Under the Federal Insurance Contributions Act (FICA), an employer must withhold Social Security taxes from wages paid to an employee during the year and must also match the tax withheld from the employee's wages. The tax consists of a portion for old age, survivors, and disability insurance (OASDI), and another portion for hospital insurance (Medicare). If the employer is a railroad company, it must withhold taxes under the Railroad Retirement Tax Act (RRTA).
As a taxpayer who runs a business, you have a million things to worry about. Customers, inventory, advertising, competition, and keeping good employees are just a few. On top of it all, the government imposes strict requirements on the collection and payment of employment taxes.
The Internal Revenue Service considers certain employee expenses to be particularly susceptible to abuse. Therefore, in order to claim a deduction for travel, entertainment, business gifts, or the use of certain listed property such as automobiles, an employee must substantiate the expenditure with adequate records or sufficient evidence corroborating the taxpayer's own statements. This documentation must show the amount, time, place, and business purpose of the expense. The IRS has placed an additional substantiation requirement for entertainment and gift deductions. The taxpayer claiming the deduction must be prepared to show the business relationship of the expense.
Generally, contributions to a welfare benefit fund are deductible when paid, but only to the extent that they qualify as ordinary and necessary business expenses of the taxpayer and only to the extent allowable under the Internal Revenue Code. The Code imposes strict limitations on the amount of tax-deductible pre-funding permitted for contributions to a welfare benefit fund.
States that impose a sales tax on the sale of tangible personal property or services frequently impose a use tax for the privilege of using, storing, or consuming goods or services within the state. Goods become taxable upon delivery to the buyer within the taxing state and after the buyer's use of the goods begins. The use tax is a non-recurrent tax; thus, once paid, an owner can use the goods repeatedly. It is usually imposed on the purchaser, user, or consumer of goods and services.
