Business Payroll Taxes – The Difference Between Chapter 7 and Chapter 13 Bankruptcy in Arizona

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Dear M & M:

What are some payroll taxes a business owner is expected to pay on their employees?

– Joan

Dear Joan:

Most employers in the United States are required to pay federal and state unemployment tax, and Social Security and Medicare taxes. A few states require employers to pay an employment training tax. Federal payroll tax rates apply to all employers. However, state payroll tax rates vary by state. Follow IRS Circular E procedures for calculating federal payroll taxes and the administering state agency’s guidelines for computing state taxes. Telephone number for Arizona Department of Revenue hotline for business related tax issues is 602 255-2060. A toll-free number to call from 520 or 928 area code is 800-843-7196. As always consult your Accountant, CPA, Bookkeeper, Enrolled Agent or Business Tax Advisor for specific information pertaining to your particular business or situation.

 -M&M

 

Dear M & M:

Can you explain the differences between Chapter 7 and Chapter 13 bankruptcy in Arizona?

-Don

Dear Don:

There are many factors to consider when it comes to deciding whether a Chapter 7 or a Chapter 13 bankruptcy is the best option for you. It is important that you have the assistance of a bankruptcy attorney before making any decisions in this area.  In addition, with a full understanding of the consequences of filing either Chapter 7 or Chapter 13 can you be sure you are making the right decision in filing bankruptcy at all. The main differences between Chapter 7 and Chapter 13 are the types of debts they include or exclude. A Chapter 7 bankruptcy filing completely discharges allowable debts; while a Chapter 13 involves partial payment of them. Chapter 7 may not be available for those who make too much money, have too many assets or do not want to lose certain assets. In a Chapter 7 bankruptcy case unsecured assets not protected by Arizona laws could be sold to pay off certain debts. Chapter 7 bankruptcy is a liquidating bankruptcy – meaning that if you have assets that you own free and clear of any liens and that are not protected by one of Arizona’s exemption laws (i.e. the homestead exemption), you risk losing it in a Chapter 7 bankruptcy filing. For example, if you owned a fishing boat that had a value of $2,000 and you did not owe any money on it, in a Chapter 7 bankruptcy case the trustee assigned to your bankruptcy case may cease the boat and sell it to pay your creditors. Chapter 13 may be a better option for you if a significant portion of your debt would not be covered by a Chapter 7, such as alimony, support payments, fines and in most cases, taxes and student loans. A Chapter 13 allows you to make payments based on what you can afford and, after a certain period, discharges the remainder of the debt. It also freezes interest at the time of filing. A Chapter 13 may also be preferable if you are behind with your car or mortgage payments and wish to avoid repossession or foreclosure. A Chapter 7 bankruptcy can usually be processed in 4 to 5 months.  A Chapter 13 bankruptcy will be a minimum of 3 years and a maximum of 5 years. Chapter 13 bankruptcy cases are much longer as you will be required to propose a plan whereby your creditors will receive some of the money that you owe them. Before taking any significant financial steps, it is imperative you have a clear understanding of the advantages and disadvantages of each of your options. As always it would be highly recommended to seek professional help from a qualified attorney experienced in bankruptcy law.

 -M&M

 

To ask your questions: Call the Small Business Development Center(SBDC) at Cochise College (520)-515-5478 or email schmittm@cochise.edu or contact the Sierra Vista Economic Development Foundation(EDF) at 520-458-6948 or email  hollism@svedf.org

 

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