WorldWide Drilling Resource

WorldWide Drilling Resource ® 15 MAY 2014 Drilling Into Money Not Boring by Mark E. Battersby The High Cost of Overlooked Payroll Taxes Continuing our discsussion, much has been written about payroll taxes and the necessity every drilling contrac- tor has to not only pay a portion of a workers’ payroll taxes, but the often overwhelming burden of filing all those reports. One of the nastiest and most feared taxes currently imposed is the so-called “Trust Fund Penalty Tax,” a whopping 100% penalty on payroll taxes withheld from a building business’s employees, but not forwarded to the federal government. The Internal Revenue Service (IRS) aggressively pursues unpaid payroll taxes and is quite willing to assess the penalty on all “responsible parties,” a label that can include the owners, share- holders, partners, members, managers, and officers in a building business. Avoiding mistakes can often be accomplished by “‘fessing up” before errors are discovered by the IRS. The IRS has developed a series of “X” amended return forms used to report adjustments to employment taxes and claim refunds of overpaid employment taxes. These forms correspond and relate line-by-line to the employment tax return they are correcting. Employers should use the "X" forms to correct employment tax errors as soon as they are discovered. For example, use Form 941-X “Adjusted Employers QUARTERLY Federal Tax Return or Claim for Refund” to correct errors on a previously filed Form 941. Employers will continue to use Form 843 “Claim for Refund and Request for Abatement” when requesting abatement of assessed penalties and interest. In addition, there is no "X" form for the Form 940, and taxpayers will continue to use a Form 940 for amended returns. For years, few other business pro- cesses were outsourced as much as the lowly task of payroll. Indeed, the function of paying employees has long been targeted as a time-consuming effort that robs a business of resources better committed to core competencies. Today, as software tools become easier to use and vendors begin focusing on smaller businesses, a shift is taking place. Many building businesses are finding payroll can often be done better and less expensively in-house. Whether done within the building business or outsourced, drilling contrac- tors, and business owners preparing to face the uncertainty of 2014, will en- counter daunting payroll tax responsi- bilities. Complying with the complex and confusing payroll tax rules, as well as staying in compliance with ever-changing labor laws, will be no small task. Small businesses with only a few employees, even one employee, need to keep up with continually changing regulations and keep the payroll process running smoothly and on time. Mark Mark E. Battersby may be contacted via e-mail at admin@ worldwidedrillingresource.com