Assisting Minnesota Taxpayers
The Internal Revenue Service (IRS) and the Minnesota Department of Revenue (MDR) have recently become more assertive in auditing businesses for business taxes and payroll withholding. If you are a business owner or financial executive who has received a notice regarding taxes or your payroll taxes trust fund, it is essential to seek help from experienced tax attorneys. At Garrity Traina, our team of skilled attorneys can provide the expertise you need.
Heightened Tax Audits and Increased Civil Investigations
In recent years, the state of Minnesota has significantly increased the number of civil tax investigators and conducted a higher number of audits on privately held small and mid-sized businesses. It is crucial to respond promptly to the tax authorities’ request for additional financial information, but only after understanding your rights. If the IRS or MDR suspects fraud, business owners and executive officers may be held personally responsible for payroll taxes, along with interest and penalties. Moreover, both business entities and individuals involved may face criminal charges. The rise in civil audits is accompanied by aggressive criminal investigations of taxpayers conducted by MDR in Minnesota.
Federal and state business tax laws are becoming increasingly intricate. If you are a small or midsized business owner in the Twin Cities area, we have the expertise to help you minimize your chances of a business tax audit.
Our team of attorneys boasts over 35 years of experience protecting employers and self-employed individuals in matters such as:
- Responding to notices
- Handling corporate tax audits, litigation, and appeals
- Providing assistance with offers in compromise and tax workouts
- Addressing trust fund assessments
- Ensuring compliance with sales and use tax laws
- Resolving issues related to failure to withhold self-employment taxes
- Tackling independent contractor tax concerns
- Assisting with appeals for tax levy actions against businesses
- Seeking innocent spouse relief for spouses of business owners
Garrity Traina — Trusted Minneapolis Payroll Tax Lawyers
At Garrity Traina, our dedicated tax lawyers are ready to provide advice and representation to Minnesota business owners. It is important not to delay responding to a federal or state tax notice. Contact Garrity Traina for a no-cost initial consultation with an experienced tax law attorney promptly.
Unexpected Taxes for Small Business Owners
Starting a small business requires a lot of hard work. While it is satisfying to see your ideas turn into a profitable venture, there are numerous factors to consider, including tax responsibilities. Understanding tax laws can be challenging, particularly for small business owners. While you may be aware of the basic taxes you need to pay for your company, there are several more that small business owners are responsible for.
List of Small Business Taxes
All types of companies, including small businesses, are obliged to pay various taxes. As a small business owner, it is crucial to understand exactly which taxes you are required to pay, especially if you are managing most aspects of your business independently. Some of the taxes for small business owners include:
- Income tax
- Self-employment taxes (covering social security and Medicare)
- Payroll taxes for employees (employer tax)
- Estimate tax
- Property taxes for buildings or land owned
The specific taxes can vary depending on the type of business entity you establish. Additional taxes that your business may be accountable for include:
- Unemployment taxes
- Workers’ compensation taxes
- Capital gains taxes
- Dividend taxes
According to the Small Business Administration, small businesses are taxed at a rate of 19.8 percent per year, and most businesses anticipate setting aside 30 to 40 percent of their income to cover federal, state, and local taxes.
Complying with Minnesota State Tax Laws
The United States regulates taxes at the federal, state, and local levels. Minnesota residents must comply with multiple state statutes regarding taxes.
Sales Tax Laws
In Minnesota, sellers need to collect sales taxes on behalf of the state instead of paying the taxes themselves and then passing the cost onto customers. Failure to comply with appropriate procedures can result in legal liability for vendors. Currently, remote sellers from other states who deliver to locations in Minnesota must also collect sales taxes. An exception is made when sellers operate through a marketplace that handles tax collection for them. Additionally, there is a use tax rate (the same as the sales tax rate) that both businesses and individuals must pay directly to the state. This use tax covers taxable items and services for which buyers did not pay sales tax to the merchant.
Personal Income Tax Laws
Employers must withhold federal and state income taxes, as well as Federal Insurance Contributions Act (FICA) taxes, from their employees’ paychecks. These taxes must be regularly deposited and tax returns must be filed accordingly, based on factors such as income tax brackets. However, independent contractors are exempt from this requirement. These categories undergo annual adjustments to account for the effects of inflation on earnings. For example, according to a 2020 press release from the Minnesota Department of Revenue, the 2021 income tax brackets differ from the 2020 brackets by 1.001%. This adjustment does not affect the Minnesota tax rate for each income grouping.
Estate Tax Laws
Minnesota does not impose an inheritance tax. However, heirs of an IRA, annuity, or other bequest that the decedent did not pay tax on may end up subject to income tax. There is also an estate tax.
The Benefits of a MN Tax Law Professional
You do not have to wait until trouble arises to seek legal counsel. A tax law professional can assist your business in various areas, including:
- Business entity selection: Choosing between forming a corporation or an LLC can be overwhelming. A tax attorney can help with the formation process and explain the tax implications of different business structures.
- Tax deductions: Running a business incurs various expenses, but tax deductions can help offset some of these costs, such as start-up expenses and the purchase of business equipment. A tax lawyer can ensure that your company takes full advantage of available deductions.
- Employee taxes: Mishandling employee taxes can put your business at risk. An attorney can provide guidance on various tax considerations and the best methods for paying these types of taxes.
- Audits: Facing an IRS audit is a daunting prospect for any business owner. However, with the guidance of a tax attorney, you can understand the audit process, know what to expect, and receive support at each stage of the audit.
Note to CPAs and Business Tax Accountants
Garrity Traina does not engage in accounting work or individual or business tax return preparation. Our involvement is limited to individual and business tax audits when requested by the client or the client’s accounting firm. We handle every case directly and do not subcontract to other tax law firms.
Our office hours on weekdays are from 9 a.m. to 5 p.m. at our Edina office and from 10:00 a.m. to 4:00 p.m. at our St. Anthony office. Evening and weekend appointments may be available upon special arrangement. Contact us to explain your circumstances and request a consultation.