Everyone makes mistakes from time to time. Even small businesses are not immune to making an occasional mistake and running into a payroll tax problem. We here at Priority One Payroll always do our very best to bring you information that may save you from making these mistakes as well as finding help and tips to correct any mistakes that are made. As we were scouring the internet we came across this great article about the 4 most common payroll tax problems.
Many small-business owners will encounter a payroll tax problem at some time or another. Although the Internal Revenue Service (IRS) takes all federal tax problems seriously, they can be even more demanding and aggressive when it comes to payroll taxes. So, here is a list of the most common tax problems payroll tax problems small-business owner’s encounter.
Failure to Withhold and Pay Federal Taxes
All employers in the United States are required to withhold federal income tax, Social Security and Medicare taxes from employee wages or salaries. Failure to do so will often lead to the IRS requiring the business owner to pay taxes on income paid to employees as well as hefty fines and penalties. If you withhold federal taxes, and then fail to pay them to the IRS, you may be held current criminally liable and face prosecution or even jail time.
Late Payroll Tax Deposits and Payments
The IRS will charge you fines and penalties if you make your payroll tax deposits and payments late. In most cases, they rest will charge 0.5% of the tax amount due every month, and may also assess a 25% penalty for tax deposits that are made considerably late. So, in order to avoid costly fines and penalties, always make sure that your tax deposits are made on the 15th day of the month when taxes were withheld from employee paychecks.
Failure to Issue IRS Form 1099
Failure to issue IRS Form 1099 is another common problem for employers that use outside companies or subcontractors to perform work for their business. If you pay an outside business or individual $600 or more in any calendar year, you are required to issue an IRS Form 1099 to that business or person and forward copies of the 1099 to the Internal Revenue Service. Failure to do so will result in a $75 penalty for each 1099 that was not issued, and you may be required to pay up to 31% of the amount that was paid in federal taxes.
If you would like to read the rest of this article please go to finweb.com.