4 Payroll Mistakes You Don’t Know You’re Making
Owning a small business can be one of the most rewarding journeys you can take. Many business owners pride themselves in creating and maintaining a company, even with all of the extra moving parts that go with it. While you may know your industry inside and out, you may not be as well versed on the bookkeeping and payroll aspect of things. Payroll mistakes can be a major headache, so if you’re unsure of these practices, seeking out professional assistance is the best thing you can do for your business.
Nobody wants to give the IRS ammunition. We’ve listed some common payroll and bookkeeping mistakes that you may not even know you’re making. So, the next time you think you can do it on your own – consider these errors first.
Doing it yourself
We’ve already mentioned the potential for error when doing the books yourself, but we thought we should reiterate. Your time is valuable and should be spent on the areas of your business that you are confident with. The cost of making payroll and bookkeeping errors would greatly exceed the cost of hiring an outsourced accountant; this is a fact.
Who are you employing?
It may appear that your employees work for you and for the welfare of your business, however, there are differences when it comes to independent contractors. Employees and independent contractors are classified differently, which make their tax-filing forms unique as well. Independent contractors schedule their own hours and are in charge of the resources they would need to complete a job or contract. Keep records of their payments for taxes and file appropriately.
If overlooked, neglecting to issue form 1099 to your vendors and independent contractors could wind up being very costly for your business, not to mention having to deal with the penalties which go with it. Although you may have thought the goods or services they provided were minimal and not worth mentioning, anything over $600 must be declared.
Beyond payroll and bonuses, you might think that’s where the line is drawn for taxable income. However, businesses sometimes forget to include things like awards, gift certificates, and prizes. You must obtain the fair market value for these and declare them as taxable income as well.
If you are a small business owner, maybe it’s time to bring in a professional for your books? At Tobin & Collins, we are dedicated to help you meet all of your accounting service needs, including financial and business consulting. Contact us today!