Most of the time, taxpayers can handle personal income taxes without too much trouble but there are times when a tax attorney can be either a handy resource or a required partner.
Uh oh. It is now after April 15, and you did not file your taxes. What do you do?
Like all creditors, the government must contend with debtor inability to pay. They must also decide how to settle accounts when reasonable minds might differ on the amount owed. Businesses resolve their account receivable challenges with the standard procedure of negotiation and compromise. The government also acknowledges the utility of this process; it promotes an equitable and efficient result for both the IRS and the taxpayer alike. Accordingly, the government has authorized the IRS to negotiate and settle taxpayer liability through the program of Offer in Compromise.
This week, Amazon disclosed Amazon seller information to the California tax authorities in response to a legal demand letter it received late last month.
Many Amazon sellers received an e-mail notification from Amazon this week with the subject “Disclosure to the California Department of Tax and Fee Administration” stating that Amazon has been served with a legal demand from the California Department of Tax and Fee Administration (CDTFA), and that the company has until November 6th to turn over all Amazon seller information and any tax identification numbers associated with those sellers.
In addition to payments to employees either as casual labor or as reimbursements, the auditor is also going to look at any payments to officers or any personal expenses that are being written out of the business, and in an effort to classify personal expenses as taxable wages. Let’s talk about that in a little bit of detail.
One of the biggest problems that we come across in payroll audits is employee reimbursements and independent contractor reimbursements. A lot of the times what will happen is an employee will get paid a normal paycheck and then they will spend their own money outside the context of the business to buy materials, to buy supplies, go post office do whatever. The business will write the employee a check out of their operating account and not run it through payroll.
After verifying payroll and payroll tax withholdings, the EDD will next go through and verify all the workers that the business issued 1099s to. This is what is known as the EDD Independent Contractor Test. First, the EDD auditor will go through each 1099 worker in detail, one by one. Even 1099’s that were issued to businesses, landlords and others that are clearly not subject to payroll tax withholdings, you can pretty much count on the EDD auditor going through each one and verifying who was issued a 1099.