Category: Business

25 Aug 2022
Anything, Business, Employment, News Pearson & Co, PC 0 comment

WORKER CLASSIFICATION – WHAT’S IN A NAME?

Employee or Independent Contractor?

 

Legal and regulatory debates continue to rage at both the state and federal levels, the topic … what workers may appropriately be deemed “employees” and which class of workers may be classified as “independent contractors”?

A worker’s classification has real world financial and other consequences for both the individual worker and the company utilizing their services. Independent contractors are not eligible for state or federal minimum wages. Additionally, they are not entitled to overtime pay, workers compensation coverage, unemployment insurance, or benefits. Effectively, independent contractors do not enjoy the protections of state or federal workplace law as do employees.

Employers are often tempted to seek grounds to classify workers as independent contractors rather than employees. Doing so relieves the employer of paying its share of employment taxes …  plus avoiding withholding and paying income, Social Security and Medicare taxes.

Employers are cautioned to be diligent in their research before classifying workers as independent contractors.

Misclassifying a worker may subject the business to significant financial penalties.

A prudent place to seek guidance is to review how the IRS determines whether a worker is an independent contractor or an employee. There are 3 relational categories to consider.

  • Behavioral control − Does the company control or have the right to control what the worker does and how the worker does the job?
  • Financial control − Does the business direct or control the financial and business aspects of the worker’s job. Are the business aspects of the worker’s job controlled by the payer? Things like how the worker is paid, are expenses reimbursed, who provides tools/supplies, etc.
  • Relationship of the parties − Are there written contracts or employee type benefits such as pension plan, insurance, vacation pay? Will the relationship continue and is the work performed a key aspect of the business

With the above as a guide, an employee is generally considered anyone who performs services under circumstances that the business can control what will be done and how it will be done. What matters is that the business has the right to control the details of how the worker’s services are performed.

In contrast, independent contractors are typically people in an independent trade, business or profession in which they offer their services to the public. Workers often classified as independent contractors include truck drivers, home health workers, auto mechanics, carpenters, plumbers, painters, roofers, drywall installers, among others.

For more on how the above applies to your specific circumstances,
be sure to give Pearson & Co a call or drop an email. We’ll respond immediately.

28 Oct 2020
Text, word Payroll is written on a folder lying on documents on an office desk with a laptop and a calculator. Business concept.
Business, IRS, News, Payroll Tax, Tax Law Pearson & Co, PC 0 comment

PAYROLL TAX DEFERRAL

PAYROLL TAX DEFERRAL
Boon for Employees? Burden for Employers?

payroll taxEarly last August, President Trump directed Treasury Secretary Steven Mnuchin to permit employers to temporarily suspend the collection of employees’ shares of Social Security payroll taxes … equal to 6.2 percent of the compensation of eligible employees. In response to the economic stress of COVID-19, the intent was to offer financial relief in the form of more take-home pay for employees for the period September 1, 2020 through December 31, 2020.

Eligible employees are those whose pretax wages or compensation during any biweekly pay period is less than $4,000. That means that an employee’s qualifying status could vary from one period to the next depending on earnings. Workers earning more than $104,000 annually are excluded from the payroll tax suspension.

During the four-month period, participating employers are to suspend withholding and not required to remit to the IRS the amount of Social Security payroll taxes that would have ordinarily been paid. Treasury Secretary Mnuchin has said he “can’t force” companies to participate, suggesting that the deferral would be voluntary, but that he hopes many companies will join in the effort.

It’s important to emphasize that this suspension of collecting and remitting Social Security payroll taxes is a payroll tax deferral … not tax forgiveness. President Trump’s order to delay the due date for payroll taxes for millions of workers includes the provision that the deferred taxes must be paid by April 30, 2021. That means eligible employees will enjoy fatter paychecks for the balance of this year … yet face the prospect of having to tighten their belts to comply with repayment in the first four months of next year.

In a nutshell, the tax is postponed for a specific period and then must be repaid.

The IRS follow-up guidance puts responsibility to pay the deferred taxes squarely on the backs of participating employers. Employers must collect and remit all the deferred payroll taxes between January 1 and April 30, 2021. This means withholding double the normal tax from employees’ pay checks during those four months … unless arrangements are made to collect the taxes due from the employee. Failure to do so results in interest and penalties that will accrue to the employer effective May 1, 2021.

Questions that immediately surface are: what if an employee refuses to agree to repayment … or leaves the company … or doesn’t earn enough to pay the back taxes? Without further clarification, it appears that the obligation to pay continues to be an employer obligation.

Employees of employers that choose to participate, may anticipate smaller paychecks next year when Social Security payroll taxes are withheld at twice the rate experienced before September 1, 2020. Alternatively, employees may be wise to set aside the extra funds received currently in a savings account to avoid high credit card debt or personal loans during the first four months of 2021.

Note 1: The President’s directive does not address Social Security tax deferral for self-employed individuals. Only employment-related taxes are included, not self-employment taxes.

Note 2: Unlike the voluntary provision for private employers, the Trump administration has refused to allow federal employees or members of the military to opt out. Additionally, employees remain liable for the deferred tax should they leave federal for civilian employment.

There are questions being raised by legislators, the American Institute of CPAs, U.S. Chamber of Commerce and others to clarify the benefits of this program to employers and employees. That said, as of this writing and in the absence of revisions by lawmakers, the above summary appears to be the facts.

If any of the foregoing seems unclear as to how it applies to your specific circumstances, please keep in mind that Pearson & Co. will help.
Give us a call or drop an email. We’ll respond immediately.
06 May 2019
Pearson Perspective
Business, Employment Pearson & Co, PC 0 comment

THE U.S. GIG ECONOMY

THE U.S. GIG ECONOMY
The Prophecies … Now Grounded in Facts

At just about this time last year, the Pearson Perspective published an article spotlighting the apparent rise of the gig economy … increasing emphasis by both employers and workers to hire and be hired as independent contractors. Another term often used to describe this burgeoning segment of the workforce is contingent workers.

Pearson Perspective - May 2019

Contingent workers are best described as all those who are not a direct hire or more specifically are not employees. Another oft-used definition is “A contingent workforce is a provisional group of workers who work for an organization on a non-permanent basis, also known as freelancers, independent professionals, temporary contract workers, independent contractors or consultants.”

While the number of independent contractors and contingent workers was, and is, difficult to quantify, one reliable statistic offered by Intuit reported gig workers to then represent 34 percent of the workforce. Astoundingly, the report further anticipated a significant increase to 43 percent by 2020. Three reasons were proposed to explain what was driving this expected juggernaut of workforce transformation:

  • Internet and technology that supports workers functioning remotely from their employer;
  • Successes such as Uber and Airbnb called attention to many who had not considered the potential to perform as contingent workers either as their primary occupation or, in current vernacular, as a side-hustle.
  • The new tax was expected to accelerate that trend by rewarding workers who convert their status as employees to that of independent contractors. That could mean that sole proprietors, partnerships and S Corporations may deduct 20 percent of their “qualified business income” from their taxable income … meaning only 80 percent would remain taxable.

So the Gig Economy was widely heralded and accepted by many as the wave of the future with significant impact for workers, employers and regulatory bodies. In this article, we’ll look at examples of the predictions and anxiety generated by this foretold upset in the balance of the American workforce.  Then read on for the latest findings on this employment phenomenon.

The Predictions

Why I Believe In The Freelance Workstream is the title of an article published in the August 18, 2014 issue of Forbes

The writers, Jeff Wald and Jeffrey Leventhal, make a strong case for the continued upward trend in freelancers as a percentage of the total U.S. workforce. Freelancers, also known as independent contractors, are estimated to be about 16-20% of the workforce by 2020. In contrast, that number was 6.7% just 15 years ago. Coincidentally, the percentage of full and part-time employees is expected to drop to 82% in 2020, a reduction from 91.9% in 1995.

A study by Staffing Industry Analysts bears witness to this reported trend. Here is a graphic representation of their analysis for the 5 years ending in 2014.

Pearson Perspective - May 2016

The Anxieties

In its acceptance of the generally accepted projections of future growth of the Gig Economy, no less of a government agency than the Department of Labor weighed in and addressed the issue this way:

“As employers seek new ways to make the employment relationship more flexible, they have increasingly relied on a variety of arrangements popularly known as “contingent work.” The use of independent contractors and part-time, temporary, seasonal, and leased workers has expanded tremendously in recent years. The Commission views this change both as a healthy development and a cause for concern.”

Employers were and continue to be urged to recognize there is risk in four key areas when using freelance talent:

  1. Risk with the Department of Labor and the IRS over whether these workers can truly be classified as independent contractors – both of these agencies would prefer to see all workers as “employees” even if part-time or temporary. The payment of payroll taxes by the employer is an obvious concern.
  2. Risk of injury – who holds the workers’ compensation coverage obligation? Who holds the risk? The Virginia Workers Compensation Commission will attribute the claim against the business owner in the absence of other coverage and employers may find that their supposed “contractors” are assigned to them by the Commission as employees. Employers should review the Commission’s explanation.
  3. Risk of Accidents – if damage occurs due to an accident, in the employer’s premises or a customer’s premises, does the freelance worker carry general liability insurance coverage for the claim?
  4. Risk of illegal use of someone else’s intellectual property – freelance workers comes  with a “toolkit” of processes and techniques they apply for the business owner’s benefit. Much of this is “intellectual property”. If that intellectual property actually belongs to a company for whom this freelancer once worked, the business owner may have liability for its use and benefit. This is particularly a challenge for software development, but can surface in many other areas or work.

 

Note:  It’s valuable to draw a distinction between temps and contingent workers. The primary difference is that temp workers are employed by a staffing firm. Contingent workers work directly with an enterprise to perform in the completion of specific assignments. Therein is the potential for risk on the part of businesses or non-profits seeking to use freelance talent.

And Now the Truth

The perception is apparently not supported by reality. Said another way, the supposed radical transformation of the U.S. workforce is not borne out in a recent survey by the Bureau of Labor Statistics (BLS). Take a look at The Gig Jobs Picture in the chart below. As you’ll see, in 2017, the share of workers in so-called gig jobs was 10.1 percent of total employment, almost exactly what it was in 2005 (10.7 percent) and 1995 (9.9 percent).

Pearson Perspective - May 2019

So what can be anticipated for the future? Hard to say, but for the moment there is an opportunity to step back, take a deep breath and accept that the gig economy has remained remarkably stable. While the past is no guarantee of the future, certainly the trend has remained notably constant.

As ever, we stand ready to help. A phone call or email to Pearson & Co. is all it takes.

29 Oct 2018
Business, News, Tax Law Pearson & Co, PC 0 comment

END OF YEAR TAX STRATEGIES

END OF YEAR TAX STRATEGIES

For Business Owners and Individual Taxpayers

Pearson & Co. CPAs - November 2018 Blog Post

Yes … it’s hard to believe … the 2018 income tax season is nearly upon us. Certainly, seems like we just finished with 2017.

As the old adage goes, “No time like the present”, to start thinking about what steps to take to be sure you enjoy maximum tax-savings advantage in the first taxable year under the Tax Cuts and Jobs Act (TCJA).  So here are considerations for you to discuss with your professional tax advisor.

As ever, Pearson & Co. stands ready to serve you in your tax and accounting needs.

Pearson & Co. CPAs - Year End Tax Strategies

Business Owners

The TCJA reforms can affect the bottom line of many small businesses. Notably, the tax-saving benefits come down to three major categories:

  • Qualified Business Income Deduction
  • 100% Expense Deduction for Depreciable Business Assets
  • Employee Fringe Benefits

Qualified Business Income Deduction

This provision in the tax reform legislation applies to so-called pass-through businesses, i.e. enterprises’ income that is taxed on the firm-owners’ personal tax return. These entities include partners in partnerships, shareholders in S corporations, members of limited liability companies (LLCs) and sole proprietors.

All taxpayers who qualify as described above and who earn less than $157,500 and file singly ($315,000 for a married couple) can now deduct from their overall taxable income 20% of the income they receive via pass-through businesses.

There is more to the story, so be sure to seek guidance from a qualified tax professional. For example, S corporation owner’s salary must meet the “reasonable compensation” standard.

100% Expense Deduction for Depreciable Business Assets

For tax years 2018 through 2025, businesses are now able to write off most depreciable business assets in the year the business places them in service. The 100-percent depreciation deduction generally applies to depreciable business assets with a recovery period of 20 years or less and certain other property.

Machinery, equipment, computers, appliances and furniture generally qualify. Additionally, the TCJA expands definition of eligible property improvements made to non-residential property.

Note: The maximum deduction increased from $500,000 to $1 million per year.

So if you’ve been holding off on these types of purchases, reconsider your position in light of the considerable tax savings that may result.

Employee Fringe Benefits

Entertainment and meals: The new law eliminates the deduction for expenses related to entertainment, amusement or recreation. However, taxpayers can continue to deduct 50 percent of the cost of business meals if the taxpayer or an employee of the taxpayer is present and other conditions are met. The meals may be provided to a current or potential business customer, client, consultant or similar business contact.

Qualified transportation: TCJA disallows deductions for expenses associated with transportation fringe benefits or expenses incurred providing transportation for commuting unless necessary for employee safety.

Bicycle commuting reimbursements: Employers can deduct qualified bicycle commuting reimbursements as a business expense for 2018 through 2025. However,  these reimbursements in must be included in the employee’s wages.

Qualified moving expenses reimbursements: Reimbursements an employer pays to an employee in 2018 for qualified moving expenses are subject to federal income tax.

Employee achievement award: Special rules allow an employee to exclude certain achievement awards from their wages if the awards are tangible personal property. The new law clarifies that tangible personal property doesn’t include cash, cash equivalents, gift cards, gift coupons, certain gift certificates, tickets to theater or sporting events, vacations, meals, lodging, stocks, bonds, securities and other similar items.

An employer also may deduct awards that are tangible personal property, subject to certain deduction limits.

Pearson & Co. CPAs - Year End Tax Strategies

Individual Taxpayers

Double-check Your W-4 Form

If you haven’t already done so check to be sure that your employer is withholding the correct amount of federal taxes from your paycheck. The idea is to have your withholdings match your anticipated tax bill, thereby avoiding owing taxes or penalty. On a more positive note, you may find that it is more advantageous to have less withheld and enjoy more take-home pay.

The IRS has made your reality check simple. Just use the IRS Withholding Calculator. Here’s what to do.

Just click here and answer a few questions … Withholding Calculator

Harvest Stock Losses That Qualify as Tax Deductions

If you file jointly you may deduct up to $3,000 ($1,500 if filing singly) in losses on stocks you sell before year-end. Doing so will reduce your taxable income, plus offset any gain on stocks you sell as well.

Compare Benefits of Standard Deduction vs. Itemizing

The new tax law essentially doubled the standard deduction and significantly reduced the qualifications for itemized deductions. Even if you have a history of itemizing, this year you may be better off taking the standard deduction.

Note: Traditionally, Virginia tax law has conformed to federal. However, that is not the case today as the state standard deduction has not been increased to track with the revised federal rules. There are proposals to revise the Commonwealth’s law, so be sure to check with your tax advisor to determine your best tax strategy.

Maximize Your Tax Advantaged Retirement Plan Contributions

Make the most of your 401K, IRA and other tax favored savings plans.

Flexible Spending Accounts

Check on your plan’s deadline for withdrawals and your current account balance. To avoid losing funds, schedule your medical appointments and purchase other health care items covered by your plan.

Divorce Considerations – Possible Sense of Urgency

Thanks to the Tax Cuts and Jobs Act (TCJA), alimony payable for divorces entered into after this year will no longer be tax deductible to the payor and will not be taxed as income to the recipient. That may result in conflicting desires on the part of divorcing couples based on comparative benefits.

Couples considering a divorce should study five areas of concern before the end of the year … ideally with guidance from a tax professional and other expert advisors with a success history of dealing with married partners calling it quits.

  • Alimony
  • Business Valuation
  • Pensions
  • Other Assets
  • Prenuptial Agreements

Takeaways

Is the tax code complex? Yes … for both business owners and individual taxpayers. And this, the first taxable year under the revised tax code, stands to be even more complex as there are unanswered questions and interpretations that will continue to surface.

Pearson & Co. stands ready to help. Call or email … we’ll respond promptly!

24 Sep 2018
Supreme Court Ruling
Business, News, Tax Law Pearson & Co, PC 0 comment

SUPREME COURT RULING STUNS SMALL ONLINE BUSINESSES

SUPREME COURT RULING STUNS SMALL ONLINE BUSINESSES
At Stake … Comply With Tax Laws of 50 States and 3,000+ Counties
To Collect and Remit Sales Taxes

Pearson & Co. CPAs

In a decision earlier this year, the Supreme Court of the U.S. (SCOTUS) ruled that states may collect sales taxes on sales by businesses within the state … whether or not the business had a physical presence in the state. This overturned a 1992 SCOTUS ruling which limited states ability to collect sales taxes only from entities with a brick-and-mortar presence within its borders. The prior decision has now been declared “unsound and incorrect” by the high court.

Impacts of the latest ruling have been received as either an unprecedented economic burden or a long overdue and positive leveling of the playing field. Small businesses selling online subscribe to the former while larger companies and tax collecting jurisdictions applaud the decision. Let’s take a look at who loses, who wins and what role Congress may play as the repercussions of this ruling pan out.

Small Online Businesses

The real challenge for small online businesses is the complexity of compliance issue. Each state determines what products, goods or services are subject to sales tax. Additionally, there are county and local tax jurisdictions that may weigh in for their share as well. So small online businesses are faced with a myriad of designations of what’s taxable, by whom, and in what amount … without any uniform definition.

So from a practical standpoint, let’s consider a Virginia based business that sells online. Clearly, the responsibility for sales within the Commonwealth is to collect and remit taxes to appropriate tax collection entities. Depending on volume of sales, that may require a few hours or at most several days for an employee to perform this function as part of a larger job responsibility.

United States Counties

Now duplicate that function with clashing requirements by 50 states, 3,000+ counties and by some estimates potentially as many as 12,000 jurisdictions nationally … no longer a part-time activity. Perhaps a typical example is a small business paying $20 to $60 quarterly to each of dozens/hundreds of jurisdictions.

So businesses, especially small businesses, operate on the same basis as individuals … finite financial resources to be deployed in the most advantageous way to maintain and promote the value of the business to all stakeholders – customers, owners and employees. Cost to employ compliance personnel restricts or eliminates valuable assets that may otherwise be directed to job creation, capital formation and return on investment. That means added cost to the detriment of increased investment in economic growth with a “trickle-up” loss to the national welfare.

When you consider the sheer numbers of tax jurisdictions that now must be served by small online businesses, with no uniformity of compliance requirements, recognize another likely event … audits by out-of-state jurisdictions. What’s a small business to do when faced with a claim? Respond with legal representation to a demand letter … at what cost … or take the easy way out and pay the requested amount rather than trying to defend a far-off tax court action?

So small online businesses are stunned by the reversal of a long-held ruling that sales tax only need to be paid on sales where the business has a physical presence. What to do? Small online businesses are becoming aligned in an effort urging Congress to step in and create national standards for interstate commerce and supplant the current patchwork quilt of state and local tax laws. Stay tuned!

Effects on Larger Businesses

Larger Businesses … Including Those Seling Online

Companies that have a bricks-and-mortar presence have been unanimous in applauding the SCOTUS decision. Their claim, not entirely without merit, is that they have been operating at a competitive disadvantage. While online sales by small business are dwarfed by the revenues generated by the big guys, they continue to grow steadily and drive a concerted call for a more even playing field and fairer tax legislation.

A statement from Target read in part, “We are pleased the Court’s ruling will close the loophole that has allowed online-only retailers to avoid collecting and remitting sales taxes while still requiring local businesses to do so.”

Interestingly, supporters of the SCOTUS ruling include big online sellers like Amazon, Walmart and Target. While they now frequently collect and remit state taxes, local taxes are rarely if ever included in that effort. So this does add to their tax responsibilities, but they have a massive technology advantage over small sellers so are generally comfortable in dealing with the change.

Note:  Technological strength could become a boon for Amazon.  It already has the compliance machinery in place and can make it easy for a seller using Amazon’s platform to collect and remit sales tax. Small online retailers may be strongly motivated to engage with Amazon for this immediate resolution to challenges they may not be able to handle financially.

States, Counties and Local Tax Jurisdictions

“Follow the money” is often touted as a sure path to determine motivation. Sales taxes typically range broadly from 1 percent to 10 percent or so. If we think about 5 to 7 percent as a likely jump in added revenue, it’s not a tremendous windfall for the tax collectors.

That said, according to the SCOTUS decision, estimates of sales taxes lost to sellers outside of a jurisdiction run between $8 billion and $33 billion annually. As Senator Dirksen once said, “A billion here and a billion there … soon you’re talking about real money.” Clearly there has been definite support from tax collection jurisdictions for the current ruling.

As evidence of anticipation and desire for the change, many states had already passed laws to trigger tax collection when and if the Supreme Court decided as it did. That means that companies selling into these states are immediately subject to compliance. Again, small businesses will bear the brunt of the need to comply now or run the risk of audits, fines or a decision to withdraw from selling in certain states.

Tax Jurisdictions

The U. S. Congress

Many major online retailers have joined with small business groups to clarify the SCOTUS ruling and provide a framework that will both defend small businesses while providing uniformity and consistency for all online players regardless of size.

Congress has the authority to resolve the issue of online sales tax fairness, and create a solution that’s uniform across the country. That said it has failed to do so despite repeated introductions of legislation by members of Congress to resolve the issue. Congress’s most robust effort was the Marketplace Fairness Act, which was introduced in the Senate in 2013 and would have authorized states that had met standards for simplified sales tax rules to require large online and catalog retailers to collect sales taxes … notably with significant exemptions to protect small businesses. The Senate passed the MFA with a bipartisan vote of 69 to 27, but it was never brought to a vote in the House.

With this recent SCOTUS ruling and pressure building from the online selling community, perhaps this will be the year when the MFA is reconsidered and passed in some final form that clarifies the current confusion.

Takeaways

Our crystal ball is as cloudy as anyone else’s, but we’re convinced of two things:

  • It is likely with the current change as desired by larger online sellers and the potential financial burdens it imposes on the smaller players, Congress will act to resolve the inequities while maintaining a fair and just commercial climate for all.
  • Consumers will not be fazed by an added sales tax. They are used to it when going to a bricks-and-mortar store and the convenience plus savings in time and money will continue to accelerate online sales initiated by consumers.

 

 

11 Jul 2018
Business, Employment Pearson & Co, PC 0 comment

HIRING QUALITY WORKERS IN TIGHT JOB MARKET

HOW TO HIRE QUALITY WORKERS IN TIGHT JOB MARKET
Strategy That Includes Significant Tax Savings

Pearson & Co., PC - Blog Post

It’s no secret … unemployment is at a record low. That’s great for Americans who are now enjoying good jobs … and challenging for employers seeking to attract and recruit quality workers. Full employment means a diminished pool of qualified job candidates.

That said, there is a largely untapped source of workers who, when hired, bring with them significant tax benefits to help new and existing small businesses. That group includes long-term unemployment recipients and other categories of workers with employment barriers.

Tax relief benefits are delivered through the Work Opportunity Tax Credit (WOTC) … income tax relief that encourages employers to hire designated categories of workers who face significant hurdles to becoming gainfully employed.

We’ll talk about the potential tax savings in a moment, but first a review of the ten categories of WOTC-eligible workers.

  • Qualified IV-A Temporary Assistance for Needy Families (TANF) recipients
  • Unemployed veterans, including disabled veterans
  • Ex-felons
  • Designated community residents living in Empowerment Zones or Rural Renewal Counties
  • Vocational rehabilitation referrals
  • Summer youth employees living in Empowerment Zones
  • Food stamp (SNAP) recipients
  • Supplemental Security Income (SSI) recipients
  • Long-term family assistance recipients
  • Qualified long-term unemployment recipients.

The Work Opportunity credit is generally based on wages paid to eligible workers during the first two years of employment. Eligible businesses claim the WOTC on their income tax return. The intent is to encourage business investments that are considered crucial to boost economic development.

Here’s the real value of a tax credit. The best way to describe tax credits is in contrast to what most taxpayers understand … tax deductions. Tax deductions reduce the amount of your income subject to tax. Tax credits directly reduce the tax itself.

For example, assume your business spends $5,000 on equipment or some other item that results in a tax deduction. That will reduce your taxable income by $5,000. In a 25% tax bracket, you would save $1,250 in taxes.

Now compare that with a $5,000 tax credit. That amount is subtracted from the amount of tax owed as opposed to an offset to income … as is the case with a tax deduction. Result: Your tax bill is reduced by the full $5,000 tax credit.

Essentially, the WOTC is a business entitlement subsidy that may be enjoyed by any company that meets the legal criteria. To qualify for the credit, an employer must first request certification by filing IRS Form 8850, Pre-screening Notice and Certification Request for the Work Opportunity Credit, with the state workforce agency within 28 days after the eligible worker begins work. Other requirements and further details can be found in the instructions to Form 8850.

Takeaway

Business owners … looking to save money, reinvest in your business and grow the value of your most valuable business asset – your people? Qualifying for the WOTC will deliver on all those plusses.

 

25 Feb 2018
Virginia Consumer Use Tax
Business Pearson & Co, PC 0 comment

VIRGINIA CONSUMER USE TAX

VIRGINIA CONSUMER USE TAX
Small Business Owners … Don’t Get Caught in Non-Compliance

Virginia Consumer Use Tax 1

OK, Virginia small business owners … you know all about paying sales taxes, because anything requiring that tax to be collected is done so by Virginia-based sellers/vendors you deal with. Likewise, you are familiar with the sales tax because you are required to collect it from buyers of your goods that are taxable.

Now let’s add another dimension to the world of taxable events … the consumer use tax. Generally, the consumer use tax becomes an issue when you rent, lease or buy tangible items that you didn’t pay sales tax on at the time of purchase. Practically speaking, this typically occurs when you buy something outside the state via the internet, by phone, through mail order or even an out-of-state purchase that you bring back to Virginia to use here.

Note: We’re not talking about “double taxation” on your purchases. They are subject to either sales tax or use tax, not both. Items exempt from sales tax in Virginia are also exempt from consumer’s use tax.

So for example, let’s say you order printer ink cartridges through a website of a company based in Texas and are not charged sales tax. You are required to pay use tax at the same rates as the Virginia sales tax. Sales tax rates in Virginia currently are:

Of course, there are exemptions. Rather than try to list those in this article, why not give us a call to discuss the specifics of your purchases and whether they are taxable or exempt.

The use tax is due for calendar-year filers by May 1. If you are a fiscal-year filer, your due date is the 15th day of the 4th month after the close of your taxable year.

Yes, there are penalties and interest charged for non-payment, underpayment or late payments. Click here for more info Penalty and interest … or better yet give us a call or drop an email. We’ll respond promptly.

Virginia Consumer Use Tax 2

Summary

Small business owners especially need to be mindful of the need to comply with the requirements to declare purchases subject to use tax and to remit the applicable taxes.

Keep in mind that the Virginia Department of Taxation routinely conducts audits to enforce compliance. That activity is likely to become even more aggressive in this age of borderless commerce that is particularly fueled by the internet. The state has a vested interest in ensuring that businesses of all sizes pay either the sales tax or use tax on purchases that are not exempt.

As ever, we stand ready to help. A phone call or email to Pearson & Co. is all it takes.

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