ITA

ITA Helps Hospital Staffing Company to Find Financial Remedy

ITA provided tax-related advisory services to a limited liability company (LLC) owned by a husband and wife. The company is engaged in providing temporary staffing to hospitals in a 13 state region with services lasting from one day to several months, depending on the needs of the hospitals.

The company, taxed as a partnership, reported net profits of approximately $120,000 from January 1, 2003 through October 31, 2003. In addition, the company received approximately $80,000 in guaranteed payments.

The company faced several issues: they were unaware of its state tax return filing requirements and had not filed or paid any tax in these 13 states. Also, as an employee benefit, the company provided its employees a flat dollar amount of $1,000 per month as a vehicle allowance.

ITA also recommended that the current transportation allowance plan be revised so that employees would be reimbursed only for expenses actually incurred, which is referred to as an accountable plan and does not require payroll tax withholding on behalf of the employer. The current vehicle allowance constitutes what is referred to as a nonaccountable plan and requires payroll withholding by the company on the amount of the vehicle allowance. Since our client was not aware of this requirement, the company has not withheld the required payroll taxes and would now be required to pay them, as well as be subjected to exposure for failure to withhold.

In addition, ITA researched the nexus requirements in the 13 state in which the company conducted business and provided advice as well regarding its state tax filing requirements, thus eliminating the potential risk of state imposed penalties and interest for failure to file the necessary income tax returns and pay applicable tax.

Had the clients not engaged ITA, the company would have incurred approximately $15,400 in self employment taxes in 2003 as a result of the net income and the guaranteed payments they received. Furthermore, ITA’s restructuring of the existing company provided an annual federal income tax savings of more than $6,000.

As a result of the services performed by ITA, the first year tax savings was $16,455 and the first year individual savings of our clients amounted to $32,411.

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