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The IRS wants to educate new small business owners about their federal tax responsibilities. “Understanding and meeting their tax filing requirements is one of the biggest challenges faced by people starting out in business,” says the head of the IRS Small Business Division.

Among the common tax issues that can trip up new business owners:

* Classification of workers. Determining whether workers are employees or independent contractors is a matter of law, not the choice of the worker or the employer.

* Federal employment tax deposits. Called trust fund taxes, these deposits must be made according to the appropriate schedule, depending on deposit amounts.

* Quarterly estimated tax payments. Business earnings are not subject to tax withholding; therefore, the owner’s income and social security tax obligations are met through quarterly estimated tax payments.

* Recordkeeping. New businesses need a good recordkeeping system to make tax filing easier and accurate.

* Disaster protection. Financial and tax records need to be protected to ensure business continuity in the event of a disaster.

* Tax scams. New business owners should be alert to the prevalence of abusive tax avoidance schemes. Falling victim to one of these schemes could result in serious tax problems.

For guidance in getting a new business off on the right tax foot, give our office a call at 302.225.5000.

If you can’t file your 2011 tax return by the April 17 deadline, you can file for an extension by that date and get until October 15, 2012, to file. You can request the extension on paper, by phone, or online. The extension is automatic, with no explanation necessary.

Be aware, however, that an extension to file does not give you more time to pay taxes due for 2011.

For assistance, contact our office at (302) 225-5000 or info@gunnip.com.

Tuesday, April 17, is the deadline for filing certain returns and taking certain tax-related actions. Here are the major deadlines.

* Filing 2011 income tax returns for individuals. If you cannot file your return by this deadline, be sure to file an extension request by April 17. The automatic extension (you don’t need to explain to the IRS why you need more time) gives you until October 15, 2012, to file your return. An extension does not, generally, give you more time to pay taxes you still owe.

* Filing 2011 partnership returns for calendar-year partnerships.

* Filing 2011 income tax returns for calendar-year trusts and estates.

* Filing 2011 annual gift tax returns.

* Making 2011 IRA contributions.

* Paying the first quarterly estimate of 2012 individual estimated tax.

* Amending 2008 individual tax returns (unless the 2008 return had a filing extension).

* Original filing of 2008 individual income tax return to claim a refund of taxes. Some taxpayers have tax refunds due them for prior years, and unless a return is filed to claim the refund by the three-year statute of limitations, the refund is lost forever.

The IRS announced that more than $1 billion in tax refunds for the year 2008 remain unclaimed by a million taxpayers who failed to file a return for that year. The tax law provides a three-year period for claiming a refund when no return is filed. That means these individuals must file a tax return for 2008 no later than Tuesday, April 17, 2012, or their refunds will be lost.

You might know someone who was below the filing threshold, yet they had withholding that they are entitled to receive as a refund.  This is common when children have a summer job, they don’t make enough that they are required to file, but their employer withheld federal and/or state income tax.

Tick-tock. Time is almost up on that six-month extension you filed back in April to give yourself more time to complete your 2010 individual income tax return.

What happens if you fail to file your return by the extended due date? One consequence: Unless a disaster-relief exception applies or you have a valid reason, you may be charged penalties and interest.

For example, the penalty for filing your return after October 17, 2011, is 5% of the amount of your unpaid tax, per month, up to a maximum of 25%. After 60 days, a minimum penalty of the smaller of $135 or 100% of the tax due applies.

In addition, a late payment penalty of ½ of 1% of the tax due may apply for each month or part of a month that you fail to pay the tax due until you reach the full 25%. The two penalties interact and can be combined.

You’ll also have to pay interest on the tax due. During 2011, the rate on underpayment of tax was 3% in the first quarter, 4% in the second and third quarters, and back to 3% in the fourth quarter. The interest is compounded daily and can be charged on penalties.

Since the penalty and interest are based on unpaid tax, neither applies when your return shows zero tax due. Filing a return is still a good idea, however. Why? The general rule limiting the IRS to a three-year period for assessing tax begins when you file. No return means no triggering of the statute of limitations.

Generally, the IRS will not provide filing extensions beyond the October 17, 2011; however, victims of recent natural disasters have been given more time to file returns and pay taxes. This tax relief is part of the federal response to recent hurricanes on the East coast, wildfires in Texas, and severe storms and flooding in other parts of the country.

Give us a call if you think you may miss a deadline, or need updates on relief and areas covered. We can help keep penalties to a minimum.

Effective July 1, 2011, the 0.2% federal unemployment tax (FUTA) surtax is no more. The FUTA tax rate, before consideration of state unemployment tax credits, is now 6.0%.

That means employers need to separately track FUTA taxable wages paid before July 1, 2011, and FUTA taxable wages paid after June 30, 2011, since the FUTA tax rates are different during those periods.

Employers whose FUTA tax is greater than $500 for the calendar year need to make quarterly FUTA deposits; the next payment is due on Aug. 1, 2011.  The August payment is based on taxable wages paid through June 30, 2011, so it will be calculated using the 6.2% rate. However, the next payment, due on Oct. 31, 2011, will be computed using the 6.0% FUTA tax rate if legislation is not enacted to retroactively reinstate the FUTA surtax beginning July 1, 2011.