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Three Tax Tips

“Is this my bill or my phone number?” – Peter Griffin

It’s tax season and I’m in a tax tip sort of mood. All sorts of questions get thrown at Brinen & Associates and we are happy to be a resource for companies and individuals. We’ve touched upon some of these topics before, but they warrant direct attention at this time of year.shutterstock_321635582

Set Up Payment Plans

We discussed the business-saving importance of payment plans recently. When you receive a tax bill that exceeded your projections, you’ve got a couple of problems. First, companies are supposed to pay quarterly taxes. So while a bill may be huge it shouldn’t wipe out your entire cash flow and catch you completely by surprise. However, if your statements will feature a deep shade of red, arrange for a payment plan with the Internal Revenue Service. Heed a recent post’s warning that though this is a sign of good faith, the IRS can move at a snail’s pace, so don’t be distraught if/when you don’t get an immediate response.

The Nexus

In the last two years, I have posted installments on nexus and even answered a letter to someone needing advice as to whether his Limited Liability Company needed to pay separate, individual state taxes due to having employees out of the headquarters’ state.

I’m sure you’ve committed them all to memory.

For those who haven’t, you should know that earning income in a state in which a Limited Liability Company is not domiciled creates nexus. This is no Henry Miller novel, either.  Nexus is the creation of minimum contacts with a state for the purposes of being sued on a particular transaction or for being required to pay taxes on that transaction.

If you earn income in another state, and you fall above the minimum filing threshold, then you have to file a tax return.

If you are receiving a K-1 from another state as a New Jersey Limited Liability Company, you should be filing a return in that state.  There may be a minimum tax to be paid.  In any event, it will start the Statute of Limitation running.

The Unemployment Factor

It’s an inevitability that your business will experience turnover. Some will depart of their own volition. Others you’ll have to part with. If you’re separating from several employees, unemployment contributions may consume some funds since you’ll likely have to uphold the business’ account.

The tax rate may increase if a lot of ex-employees claim unemployment, and you will be penalized with having to pay a maximum state-imposed amount if the account goes negative. If you had a good 2015 and your projections for ‘16 are solid, consider making some preemptive payments now to keep the future rate on the low end.

Some of this knowledge could save you some time and/or money, and who couldn’t use a little more of those?

Always feel free to contact Brinen & Associates for tax questions and comments.

Special thanks to ghergich.com for use of their graphics.

 

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