The 2 Most Common Payroll Tax Mistakes
As the year comes to a close, we hope you’re thinking about your taxes and getting ready for a great new year. As a business owner there are a lot of details you need to remember about your taxes. One in particular that can cause big trouble for unsuspecting entrepreneurs is payroll taxes. If you don’t already have a tax expert on your side, now is the time to find one. At Fix-It Accounting we help our clients stay on top of their taxes. Here are the some common payroll tax mistakes we see each year.
The most common payroll tax mistake that we see is the misclassification of workers. In nearly all cases this occurs when full-time employees are listed as independent contractors. There is incentive for businesses to do this as it lessens their tax burden, however if it cannot be proven true you may find yourself in hot water. In general the independent contractor label refers to a worker over whose work schedule you have little control. In some cases, employers draft contracts with independent contractors which explain in detail the nature of their relationship, though the IRS will not be beholden to this agreement. If you have questions about the classification of your employees don’t hesitate to ask someone, you’re better off safe than sorry!
Failing To Keep Records
Maintaining proper records is important for a company of any size, however it may seem less pressing to you as a small business owner. Don’t let your size lull you into a sense of comfort in this area. It is critical that you get all of the proper paperwork from your employees (including family members). This paperwork includes W-4, I-9, timesheets and expense reports. Maintaining the proper paperwork is also critical, without it you’ll be unable to correctly make all your required payroll tax deposits. If any or all of this sounds foreign, your very best bet at success is to hire an accounting firm or payroll service to support you.
Payroll tax is far too often the place where unprepared business owners have their first run ins with the IRS. Don’t let one small payroll mistake keep you from enjoying your successful year in business. If you have questions about how to manage your employee payroll, or if you just need a tax expert on your side, contact us today.