4 Crucial Payroll Tax Tips
Payroll taxes are an important part of any business, but they can be time consuming and confusing at first if you don’t know what you’re doing. There are a variety of payroll service and payroll outsourcing services available (try payrollserviceaustralia.com.au) if you don’t understand how it works, but it can be beneficial to understand the tax laws on your own as well.
According to the National Small Business Association, up to one third of all small business owners spend more than six hours just on payroll alone! If you were to add that time up, it would equal just about two business work weeks a year. Even with that much time spent on payroll taxes, mistakes (sometimes critical and costly mistakes) are still common. The following are a few ways to make sure that you minimize mistakes and reduce the time that you or a payroll service or payroll outsourcing company is needing to spend on payroll taxes.
Start prepping early! :
Make sure that you are aware of any appropriate tax related deadlines, both for filing and depositing taxes. Late tax deposits can result in up to a 10% penalty, and “failure to file” penalties can be up to 5% per month until return is filed. Everyone knows the obvious April tax deadline, but there are many others throughout the years to be aware of as well.
Make sure to stay up to date with forms! :
Check often to make sure your tax forms or documents are the most current available.Tax forms tend to change frequently and not using the most current can cause costly time delays that may lead to financial penalties.
Check your work! :
Make sure you go over all columns and totals multiple times before submitting to avoid mistakes.This verifies that the math is correct and that all numbers submitted on separate forms match each other. It helps to have a coworker double-check your work as well. Two pairs of eyes are always better than one!
Check employee’s roles against their government definitions!
With the recent governmental initiative to make sure all employees are appropriately classified, it’s even more important to make sure all employee’s roles are accurately and appropriately defined. For instance, to be classified as a “statutory” employee, that employee’s number of hours, methods, specific tasks and work equipment must all be controlled by the employer. Statutory employees are subject to payrolls taxes so it is important to define who fits into that category. Independent contractors, however, are not subject to those same taxes. Mixing the two categories of employees up can cause costly back taxes and penalties so be careful.
Staying compliant with all applicable payroll tax rolls and regulations is incredibly important in reducing time, frustration and cost associated with tax related errors and fines. All employers or payroll service should keep the most recent edition of Publication 15 or Circular E which defines payroll taxes, forms, and statute laws.