The Impact of Late Payroll Taxes on Businesses and How to Avoid Penalties
As a business owner, you have a lot of responsibilities to manage. One of the most important is ensuring that your payroll taxes are processed and paid on time. Late payroll taxes can have serious consequences for your business, including penalties, interest charges, and even legal action. In this blog post, we’ll explore the impact of late payroll taxes on businesses and offer some tips on how to avoid penalties.
Impact of Late Payroll Taxes
1. Penalties
One of the most immediate consequences of late payroll taxes is penalties imposed by the IRS. This penalty can vary depending on the amount of taxes owed and how late they are. Late payroll taxes are subject to a penalty of up to 10% of the tax due, and this penalty can increase over time.
2. Interest Charges
The IRS also charges interest on any unpaid payroll taxes. This interest is calculated at the federal short-term rate plus 3%. Late payments of federal employment taxes can result in interest charges that increase over time, adding up to significant costs for your business.
3. Legal Action
If your business fails to pay payroll taxes, the IRS can take legal action against you. This can include placing liens on your property or bank accounts, garnishing your wages or assets, and even seizing your business if the debt is not paid.
Tips for Avoiding Late Payroll Taxes
1. Keep Accurate Records
The first step in avoiding late payroll taxes is to keep accurate records of all your business transactions. This will include records of all employee wages, deductions, and taxes withheld. Having a reliable and organized system for tracking these records will help you to avoid mistakes and ensure that your taxes are paid on time.
2. Set Up Automated Payments
Another way to avoid late payroll taxes is to set up automated payments through the Electronic Federal Tax Payment System (EFTPS). This system allows you to schedule payments in advance, ensuring that your taxes are paid on time and avoiding any penalties or interest charges.
3. Maintain Adequate Cash Flow
Maintaining adequate cash flow is critical to ensuring that your payroll taxes are paid on time. You should have enough cash on hand to pay your taxes along with other operating expenses. If cash flow is tight, you may need to explore other financing options to ensure that you can meet your tax obligations.
4. Use a Payroll Provider
Using a payroll provider can help ensure that your taxes are paid on time and accurately. A payroll provider can automate payment processing, manage employee records, and provide expert advice to help you avoid penalties and legal action.
5. Consider Outsourcing Your Payroll
If managing payroll taxes is becoming too much for you to handle on your own, it may be time to consider outsourcing to a professional. Outsourcing payroll can help reduce errors, minimize the amount of time and effort needed to manage payroll, and ensure that your taxes are paid on time.
In Conclusion
Late payroll taxes can have serious consequences for businesses, including penalties, interest charges, and even legal action. It is critical to have a reliable and organized system for managing payroll taxes and ensuring that they are paid on time. By keeping accurate records, setting up automated payments, maintaining adequate cash flow, using a payroll provider, and considering outsourcing your payroll, you can avoid the negative impact of late payroll taxes and protect your business from potential financial harm.
Need a hand with payroll taxes? Let us help! Contact us today to learn more about what we can do for you!
Understanding the Employee Retention Credit: Basics and Benefits
The COVID-19 pandemic has impacted businesses in various ways, from loss of revenue to employee layoffs. However, there is a potential benefit for employers that kept their employees on payroll during the pandemic: the Employee Retention Credit (ERC). In this blog post, we will discuss the basics and benefits of the ERC and how it can help businesses retain their employees.
What Is the ERC?
The ERC is a refundable tax credit available to certain employers who retained their employees during the pandemic. It was established under the CARES Act in 2020, extended through 2021 under the Consolidated Appropriations Act, and expanded by the American Rescue Plan Act.
The ERC is designed to provide financial relief to eligible employers that were adversely affected by the pandemic and to promote employee retention. It is available to employers who meet certain criteria, including a decline in gross receipts or a full or partial suspension of operations due to government orders.
Benefits of the ERC
The ERC provides significant benefits to employers who qualify. Here are some of the key benefits of the credit:
1. Up to $28,000 per employee: The ERC is worth up to $7,000 per quarter per employee in 2021, up to a maximum of $28,000 per employee. This amount is based on a percentage of wages paid to employees.
2. Refundable: Unlike some other tax credits, the ERC is refundable, which means that if the credit exceeds the amount of tax owed, the employer will receive a refund.
3. Expanded eligibility: The ERC was expanded in 2021 to allow more employers to qualify for the credit. For example, employers that were not in operation during 2019 may be eligible based on a comparison of their 2021 quarters. Also, for 2021, employers with up to 500 employees may be eligible (versus 100 employees in 2020).
4. Can be used in conjunction with PPP: Employers who received a Paycheck Protection Program (PPP) loan may still be eligible for the ERC, although the same wages cannot be used for both. This means that employers can potentially receive both the PPP loan and the ERC to help them retain their employees.
5. Helps retain employees: One of the primary benefits of the ERC is that it helps employers retain their employees during a difficult time. By providing financial relief to employers, the ERC can help prevent layoffs and keep businesses operating.
How to Claim the ERC
To claim the ERC, eligible employers must file Form 941, the Employer’s Quarterly Federal Tax Return, with the Internal Revenue Service (IRS). For employers who have already filed their Form 941 for a quarter, an amended return can be filed to claim the credit. The credit can also be claimed by filing Form 7200, Advance Payment of Employer Credits Due to COVID-19.
Employers should carefully review the eligibility criteria and consult with their tax advisor or accountant for guidance on claiming the credit. It’s important to keep detailed records and documentation of wages paid to employees and other relevant information to support the credit claims.
Eligibility Criteria for ERC
To be eligible for the ERC, employers must meet certain criteria, including:
– Experiencing a decline in gross receipts: Employers must have had a significant decline in gross receipts during one or more quarters in 2020 or 2021. A significant decline is generally defined as a 50% or more reduction in gross receipts compared to the same quarter in the previous year. For 2021, the threshold is a 20% decline in gross receipts compared to the same quarter in 2019.
– Partial or full suspension of operations due to government orders: Employers must have had a full or partial suspension of operations during one or more quarters in 2020 or 2021 due to government orders related to COVID-19.
– Retaining employees: Employers must have retained their employees during the applicable quarter(s). For 2021, the employee retention requirement applies to all employees, not just those who are not providing services due to the suspension of operations.
In Conclusion
The Employee Retention Credit is a valuable resource for businesses that retained their employees during the COVID-19 pandemic. The credit provides financial relief to employers that were adversely affected by the pandemic and promotes employee retention. The ERC is refundable, can be used in conjunction with PPP, and provides up to $28,000 per employee. Employers should consult a qualified accountant to determine their eligibility for the credit and ensure that they are properly claiming the credit on their tax returns.
How To Be Your CPA’s Favorite Client At Tax Season
If you want to be your CPA’s favorite client during tax season, there are some things you can do!
Get To Know Your CPA
A good CPA will be able to help you navigate your tax situation throughout the year. They will be able to help you determine how much you should set aside for your taxes, which business expenses qualify for tax deductions or credits, and how to keep track of all the documents you’ll need. They will be able to provide you with year-round tax planning advice that can save you money in the future. Lastly, they will be able to represent you before the IRS for any audits or collections. It’s a good idea to ask about these things before you begin working with your CPA. This will ensure that your relationship is a positive one and that you are happy with the service you’re receiving from your CPA.
Ask Questions
When clients file taxes, they often don’t have a complete list of income and expenses. This can lead to errors on the tax return, or it can keep the CPA from completing it in time for filing. The answer to these problems is simple: Ask. In your next client meeting, make a point of asking them how they plan to handle their business finances throughout the year. This is a good opportunity to demonstrate your value. This process also helps them see how much you care about their business and how they can benefit from working with you. Once you’ve built trust, you can start to focus on referring them.
Make Yourself Available
One of the best ways to show your CPA that you value their time is by demonstrating you can be available on short notice. Whether it’s for a quick phone call or in-person meeting, be proactive and flexible about arranging a time to chat with them. Your CPA will appreciate this and you may end up developing a relationship that could turn into an ongoing partnership. Another way to demonstrate your value to a CPA is by helping them run tax projections. Most CPAs appreciate this because it can save them time and effort when preparing their clients’ tax returns. Similarly, your clients may need help coordinating their tax and investment documents. This can save them a lot of stress, which in turn, helps them build their trust in you as their financial consultant.
Be Honest
Whether you’re a first-time client or a seasoned pro, you need to be honest. You don’t want to mislead your accountant or make them feel uncomfortable by providing false information. It’s also important to be upfront with your financial situation, especially if you are a small business owner and don’t have a great record keeping system in place. Providing inaccurate numbers to your tax preparer can put you in danger of penalties, which is not what you want. In addition, be honest about your goals and ambitions as well. This can help your relationship with your accountant grow and serve as a reminder of why you hired them in the first place. It can also lead to referrals from your client base, which will be a huge bonus for you.
Priscilla A. Chesler CPA PC
If you’re looking for an experienced, trustworthy, and reliable tax accountant in Litchfield Park, AZ, contact our full-service accounting team here at Priscilla A. Chesler CPA PC! We understand the value of a good professional relationship and make it a point to get to know your business on a fundamental level, so we can provide the best service, advice and guidance. Give us a call today to see what we can do for you: https://pchesler.com/contact-us/
When tax laws change, it is important for CPAs to be up to date on them. This knowledge can ensure they provide their clients with accurate advice and services!
The IRS
Every year or so, the authorities alter the rules and laws that govern taxation. This is a constant concern for both tax professionals and clients alike. The IRS is one organization that enacts the laws, and it normally publishes a summary of the changes as well as a comprehensive list of related topics. However, it is up to the tax professionals to ensure that their firm and staff members are aware of all the changes in order to provide better service to their clients.
AICPA
The American Institute of Certified Public Accountants, or AICPA, represents CPAs with regards to rule-making and standard-setting in the accounting industry. It also serves as an advocate before legislative bodies and public interest groups. In addition, the organization provides members with resources, info, and leadership to help them deliver their CPA services in the most efficient and professional manner possible. It also monitors and enforces CPAs’ technical and ethical standards.
The State Government
Tax laws are complex, and they change a lot. They also vary from state to state and year to year. One of the best ways to find out if your CPA is up to date on the latest tax law is to look to your state’s government for answers. Each state has a tax department that keeps tabs on the latest and greatest, from changes in filing requirements to new taxes and credits. Your state may have a website or contact info for the local board of accountancy, where your accountant earned their professional designation. For example, the NASBA has a tool called “CPAverify” that will tell you if your accountant holds an active license and has the relevant credentials in their portfolio. If you are unsure about whether your CPA has the credentials, call their office and ask for an orientation tour or to schedule an appointment. With the right information, you can trust your accountant to take care of your tax preparation and other accounting needs.
Priscilla A. Chesler CPA PC
Here at Priscilla A. Chesler CPA PC, our CPAs work hard to stay current on the latest tax laws. As we’ve discussed, it’s important to keep up with these changes and know what they mean for you. In addition to preparing tax returns and providing accounting services, our CPAs offer a variety of other tax-related services. Contact our full-service accounting team today to learn more about our services: https://pchesler.com/contact-us/
There are many reasons why you might need an accountant, regardless of your finances. Whether it’s to help you make the most of tax credits, minimize your tax burden or simply to keep your financials in order, having a trustworthy accounting professional on your side is essential.
Know Your Numbers
Whether you are a solopreneur or just starting out in the garage, there are times when you need to call on a professional to take care of your finances. Having an accountant on your team can help you make the most of your business and its success. One of the first things they can do is look over your accounts and see if there are any errors in your spending. This can save you money in the long run. They can also point out when it is a good time to expand your business or when it is a good time to make savings. A good accountant can also help you plan for your future growth and development. They can give you advice on when to make a savings plan or make a cash flow forecast.
Plan Ahead
If you’re starting out in business or working for yourself, it might be helpful to have an accountant who can dissect your documents and spot potential problems. You might also need an accountant if you’re going to secure financing from banks or other financial institutions. This is because lenders will often trust expert opinions, and they’re more likely to offer you loans if your accountant can demonstrate their expertise in finance. To find an accountant who will be a good fit for you, ask other business owners who they use and interview at least three or four prospects. This can help you get a sense for the accountant’s priorities and personality, and you’ll know whether or not they’re a good match for your needs.
Financial Statements
Financial statements are important for a number of reasons. They give you a snapshot of your business’s financial health, provide information to investors and lenders and show potential partners what your business is worth. They also help you make decisions about your business, such as whether or not to expand. A balance sheet, income statement and cash flow statement work together to provide you with a detailed look at the financial state of your business. The person who prepares these documents depends on the situation, but usually it’s your accountant or bookkeeper. These documents are often requested when you’re selling or buying a business, and sometimes when you apply for a loan.
Tax Plan
Creating a tax plan is not only necessary, but it’s the best way to ensure you’re getting the most out of your financial strategy. This includes knowing what deductions and credits are available to you, and claiming them when appropriate. Taking advantage of them could make a huge difference in how much money you owe to the IRS and how much refund you receive. It can also help you reduce your overall tax liability and save for the future. Tax planning is a year-round activity, but it becomes especially important as the end of the year approaches and you’re thinking about filing your taxes. A tax planning professional at Priscilla A. Chesler CPA PC can help you minimize your liability and get the most out of your tax return! Contact us here today: https://pchesler.com/contact-us/
How To Be Your CPA’s Favorite Client At Tax Season
When tax laws change, it is important for CPAs to be up to date on them. This knowledge can ensure they provide their clients with accurate advice and services!
There are many reasons why you might need an