California vendors fight for their cash

NEW YORK (CNNMoney.com) -- As if struggling to stay afloat during a faltering economy isn't difficult enough, hundreds of small business vendors that rely on contracts with California are facing another hurdle: There's a good chance the state won't be paying any of their invoices this month.

After the state legislature failed to agree on budget solutions earlier this month to close a $26 billion gap, California started issuing IOUs for a variety of payments it owes -- including most of its vendor bills, personal income tax refunds, and funding for local governments. "This means that the state is casting off its cash-flow problems onto hundreds of families and small businesses in California," says Jacob Roper, a spokesman for the state controller's office.

So far, California has mailed $354 million worth of IOUs and plans to issue a total of $3 billion by the end of July. Around $140 million of the warrants are expected go to small business owners. While the state controller's office won't say exactly how many small companies will be affected, it's likely to be a big number: The state's department of general services says it holds $2.7 billion worth of annual contracts with at least 14,000 small companies, most of them California firms.

Affected business owners say they're in uncharted territory.

"We've never seen this before -- never had anything happen where we didn't get money from the state," says Gary Button, vice president of Redwood Debris Box Service in Burlingame, Calif., a firm that provides garbage and recycling containers for the state's department of transportation. State work only accounts for about 3% of Redwood Debris' business, but Button is expecting an IOU any day, which he says he will hold on to until it matures.

"I'm not going to cash it in for less than it's worth," says Button.

The state plans to redeem the IOUs, with a 3.75% annual interest rate, on October 2, or earlier if a budget deal is signed. But many small firms -- especially those that do the majority of their business with California -- can't wait that long.

"We've already been delayed by six months in payment from the state -- and now we're expecting one of those IOUs," says Gloria Freeman, owner of Staff USA, a firm in Rocklin, Calif. Contracts with the state account for 80% of her firm's annual revenue. "The real problem is not knowing how long it will take them to resolve this issue."

Staff USA provides medical staffing for various state-run divisions, and Freeman says that California owes her hundreds of thousands of dollars, much of that for services she rendered early this year. In anticipation of receiving an IOU instead of money, Freeman has laid off five employees. Searching for a new cash stream, she recently launched a new online auction business, Auction Ten, that helps consignors sell antiques and collectibles.

While she hopes that Auction Ten sales will help supplement her income, Freeman has found another use for the site. "I'll be auctioning off IOUs for people who don't want or can't redeem them via the bank," she says.

Most small businesses hope to cash in their IOUs at a bank, a process that's turning out to be difficult. Initially, all major California banks said they would honor the IOUs by charging customers a small processing fee, paying out the face value, then taking over the interest. However, the state's largest banks, including Bank of America (BAC, Fortune 500) and Wells Fargo (WFC, Fortune 500), later imposed a deadline. They stopped accepting the IOUs on Saturday.

That's a big problem for small vendors who had no hope of making the deadline because they haven't yet received the warrants they're owed. The state controller's office says there's no pecking order for issuing them; the state pays them out as bills come due.

By enforcing a deadline, the big banks hope to pressure California to make progress fast. "The message that they're sending is that the budget needs to be solved sooner rather than later," says Beth Mills, a spokeswoman for the California Bankers Association. "These banks don't want to be seen as enabling the Legislature."

Redemption options
A number of California's community banks and credit units plan to accept the IOUs indefinitely, but in many cases, the terms are tough.

"My community bank will redeem the IOU for a fee, but I have no choice but to do it," says the owner of an 11-person firm who asked not to be named. "It's not worth my while to wait for this thing to mature. I'd be losing money." His company, which does $10 million in annual business with the state, has been providing goods to prisons, state hospitals, and schools for more than 20 years. This is the first time he's been confronted with an IOU.

"If this situation continues to force us to take losses, I'll have to look into furloughing employees and laying some off," he says. Even before the latest crisis, California was firing off distress flares: Last month, he received a letter from the state asking if he would consider voluntarily reducing his company's charges by 15%.

US payroll services Outsourcing

Payroll service including tax filing is mandatory even if the form is a small or medium-sized business owner. There are so many options available.Even quick books offers two types of payroll service like Assisted payroll and Do-It-On your own payroll service.

Payroll is US is not as simple as in any other countries. There will be Federal withholding,state with holding and county with holding which need to be paid within due date failing which employer will face hefty penalty and even results in shutting the business.

There is a list of approved provider from IRS published in their site.

The following companies have passed the IRS Assurance Testing System (ATS) and/or Business Acceptance Testing (BATS) requirements for Software Developers, Reporting Agents, and Transmitters of electronic business returns to the IRS.

The Payroll Department’s responsibilities include:

•Providing cost-effective payroll processing that is accurate, timely and in compliance with University policy and all Federal and State agencies.
•Maintaining all employees’ records to ensure compliance and confidentiality.
•Ensuring all deductions, benefits and taxes are correctly deducted and reported timely to the appropriate agency.
•Attaining the most current understanding of Federal, State and University regulations regarding payroll in order to provide accurate information.

Some of the services provided by the Payroll Department are:

•Providing assistance to the university community with the resolution of operational problems related to employee’s salaries.
•Advising HR Liaisons and Managers in payroll related matters, including processing of salary actions, time and leave reporting, and related accounting and reporting.
•Maintaining a high-level of involvement and quality communication with the departments to ensure that service is responsive and supportive to their needs and goals.

http://www.irs.gov/efile/lists/0,,id=101120,00.html

Some of the services offered from payroll companies includes:

•Employee earnings statements.
•Payroll journals.
•Month-to-date department summaries.
•A notice of cash needed to cover payroll expenses and tax liabilities.
•Timely and accurate notifications of tax liabilities and deposits.
•Payroll worksheets to record your next payroll.
•Direct credit to employees bank account on the specified date.

To know the payroll due date follow the blow link:-

http://www.fiu.edu/hr/Payroll/Forms/payrollcalendaranddeadlines2009.pdf

To know the free payroll software to download follow the link:

http://www.brothersoft.com/downloads/payroll.html

If you are looking for fundamentals of US payroll you can download US master payroll guide using the link given below:

http://www.ebookspdf.com/computers/374/sap-guide-the-payroll-process/#more-374

Link to download US master payroll PDF for free using the link given below:

http://gigapedia.com/items:links?id=270719

Payroll professional looking for getting certification in payroll they can login to the following link:

The Fundamental Payroll Certification (FPC) is open to all those who wish to demonstrate a baseline of payroll competency. The FPC is designed for:

• Entry-level Payroll Professionals
• Sales Professionals/Consultants serving the payroll industry
• Systems Analysts/Engineers writing payroll programs
• Payroll Service Bureau Client Representatives

http://www.americanpayroll.org/certification/certification-fpcinfo/

These are the services which can be processed from other countries which has good understanding of accounting and payroll services. Some of the countries where US payroll is processed includes India where one can get talented youths with good knowledge in accounting and payroll services.

Next BPO destination Ireland and Switzerland offer big tax savings than the U.S. or Europe

Bangalore: At least half-dozen major corporations in the U.S. like Tyco International (TYC) and Ingersoll-Rand (IR) have proposed reincorporating in Ireland or Switzerland since October because of the U.S. President Barack Obama's plans to clamp down on corporate overseas tax maneuvering, reports Business Week.

This is because both Ireland and Switzerland offer big tax savings than the U.S. or Europe. Also, both of the countries have well-established tax treaties, which decide which country has primary taxing rights and help avoid double taxation. Paul Schmidt who heads the international tax practice at a law firm Baker Hosteller told Business Week that Switzerland's 'statutory' tax rate is 24 percent which is a huge savings over the potential 35 percent federal tax rate that the business firms could owe in the U.S. Meanwhile, Ireland has a 12.5 percent corporate tax rate and a good working relationship with the Internal Revenue Service (IRS), according to Conor Begley, an independent tax consultant and Former Director of international tax at Grant Thornton.

According to the international tax experts, the U.S. based companies would face the exit charges (taxes based on lost revenue to the IRS for future earnings) and be removed from the Standard & Poor's 500-stock index. Several companies that have "re-domiciled" have been dumped from the index. So some companies could be scared off from relocating their official bases from the U.S.

This will make US companies to move their base to Scandinavian countries and from there sub-outsource to India

Source: siliconindia