Why Doesn’t the IRS Think Payroll Needs Affordable Tax Workshops?

Every year the IRS offers a series of Tax Forums across the country, usually in seven or eight cities from east to west coast. The Forums offer all kinds of workshops on all kinds of tax issues. It is geared primarily to CPAs and Enrolled Agents. But the cost is only $209 so even if there are only two or three workshops for payroll it is still a great deal. This is especially true if you are a CPP like me who needs to have these types of classes to renew.

For the past several years I have attended the Tax Forum here in Las Vegas with my CPA friend. I even wrote several articles touting how great they were for payroll professionals. Workshops I have attended included taxing nonresident aliens and filing W-2s electronically. After the first Forum I attended they asked for a survey of attendees as to what workshops they would like to see in the future. I, of course, jotted down some quick suggestions on adding Form 941, third party sick pay, and taxing fringe benefits in general. I submitted the survey and went merrily on my way, knowing I would see at least one or two of these courses next time around.

The next year came around but they did not have any new workshops for payroll people. In fact they had dropped a few from the time before. But still they had enough to get my money’s worth so I attended. And again they asked for ideas for workshops. Well this time I got a large cup of Starbuck’s coffee, a muffin and a pen and off I went. War and Peace it wasn’t but it was nearly that large. I explained how they could attract payroll professionals thereby increasing attendance, and ensure better compliance by offering these workshops. And it’s not like CPAs don’t need the information, they do. I submitted my tome of a survey and headed off into the future secure in the knowledge that I would see these workshops this year. I mean the IRS would surely jump at the chance to educate those professionals who are responsible for collecting at
least half of the taxes in this country. Isn’t compliance in payroll one of the most important things to them? They have all these publications to tell us how to handle fringe benefits surely a workshop or two wouldn’t be out of line?

So as soon as I got the e-mail for the Tax Forum this year I opened it with great anticipation. Wondering how I was going to fit in all the payroll related workshops this year. You know where this is going of course. Not only did they ignore my suggestions for workshops related to payroll but actually dropped any workshops that would even matter to payroll professionals. They only ones they kept were the tired old ones they always offer. Those are the ones on how to submit W-2s electronically and matching names and numbers on the W-2 to the SSA’s data base. Those both are actually offered by the Social Security Administration so I can’t fault them for not adding any new ones.

So the question arises, why doesn’t the IRS want to offer affordable tax compliance workshops to payroll professionals at their Tax Forums? Are they worried that so many payroll professionals will show up there will not be enough room for the CPAs? I don’t think so! Do they not care about compliance when it comes to payroll? I doubt that. So why not use this opportunity to offer sessions for payroll professionals? It’s a question the IRS needs to address.

Vicki M. Lambert, CPP
www.thepayrolladvisor.com

Double The Tax Fun – 2 States!

Q.  I am having a difficult time trying to figure how much I owe in state tax.  I lived and worked in California from 1/1/2009 through 8/7/2009.  I began living in Colorado on 8/8/2009 through the end of the year and worked from home for the same company I worked for back in California.  State taxes were withheld for each state on the income made while living in each state (California withholding stopped when I moved to Colorado)  Do I owe California state income tax on the income I earned while living in Colorado?  If so can I get a credit as I was also taxed by Colorado on that income? Thanks!

A. Multi-state tax situations are always so much fun to decipher.  Over the last several years of my tax practice, I’ve prepared multi-state returns for Iowa, Missouri, Oklahoma and Montana in conjunction with Arizona.  Each state has different laws regarding what income must be counted.  However, residency is the most important.  In your case, if you have documentation showing that you physically relocated on the date you mentioned, then it becomes much easier to prove that your residency changed.  The company you work for is irrelevant to the solution.

California is one of those states with huge budget problems right now.  In an audit, they will try to prove that you did not change states completely.  Residency involves switching your drivers license, sale of the old home or cancellation of the lease, change of mailing address, car title address changes, voter registration changes etc.  If CA is able to prove that you only will be in CO temporarily, then they may determine that you owe CA tax on everything. I don’t know the tax law as well in CA, but they may provide a credit to you for tax paid to CO if it is determined that you actually owe CA tax on everything earned last year.  Check with your tax preparer.

Good documentation is key.  For this reason, I would visit a licensed tax preparer this year.  The complexities of dividing up income and maintaining adequate documentation as well as the right questions to ask to determine your true residency status is worth the price of the professionally prepared return.

Which 1040 Do I Use?

Q. How do I know which 1040 I’m allowed to use? Does it really make a difference?

A. Yes! Each form has specific requirements that a taxpayer must meet in order to use it. IRS Tax Tip 2010-05 contains instructions on which form you should select.  Your options are:

1040EZ Requirements
Your taxable income must be below $100,000 and your earned interest below $1,500. You can only use the Single or Married Filing Jointly filing status. You must be under age 65 and not claim any dependents. You will not be claiming any of the special additional deductions for real estate taxes, motor vehicle purchase or disaster losses.

1040A Requirements
Your taxable income still must be below $100,000 to use this form. You want to claim the credits disallowed on the EZ form. You have capital gain distributions. You contributed to and IRA, paid student loan interest or higher ed tuition.

1040
Anyone can file with this form. However, if you have a simple tax situation, why go through the trouble of the long 2-page form if you don’t have to?

If you are confused about which form to file, you may wish to use the services of a professional tax preparer or CPA. Professionals are trained to help you understand your tax situation and can often make recommendations to help you improve your take home pay or lessen your tax bill in the upcoming year. Make sure you interview your tax preparer carefully. Not all of them are as prepared for any situation as you hope they will be.

Enough Withholding?

Q. I followed your advice and had my payroll department withhold based on W4 stuff instead of a flat percent.  How do I know if I’m on track?

A. That’s a rather amusing question actually.  Publication 15 and the W-4 both require that you use only marital status and number of allowances on the form.  If that is not the case, then the form is invalid and you revert to the status of Single-0 which is the highest regular withholding amount available.  You are not permitted to use a flat percent when calculating your federal withholding.  Your payroll department should already know this.

To answer your question, you have two options when deciding if your withholding needs to be adjusted.  I recommend to my clients that they do the annual check up in late August or early September.  That way, if there is gross over or under withholding, there is still time to fix it before the end of the year without breaking the budget.  Your CPA or tax planner of course is the first place you should check.  He/she will know your financial situation already and can quickly compare your withholding to your expected liability.

Secondly, you could visit the IRS website and download Publication 919.  This document is not for the faint of heart.  Basically, you will be completing a tax return using your last paystub and estimated information from your tax return.

Remember, the objective of withholding for federal and state purposes (not Social Security and Medicare) is to have your payments (withholding) match your liability (from your tax return) so that your refund or extra payment with the 1040 is as small as possible.

On a side note, if you look in the right margin of this blog, you will see my most recent Twitter posts.  Feel free to follow me on Twitter for daily financial thoughts.