Can My Business Claim Employee Bonuses on Taxes?

Can My Business Claim Employee Bonuses on Taxes?


Can a business owner claim a bonus given to an employee as a business expense? That answer to that question is maybe, according to Enrolled Agents in San Diego. It all depends on why the bonus was given out. 

An Earned Bonus Is a Tax Deduction

If an employee earned his or her bonus, that money can be claimed as a business expense. For instance, an individual may have received $500 for meeting a sales goal or $1,000 for signing up the most new customers. However, if a bonus is given out as a gift, that money cannot be claimed as a business expense. For example, if an employer gave each employee $1,000 just because it’s Christmas, that would be a gift.

Timing Is Critical Too

To claim a bonus as a business expense on a tax return, it needs to be paid in that same tax year. However, companies that use the accrual method of accounting may be able to pay that bonus within 75 days after the end of the calendar year. Businesses generally need to seek approval to use the accrual method for their small businesses.

Be Careful with Family Members

It is important to point out that employees must claim the bonuses as income for the owner to also claim them as an expense. In some cases, employers will pay bonuses to family members who do not claim them as income. This could get both the business and the employee in trouble.


Should businesses claim bonuses on their tax returns? As long as the bonus was given for services rendered and in the same tax year as the return being filed, business owners should be able to claim them with no issue.


Make sure you’re playing by the rules with help from R.A. Michael and Associates. We’ve been helping taxpayers for over two decades with a wide range of IRS issues, from unpaid employment taxes to IRS collections. Call us today at (844) 780-1100 and schedule your free consultation.

Your Offer in Compromise Was Denied, Here’s How to Appeal

Your Offer in Compromise Was Denied, Here’s How to Appeal


An Offer in Compromise may make it possible to end an audit and resolve an outstanding tax balance with the government. However, it is possible that the OIC is denied. What can you do if the IRS doesn’t accept your compromise proposal?

Why Might an Offer in Compromise Be Denied?

An OIC may be denied for a variety of reasons including a conviction of a serious crime or not submitting the application fee. You may also be above the living expenses limit or have made an offer that is less than what the IRS believes it can reasonably collect.

Can You Appeal?

In some cases, you may be able to appeal the IRS decision. This is true if you do not work for yourself and you don’t have any rental properties. You will also need to actually receive a rejection letter from the IRS. If you do plan on appealing, you must do so within 30 days or risk having to submit your offer again. 

Writing an Appeal Letter

When you receive your rejection letter from the IRS, it will state the exact reason why your request was denied. Therefore, it is your responsibility to present relevant facts and legal precedent to convince the government that your OIC should be accepted. It is important to note that not being able to pay the balance owed is not a valid reason to appeal a rejected OIC.


If you have had your OIC rejected, it may be possible to get the IRS to take a second look at your case. This may help you save time and money resolving your case and prevent having to go through the OIC process a second time.


Learn more by reaching out to the experts at R.A. Michael and Associates. We specialize in IRS lien relief, appeals, and general representation. Call us today at (844) 780-1100 today and schedule a free consultation.

Is It Possible to Avoid a Tax Lien?

Is It Possible to Avoid a Tax Lien?


For those who owe the Internal Revenue Service (IRS) a considerable amount in back taxes, an IRS tax lien can be a major financial headache to deal with. Once the IRS has imposed a tax lien, individuals are at risk of losing their property, cash, and assets. In order to avoid such a situation from occurring, taxpayers should learn how to prevent an IRS tax lien in the first place.

What It Is

A tax lien is a type of claim on your assets put in place by the government. The lien serves as a type of notification for the courts by the federal government that gives them the right to seize your property should a bankruptcy proceeding move forward or if you decide you want to sell your property. The lien serves as a type of security for those with an outstanding balance owed in back taxes.

How It Affects You

Generally, a tax lien will freeze all of your credit and assets, which means you cannot apply for additional financing, like home loans, when the lien is in place. This is especially difficult for those taxpaying citizens who run their own businesses. Tax liens are enforceable against any asset you acquire after the lien has been imposed, too. A lien is also public record, which means it could be reported in the local newspaper and could be something competitors use against you.

Avoiding Liens

To avoid a tax lien, establish a payment plan with the IRS to pay off all of the back taxes owed on your account. This informs them you intend to repay the amount owed within a timely matter. If the IRS is receiving the funds, they will work with you instead of imposing a tax lien.


If you need help finding relief from tax liens or other tax-related issues, reach out to R.A. Michael and Associates. We specialize in tax liens and IRS collections relief. Call (844) 780-1100 today and schedule a free consultation.

When and Why to File a Subordination of a Tax Lien

When and Why to File a Subordination of a Tax Lien


After the Internal Revenue Service (IRS) issues a tax lien on an individual’s financial assets, they lay claim to all profits from the sale of your property. For taxpayers who owe a lot of money in back taxes or to other obligations, this can be incredibly devastating financially. If they are unable to meet their financial obligations, this generally puts the individual deeper into a financial hole.

In few cases, the IRS will allow creditors to lay claim to the profits from a property sale ahead of the federal government. This is known as subordination of a tax lien. The agency is allowing another organization to receive profits from the sale before the government steps in and takes it for itself. The creditor takes a part of the cut from the sale of any property, and then the government can claim the remainder.

To apply for subordination, a taxpayer should complete Form 14134. This form includes detailed instructions on how to complete all of the included paperwork.

For the taxpayer, this can be incredibly useful when another debt to a creditor needs to be paid off as soon as possible while also paying the federal government a large chunk of money for their back taxes, too. You should apply for subordination only when you have a large debt to pay off while in serious debt with the Internal Revenue Service.

In order to apply for a subordination, the individual must complete the aforementioned form in its entirety and correctly. The person should also meet all standards for the program, meaning the IRS will look into your account and situation to ensure you actually do qualify for tax lien subordination. Should you qualify, they handle the rest of the situation.


For more information or help filing for lien subordination, reach out to R.A. Michael and Associates. We specialize in a number of IRS issues, including IRS appeals and IRS tax collection relief. Call (844) 780-1100 today and schedule your free consultation.

Understanding Non-Collectible Status

Understanding Non-Collectible Status


Owing money to the IRS is probably one of the least desirable circumstances in the financial world. The Internal Revenue Service absolutely wants their money from taxes and are willing to go through a variety of lengths in order to retrieve those funds, including freezing your assets entirely or auditing your business or personal wealth. This can be an incredibly embarrassing, costly, and stressful experience to undergo. There are a few options to avoid having your assets frozen or having an IRS lien put in place, including requesting a payment plan or requesting your account be put in non-collectible status.


Determining Non-Collectible Status


The IRS does not want to waste their resources in trying to pursue collections from taxpayers who are clearly unable to pay their back tax debt in full. Non-collectible status is usually given to those who can prove they have no equity in their assets and do not have enough surplus income to pay the back taxes after paying all necessary monthly living expenses. The IRS is quite reasonable when it comes to people in dire financial situations.


When the IRS puts an account in non-collectible status, it means no one from the Internal Revenue Service will reach out to you in the attempt to recover money from the back taxes.


The IRS does go into great detail with your bank records and financial information to prove your inability to pay, however. Don’t try to pull a fast one on the IRS, otherwise you may incur further fees and will absolutely be required to set up a repayment plan.


For those in non-collections status, it is not uncommon to remain as such until the statute of limitations on collections completely runs out. This does not mean your tax debt is entirely gone, however, and you can speak with a San Diego CPA to learn more and discuss the appropriate steps to take to resolve your IRS issues.


For more information or help resolving your issues with the IRS, call R.A. Michael and Associates at (844) 780-1100 today. Whether you face an IRS lien or need IRS appeals representation, we can help. Reach out today for a free consultation.

Who Can Represent Me If I Go to Tax Court?

Should you find yourself in court up against the Internal Revenue Service, there is no need to fear. As a taxpayer, you have the right to representation when going before the Tax Court, including representing yourself, although self-representation is not always advised. In limited circumstances, a non-attorney may also represent you in Tax Court. This may require special permission or specific subject matter. However, the following options allow unlimited representation before the Court.

Tax Attorney

An attorney is an obvious choice when going into court. Because you are going before the tax court in a case against the IRS, you should be sure to hire an attorney that specializes in tax law. Also, you should choose an attorney that has an active license with the state bar association and is admitted to practice in Tax Court.

Certified Public Accountant

Non-attorneys such as San Diego CPAs may also be admitted to practice in Tax Court. To do so, the CPA must pass the Tax Court’s written examination and pay a fee. A CPA has expert-level knowledge of finances and any applicable tax laws. Notably, any professional admitted to practice before the Court must adhere to the American Bar Association’s Rules of Professional Conduct. Additionally, the CPA should be in good standing with the state and the Court.

Enrolled Agent (EA)

EAs are non-attorneys that may be admitted to practice before the Tax Court. An EA holds a special license granted by the United States Treasury Department. So unlike a CPA whose license is granted by the state, an EA can represent a client in any state. EAs must undergo rigorous background checks and testing before being admitted to practice. They must also maintain good standing by attending on-going annual training.

Find trusted representation by calling R.A. Michael and Associates at (844) 780-1100. Whether you are fighting a tax lien or looking for Trust Fund Recovery Penalty relief, reach out today and schedule a free consultation.


What You Need to Know About Amending Your Tax Return

What You Need to Know About Amending Your Tax Return


Filing your taxes can be a daunting task as it is. It can be more tedious when you find out you need to file an amended tax return to fix or add some information to your previously filed return. Here are some things to keep in mind before you proceed, presented by local San Diego Enrolled Agents.

Mail Your Return

When it comes to filing an amended tax return, you will have to send it by mail. There is no e-file option available. You will need to use Form 1040X to amend your return for corrections in filing status, changes to income, credits, or deductions.

You Shouldn’t Always Amend

If you find that you made some mathematical errors or have forgotten to include any supporting schedules or documents, you will not have to file an amended return. The IRS will correct the math and send you a request for the additional documents or schedules.

A Second Form 1095-A

In the event your original Health Insurance Marketplace Statement (Form 1095-A) was incorrect, you may receive a second one. If you do receive an updated statement, compare it with the original and see if there are differences. If the two don’t match, you will need to file an amended return.

The Three-Year Deadline

An amended return will need to be filed within three years of the original filing date or within two years of paying your taxes, whichever comes first.

Multiple Amended Returns

If you have multiple years to amend, you will need to file a different Form 1040X for each year’s tax returns. Additionally, each amended form should be mailed in separate envelopes.

Forms and Schedules

Be sure to include any IRS forms and schedules when sending in your amended return using Form 1040X.

Refund Correction

Wait until you receive your tax refund before filing your amended return. It can take up to four months for the IRS to process an amended tax return. If you find that you owe additional taxes, pay your additional taxes when submitting your Form 1040X as soon as you can to avoid paying interest and penalties.

Checking Corrected Return Status

Once you have filed your amended return, you will be able to start checking the status around three weeks after it was filed.


Need help filing an amendment? Maybe you’ve found yourself in a situation with the IRS and are wondering how to appeal an IRS decision. Either way, we have you covered. Call R.A. Michael and Associates today at (844) 780-1100 and schedule your free consultation.

How to Successfully Negotiate Delinquent Payroll Taxes

How to Successfully Negotiate Delinquent Payroll Taxes


Dealing with the IRS can be a tiresome process that ultimately leaves most individuals with a serious headache. That does not need to be the case, however. If you are facing various IRS penalties, know that there are ways to successfully negotiate payroll taxes.

Step 1

Start by making the required tax deposits on your current payroll taxes. The IRS cannot enter into any type of negotiation with your business until the taxpayer becomes current with federal tax laws.

Step 2

File any of your overdue tax returns, then file your future tax returns on time. Even if you cannot pay the taxes on unfiled returns, you must still file them with the IRS.

Step 3

Prepare Form 433-A for sole proprietors or Form 433-B for businesses. The IRS has a few different resolution programs and will make use of these forms to determine if your business meets the qualifications for such programs.

Step 4

Provide any supporting documentation that’s requested, including copies of bank statements, loan statements, contracts, leases, mortgages, and utility bills.

Step 5

If your business has a positive cash flow every month, you can submit a written request for a manageable installment agreement.

Step 6

Work with your Enrolled Agent in San Diego to determine whether or not your business qualifies for Currently Not Collectible Status, which means the IRS gives you a full year to work out a plan to repay the taxes.

Step 7

Consider settling with the IRS for less than what you owe by qualifying for the Offer in Compromise program. Contrary to what many think, many businesses that have payroll tax liabilities may participate in the program.


Don’t wait for your IRS troubles to get worse before reaching out to R.A. Michael and Associates. We help business owners resolve delinquent payroll tax problems and avoid IRS tax liens and the TFRP. Call us today at (844) 780-1100 and schedule a free consultation.

Does the IRS Allow Second Extensions?

Does the IRS Allow Second Extensions?


The Internal Revenue Service gives taxpayers the opportunity to file an extension if they are unable to file their tax return by the traditional April 15 deadline. By submitting file Form 4868 by April 15, taxpayers can prolong their filing date until October 15 of the same year. In the past, it was possible to file more than one extension. However, it is important to note that rules have changed and this is a one-time extension to file. Any taxes you owe are still due by the April 15 deadline. If you are unable to meet the October 15 extension date, you must find an alternative way to file and settle your tax debt if you wish to avoid IRS collections.

Penalties for Failing to File and Pay Your Taxes

If you do not file by the October 15 extension deadline, you may face stiff IRS civil penalties and fees including:

  • Half a percent of the amount you owe for each month that you do not file
  • Five percent of the amount of taxes left unpaid every month past the extension deadline
  • A penalty of up to 25 percent of the amount owed for each month that you fail to file your taxes
  • Up to a 25 percent penalty for any taxes that you do not pay

It is possible that the failure to pay penalties will be reduced by the failing to file penalties if you are subject to both.


However, the IRS will not penalize you if you can prove that you were unable to meet the October 15 deadline due to extreme hardship, such as a fire or natural disaster.

Ways to Settle Your Account

Even if you miss the October 15 deadline, there are steps you can take to minimize the penalties:

  • Submit a payment as soon as possible, even if it is a partial payment, to show the IRS that you are not trying to evade your responsibilities
  • File as soon as possible–preferably online
  • Communicate with the IRS about your efforts to pay, and keep records of all of your conversations and cancelled checks for your tax payments


If you need help resolving issues with the IRS, don’t wait another minute to reach out to R.A. Michael and Associates. We’ve been helping taxpayers just like you solve their IRS problems as quickly as possible for almost three decades. Call us today at (844) 780-1100. Your initial consultation is always free.

5 Things You Must Do Before Hiring Employees

5 Things You Must Do Before Hiring Employees


Your business is growing exponentially since you first opened the doors, and now it is time to begin the hiring process to expand your reach. Hiring employees is a wise move that can make the burden of running a business easier on you, but it also comes with its own share of headaches to deal with. Before making any hires, San Diego CPAs suggest all employers do the following.

1. Get an Employee Identification Number

To start, you need to acquire an employee identification number from the IRS. This number allows you to file tax returns from your business instead of using your Social Security Number. The IRS will also be able to identify your business and track its earnings.

2. Complete Labor Department Registration

Registering with the local labor department for your state is the next step to hiring employees. You are required to register your company in order to bring in any new workers. This allows you to contribute to the state’s unemployment compensation fund.

3. Secure Worker’s Compensation Insurance

Before hiring anyone, you should purchase worker’s compensation insurance to ensure all of your employees are covered in case of any injuries or damages while on the job. The coverage is required by law to protect employees in such circumstances.

4. Check for Correct Authorization

You need to ensure every potential employee has the correct authorization to work in the United States. This generally consists of checking for a Social Security Number, checking to see if the employee is of legal working age, and a single form of identification will also be required.

5. Withhold Taxes

As the business owner, it is your job to withhold taxes from an employee’s paycheck each week or month. Some taxes you must take care of include Social Security, Federal, and State Taxes. It can be tempting to keep these monies for other business expenses, but doing so will land you in hot water and you could find yourself responsible for paying back delinquent employment tax.  


Most business owners want to jump into the hiring process, but there is serious work to accomplish beforehand. Be sure to follow each step thoroughly.


Whether you’ve put off paying employment taxes or have found yourself in other trouble with the IRS, we can help. R.A. Michael and Associates have been helping taxpayers appeal IRS decisions and resolve issues with the IRS since 1987. Give us a call at (844) 780-1100 and schedule a free consultation today!