If you have at least one employee, you’re responsible for payroll taxes. The responsibility is great and the penalties for missteps make it essential that you do things right.
1. Misclassifying workers
One of the most relevant issues in accounting today is misclassification of workers. Many businesses treat their workers as independent contractors instead of employees because payroll taxes and benefit costs are so high. Don’t let this happen to you. When in doubt, consult a tax advisor like Beaton Accounting.
2. Not using an accountable plan for employee reimbursements
For a dependable plan, you must formalize all arrangements and set reasonable times for actions. Your reimbursable expenses must be business related. Advances cannot be made 30 days prior to the expense. Your employees must account for all expenses within 60 days and return excess reimbursements within 120 days.
3. Failing to keep payroll records
Keep your records up to date. You are required to maintain your payroll records for IRS inspection. This includes time sheets, expense accounts, W-2s and other records. These records should extend back four years to be safe.
4. Choosing to pay creditors before the IRS
When you owe vendors, landlords or utility companies, it may be tempting to pay them before the IRS—don’t do that! The best strategy is to set aside cash to cover your payroll taxes so that you don’t make the mistake of dipping into that account.
5. Failing to monitor payroll company activities
You remain responsible for payroll taxes—even if you outsource! For the best protection, monitor your tax account to double check that your funds are being deposited on time and in the correct amount.
To read more on this article, go to http://www.sba.gov/blogs/5-payroll-tax-mistakes-avoid
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