Tax Help – Common Tax Concerns
Truth be told, taxes are complicated, especially if you own a small business. Read below about tax concerns to avoid a few of the most frequent pitfalls experienced by small business owners these days.
As your business expands, you'll most likely require to hire employees. Some of the most common tax concerns involve employee tax issues. When you hire employees, you need to file timely payroll tax returns and make the necessary tax deposits.
Payroll taxes consist of 3 types of taxes:
- Income Tax-You must withhold the proper amount of income tax from each employee's paycheck all through the year.
-Social Security and Medicare Tax or FICA-You must withhold the employee's share of FICA taxes from each paycheck and you must match up that amount.
-Federal Unemployment Tax or FUTA-This tax goes to the unemployment insurance system and is paid by the employer. The employee pays no part of FUTA.
At all times pay your payroll taxes in full andin timely manner. If you don't, the IRS adds interest and large penalties. The interest and penalties can quickly grow if you don't pay them instantly. These fees could be huge and can cause businesses to flop if they can't afford to pay the fees.
One more common tax issue is misclassifying workers. Workers are generally classified as either regular employees or independent contractors. Business owners have payroll tax withholding and reporting obligations for all of their employees; nevertheless, business owners don't have to withhold or make contributions for payroll taxes for true independent contractors.
Calling somebody an independent contractor saves lots of time complying with IRS reporting requirements. It likewise saves money-you do not need to make the employer's share of the FICA contributions and you won't need to pay unemployment compensation. It costs a business 20 percent to 40 percent more per worker to treat them as employees. While it may be appealing to use independent contractors instead of employees, the IRS is very aware of the benefits of misidentifying an employee as an independent contractor and will impose stiff penalties for those who break the rule.
As your business expands, you'll most likely require to hire employees. Some of the most common tax concerns involve employee tax issues. When you hire employees, you need to file timely payroll tax returns and make the necessary tax deposits.
Payroll taxes consist of 3 types of taxes:
- Income Tax-You must withhold the proper amount of income tax from each employee's paycheck all through the year.
-Social Security and Medicare Tax or FICA-You must withhold the employee's share of FICA taxes from each paycheck and you must match up that amount.
-Federal Unemployment Tax or FUTA-This tax goes to the unemployment insurance system and is paid by the employer. The employee pays no part of FUTA.
At all times pay your payroll taxes in full andin timely manner. If you don't, the IRS adds interest and large penalties. The interest and penalties can quickly grow if you don't pay them instantly. These fees could be huge and can cause businesses to flop if they can't afford to pay the fees.
One more common tax issue is misclassifying workers. Workers are generally classified as either regular employees or independent contractors. Business owners have payroll tax withholding and reporting obligations for all of their employees; nevertheless, business owners don't have to withhold or make contributions for payroll taxes for true independent contractors.
Calling somebody an independent contractor saves lots of time complying with IRS reporting requirements. It likewise saves money-you do not need to make the employer's share of the FICA contributions and you won't need to pay unemployment compensation. It costs a business 20 percent to 40 percent more per worker to treat them as employees. While it may be appealing to use independent contractors instead of employees, the IRS is very aware of the benefits of misidentifying an employee as an independent contractor and will impose stiff penalties for those who break the rule.