Posted on 02/12/2004 11:27:30 PM PST by JohnHuang2
A slave for the IRS
© 2004 WorldNetDaily.com
I've got a problem, and I need a business Ann Landers with a social conscience. During the past four months, I've been working as an unpaid slave for the federal government. This happened because earlier in the year I decided to open a small business. The type of business is unimportant – it could be the same one you're working in or the espresso stand you frequent on your morning drive into work. Anything that provides a needed service and some gainful employment for area residents.
My servitude began with the arrival of a large white envelope from the Internal Revenue Service. It was followed by a similar-sized green and white envelope from the state tax collectors. My accountant helped me fill out the forms, for which he was well-compensated. Unlike me. I sent in the money, bought payroll software, hired employees and we were in business.
For those of you who do not have employees, payroll software is necessary to figure out how much of the salary you pay your employees actually can be given to them, and how much goes to the federal and state governments in the form of withholding, much of which you are required to match and then pass on without regard for your profitability. Think of "matching" as having a separate employee for each few you hire, one who never comes to work, never contributes anything, but has his hand out each and every month.
Being small, our servitude at first seemed modest. I only had to send off the money that I withheld – along with my matching amounts – once each month. Tax reports detailing the withholding must be filed quarterly. Not understanding these, and not having the time to both run the business and learn, I employed an accountant to calculate the amounts and fill in the forms, which I sent along.
During October, my servitude began in earnest. The accountant explained that he would soon have no time to help me with bookkeeping, so we had best get at it now. Invoices were tracked down and sorted, amounts and vendors entered into computer software, and books ultimately balanced to the accountant's satisfaction. That took the bulk of my day, several times a week, for three months. The accountant's bill for all this will likely exceed what is due in taxes.
Yesterday, I received a love note from the IRS informing me that although I'd sent in all the payroll taxes and the amounts were correct, I had mailed them to the wrong address, depriving the government of the use of the money for up to three full days. They never told me the "crime" for which I was being penalized; I spent a day figuring it out. For this bureaucratic travesty, I was assessed a 10 percent penalty. By my calculations, 10 percent for three days equates to 100 percent per month, or 1,200 percent per year. A tidy little interest rate that could only make the mob envious.
My accountant commiserated with me, wondering how I'd been foolish enough to think that I could actually send the monthly withholding checks to the same address where I sent the quarterly tax withholding reports and payments.
"No, they can't take the payments there," he said. "Best to deposit them at the bank." I suggested that advice would have been more useful a year ago. "You could always ask to have the penalty removed," he said.
Maybe. But I could also consider it a cheap education and do what much of the rest of American business seems to be doing. I could fire my employees, hire half of them back through an employee-leasing firm, and outsource the rest of my work to China, Taiwan or Mexico. Then I could dump the accountant and hire a tax lawyer to help me invest the savings and make sure the IRS never gets another penny out of me. What's your advice?
I recommend them highly, if you think they can improve your bottom line. They are expensive however. I looked into it and found that by the time I paid for their 401Ks and better medical insurances, and fees that I would end up spending a great deal more in employee benefits.
But then, everyone has a different situation.
I wonder what this guy was smokin.
On of the first things that a person who starts a business MUST DO is to understand the regs regarding payroll taxes and quarterly reports.
It is why there are bookkeeping services, but you must know and understand hoe to do it yourself in a pinch.
All this stuff happens to every small business owner that I know including me.
Banks are very helpful these days, as are a newspaper full of people looking for bookkeeping work.
I was lucky, as my wife did it for me most of the time.
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