Payroll taxes can be confusing for businesses, especially businesses that find themselves growing much faster than they expected. It’s important to calculate withholding properly not least because the IRS views tax problems that throws another taxpayer’s return out of whack much more severely. But if you’re detail-oriented, and know the rules, you’ll be able to pay the tax you owe.
Continue reading below for some useful payroll tax tips for your business.
If you’d like to speak with a Charles Krengel, P.A. representative today, call us at (800) 892-9631 or click here to contact us online!
Know What Qualifies As Income To The IRS
Needless to say, the wages you pay out is income; we’re all aware of this. But did you know that if you send an employee a gift card, that’s income? If they win an award, that’s income? Even non-cash prizes can qualify as income. The same is true if you pay travel expenses or gas on the company dime. It’s important to track the value of the gifts and awards you give out and probably include them for tax purposes: Otherwise, your employees will have tax problems, and you’ll have to help them figure out what they owe, and fast.
Be Sure Your Employees Are Classified Correctly
Whether an employee is a contractor or an actual employee is a fairly important distinction to make, tax-wise. A contractor generally has no payroll taxes deducted from their checks, although you can arrange to do so in some situations, and doesn’t qualify for benefits. They’re also paid with a 1099, not a W-2.
Know Which Expense Accounts Are Taxable
Many businesses think expense accounts are non-taxable, but that’s not actually true; to be so, they have to meet certain criteria. Specifically, an expense account needs to only reimburse for work-related expenses, if you meet specific accounting requirements to track expenses (in other words, any employees with expense accounts come back with receipts), and if an employee is paid in excess, that this money is returned to you directly. Otherwise, that expense account is qualified as income and you need to withhold from it accordingly.
Check the Value Of Fringe Benefits
What qualifies as “income” can be a mutable thing to the IRS. For example, if an employee uses a company car, that may qualify as “income” of a sort, and may need to be taxed depending on the situation. And there are no fewer than three different ways of figuring out the taxable value of this benefit. So, if you’ve got employees drawing certain benefits, look carefully at the tax rules surrounding them, and be ready to pay accordingly.
Make Your Payments On Time
One luxury your employees have that you don’t is that they only have to pay their taxes once a year. Most businesses are expected to deliver payroll taxes once the amount owed reaches a certain threshold. For smaller businesses this might mean a few times a year; for larger businesses it may mean they’ve got to make a deposit with the government every week. Ensure you know what the threshold is and have an idea of when you’ll cross it, so you can be ready with the check.
Consider using a payroll service to handle your payroll. These companies will handle all aspects of your payroll including preparing checks, direct deposit, making payroll deposits and filing payroll returns. The administrative burden is removed from you so you can concentrate on building your business.
If you’d like to speak with a Charles Krengel, P.A. representative today, call us at (800) 892-9631 or click here to contact us online!
