The Heroes Group is on a mission to eliminate small business owners from processing their own payroll. Fun fact: Business owners can be held personally liable for ensuring payroll taxes are handed over to the IRS. It’s called the Trust Fund Recovery Penalty (TFRP), and many small business owners haven’t heard of it.
Payroll is a sign of growth. Arguably there’s a direct correlation between hiring a new team member and increasing net profit for your business. However, payroll has its woes. Payroll has more rules and filing requirements than getting married in front of family and 300 of your closest friends in Aruba. Over the years we’ve learned the do’s and don’ts of payroll.
1. Not Setting Aside Money for Payroll Taxes
Like it or not, if you aren’t using a payroll service provider, chances are the employer and employee portion of payroll taxes (FICA, withholding, etc.) will remain in your bank account until you report it to the IRS – typically quarterly. Businesses often don’t segregate these funds and unknowingly spend them (or even worse, knowingly “borrow” the money).
2. Letting Your Office Manager Manually Calculate Payroll For You
Allowing your office manager to calculate payroll for you adds a layer of risk and liability for both of you. Once they become part of the payroll process, they are considered a responsible person under the TFRP rules. Moreover, you and potentially any bank account signers aren’t off the hook if they make an accidental mistake (we’re all human after all).
3. Failure to Issue 1099 Form
Employers typically reports your annual earnings on a Form W2 if you are earning a steady salary or wage. A Form 1099 must be issued to independent contractors (or vendors) who have provided more than $600 in services. There are some exceptions, for example some corporations are not required to be issued a Form 1099. Ask your CPA for details. There are penalties if a company or employer fails to timely distribute a Form 1099.
Have a question or need assistance?
We're here to help! At The Heroes Group we're payroll tax experts and understand the do's and don'ts of payroll woes you might be experiencing. We also partner with awesome, cost effective payroll processing companies to let you focus on your business! Contact your THG team member or contact us today if you'd like to have a conversion on payroll!