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How Much Are California Payroll Taxes in 2022?

How Much Are California Payroll Taxes in 2022?

How Much Are California Payroll Taxes in 2022?

November 30, 2022

How Much Are California Payroll Taxes in 2022?

peakreliance

Accounting, Bookkeeping, California, Taxes

California is one of the most expensive states in which to run a business, and that’s not going to change anytime soon. The state has a complex set of laws governing payroll taxes, and they keep getting more expensive over time. In this article, we take a look at how much employers in the state need to pay payroll taxes as of 2022. We’ll explain the details about the different tax types, how they’re calculated and their effect on your business’s bottom line. 

What is a Payroll Tax? 

The terms “payroll tax” and “payroll withholding tax” are often used interchangeably. However, these two terms actually refer to two very different things. Payroll taxes are the type of taxes employers in the U.S. are required by law to deposit into an employee’s account. This includes both state and federal payroll taxes. Federal law requires employers to withhold payroll taxes from employees’ paychecks. If an employee doesn’t have a sufficient amount of money in their account to cover a certain tax, the employer is required to cover the difference. Federal payroll taxes include: – Medicare tax – This tax applies only to employers with annual payrolls of more than $200,000. It’s a 0.9% tax on the first $200,000 of the employer’s annual payroll, plus an additional 0.9% on the excess amount. – Social Security tax – This tax applies to both employers and employees. Employers pay 6.2% on the first $127,200 of wages, and employees pay the full 12.4% on the first $127,200 of wages, plus an additional 2% on the excess amount of $33,400. – Federal income tax – Employers are required to withhold another 10% of wages paid to employees as federal income tax. 

How Are California Payroll Taxes Calculated? 

The amount of California payroll taxes you’ll have to pay depends on a number of factors. In general, the amount of taxes you have to pay will depend on the amount of wages you pay to each employee. The formula used to calculate California payroll taxes is:

  • Wages paid to employees – The total amount paid in wages for each pay period. California tax laws require that you withhold income tax from this amount.  
  • California income tax withheld – The amount of income tax withheld from each employee’s wages.  
  • Federal tax withheld – The amount of federal payroll taxes withheld from each employee’s wages. 
Who pays California Payroll Taxes? 

Federal law requires that all employers in the U.S. withhold federal payroll taxes from employees’ paychecks. However, California law requires that you also withhold state income tax from your employees’ paychecks. This state income tax is collected by the state and deposited into an account held by the employees. If you’re an employer with employees working in California, you must withhold and pay both state and federal payroll taxes. This income tax is collected by the state and deposited into an account held by the employees. If you have employees working in California, but don’t have a business headquartered there, you don’t have to pay California payroll taxes. 

Which Calculation Is Used for Which Type of Payroll Tax? 

Federal payroll taxes are calculated using the same formula as California payroll taxes. However, the tax rates and brackets change slightly each year. This means that you need to make sure you’re paying the right amount of taxes. You should use a software program to help you track your payroll taxes. If your business has more than $500,000 in annual payroll, you should also consider hiring payroll taxes for your staff. 

Who pays Additional Payroll Tax in California? 

Every business in California is required to pay a gross receipts tax. This is paid on all business sales made in the state. Business owners in the state who have employees working in California who earn more than $400,000 annually may have to pay a gross receipts tax on top of the state’s regular payroll tax. This is an additional tax, called an excise tax, levied by the state. 

Conclusion 

California has a complex set of payroll tax laws, which can make it difficult for employers to stay on top of their tax obligations. However, these laws do impact your bottom line, so it’s important to stay abreast of the latest taxes and payroll tax rules. To stay compliant, you’ll need to track your employees’ earnings and withhold the appropriate amount of taxes from their paychecks. The good news is that payroll taxes are a source of revenue for the government, so they’re worth the hassle. 

If you need help with your payroll taxes in California, Peak Reliance has the necessary experience in organizing the finances. We have experienced and qualified tax experts to assist you. Check out our pricing plans or call us at +1 (718) 218-5558 for more information. 

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California Payroll Taxes, Payroll Taxes, Tax filing, Tax Season

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The Complete Guide to Payroll Taxes in Texas for 2022

Payroll Taxes in Texas in 2022

The Complete Guide to Payroll Taxes in Texas for 2022

November 29, 2022

Payroll Taxes in Texas in 2022

peakreliance

Accounting, Bookkeeping, Taxes

Payroll taxes are a major financial burden on many small businesses who are forced to take out large loans in order to fund expenses. However, the good news is that payroll tax season is almost over. The deadline for filing your 2022 taxes has passed, and now you can focus on other business matters such as developing a marketing strategy and hiring new employees. The following guide will provide you with everything you need to know about payroll taxes in Texas for the upcoming year. 

What is Payroll Tax Season? 

Payroll taxes are one of the biggest yearly expenses for many small business owners. You are required by law to pay these taxes when you take out an employee or contractor. However, they can also be filed by an employer-employee as well as a joint employer. Payroll taxes are calculated on a percentage of your total income, usually 40% or 50%. Some employers may be required to pay more than 50% of their income in payroll taxes. The IRS publishes a list of standard deductions and other income-based deductions that most people can use to reduce their taxable income. Moreover, many employers will also reimburse employees for some or all of their payroll taxes. These are known as self-employment taxes.

Where Do Payroll Taxes Come From? 

Most payroll taxes fall under the category of income taxes, including income tax, Social Security, and Medicare taxes. However, there are also a few payroll taxes that are paid by a trust fund or other government-issued bonds. These are known as employment and occupation-based taxes and are popular with local and state governments.  

How Texas Payroll Taxes Are Determined 

Payroll taxes are calculated based on a percentage of all income received by employees, including tips, wages, overtime, and other forms of compensation. Other taxes, including property taxes, sales taxes, and income taxes, are all calculated on a percentage of income as well as total assets. If the ratio of employee income to employer income is high, then employees may experience higher stress levels and be more likely to develop disorders such as cardiovascular disease, high blood pressure, and diabetes. 

What Are the Different Types of Payroll Taxes in Texas? 

There are three main types of payroll taxes in Texas: employment and occupation-based taxes, trust fund taxes, and income taxes.

Employment and Occupation-Based Taxes: These taxes are calculated on the number of employees and their respective wages or salary. These taxes are usually paid by the employer and apply to all employees, even if they work for less than 10 hours per week.

Trust Fund Taxes: These taxes are paid by a special fund managed by the IRS. They are calculated on the total amount of bonds issued by the state or local government in which the business is located. These taxes are meant to fund public works and other projects throughout the country.

Income Taxes: This is the main source of payroll taxes in Texas. It is calculated on the total income of the employer, including income from sources within and without the employee. The IRS publishes a list of standard deductions and other income-based deductions that most people can use to reduce their taxable income. These are known as standard deductions. Moreover, many employers will also reimburse employees for some or all of their payroll taxes. These are known as net operating losses (NOLs) and are generally carried forward to future years.  

The Bottom Line 

Payroll taxes are a major financial burden on many small businesses. You are required by law to pay these taxes when you take out an employee or contractor. However, they can also be filed by an employer-employee as well as a joint employer. The deadline for filing your 2022 taxes has passed, and now you can focus on other business matters such as developing a marketing strategy and hiring new employees. 

 

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Payroll Taxes, Payroll Taxes in Texas, Tax filing, Tax Season

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Do’s and Don’ts if You Haven’t Filed Taxes in Years

Do's and Don’ts if You Haven't Filed Taxes in Years

Do’s and Don’ts if You Haven’t Filed Taxes in Years

November 28, 2022

Do's and Don’ts if You Haven't Filed Taxes in Years

peakreliance

Accounting, Bookkeeping, Taxes

If you haven’t done a tax return in years, it could have serious repercussions and cost you money. You run the risk of forfeiting your right to a refund or owing the IRS hundreds of dollars in the form of taxes, fines, and interest.

Now, you legitimately have a tax problem.

Fortunately, you still have time to file past-due tax returns, which may help you fix some of these problems. And if you recruit a bit of help with the paperwork, it might be smoother than you’d expect. Below, we have listed some of the consequences of failing to file your taxes and some ways to present them in a timeline format for your convenience.

What will happen if you haven’t filed taxes for 10 years?

There are a few types of consequences to consider with the IRS when you haven’t filed tax returns.

IRS and Penalties

The IRS may initiate a lawsuit against you if you don’t file your taxes for a long period of time. This can entail putting a mortgage on your residence or having your assets seized. In some circumstances, you can also face criminal prosecution. It is ideal to contact a tax lawyer or other tax experts if you are concerned about any of these repercussions. With Peak Reliance and their highly qualified tax experts, you need not worry about that.

Every month your tax return is overdue, the IRS charges you a ‘failure to file’ penalty and a ‘failure to pay’ penalty totaling about 5% of the unpaid amount. However, the overall fees are limited to a maximum tax penalty of 25%, so luckily they won’t continue to rise indefinitely.

The IRS may decide to collect your salary or bank account to pay your tax debt if you haven’t filed taxes in a number of years. Wages or other sources of income may be taken as a result of this.

Additionally, the IRS may publish a notice of a federal tax lien, which may limit your future financial options. Your ability to obtain credit or take out loans may be restricted by an IRS tax lien. The government can now have a role in your transaction and will deduct the tax due from the proceeds of any sale, which can limit the amount of property/assets you can sell.

In the worst-case scenario, the IRS can impose a penalty of up to $250,000 in fines and up to five years in prison for deliberately failing to file taxes.

Other Penalties

You may have problems for a variety of additional reasons if you don’t file your taxes. You risk losing out on potential tax refunds as well as opportunities in your life where you must provide your most recent tax returns. You won’t have any tax returns to offer if you haven’t recently filed your taxes.

When you apply for a passport, for instance, you could be required to present your most recent tax records. When you apply for a mortgage, rent, or other loan, you’ll almost probably be required to provide your tax returns. When you apply for health insurance, you can also be asked for your most recent tax returns.

Your most recent federal income tax returns are also required if you are applying for financial aid on behalf of yourself or your child. Finally, the income you disclose on your tax returns is a factor in determining your retirement benefits, including Social Security and Medicare. Your future financial security may be at risk if you fail to file your tax return for several years.

The Way Out
Step 1 – Check your standing with the IRS.

The IRS frequently files a ‘Substitution for Return’ on your behalf if you fail to file your taxes. The IRS makes an estimate of what it believes you owe, but it ignores any exclusions or deductions.

The IRS will next notify you via tax notice CP3219N, often known as a ‘90-day letter’, of what it intends to file on your behalf. The IRS will submit the tax return it believes you are required to file if you don’t respond to the notice, at which point costs will start to accrue.

Step 2 – Decide if you want to pay or file your own returns

You can choose how to proceed if the IRS has filed substitute tax returns on your behalf. One choice is to just pay the tax and associated fees that the IRS estimates you owe. The IRS does give several tax relief alternatives, like an installment arrangement, if you are unable to pay the full amount due at once. This tax payment method is rather straightforward.

A tax levy will be resolved by paying the due taxes and fees, but you may not receive the tax documents you require for other purposes, such as obtaining a new mortgage loan. Additionally, you’ll probably pay more than necessary because there are no deductions on the IRS substitute filings.

You may spend far less and have the tax documents you may need for future financial decisions if you choose to file your own tax returns for the missing years.

Step 3 – Collect the numbers to complete your tax forms.

You’ll need to perform some forensic accounting to estimate your income and expenses over the years if your bookkeeping become a little sloppy during the last 10 years for which you had unfiled tax returns. If you want to outsource some of the work, a forensic accountant or a certified public accountant (CPA) can assist you with this.

·         Completing Records:

To be ready to submit, sort out all of the gaps and missing data in your financial records. To properly calculate your income and claim the most tax deductions and credits on your tax return, you need to accurately record your income and spending for each year.

·         Supporting Paperwork:

Your receipts and income statements will be included in your financial records, but keep hold of them and any further proof that may assist you to justify why you took so long to file your taxes. You might feel more at ease once you complete the clean-up procedure if you have documentation to back up your calculations and your delay.

Step 4 – File The Pending Tax Returns

You can mail the IRS your unfiled tax forms as soon as you obtain the necessary documentation because there is no deadline for doing so. Better yet, if you meet the requirements, you may still file a tax return up to three years beyond the filing date.

Keep in mind that submitting a company tax-return consists of two steps. The first step is to send the IRS the company tax forms. With the help of this form, you may formally file your taxes and inform the IRS about your income and outstanding debt.

Step 5 – Pay your taxes through whichever method

Paying the taxes you owe is the second step in filing the missing tax returns. You may easily pay your taxes with a bank draft or credit card. Of course, you will have a huge tax burden to deal with if you’re filing years’ worth of tax returns at once.

Fortunately, even though the due date has passed, the IRS is ready and able to deal with taxpayers who are unable to pay the entire amount owed in back taxes by the deadline. If you are unable to make the entire payment right away, there are various choices and installment plans you can choose from.

Some options include:

  • Setting up an installment or payment plan.

  • Pursuing an offer in compromise; a deal with the IRS to settle your tax debt for less than you owe.

  • Request a ‘Currently Not Collectible’ status to delay payment until you can afford to pay it.

  • Take out a loan to cover your tax debt.

Step 6 – Prepare for Future Taxes

Make sure the accounting software has been updated for future tax filings before you close it, after organizing your recently updated tax forms. Tracking income and spending and submitting taxes on time each year may be made simpler with a clear accounting system. Set up your company’s accounting system now to ensure that you won’t have to worry about tax problems with federal or state tax returns this year or in the future.

If you’re prepared to take on years of unfiled tax returns, you might need assistance going back over your accounting records, updating your income and spending, and making sure you’re not overpaying taxes. Peak Reliance has the necessary experience in organizing the finances. We have experienced and qualified tax experts to assist you in filing the missing returns. Check out our pricing plans  or call us at +1 (718) 218-5558 for more information.

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Tax filing, Tax Season

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All About IRS: Tax Filing and Audit

All About IRS and Filing Taxes

All About IRS: Tax Filing and Audit

November 15, 2022

All About IRS and Filing Taxes

peakreliance

Accounting, Bookkeeping, CPA

What is IRS?

The Internal Revenue Service also famously known as the IRS is a bureau of the US Department of Treasury. The IRS is responsible for collecting tax revenue and assessing finances for companies operating in the US.

The IRS has gone through several reorganization and modernization changes, over the years since it’s foundation back in 1862, during this time it was renamed and experienced a change in authority by being placed under the Department of Treasury, USA.

IRS is very clear in its mission. The bureau’s work is to “Provide America’s taxpayers top-quality service by helping them understand and meet their tax responsibilities and enforce the law with integrity and fairness to all.”

What does IRS do?

IRS aims to carry out the tax laws in the US. It evaluates and collects taxes, assists taxpayers understand and meet their tax responsibilities and helps implements tax law to ensure everyone pays what they rightfully owe the state.

The IRS executes three main functions:

  1. Administer tax laws
  2. Process tax returns and collect revenue
  3. Taxpayer service
  4. Tax law enforcement

Collecting taxes

One of the most significant responsibilities of the IRS is to assess and collect taxes on behalf of the government. The sum consists of income taxes, employment taxes, business income taxes, excise taxes and estate and gift taxes etc.

Along with the timely collection of taxes, they are also in authority for issuing tax refunds, which an individual or business can collect as a result of the overpayment of the due tax amount.

Providing services to taxpayers

Another central responsibility of the IRS is providing services to taxpayers in the form of guidance and help regarding tax laws and legal matters. These services can be availed through the IRS website, its telephone helplines, IRS Taxpayer Assistance Centers and volunteer tax assistance.

Enforcing tax laws

A final responsibility of the IRS is the implementation of tax laws. The IRS identifies and pursues those who have underpaid/not paid their taxes, whether as a result of a calculation error or deliberate criminal activity. These examinations typically take the form of either correspondence or field examinations. They carry out criminal investigations and supervise tax-exempt organizations and qualified retirement plans. It is the responsibility and accountability of the IRS to ensure all companies and individuals pay their fair share on time and accurately.

The IRS and Audit

As part of its tax law implementation mission, the IRS audits a hand-picked portion of income tax returns each year. In the fiscal year 2020, the agency audited 509,917 tax returns.

The reasons for an IRS audit vary according to some factors which may also increase the chances of examination for some companies. The chief amongst these is higher income levels. Other factors that may prove to be red flags for an audit include; not declaring the right and accurate amount of income, claiming a higher-than-normal number of business-related deductions, making excessively hefty charitable donations compared to income, and claiming rental real estate losses. However, no single factor determines who does or does not face an IRS audit each year.

The IRS and Taxes

Companies can pay their due taxes to the IRS through the following ways:

  1. An electronic funds transfer from your bank account
  2. A debit/credit card
  3. A same-day bank wire or
  4. An electronic funds withdrawal at the time of e-filing your return.

There are other payment options available as well for businesses and individuals who cannot mare electronic payments. They can pay through:

  1. A personal check
  2. A cashier’s check, or
  3. A money order in the name of the US Treasury.

 However, they need to be sure that it contains the following information:

  • Company’s name and address
  • Phone number
  • Social Security number (where applicable)
  • Employer identification number (where applicable)
  • Tax year
  • Related tax form or notice number

Businesses can even pay in cash if they wish however, with each payment method all terms and conditions must be followed to avoid any future problems or delays as this is a sensitive legal matter.

Out of all of these options, the best and most efficient, quick and safe way is to use on of the electronic payment methods to clear the payment.

Do we really need IRS?

IRS claims to be one of the worlds most efficient tax administrators. The taxes that they collect are used to fund public utilities like national defense, aid for veterans, Social Security, medical care services, foreign affairs, community development and other services that the government provides.

IRS performs an important function for the US government, keeping all organizations, companies and business individuals in line with the tax laws. The bureau collects the necessary funds that the state needs to provide public services to its inhabitants and makes the functions of the entire federal government possible.

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Accounting, Audit, Bookkeeper, Bookkeping, cpa, IRS, Online CPA, Tax Deductions, Tax filing, Taxes

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What’s the Penalty for Not Filing Taxes

What's the Penalty for Not Filing Taxes

What’s the Penalty for Not Filing Taxes

November 14, 2022

What's the Penalty for Not Filing Taxes

peakreliance

Accounting, Bookkeeping, CPA

Most, if not all, taxpayers don’t intentionally file their taxes late. There are many good reasons why companies often fail to file their taxes on time however, it’s important to file tax return as soon as possible, even if a company can’t pay them yet.

Penalties for not filing taxes by IRS

There are two parts to filing taxes:

  1. The actual tax returns
  2. The payment of the taxes owed

If these are not done by the IRS’s deadlines, there are two penalties that will be charged.

  1. Failure to file taxes

In case of failure to file your tax return with the IRS by the deadline, IRS will charge 5% of the unpaid taxes every month until the income tax return has submitted. The maximum penalty will not surpass 25% of the unpaid taxes.

In case the tax return hasn’t been filed within sixty days of the deadline, the lowest penalty for failure to file is $210. If the amount of owed taxes is less than that amount, the penalty is 100% of the total tax bill.

2. Failure to pay taxes

If federal tax return paperwork is filed but tax bill hasn’t been paid on time, the IRS will charge a penalty of 0.5% of the unpaid taxes every month.

In case where you fail to file your tax return along with not having paid any taxes due by the deadline, the penalty charged per month for both is 5%. In all cases, penalties will be stopped at 25% of the year’s tax bill.

Failure to file and pay your company’s taxes is considered a federal crime. The IRS has an established administrative penalty schedule in place for delayed filing, but the longer you wait to file, the bigger the risk of potential civil or criminal penalties.

What happens if you don’t file taxes at all?

The IRS will alert you about this failure in increasingly direct ways.

1. You’ll get reminder letters.

2. You’ll start acquiring penalties.

3. Your assets may be levied.

4. The IRS will file for you.

5. There might be legal consequences.

What to do?

If deadline is over, the IRS may file a “substitute return” for you. However, as it is very well understood, the IRS will not be looking to save you any money and a substitute return will not contain any of the standard deductions your accountant would naturally include in your tax return. Working example, a substitute return only permits one exclusion: single or married filing taxes separate, so you will end up with higher tax liability than if you would have just filed.

The bottom line is, there are several reasons to file your tax return even if you cannot pay, including:

  • Avoiding or reducing the “failure-to-file” penalty
  • Avoiding a substitute return being filed by the IRS, and availing your adjustments, deductions and exemptions.
  • Starting the act of limitations for a possible audit of your return.
  • Starting the act of limitations for collection of the tax, interest, and penalties on your return.

Whenever IRS finds out that you owe them money, they will send you a bill called a “Notice of Tax Due” and “Demand for Payment”. This document lists the taxes you owe, along with interest and penalties. Because interest and penalties continue to accumulate, you should pay as soon as possible.

Payment Options and Exemptions

It’s smart to always pay as much as one can, to decrease the amount of interest and penalties. Once the payment is made you can write or visit the nearest IRS office and inform them about your situation. Companies can pay their due taxes to the IRS through the following ways:

  1. An electronic funds transfer from your bank account
  2. A debit/credit card
  3. A same-day bank wire or
  4. An electronic funds withdrawal at the time of e-filing your return.

Based on your situation, the IRS may offer one of the following resolutions to paying your bill:

  1. Installment Option

IRS may agree that you make monthly payments under an installment agreement. This lets your full payment to be compensated in smaller, more manageable chunks.

  1. Temporary Delay

The IRS may give you the option of temporarily delaying the collection of your bill. The condition is if they determine you really cannot pay any of your tax debt because of a logical. The IRS will however be on their toes and continue to evaluate your ability to. They may also file a “Notice of Federal Tax Lien” to protect the government’s interest in your assets.

  1. Offer in Compromise

The IRS has the option to settle your unpaid tax accounts for less than the full amount of the due amount if you qualify for an “Offer in Compromise”. This applies to all taxes, interest and penalties. An Offer in Compromise is the last option and is only considered after all other payment alternatives have been checked.

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Audit, IRS, IRS Penalty for not filing, penalties for late tax filing, Tax filing

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