Do you know when to hire out corporate payroll services?
According to Accounting Today, most businesses could benefit from corporate payroll services due to the number of common accounting mistakes that land owners in hot water. In 2010, the IRS launched the Employment Tax Research Project, or ETRP, in an effort to ferret out fraud (or identify unintentional errors), so more businesses are being flagged for review and penalized when their accounts don’t balance.
Here are a few signs your business may be at risk:
1. You pay earnings to independent contractors.
Unfortunately, many people who think they’re working with independent contractors are really dealing with employees. The IRS has identified three main factors in determining whether you’re employing or contracting with staff:
- Behavior – Do you determine the methods your workers use in completing their work?
- Financial – Do your workers invest their own money in the pursuit of completing their work?
- Stated Relationship – When you hired your workers, did you have them fill out employment paperwork or a contract for temporary employment?
Incorrectly classifying your employees is an easy way to quickly rack up multiple penalties and significant fines.
2. You work with vendors.
When doing business with vendors, it’s best to subject them all to backup withholding unless you are positive they’re exempt. You should obtain a Form W-9 from all of your vendors before remitting payment to avoid the consequences of failure-to-deposit. In addition, both independent contractors and vendors need to receive a timely 1099 form at the end of the year.
3. You reimburse your employees for certain expenses.
It’s a frustrating consequence of today’s tax law, but certain reimbursements—regardless of whether the expenses were necessary to complete normal business tasks—are counted as income. You’re liable for paying taxes on them, and so are your employees. Making things even more frustrating is that other reimbursements aren’t considered income, so you may need a specialist to help you figure out how to file returns correctly.
4. You give your employees gifts or prizes.
The popularity of giving gift cards or gift certificates to employees as incentives or rewards has placed certain businesses in hot water. According to the IRS, these items are the same as cash and need to be counted as taxable wages. In fact, any prize given with a value of over $100, as well as those falling within certain guidelines, always need to be reported as income.
5. You have many employees, pay a high amount of wages or aren’t depositing payroll tax payments monthly.
There are strict deadlines for filing payroll taxes, but because these dates change based on the amount of taxes you’re collecting, you may not realize you’re filing late. Penalties range from 2 to 15 percent of your tax bill, so it’s worth the investment if you need to hire an expert to help you get your records set up. You can look to corporate payroll services to get your deposit schedule synced with your obligations.
Running a business would be so much easier if all you had to worry about was making profits, but that’s not where your obligations end. Taxes take up a huge amount of your time and mental real estate, and when they don’t, they cost you big. Thankfully, you can look to specialists for all the help you need without needing to hire an extra person. Request help in training a current employee or ship your tax issues out to someone else entirely, and get the guarantee of working with a reliable, established business.