Payroll and bookkeeping are utilized by almost every small to medium-sized businesses. These are ideal for managing the accounts and finance related work. Along with simplifying the work, it also helps in saving you’re a lot of time and effort. But, have you ever thought what mistakes you’re doing while using Payroll and Bookkeeping? It has been observed that small business owners are making a few mistakes in their accounting and taxation.
Let’s have a look at these common mistakes that are needed to be avoided by the small business owners:
- Ignoring the backup for the vendor payment: Many times, it has been seen that companies neglect the backup withholding the vendor payment. Needless to say that if any company pays a vendor before getting the Form W-9 then this could be a subject to 28 % payment for backup withholding. Therefore, it is always advised to give focus on backup to avoid this situation.
- Failure in the issuance of the Form 1099: All the small business owners are needed to remember that Form 1099 must be issued to those who’re considered as independent contractors. It can also be issued to the vendors to give a business of over $600. For any reason, this fails then it could lead to penalties.
- No deposition of withheld tax with the time frame: Are you doing the same mistake? If yes then avoid it as you’re needed to deposit the withheld tax either in monthly or semi-weekly manner. If you fail to deposit the tax within the time frame then you’ll be penalized with late deposit fee as well as interest charges up to 15 percent.
- Categorizing the employee under an independent contractor segment: When it comes to the mistakes while using payroll and Bookkeeping service then this can this needs to be ignored. Workers of the company can be either categorized as an employee or independent contractor. Making the right categorization in accounting is essential. With this, some workers of the company may be subject to tax withholding.
- Excluding commuting and travel from the income of the employee: In a number of companies, expenses of travel are not counted under the taxable income of the employee. In some unique situations, you’ll find that travel expenses that are associated with short-term projects are subject to income tax.
- Excluding fringe benefit value: Under the category of Taxable fringe benefits, you’ll see country club dues, housing benefits, spouse travel expense and company’s cars. Because of different valuation methods, it is sometimes difficult for calculating the fringe benefit value accurately. Therefore, this mistake also needs to be avoided.
- If everything is done by you alone: It has been seen that many business owners try to resolve the payroll issues on their own. But, this will increase your problem and will cost you extra.
Apart from this, there are many other common mistakes such as not including the market value of gift cards, overlooking tax deduction, missing filing deadlines and many more. With all these mistakes, you’ll be making unnecessary payments from your company’s account. But now, you don’t have to face these unnecessary penalties from the IRS and payments. For this, you need to get partnered with payroll or Bookkeeping service. With this, you will forget all the hassles related to your business payroll tax issues. The main benefit related to the bookkeeping service is that you will get stress free accounting that will surely help you to increase the productivity of your business.