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These Payroll Errors Cost Business Owners Thousands of Dollars

Posted by Ann Irons, CPA

Jun 4, 2014 12:05:35 PM

payroll-bellingham-maTo most small business owners, the concept of payroll seems simple enough. Your employees work, you cut a check. Right?

That’s part of it, says Ann Irons, a CPA whose accounting team offers third party and small business payroll services in Bellingham, MA. Unfortunately, not everyone is aware of the complexities and dynamics of tax laws as they relate to payroll. It’s a costly mistake, one that has serious legal and financial consequences for your business. With that in mind, it’s no wonder that so many have sought outside help from professionals. It isn’t only about avoiding hefty fines and penalties. When you entrust t your payroll duties to a professional, you also gain the added security of knowing that you will not miss out opportunities to save money.

If you opt to outsource your payroll services, you will need to provide us with your employer identification number, or EIN. As a corporation or partnership, you should already have had a number issued to you. Otherwise, you will need to apply for one from the Internal Revenue Service at 1(800) 829-4933.

A Compliant Company Is a Cost-Effective Company

Incorrectly classifying workers is among the most common mistakes made by small business owners. There is some confusion about which workers can be categorized as employees and which should be designated as independent contractors. A worker who performs services that are offered by your company, you must classify that worker as an employee. The decision to classify a worker as an independent contractor isn’t arbitrary, nor is it made at a worker’s discretion. Whether or not a worker agrees to receive payment as a contractor isn’t relevant if dictated otherwise by the IRS. We can help you determine the appropriate classification of your workforce as it relates to payroll and taxes.

As you map out your budget, don’t forget to include any payroll taxes levied by the federal government and, if applicable, your state government. This should be included on top of the amount of wages you intend to pay your workers. The IRS currently requires you to match employee withholdings for Medicare and Social Security, currently at a rate of 7.65 percent of their gross pay. In accordance with the Federal Unemployment Tax Act, or FUTA, you must also contribute to the United States’ fund for unemployed citizens. Whether you live in Massachusetts or another state, additional employment taxes may be levied. Confused yet? If so, you needn’t worry. As a CPA registered in the state of Massachusetts, Irons has current, in-depth knowledge of MA tax laws.

We’ve also seen business owners who neglected to organize and deposit payroll taxes, only to be hit with massive penalties. In fact, you could even be required a 100 percent penalty for neglecting to pass along withholdings to the federal government prior to the stated deadline. Rather than risk it, it’s best to leave these details to those whose sole aim is to keep your company fully compliant.

Why risk it? To learn more about small business accounting and payroll services, or to request a consultation with Ann Irons, CPA, LLC, contact our Bellingham, MA tax office at 508-966-0700. We serve small businesses and individuals in and around Woonsocket, Medway, Milford, Boston, and the surrounding areas.

Topics: Small Business Accounting, Payroll Processing

About Ann M. Irons, CPA LLC

ann_irons_head_shotAnn spent over 25 years in the financial service industry, gaining knowledge and experience that allows her to provide an array of tax, bookkeeping, and accounting services for her clients. Relying on a stringent code of ethics and a dedication to maintaining the highest industry standards, Ann works hard to ensure her clients receive the quality service they’ve come to expect. A member of AICPA and MSCPA, Ann has also had an article featured in the renowned publication, Banker and Tradesman. 

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