Today is May 1st, which is International Worker's Day. It started as a movement for a shorter work day, along with higher wages and the right to organize. And it seems like a great opportunity to talk payroll!
About Payroll for Small Businesses
Payroll is the amount of money you have to pay to your employees over a set period of time. As a small business owner, it's important to pay your employees on time, every time. Otherwise, they won't be your employees for long!
But another frequently overlooked component of payroll is taxes. You and your employees contribute to payroll taxes. Payroll taxes comprise both federal and state taxes, and depending on where you live, you may have to pay local payroll taxes, too.
Taxes are levied any time an employee is paid—wages, tips, bonuses, and other forms of compensation. You don't have to contribute to a contractor's payroll taxes, but the government has strict regulations about the types of workers that can be considered contractors.
What Are My Responsibilities for Payroll Taxes?
As an employer, you have to deposit your payroll taxes to the appropriate agency on time and accurately.
Late or inaccurate taxes will cost you in penalties and interest charges.
As a business owner, you have certain responsibilities for payroll. Here are some tips that will help you navigate the oftentimes confusing path of payroll:
- Small business owners are more likely to get audited, because the IRS targets them since many owners have been underreporting on their taxes.
- In the worst case scenario, you might lose your business due to the IRS aggressively collecting past due payroll taxes.
- Not filing/paying your payroll taxes can land you in jail.
- If you owe payroll taxes, it's time to get expert help, but it's better to just get it right the first time by keeping good records and having experts take care of it for you.
At inDinero, we can help you find a great payroll provider that integrates with our system, so that all of your taxes and expenses stay in good order!
Smart business decisions start with a basic understanding of money—where it's going, who you owe, and the types of taxes you need to pay. Download our Accounting Alphabet for Business Owners and CEOs to get started!