6 Facts Every Small Business Should Know About Payroll Taxes
Every business must have a system for paying employees, filing government forms, and paying taxes. Because of the numerous aspects included in payroll processing, it is common for small business owners to make mistakes with their payroll taxes. Past due payroll taxes can take a toll on your small business, so it is important to know common payroll tax audit triggers and how to avoid IRS penalties, tax debt, and a criminal investigation.
1. The IRS recently conducted a study that found small businesses in metropolitan areas are particularly likely to be uncompliant with tax laws. This means small Business owners are the largest source of uncollected taxes, and the IRS is catching on. By shifting their focus of enforcement efforts to small businesses, now is more important than ever to ensure your payroll taxes are being processed correctly.
2. Past due payroll tax penalties can add up quickly. These penalties can dramatically increase your tax bill. Some penalties can add up to 33% interest! Having a huge tax debt with the IRS is one of the last things you want for your small business.
3. The IRS considers not filing your payroll taxes serious enough to consider it a federal crime. The IRS has the power to refer you to the Criminal Investigation Division and the Department of Justice if they are able to prove you intentionally did not pay or file.
4. Borrowing money from your payroll taxes is against the law. Many small businesses collect payroll taxes, but use it to pay for operating expenses. Any money collected from employees to pay their federal withheld tax, FICA, Medicare, or other government funds does not belong to the business.
5. Business owners are not protected from the wrath of the IRS. If your business does not properly file and pay payroll taxes the IRS can come after the business owner individually for payroll taxes owed. This known as the Trust Fund Recovery Penalty, allowing the IRS to pierce the corporate veil and go after individuals.
6. What if you get audited? First, don’t freak out. The most important thing to do in this situation is to get professional help before it is too late. Representing yourself before the IRS would be just like going to court without a lawyer. A professional will end up saving you money in the long run, and can ensure everything is handled legally and as smoothly as possible.
Even the smallest payroll mistake can lead to costly problems for any business. By investing in proper bookkeeping and payroll software from the start, you can help ensure that the accounting for your business is done correctly.
Payroll processing Help in Wilmington NC
BOSS is a growing firm of local business advisers who are committed to providing responsive service, strategic thinking, and competitive pricing to our clients. If you’d like help or to learn more about running a small business in Wilmington, NC give us a call at (910) 338-1198, stop by our new office located at 3901 Oleander Drive, Suite G in Wilmington, or click here to fill out our online contact form. We look forward to hearing from you!