score

A released and paid tax lien remains on your file for seven years after the date of release or a decade from the date the release was filed. Unreleased or unpaid tax liens remain on the defaulter’s file for a decade from the date of filing. Bearing a tax lien on your credit record can negatively affect your creditworthiness, and a credit score that is poor can restrain you from obtaining a loan. The extent that your credit score is affected by a tax lien is determined by various factors like your credit behavior and other items on your credit report. Also, all credit reporting agencies have their own scoring formula and may differently compute your credit score.

Avoiding Tax Liens

The IRS Fresh Start program provides taxpayers an opportunity to pay taxes and avoid a tax lien if the balance does not surpass $10,000. The program also enables taxpayers to evade tax liens by signing a monthly installment payment plan through direct debit with the IRS. Through this program, taxpayers can also request that the IRS remove a tax lien once it has been paid or the tax debt has been settled.

If you owe the IRS less than $50,000, you can pay the balance in monthly installments over the course of six years. You can also use a loan or a credit card to pay the debt, which is optimal for some taxpayers as penalties and interest charged by the IRS are normally higher than the fees and interest charged by banks. The interest rate the IRS charges is equal to the federal short-term rate and an additional three percentage points.

To learn more about how a tax lien can affect your credit score or for information on appealing an IRS decision, please give us a call at (844) 780-1100. We’ve been helping taxpayers since 1987 and can help you find the tax relief you’ve been looking for.

Important Tax Information for Your Side Business

Important Tax Information for Your Side Business

Most people know they must include wages, interest, dividends, commissions, and tips as income on tax returns. However, not everyone knows to report other income like:

• Money earned from side businesses
• Broker and barter exchange proceeds
• Prizes, contest winnings, and awards
• Gambling proceeds

Business Classification

Whether your side business is a profit-making venture or a hobby, it is important to know the tax implications that come with it to avoid tax-related problems like being assessed an IRS civil penalty. This will help you protect your financial integrity and the existence of your side business.

Before starting your side business, decide whether or not it will be a profit-making venture. If so, formulate a business plan to help you realize your objective. This will enable you overcome the 3/5 restriction of Section 183 of the Internal Revenue Code. This section states that businesses must record profits for three out of five years, with one of the five being the present year. Failure to do that will result in the IRS considering your business a hobby. Whether the IRS sees your side business as a hobby or for-profit venture will affect the deductions you take, whether or not you pay self-employment tax, and whether or not financial losses related to your side business can offset other income.

Hobby expenses and income are also filed differently from profit-making ventures when it comes to taxation. If you consider your side business a hobby instead of a profit-making venture, you should report the income on line 21, which features “other incomes”. This type of income is not imposed with self-employment taxes. Expenses in this section are classified as “miscellaneous deductions”, and once you adhere to these rules, you will be termed as tax compliant and creditworthy.


For self-employed taxpayers, taking deductions come tax time can help offset business expenses accrued throughout the year. Keeping records and receipts of expenditures as well as knowing what deductions are permissible are essential to personal and professional financial health. Some common deductions include:

  • Contributions to a Retirement Plan
  • Business Use of a Personal Vehicle
  • Home Office Space
  • The Purchase of Major Business Assets

The Cohan Rule

Some people assume that if they do not keep business records they can invoke the Cohan Rule, which allows taxpayers to estimate business expenses (typically as they relate to travel and entertainment) to their best guest if they failed to keep receipts. While that may have worked decades ago, nowadays the Cohan Rule only applies when people are unable to locate business records or receipts, even after making a tremendous effort to retrieve them.

Failing to comply with tax rules for your side business could result in serious consequences, including an IRS bank levy or wage garnishment. If you currently owe the IRS a significant amount of money for unpaid employment taxes, R.A. Michael & Associates can help. Give us a call today at (844) 780-1100 and take the first step towards tax relief.

What Is a Tax Lien?

What Is a Tax Lien?

An IRS tax lien is a tool that the government can employ to claim the assets of individuals who have failed to pay their taxes. Tax liens are typically used as a last resort only after other efforts to claim an individual’s back taxes have failed and usually precede an IRS wage levy notice.

Understanding a Tax Lien

An IRS tax lien is essentially a claim against an individual’s property that the government uses to secure assets in order to force a person to pay his or her taxes. The value of a lien is equal to the value of the taxes that the individual owes to the government, plus any fees and other expenses that have accrued as part of the legal process. Once the lien has been placed against an individual’s property, that property can be confiscated by the government to pay the tax debt if that person does not meet his or her tax obligations with a different form of payment.

How to Get Rid of a Lien

A person who is subject to a tax lien can remove the IRS lien in several different ways. The easiest way to eliminate the lien is to pay the taxes that are owed to the government. People who are unable to do so may be able to eliminate the lien by having the debt dismissed in a bankruptcy court or by reaching a compromise with the authority that originally issued the lien. Failure to eliminate the lien will eventually result in the confiscation of property in order to settle the debt.

Long-Term Effects of Liens

A tax lien can have a significant economic impact on an individual. Lending agencies are made aware of the lien when it is first issued, making it very difficult for people to secure loans while the lien is in effect. Additionally, an IRS lien can often prevent or inhibit the sale of the property to which the lien is attached.

For help resolving this issue, including information on subordinating tax liens or filing an IRS appeal, call (844) 780-1100 and request a free consultation today. Help is just a phone call away.

4 Online Resources for Employment Tax Problems

4 Online Resources for Employment Tax Problems

Individuals and businesses often need assistance or information about changes in the tax code, allowable expenses, how to handle overdue taxes, and other issues. There are a number of resources online that may provide answers to common tax problems with the Internal Revenue Service.

1. IRS Virtual Workshop

The IRS offers an interactive training tool for small businesses. The workshop covers basic obligations for the small business and explains how the tax system works. There is information available on setting up and running your business to avoid tax issues, setting up retirement plans for the owner and employees, and managing payroll withholdings. With this information, small business owners can avoid many common tax issues like IRS unpaid employment taxes in San Diego or IRS civil penalties.

2. IRS Video Portal

On the website, the IRS offers webinars on various tax issues for individuals, tax professionals, businesses, and non-profit organizations. Information is also available in Spanish. One of the more popular topics is “Ten Things to Ask Your Accountant”. This lesson provides guidelines for small businesses, helping business owners learn about legitimate tax deductions.

3. IRS Audio Files

Archives of national phone forums are available at These forums are designed for tax professionals, attorneys, industry partners, and payroll administrators. Most of the broadcasts are one hour long and include topics like “Travel Reimbursement Policy – What You Need to Know” and “Tax Sheltered Annuity Plan, 403(b) Updates”. Users can search as far back as five years to find a topic that addresses a specific tax issue.

4. Small Business Administration

Many freelancers, independent contractors, or sole proprietors can find useful information at Information about quarterly tax obligations, vendor licenses, sales tax collection, tips for selling at flea markets and craft fairs, and payroll obligations can help small businesses and individuals avoid many tax issues that may arise.

If you need additional help to resolve unpaid employment tax or would like to file an IRS administrative appeal in San Diego, reach out to R.A. Michael & Associates, Inc. We offer free consultations and can help you find the relief you need. Give us a call today at (844) 780-1100 and make an appointment.

All About the Fresh Start Initiative

All About the Fresh Start Initiative

The Fresh Start Initiative is a comprehensive program designed to assist taxpayers laboring under the burden of unpaid taxes. The Fresh Start Initiative, designed for both wage earners who have been unemployed and self-employed individuals who have experienced a drop in revenue, is comprised of four primary elements. The IRS sets forth the specific requirements to qualify for the program, including a minimum time period of unemployment. The Fresh Start Initiative may also be able to help people with an IRS lien in San Diego or small businesses facing significant tax burdens.

Penalty Relief

One of the main components of the Fresh Start Initiative is providing qualified taxpayers with relief from penalties. The reality is that for many taxpayers penalties are substantial and add a significant financial burden to both individuals and their families.

Through the Fresh Start Initiative, the IRS abates the penalties on a past due account provided the balance is paid within a set period of time.

Installment Agreements

Installment agreements allow people who cannot pay their entire tax bill at once and on time to repay in increments. The IRS has raised the threshold from $25,000 to $50,000 and has extended the time period for repayment from five to six years. Although interest continues to accrue, taxpayers will be responsible for fewer penalties.

Expansion of Offer in Compromise Program

The Fresh Start Initiative also expands the existing Offer in Compromise program that exists through the IRS. The Offer in Compromise program permits certain taxpayers to fully settle their past due liability for an amount less than the actual balance owed to the IRS. Under the Fresh Start Initiative, more taxpayers will qualify for the Offer in Compromise program.

Informational Resources

The initiative also offers taxpayers a wider range of informational resources. These resources are designed to give taxpayers a better understanding of the collection process as well as what assistance is available to them to better address a past due tax liability issue.

To learn more about the Fresh Start Initiative or for help resolving an IRS wage levy or other collection issue, give us a call at (844) 780-1100. Your initial consultation is free.