Question

when determining tax basis, should a penalty on late payment of payroll taxes be separately stated? What about life insurance premiums on lives of partners when partnership is the beneficiary?

Answer 1

Ans

[A]

Collecting, reporting, and remitting payroll taxes are some of your key responsibilities when you have employees & if you forget then your small business could receive a penalty for not paying payroll taxes.

If you don’t pay payroll taxes for your business, you’ll receive a bill from the IRS and likely a penalty, too. According to the IRS, employers who don’t follow employment tax laws are subject to civil and criminal penalties.

The penalty the IRS charges you depends on how much you owe & how late the payment is. You should pay the tax & penalty together.

# Days Late	Penalty
1 – 5 days	2%
6 – 15 days	5%
16+ days	10%
10+ days after first IRS bill	15%

For Example :- You are responsible for depositing 2,500 in payroll taxes to the IRS. You are 16 days late. The IRS would charge you a penalty of 250, meaning you would owe 2,750 in total.

There are additional penalties if you file your reports late, too.

Hence you should pay your taxes & penalties together incase you fail to pay your taxes ON TIME.

[B]

Life insurance premiums are personal expenses so generally these are not eligible for deduction. However, sometimes it depends on the beneficiaries. If a taxpayer takes out a policy for the purpose of protecting himself from loss in the event of the death of the insured, the taxpayer is considered a beneficiary directly or indirectly under the policy.

If the taxpayer is not a beneficiary under the policy, the premiums so paid will not be disallowed as deductions merely because the taxpayer may derive a benefit from the increased efficiency of the officer or employee insured. A taxpayer is considered a beneficiary under a policy where he as a principal member of a partnership, takes out an insurance policy on his own life irrevocably designating his partner as the sole beneficiary in order to induce his partner to retain his investment in the partnership.

Whether or not the taxpayer is a beneficiary under a policy, the proceeds of the policy paid by reason of the death of the insured may be excluded from gross income whether the beneficiary is an individual or a corporation, except in the case of

1. Certain transferees, as provided in section 101(a)(2)
2. Portions of amounts of life insurance proceeds received at a date later than death under the provisions of section 101(d)
3. Life insurance policy proceeds which are includible in the gross income of a husband or wife under section 71 (relating to alimony) or section 682 (relating to income of an estate or trust in case of divorce, etc.)