When running a business with employees, there are many obligations you must handle, incluiding employer taxes. One of the biggest items you need to take care of is payroll and payroll taxes.
Employers are required to collect payroll taxes from their full-time employees. These taxes need to be withheld from wages and submitted to the appropriate agencies. These can include federal, state, and local income tax, social security tax, medicare tax, and state and federal unemployment tax.
It’s essential to get the deductions right in order to avoid potential legal and tax issues.
Common Taxes Issues
There are many types of tax issues employers can encounter. Some of the most common tax issues businesses might face are:
1. Misclassifying Employees As Contractors
While taxes must be withheld from employees, the rules are more lenient for contractors. Independent contractors are typically not eligible for employer benefits, and taxes do not need to be withheld. Instead, it’s up to the contractor to submit his or her taxes. However, it’s important for businesses to not just incorrectly classify employees as contractors. Mislabeling a full-time worker as an independent contractor – even if it’s an accident – can have serious consequences.
2. Late Payments
Employers are required to pay quarterly taxes. Failure to submit these on time can result in penalties and interest, and even legal action for those who are responsible for submitting taxes. Companies also need to submit wage reports with federal, state, and local tax authorities.
3. Failure To Pay Overtime Wages
Federal law requires employers to pay workers time and a half when they work overtime. Failing to adhere to overtime rules can result in required back payments, penalties, and interest. In addition, you can face complaints and actions from employees.
4. Paying Wrong Tax Amounts
The state and federal tax rates change yearly. You must account for these changes to ensure you pay the correct amount in state and federal income taxes, as well as make the right tax deductions for medicare and social security.
5. Lack of Records
Your business needs to keep up-to-date and accurate records on each employee’s work history and wages. This can include hours worked, overtime, wages, holiday pay, bonuses, vacation and sick time, and more. It’s important to keep these so you can reference them later, or if audited by the IRS. As a general rule of thumb, if you’re questioning whether or not you should keep a record or file, hang onto it.
Ways A Business Attorney Can Help With Employer Taxes
These common tax errors can result in penalties, interest, and potential legal issues. You need a business attorney to help. A lawyer can help you identify errors and work on solutions that can minimize your penalties. If you’re facing criminal charges, you will need an attorney to help you navigate the legal system.
A business attorney can also help prevent tax issues by helping you ensure your employees are classified correctly, and your payroll deductions are set up accurately. An attorney can also advise you on any other questions you have.
Why Hire Us
When you need a business attorney, let the experts at Johnstone Adams LLC represent you. We want to help you and your business succeed.
We can assist with employer taxes and other business matters. Ranked in the 2022 U.S. News – Best Lawyers® “Best Law Firms” list regionally in 12 practice areas, we have experts in many areas of law to give our clients top-notch representation. In business for more than a century, our firm can mix its experience with the ability to evolve with the changing times.
To get started, contact us at 844-682-7682 or email@example.com.