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Tax and Tax Information - Income Tax

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Tax and Tax Information * Income Tax

Most Frequently Asked Paye Questions And Answers   
Terry Cartwright

<p>
What is an income tax code?<p>
An income tax code is a reference number which may also include letters or be entirely letters which determines the amount of gross pay which is free of income tax deductions and may also determine the way in which income tax should be deducted. If the tax code contains a number this number represents the amount of tax free income an employee can earn in a financial year, for example 522L means an employee has a tax free personal allowance of 5,225 pounds. A BR tax code actually means basic rate and all the employees gross pay is subject to a tax deduction at the prevailing basic rate of tax.<p>
What does week 1 of month 1basis mean?<p>
Week 1 and Month 1 basis is an instruction to the employer operating a PAYE scheme to not calculate the income tax on a cumulative basis which is the normal basis but instead the employer has to calculate the income tax to be deducted on a non cumulative basis. When the income tax deducted is on a non cumulative basis gross pay in previous pay periods is ignored.<p>
Because the income tax is deducted on the gross pay in a specific pay period an employee on a week 1 or month 1 basis does not receive an income tax refund in respect of previous tax deductions. Normally an employee is placed on a week 1 or month 1 basis when the tax deductions history for the current financial year are incomplete and the week 1 month 1 basis is removed when the missing history is determined<p>
Do I deduct income tax and national insurance if a new starter says they are self employed?<p>
The decision as to whether a worker is an employee or self employed rests with the employer responsible for the PAYE administration. If that worker is determined to be an employee then income tax and national insurance deductions must be deducted from payments made to that employee.<p>
Tax and national insurance are not deducted from workers designated as self employed. But it is not as simple as that and any employer who has doubts should clarify the position with the local Inland Revenue helpline. Making the wrong decision can be expensive as strict rules are enforced.<p>
Several conditions are applied to determine if a worker is an employee or self employed and several years after that worker joined the business that can result in serious potential tax liabilities in the future. The inland revenue treat the employee status very seriously and have a number of parameters which they invoke in doubtful circumstances to determine the status of the worker as an employee rather than self employed.<p>
When the status of a worker is determined by the tax authority to be employee and not self employed the employer will incur a liability for income tax and national insurance that should have been deducted from the employee and also a liability for employers national insurance contributions. The liability being increased as the Inland Revenue will determine that the amount paid to the employee was a net wages payment after deductions and the perceived gross pay thereby enhanced.<p>
As the income tax and national insurance contributions may not be practically recoverable from the employee and the calculation would be applied retrospectively to previous years employment the cost to an employer can be considerable.<p>
When should national insurance deductions be made from an employee?<p>
National insurance must be deducted from all employees who are over the age of 16 and under the state retirement pension age of 60 for a woman and 65 for a man. Equality of employment does not apply to government legislation on equality of employment between men and women where national insurance contributions and pension payments are concerned.<p>
In addition national insurance should only be deducted from an employee wage or salary if that income is at or above the national insurance earnings threshold. The earning threshold usually changes each year and should be checked in case of doubt with the current tax thresholds applicable.<p>
What is the procedure when a new employee does not have a P45?<p>
Ocassionally a new employee does not have a P45 containing details of previous gross pay and income tax deducted in the financial year and the new employer still has a responsibility to deduct tax and national insurance contributions from that employee and also advise the inland revenue of the employee tax status. A P46 must be completed and forwarded to HMRC in cases where a new employee does not have a P45. Following receipt of the P46 the Inland Revenue will notify the employer of the income tax deductions to be made.<p>
In the period from when the employee commences employment and notification of the employee tax status is received the employer should adopt a week 1 or month 1 status for that employee and also use an emergency tax code. The emergency tax code would be the standard personal allowance for that tax year.<p>
Is a medical certificate required before statutory sick pay payments are made?<p>
It is advisable for an employer to obtain from an employee written documentation of sickness. This documentation can be in the form of self certification which should be filed as part of the PAYE administration. If an employee satisfies all the conditions to receive statutory sick pay and there is no reason for the employer to doubt the claim then strictly speaking statutory sick pay can be paid without medical evidence.<p>
How as an employer do I fund working tax credits?<p>
Working tax credits an employer may pay to an employee is deducted from the PAYE and other deductions that employer has made and is payable to the Inland Revenue. Eligible deductions include deductions from employees in respect of income tax, national insurance, student loans and CIS deductions and employer national insurance contributions. If the deductions are insufficient to cover the tot6al working tax credit to be paid to an employee the employer can apply to the Inland Revenue who will fund the shortfall.<p>
Why the employer is charged penalty fines when the accountant submits the tax returns?<p>
Penalty fines are chargeable to the employer responsible for submission of the annual PAYE tax returns. If an accountant, bookkeeper or payroll bureau has been appointed they are permitted to submit tax returns with the permission of the employer. Arrangements between an accountant or bookeeper to submit tax returns online does not remove the employers responsibility who would be liable to a penalty fine by the tax authority if the submission was late.

Article to continue below----------------------------------------------

Rally To Push For Hike To Georgia Cigarette Tax (AP Via Yahoo! Finance)
Anti-smoking advocates say they know a way to help fill Georgia's $1 billion budget shortfall: hike the tax on cigarettes by $1.

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Article to continue below----------------------------------------------

N.Y.âs Paterson Shuns Wall Street Stock Transfer Tax (Update2) (BusinessWeek)
New York Governor David Paterson, facing at least a $9 billion budget deficit, rejected a call for a stock transfer tax on Wall Street.
U.S. Sales Tax Rates Hit Record High (Forbes)
Shopping blues: Top tax 12%. Chicago's 10.25% highest big-city rate. More Internet tax fights loom.

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Terry Cartwright of DIY Accounting designs Payroll Software for small to medium sized businesses http://www.diyaccounting.co.uk and Paye Payroll Software packages for up to 20 employees at http://www.diyaccounting.co.uk/payroll.htm

What Other Authors say about Taxes

State Of California Income Tax Forms – Information To Know About Them by Carl LaFresnaye

If you live in the state of California, chances are you have to file your state taxes forms every year. Very few people don't have to file – those who have no income or are too young are among them. If...

Panama: The Benefits of this Jurisdiction for your IBC by Richard Price

Why use the jurisdiction of Panama for your IBC? Does 'no income tax', 'no capital gains tax' and 'no estate tax' capture your attention? If so, read on…Panama constitution provides the highest levels...

Checking The Status Of Your Federal Tax Refund by Carl LaFresnaye

You've completed your taxes and were delighted to discover you will get a tax refund! Regardless of whether it is large or small, you want it – and you want it now! You can start planning how you will...

Last-Minute Tax Help by David C Skul

Even if in most cases people don't want to hear about the word "taxes" until March, preparing early and staying organized will give you no headaches later. But, for most of the people, the deadline is...

Getting The Biggest Benefit From Tax Help by Stephen Kreutzer

Taxes are a way of American life. They are own duty to pay and file. Many people go in search of someone to help them when tax time rolls around. Tax help seems to be in abundance from January 1st to April...

Preparing Ahead For A Pleasant Tax Day by Carl LaFresnaye

How did you spend your last tax day? In line at a post office at almost midnight, dropping off your taxes? Dreading going on an extension again – knowing if you owe and don't pay it on time, there will...

Delinquent Taxes - What Happens if I Don't Pay the IRS? by Neil Lemons

Depending on how much time has past, an individual will see hundreds; even of thousands of dollars owed in back taxes that were not originally assessed when first receiving a letter from IRS. Similar to...

Tax preparation: Should You File Or Pay A Professional? by Kenneth L Myers

You do not have to be a professional to do your taxes however if you have a complicated income structure or are just not quite sure, there are services to help you prepare taxes for yourself or your business....

Fraudulent Tax Shelters - KMPG Goes Down Hard by Richard A. Chapo

In the largest criminal tax case ever filed, KMPG has copped a plea to using fraudulent tax shelters to bilk the government out of 2.5 billion dollars. KMPG has agreed to pay a fine of $456 million dollars,...


Who are the CPA Moms?      Your Tax Professional Forever!!!!

“CPA Moms - Tax Moms - EA Moms" are trade names given to Accounting and Tax Professionals who chose to work in an “relaxed” environment. Some "Moms" work from home, other work from personal offices. Not all are Moms, there are some Dads. We call them Mr. Tax Moms. CPA Dads or Enrolled Agents Dads.
Each Mom is independent. Once a client starts working with a Mom, the client will keep the same “Mom” year after year regardless of where the client moves or relocates. Being in a “relaxed” environment has many advantages. Lower overhead, faster response time, more availability, etc.
To be a member a CPA Mom, Tax Moms, or an Erolled Moms the Tax Professional must ALWAYS be in good standing with their state licensing agency, experienced, and must demonstrate a high level of ethics, professionalism and proficiency.
Tax Net Inc, the parent company for all CPA Moms, Tax Moms and Enrolled Moms, developed the marketing and on-line systems to help qualified Tax Professionals who "choose" work from their “relaxed” environment and offer better service at a lower price to the consumer.
Since the “Moms” do taxes and accounting of all complexities, there is always a Mom available for every level of work. Since each Mom has a private 800 number, you are just a phone call away, regardless of where you live.
For reliability and dependability of Tax Net, Inc, the parent company of the “Moms” organization click on the Better Business Bureau (BBB) icon.

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Index of Articles about Taxes

What Other Authors say about Taxes

State Of California Income Tax Forms – Information To Know About Them by Carl LaFresnaye

If you live in the state of California, chances are you have to file your state taxes forms every year. Very few people don't have to file – those who have no income or are too young are among them. If...

Panama: The Benefits of this Jurisdiction for your IBC by Richard Price

Why use the jurisdiction of Panama for your IBC? Does 'no income tax', 'no capital gains tax' and 'no estate tax' capture your attention? If so, read on…Panama constitution provides the highest levels...

Checking The Status Of Your Federal Tax Refund by Carl LaFresnaye

You've completed your taxes and were delighted to discover you will get a tax refund! Regardless of whether it is large or small, you want it – and you want it now! You can start planning how you will...

Last-Minute Tax Help by David C Skul

Even if in most cases people don't want to hear about the word "taxes" until March, preparing early and staying organized will give you no headaches later. But, for most of the people, the deadline is...

Getting The Biggest Benefit From Tax Help by Stephen Kreutzer

Taxes are a way of American life. They are own duty to pay and file. Many people go in search of someone to help them when tax time rolls around. Tax help seems to be in abundance from January 1st to April...

Preparing Ahead For A Pleasant Tax Day by Carl LaFresnaye

How did you spend your last tax day? In line at a post office at almost midnight, dropping off your taxes? Dreading going on an extension again – knowing if you owe and don't pay it on time, there will...

Delinquent Taxes - What Happens if I Don't Pay the IRS? by Neil Lemons

Depending on how much time has past, an individual will see hundreds; even of thousands of dollars owed in back taxes that were not originally assessed when first receiving a letter from IRS. Similar to...

Tax preparation: Should You File Or Pay A Professional? by Kenneth L Myers

You do not have to be a professional to do your taxes however if you have a complicated income structure or are just not quite sure, there are services to help you prepare taxes for yourself or your business....

Fraudulent Tax Shelters - KMPG Goes Down Hard by Richard A. Chapo

In the largest criminal tax case ever filed, KMPG has copped a plea to using fraudulent tax shelters to bilk the government out of 2.5 billion dollars. KMPG has agreed to pay a fine of $456 million dollars,...