As you work to grow your small business in the Tulsa area, it is crucial that you keep your attention focused on your legal and financial obligations in addition to your day-to-day business activities. Failing to do so could substantially harm the success of your business. One such obligation involves the duty to pay payroll taxes. Business owners that fail to make payroll tax deposits on time and in the correct amounts may face steep penalties.
Common Types of Payroll Taxes That Business Owners Neglect
Generally, a business that has employees must abide by specific payroll tax deposit requirements. The most common types of taxes that business owners must account for include the following:
- Social Security tax
- Medicare tax
- Federal income tax
- Federal unemployment tax
As a business owner, you have an obligation to withhold certain taxes from your employees’ wages including Social Security, Medicare, and federal income tax. You must then deposit that money on the employees’ behalf. Business owners also have to pay a matching amount for some types of taxes, such as Social Security and Medicare, and the full amount of other types of taxes, such as federal unemployment tax.
Reasons Business Owners Fail to Meet Payroll Tax Obligations
For small business owners, deposits may be required on a semi-weekly or a monthly basis. Missing a required deposit can land you in trouble with the Internal Revenue Service (IRS). Some of the more common reasons that business owners find themselves facing tax problems involving payroll taxes include the following:
- Accidentally forgetting to pay the taxes
- Paying the payroll taxes late
- Calculating the tax owed incorrectly
- Intentionally failing to pay the taxes owed
Regardless of the reason that you failed to pay the tax, penalties and interest will start to accrue against you.
How Payroll Taxes Are Reported
In addition to making payroll tax deposits, business owners also have an obligation to report certain information to the IRS. Reporting is the way that business owners tell the IRS how much money is owed. Business owners report payroll taxes in one of the following ways, depending on the type of tax liability involved:
- Quarterly, using IRS Form 941
- Annually, using Form 940
Regardless of how much time and money you invest in growing your small business, failing to keep up with your payroll tax obligations can put a serious dent in your overall success. If you find yourself late in paying a tax or reporting a tax that is owed, it is important to act quickly. Contact us today using our online contact form to find out how we can help.