Running your own business can be incredibly rewarding, but it also comes with its share of paperwork! One of the most important paperwork elements has to do with payroll taxes.
What Are Payroll Taxes?
When you run a business and pay your employees, you are responsible for withholding the correct amounts for:
- Income tax
- Social Security
Every time you pay your employees wages, all of these withholdings, plus any state and local withholdings, must be accounted for.
What Do I Do With Payroll Withholdings?
As the employer, you’re responsible for depositing these payroll withholdings to the government. The timing of your deposits will depend on the size and scope of your business, but you can expect to make deposits on a monthly or semi-weekly schedule.
What Happens If I Don’t Pay?
If you fail to pay your payroll taxes on schedule, your account will be flagged by the IRS. Your payroll taxes must be paid by electronic transfer. If you miss a payment or are late, you will be assessed a “failure to deposit” fee of up to 15%. Additional fees, penalties, and even legal action may follow depending on your situation and subsequent actions.
How Do I Stay On Top of Payroll Taxes?
Due to the intricacies of the payroll tax system, many businesses opt to have an outside party handle their payroll and take care of all withholdings and payments to the government. These businesses are known as Certified Professional Employer Organizations (CPEO). If you decide to use a CPEO, you have to register that partnership with the IRS so they know to expect your tax payments from the CPEO, not from your business.
If you have questions about payroll taxes, withholdings, or CPEO partnerships, contact the tax experts at Taxation Solutions, Inc.! We’re here to help business owners in Indianapolis navigate the tax code and make informed decisions about tax-related business matters. Call us today to set up an appointment!