6 Myths About Payroll Taxes
- October 28, 2019
- Posted by: asal
- Category: Tax Resolution
Payroll taxes are an essential part of running a successful business. These are taxes that an employer pays to the government on behalf of his employees. Payroll taxes also include contributions that the employer makes himself. Payroll taxes are deducted from your employee’s paycheck or salary. These deductions fund several government services, including medical insurance and social security.
Every business owner must ensure that all his employees gets adequate payments and right on time. Your taxes may vary depending on the scale of your business. Yet, every business has to pay a stipulated amount of payroll taxes. Here are a few misconceptions with regards to payroll taxing that you must be aware of.
Misconceptions about payroll taxing
#1 Payroll software will do all your work
Payroll software has made tax calculations tremendously effortless. However, it is unwise to rely on your software to manage all your payroll taxes. This task requires frequent checking and manual updating to make it free of any fallacies.
No doubt, the software is more reliable than manual data entry, but it is still not devoid of all inaccuracies. It is important to recheck all calculations once your software does all the labor for you.
#2 Making your employees independent contractors or virtual assistants will save you payroll taxes
An employee is eligible for medical insurance and other perks that come with payroll taxes. However, this is not the case for independent contractors and virtual assistants. This is one way you save money hiring VAs, but you have no control over the kind of work they do for you.
You can indeed save money employing virtual assistants and independent contractors in your business. However, transforming your current employees to VAs is not only unethical business move, but it is also illegal.
There is a set list of rules given by the IRS that applies to employees. Converting these employees to independent contractors may cause problems to your business that are way beyond payroll tax debts.
#3 Tax-free benefits are not included in payroll taxes
Tax-free benefits are perks that are given to employees without having to pay taxes for it. Payroll taxes are inclusive of all these benefits. Employers still should cater to these benefits. For instance, contributions to 401k accounts are still made from an employee’s salary even though it is a tax-free benefit that is still subject to FICA.
#4 Employment taxes can be paid with quarterly employer tax return
Federal income taxes that are withheld must be deposited using the Electronic Federal Tax Payment System or EFTPS. This must also include employers, as well as employees, the share of FICA with the US treasury. In case tax due exceeds the amount of $500 as additional FUTA tax for the quarter is a necessary deposit.
#5 Finding another company to handle your payroll taxes will reduce the workload
Many companies are hiring people to do their payroll taxing for them. These individuals or firms manage payroll taxing and also look at the amount of money that must be withheld from paychecks. However, what they don’t realize is if their taxes contain inaccurate calculations, the firm that manages it will not be held responsible. Even if the company you outsource your payroll taxes from commits fraud, your business deals with it. Your company will deal with the consequences, and this can land you in hot water. It is wise to manage all your accounts by yourself to avoid legal issues that come with faulty tax deposits.
#6 Tax regulations and rules are stable and rarely ever change
Before filing your payroll taxes, you must check your local, national, and state policies. Even if you went through these policies a year ago chances are, they have been regulated. This change in policies will require you to make a few necessary changes in your payroll taxes. So, you must always be up to date with the tax policies in your region to avoid miscalculations.
Get legitimate help for your tax resolutions
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