Boost Employees' Take Home Pay

Even in good times, many employees have a hard time making ends meet. Employers can help many of their employees get more take home pay. How? With a tax benefit for employees called the advance earned income tax credit (advance EITC). Advance EITC allows employers to add a portion of their employees' earned income tax credits directly to their paychecks.

To get the advance EITC, employees must expect to earn less than $26,928 in 1999, expect to have at least one qualifying child, complete Form W-5 and give it back to their employers. See Publication 15, Employer's Tax Guide (Circular E).

For more information on advance EITC, you can download Form W-5 here, or call 1-800-829-3676 to get the free publication and form.

Phone In Form 941

Small businesses have an option to file their Form 941 quarterly returns using a system that has proved highly popular and successful among individual taxpayers. Each quarter, the Internal Revenue Service is mailing to millions of eligible small businesses the 941TeleFile package. The package allows qualifying businesses to file using a Touch-Tone telephone.

The package sent by the IRS contains everything a business needs to successfully use 941TeleFile: the 941 TeleFile Tax Record, a payment voucher and a paper Form 941 for those who do not meet the filing requirements.

Instructions on the first page list the qualifications. A business that meets these should complete the tax record using the instructions, then call the TeleFile system using a Touch-Tone phone and the toll-free number listed. A recording guides users step by step through the phone call and all the entries are repeated so users can check their accuracy. As the user enters information, 941 TeleFile computes all the taxes and balances. At the end of the phone call, the system provides a confirmation number that the user records on the space provided on the 941 TeleFile Tax Record. The tax record is the proof of filing and the official record of filing the return and should be saved. The call takes about 10 minutes; there is nothing to mail.

April 1998 was the first time that 941 TeleFile was made available to small businesses nationwide. The IRS receives more than 300,000 returns per quarter through 941TeleFile.

The 941 TeleFile system will begin accepting calls for the first quarter of 1999 on April 1, 1999. The IRS TeleFile help desk is available to assist and answer questions users have or to help them file. The number is 1-901-546-2690 and is not a toll-free call.

Business Taxpayers Should Look for Tax Changes

The new year seems always to bring with it tax law changes that affect business owners filling out their annual tax returns or that require planning for the next year. Things are no different in 1999. The changes affect how self-employed people and farmers handle income on 1998 returns, and provisions that business owners should be aware of for planning in 1999.

On 1998 returns, the amount of health insurance premiums deductible by self-employed people increases from 40 percent to 45 percent. From 1999 through 2001, 60 percent will be deductible.

Farmers can elect to compute their 1998 income taxes by averaging farm income over a three-year period. This became effective for tax years beginning after December 31, 1997, and ending before January 1, 2001.

One of the more high-profile changes takes effect after December 31, 1998. Self-employed people and employees may be able to take a home office deduction if they use the office for administrative or management activities and meet basic tests. There must be no other fixed place where the person conducts substantial administrative or management activities and the office must be used exclusively and regularly as a place of business. An employee's home office deduction qualifies if the office is used for the employer's convenience. One warning here: an employee's decision not to use suitable space made available by the employer can affect the deductibility.

The IRS will waive penalties on businesses that timely use paper federal tax deposit coupons while converting to the Electronic Federal Tax Payment System (EFTPS). This penalty relief will run through June 30, 1999. It applies to all tax-payers required to enroll in EFTPS and deposit electronically starting July 1, 1997, or later. Two toll-free EFTPS customer service numbers, 1-800-945-8400 and 1-800-555-4477, can answer questions.

General Information | 1998 Tax Year Archives | Tax Help Archives | Home