September 2007 Newsletter continued

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Bulletin Board  | Federal & State Tax Forms

This newsletter offers factual and up-to-date information on the subjects discussed, but should not be regarded as a complete analysis of these subjects.  No party assumes liability for any loss or damage resulting from reliance or use of this material.

● Corporate extended tax returns due in 15 days, September 15, 2007

● 3rd quarter individual & corporate estimated tax payments due September 15, 2007

● Individual & partnership extended tax returns due in 45 days, October 15, 2007

 

IRS focusing on employment tax issues

As IRS works on narrowing the tax gap, they are focusing on schemes for avoiding payment of Social Security and Medicare taxes.  Their number one employment tax issue is misclassified workers.  IRS suspects that a disturbingly large number of businesses circumvent their payroll tax responsibilities by calling workers independent contractors when they are really employees.  In particular, IRS will take a tougher line when it finds companies retain too much control over contractors.  And starting next year, workers who think they have been misclassified can use a special form to file, giving IRS information about their employers when they pay their share of employment tax.  These leads will help the IRS catch violators.

 

Higher penalties will help curb the problem.  This year or next, Congress will pass legislation hiking fines on those who are caught abusing.

 

Payroll tax fraud is another big issue.  IRS plans assaults on abuses:  withholding employment taxes from workers but spending the funds rather than depositing them with the treasury, sifting employment of workers to shell subsidiaries that have no history of unemployment claims, and taking profits from an S corporation via dividends instead of salary to avoid payroll taxes.