Any business with at least a single employee has to deal with payroll taxes. This is how the law works. Every tax you can think of has some significance in your business, be it the most basic withholding taxes or the FICA tax contributions. If you fail to pay these taxes correctly, hefty penalties await.
For this reason, accountants in Utah say employers should double check the taxes that come with the payroll. Because often, a few errors slip by and cost the business a sizeable amount of money. Here are some payroll tax mistakes employers commonly commit:
One of the most common issues during audits is the classification of workers: is the individual an independent contractor or an employee? There’s a difference between the two, primarily in the taxes associated with the payroll. Employee benefit costs and payroll taxes are generally higher for employees. It’s best to clarify the classification of every employee with an experienced accountant.
Non-Payment to the IRS
When a business faces financial problems, it seems tempting to pay off various creditors before the government. This, however, is a mistake. The government holds every business owner liable for the withholding taxes of employee wages – no ifs, no buts. As good practice, allocate enough money to pay for these trust fund taxes to avoid any penalty or issue with the government.
Lack of Records
If your finances aren’t on paper, you may find yourself in deep trouble. The government instructs all business owners to keep payroll records in the event that the IRS conducts an inspection. Now, your payroll records have to contain everything – from W-2 copies to time sheets. It’s good practice to keep records for at least four years. You should also have records for reimbursements and preferably have an accountable plan for that.
These are just three of the many mistakes that surround payroll taxes. Be a responsible business owner and avoid these blunders through proper bookkeeping.