You wear many hats and have many responsibilities as a small business owner. While pursuing your ultimate goal of making your business profitable and sustainable, it’s normal that some duties and obligations get allocated to the backburner. Paying attention to payroll taxes for your employees can be one of these obligations, but running afoul or federal and state tax law can land you in hot water with governmental agencies.
Our firm previously provided a list of five payroll tax mistakes small businesses can make. We have compiled a new list of four additional payroll tax mistakes businesses commonly commit. We hope this helps you avoid mistakes and develop your own best practices.
1. Not withholding the right amount of payroll taxes from employees’ paychecks. One of your priorities should be ensuring that you are withholding the proper amount of state and federal income tax, Social Security, Medicare, Unemployment Tax, and other obligations from your workers’ wages. Not adhering to these requirements may result in your business’ bottom line suffering when you eventually have to pay up.
2. Incorrectly figuring and paying overtime wages. It is common knowledge that employees’ overtime compensation differs from their usual hourly rate. The overtime rate is often calculated as 1.5 times the normal rate, but state and federal laws sometimes differ. Holidays may warrant a different wage rate, as well. Due to the penalties involved with improper overtime wages and the constantly changing laws related to this practice, retaining an attorney experienced with tax law is imperative.
3. Paying the IRS after you pay off certain debt and creditors. It is not uncommon for entrepreneurs to, at times, be overwhelmed with all of their financial obligations. Sometimes, small business owners may make a choice to pay certain creditors before the IRS. This is not a wise decision; however, know that there are solutions for you, such as payroll factoring.
4. Not using Form 1099 for outside commercial entities. By law, business owners must issue this IRS document to people or businesses to whom their company has paid more than $600 in one year. This includes contractors or subcontractors who have rendered services for your business’s benefit.
Contact Attorney Robert V. Boeshaar
Our firm understands the importance of small businesses to our economy. Committing an honest tax mistake can seriously derail your personal and professional finances. We exist to prevent that from happening. Contact us today to get started with a free 15-minute consultation.
Robert V. Boeshaar Attorney at Law, LL.M.,PLLC
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