As a small business owner, there is so much to remember. Keeping inventory in stock, hiring employees, managing the books, and establishing relationships with clients all demand your attention. While payroll taxes may not be something you spend a large amount of your time focusing on, you shouldn’t ignore them. The IRS takes payroll taxes very seriously, so be sure you understand these seven important things:
7 Tips for Small Business Owners about Payroll Taxes
Crossing State Lines.
If you own a business with employees in more than one state, payroll taxes become much more complex. That’s because different states have individual rules and regulations regarding how payroll taxes are calculated, handled, and distributed. While it may be advantageous to hire employees in other states, make sure you understand the tax liabilities involved before proceeding. The additional taxes you will be subjected to may or may not outweigh the benefits.
Tax Compliance Enforcement.
While you may run an honest business, slipups can carry stiff penalties. That’s because the IRS has chosen to focus its tax compliance enforcement on small businesses. They crack down on small businesses because they have been identified as the single largest source of uncollected taxes in the country. This is likely a case of a few bad seeds ruining the reputation for everyone else, but still warrants careful treading. Keep this in mind when you want to discount the importance of careful bookkeeping and payroll taxes.
Keep Your Hands Off.
The biggest “no-no” in regards to payroll taxes involves interfering with the funds. Above all else, you must remember to keep your hands off and leave funds alone. It is completely against the law to borrow or use payroll taxes for any purpose. That’s because they don’t technically belong to you. They are a portion of your employees’ paychecks and do not belong to the employer.
You can’t set up a payroll program or system and expect it to run itself. It’s important to constantly monitor things on a rolling basis and the need for continual evaluation is huge. Tax laws and requirements change frequently, so don’t fall behind on the times.
Bonus Checks and Overtime.
Did you know the timing of bonus checks and overtime payments can have major tax implications? The timing of these payments needs to be correctly aligned with payroll tax due dates. Improper alignment could mean penalties and fines.
Improper payroll tax deductions can lead to stiff and severe penalties. In fact, not paying payroll taxes can be a federal crime. If your situation is severe enough, you may be referred to the Criminal Investigation Division or Department of Justice.
Delinquent Payroll Taxes.
If you have delinquent payroll taxes, it’s best to deal with the situation swiftly. The best piece of advice is to stay current on all of your present and future payroll tax withholdings. The second piece of advice is to seek professional tax relief help and develop a plan for paying off your debt. Delinquent payroll taxes add up quickly and can be considered a federal crime. To avoid unnecessary penalties, it’s best to cooperate.
Payroll Tax FAQs :
While these seven things are pretty important, you have to start with the basics. Do you have questions regarding basic employer payroll taxes? Here are answers to commonly asked questions:
How can I ensure compliance?
There are hundreds of rules, codes, and regulations regarding payroll and payroll tax withholdings. These often lead to major confusion over rules and compliance. To avoid mistakes, it’s important to educate yourself on common errors, learn about simple ways to follow the rules, and get professional help when necessary.
I’m overwhelmed… where can I get help?
The good news for those overwhelmed by payroll taxes is that there is help waiting around the corner. There are plenty of services, software, and tools to help alleviate the pressure and ensure compliance. While these are helpful, it’s important to keep an eye on these tools from time to time to make sure they are working properly.
I have delinquent payroll taxes, am I in trouble?
The short answer is “not necessarily.” As soon as you find out about delinquent payroll taxes, it’s important to contact professional help. You will want to deal with the IRS honestly and reasonably.
Payroll tax deductions are an important part of running a small business. To remain in the good graces of the IRS, you must make sure you follow all laws and regulations pertaining to your business. The IRS is always looking to crack down on small businesses that disobey their rules; don’t let yours be one of them.