Enrolled Agents Needed for More Than Income Tax Matters
Your work as an enrolled agent is not limited to only addressing income tax issues. You also possess the expertise to help business owners with payroll tax matters. In fact, your status from having passed the enrolled agent test allows you to negotiate for taxpayers about their payroll tax problems with the IRS.
Any business with employees becomes quickly embroiled in trouble when failing to make timely payment of payroll taxes. Avoiding these problems and accurately calculating payroll taxes is a valuable specialty for an enrolled agent practice. The enormous benefit of your advice related to payroll taxes opens the door to providing a range of tax services to business owners.
Employer withholding and remitting of payroll taxes that seems like a simple part of your enrolled agent continuing education is not so easy for many small businesses. Failure of a business to pay withheld taxes incurs a severe trust fund recovery penalty.
Of course, employers also are responsible for paying their shares of employment taxes. This includes the employer part of Social Security and Medicare plus other taxes that are paid solely by employers.
The payment schedule for remitting employment taxes on time depends upon the amount of tax payable. Deposits are made either monthly or semiweekly. A business owing less than $50,000 of taxes per calendar quarter is eligible for monthly deposits. Completion of required reports for each quarter are addressed in your EA continuing education.
Accurate calculation of payroll taxes requires careful attention to detail. Income tax withheld from employee paychecks requires having a W-4 from every worker. Various withholding amounts apply depending upon the exemptions employees claim, their income level, and the frequency of payroll dates.
Social Security and Medicare taxes are fixed percentages. But these are subject to change. This includes temporary changes such as the two percentage point reduction in the employee portion of Social Security tax for 2011 only.
Employers in some states also must withhold and remit state income tax. In addition, the states and federal government assess unemployment taxes. Deposit schedules for these taxes are completely different than other payroll taxes. For example, a business owing less than $500 of federal unemployment tax per year is permitted to make an annual payment instead of deposits throughout the year.
Taxpayers with business interests represent opportunities for tax practitioners to obtain plenty of work. Enrolled agents have thriving practices by attracting these individuals. A good way to start the relationships is by possessing a high level of expertise to handle the multiple tax consequences involving payroll.
IRS Circular 230 Disclosure
Pursuant to the requirements of the Internal Revenue Service Circular 230, we inform you that, to the extent any advice relating to a Federal tax issue is contained in this communication, including in any attachments, it was not written or intended to be used, and cannot be used, for the purpose of (a) avoiding any tax related penalties that may be imposed on you or any other person under the Internal Revenue Code, or (b) promoting, marketing or recommending to another person any transaction or matter addressed in this communication.