Missing tax filing deadlines can be costly

Feb. 14, 2001 - Today is Valentine’s Day.

If you’re in love, you’ve got your work cut out for you. If you’re a business, it means you’re 14 days past the deadline for completing a staggering list of tax-related items, says Millian Toms, CPA.

“When you’re in business you’re required to know and do all these things, and find out about them. But there’s only so much reading you can be expected to do,” Millian says. “It’s important to find someone who can help you with these things.”

Here’s a checklist of items businesses were required by law to have completed no later than Jan. 31:

• All W- 2 forms needed to be in the mail, and W- 3 transmittals had to be reconciled to the four quarterly returns of the business and with the payments made by the business. “It’s amazing how often they don’t agree,” Millian says, but notes that the lack of agreement can be and usually is due to an administrative error, not a nefarious scheme to defraud the IRS.

“We have to prepare, reconcile, and make sure the payments agree,” Millian says. “It’s a big undertaking. That’s one of the reasons I recommend businesses use a payroll tax service. You have final responsibility and need to verify what they have done.

“But the payroll service is in that business, and that’s all they do. They’re going to be better at,” she adds. “They’ll even file the quarterly statement for you and pay it out of your account.”

• Quarterly state unemployment tax returns were due. This is your last chance to make sure you haven’t paid on more than $9,500 per employee.

• Federal annual unemployment tax returns were due. Those also must be reconciled to the four quarterly payments made during the year.

• The state income tax withholding transmittal of W 2s. “The state gets its copy, which has to first reconcile to 12 monthly payments or four quarterly payments.”

• All 1099 forms had to be in the mail. Similar to W 2 forms, the 1099 is a wage statement for independent contractors and attorneys (they’re also for payments for services by unincorporated businesses). “These usually don’t have withholding. They must be transmitted directly to the recipient – the independent contractor,” Millian says.

• Thus far we’ve been talking state and federal level, but now it’s time for local communities to get into the picture. Millian says one of the most important forms a business should pay attention to is the Personal Property Tax form. It’s due to the city by Jan. 31 and is a statement of the cost of all fixed assets in the business as of the preceding Dec. 31.

“In order to do this it means a business must have all of their accounting done,” Millian says.

“This is very important to file. If you don’t, you can lose your right to contest an assessment,” she adds. For example, if you work out of your home but fail to file a Personal Property Tax form, the city can assess anything they want and you cannot contest until the following year.

• Also on the community level is paperwork necessary for those who work in Detroit and other cities with their own income tax. Again, this form is designed to reconcile 12 monthly (or four quarterly) returns with payments the business has made.

• Moving back up from the community to the state level, the State of Michigan sends out its unemployment rate determination, another key piece of information Millian says is extremely important. The form shows how much your business has paid, and how much has been paid out in unemployment from the account.

“This notifies you of what your new tax rate is. The rate is based on your unemployment history – they (the state) determine the reserve you need to carry. Your rate could be very low if you’ve never laid anyone off, but if you lay off one person, even if you go years without laying off another person, your rate will rise and stay high for several years.”

Millian’s point is that a business has 30 days from receiving this form before it must be contested. “Check the information on the form. If you don’t, then you have to live with that rate” for a full year.

“For the average small business, all of the above is true,” Millian says. “And I’m just talking about the Mom and Pop business on the corner. None of this includes the businesses that have profit sharing, which, for example, can add even more. And stocks mean dividends, you know.”

Millian M. Toms is a Royal Oak-based CPA and business advisor. She is also an active member of the community including The Optimists and Greater Royal Oak Chamber of Commerce. 

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