As a small business owner, you’ve got a lot of things and people that you’re responsible for. One of the many things you have to keep up with is your payroll taxes. At Hacker Accounting, we know how confusing and frustrating it can be to deal with payroll taxes. But they are necessary and if you don’t do them it could cause serious problems for you and your business. Here are six things you should know before filing payroll taxes.
The IRS identifies small business owners as being one of the largest sources of uncollected taxes in the country. That means that small businesses are more likely to be the target of increased tax compliance enforcement. You need to make sure that your taxes are done correctly and on time because there’s a good chance that your taxes will be looked at with a finer magnifying glass than the kind the IRS will use on bigger businesses or individuals.
Payroll Taxes Are No Joke
Not filing or paying your payroll taxes is a BIG deal. How big? It’s considered a federal crime. We can’t emphasize enough how important it is to stay on top of your payroll taxes. The consequences for not doing so can be severe.
Payroll tax penalties can add up real quick. There are three major penalties you can be hit with.
- File Failure
- Deposit Failure
- Pay Failure
The combined amount of these penalties plus interest can dramatically increase your tax bill. And these penalties can kick in quickly. If you don’t pay within sixteen days after you file your 941 Payroll Tax Return, you can be struck by penalties.
Owners Are Responsible
If you own your business, you have an additional reason to be diligent about filing payroll taxes. That reason is The Trust Fund Recovery Penalty. This penalty gives the IRS the ability to go after individual business owners and shareholders for payroll taxes owed. Unlike other creditors who are only able to collect from the business directly, the IRS can go after YOU if you don’t pay your payroll taxes.
Borrowing from payroll taxes is illegal. You cannot use the money you collect from payroll taxes to pay your operating expenses. All monies collected from employees to pay their share of federal withheld tax, FICA and Medicare does not belong to you. You must account and pay it to the government. On average, expect to make a federal tax deposit three days after the pay date of the payroll checks.
What should you do if you get an audit? First things first. Do NOT panic. Audits aren’t death sentences, nor are they signs of imminent doom. You can work through them. Some businesses can come out of an audit stronger than ever. The trick is to see a professional. Trying to sort through your own audit by yourself is a recipe for disaster. You know that saying “A man who is his own lawyer has a fool for a client”? You can say the same thing for someone who deals with an audit without any professional help. Hopefully an audit will never happen to you. But if it does, call Hacker Accounting!
Related: How Health Benefits Affect My Taxes
Got questions about filing payroll taxes? Let Hacker Accounting help you with that! Give us a call at 602-375-5251.