No matter which industry you belong to, there is a common source of frustration for all members of the small business community: payroll. Payroll is a highly regulated business obligation involving everything from employee personal information to federal governmental legal requirements that, if not done properly, can reap harsh consequences.
Daniel Petri, an associate licensed tax professional at the Tax Defense Network offers four key factors to consider that will help you avoid any mishaps:
- Don’t attempt to handle payroll on your own. Unless your small business is an accounting agency, it’s likely you aren’t an expert on payroll. Further, you probably do not have the time required to handle payroll properly. In case you forgot, the IRS and the majority of states issue large penalties when payroll tax returns aren’t timely filed, as well as when withholding deposits are not made timely or in full. Make your life easier, don’t attempt to handle payroll on your own.
- Keep a running profit and loss statement. An accurate and up-to-date profit and loss statement will provide a good idea of the business’ monthly profit. This can be very important in accounting for any current taxes the business owes. It also can bring the owner’s attention to expenses that may be unnecessary and can be cut or reduced.
- Always keep a second business bank account that is used only for the payroll of the company. This way the money that is appropriated for the payroll and payroll taxes is separated from the general business funds, Petri advises.
- Try to make a federal tax deposit for payroll taxes every time your business issues payroll to its employees. That way the money that must go toward the payroll taxes is applied correctly. “There are no penalties with the IRS for depositing your payroll taxes too frequently, however there are large penalties for depositing late,” Petri says. Also, if payroll taxes are paid when employees are paid then you won’t be tempted to use that money for other business expenses.
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