Understanding more about the payroll tax

With so many little things to worry about as a small business owner, don't let the payroll tax scare you. Go out and hire a skilled CPA to work on your accounts and to calculate payroll for you so you don't need to try and do it on your own. If you can't hire a professional, at least go out and get a good program like QuickBooks to help you with all of your payroll necessities.

As an employer you are required to withhold payroll taxes on behalf of your employees. Check out the IRS.gov website to learn more about the different taxes you are subject to and the dates in which you need to file your taxes.

Each time you hire someone, you need to follow the proper hiring procedures. They need to fill out a W-4 in order to report them as a new employee and to have all the proper withholdings and other taxes done.

So what are the rates that you need to pay? You need to check with the IRS as they are always subject to change. Right now an employer must withhold 6.2% of an employee's wages and pay a matching amount in social security until the employee hits the wage base for the year. The employer and employee total must equal 12.4% of gross compensation. Once that amount is earned, the employer and employee no longer owe additional Social Security tax for the given year.

After this amount is pulled out you also need to look into the Medicare tax which is 1.45% and the total with the employee amount must match 2.9% in order to reach the IRS requirements. No matter what, Medicare is one of the taxes that you are required to pay. Since payroll taxes are so complex and they can get very confusing you need to look into different ways to take care of it whether that is by hiring a CPA to deal with it or using a software program, it will help you to avoid fees and audits from the IRS.

No matter what, always make your tax payments on time. You will be penalized if you don't and these penalties are no laughing matter. They are pretty costly and you can even face larger fines in the future if it occurs again.

Employees all have different responsibilities within the company. You must define what your employees are in order to file your taxes right. Do you have contractors and others that do work for your company but they aren't officially employees? You need to find out what the rules are pertaining to the different employees so you don't overpay your taxes.

The IRS is really cracking down on small businesses as many of them are not paying their taxes correctly. You have to look into hiring someone if you aren't sure how to do your payroll taxes as one of the things the auditor could state that some independent contractors are employees and need to be on your payroll. This is why it is so important to keep your paperwork and to make sure you are reading up on the IRS rules pertaining to other employees.

In addition to all the taxes you have to worry about now, don't forget about insurance. You must carry Workers Compensation insurance and it's required by law to purchase it before you even open. You might want to look into liability insurance as well to make sure you are fully protected.

It's not an easy process to get your business all set up. Hire people that have experience and expertise and can help you out with your new business. You definitely don't want to get on the bad side of the IRS so hire a skilled CPA soon!