Payroll is a complicated process, especially for small business owners. Minor errors not only detract from the company but can also lead to consequences come tax time. Outside payroll services have become a popular solution and can save you time and money throughout the year. By working with a qualified CPA, you can avoid some of the common mistakes made.

Employee-Contractor Distinction

Many small businesses are following the trend of outsourcing their workforce, especially for one-off projects. Contractors are a great way to save money, but it’s important to know when they should be classified as an employee. Certain regulations, such as requirements on where to work, benefits, and how their taxes are handled, may qualify a contractor as an employee without you or them even knowing. When mishandled, the IRS may audit your business and fine you for misclassification.

Tax Withholding

Government regulations and institutions require tax withholdings from every paycheck of every employee, including yourself. The same goes for your business. This can be complicated when handling payroll on your own, and mistakes can lead to tax punishments. These also affect your employees on a personal level, as they’ll face tax consequences when they file if net pay isn’t correctly calculated.

Mishandled Cash

The tax withholdings from your payroll and business income eventually have to go to the IRS. Knowing when and how to file is important, as is how to keep that money separated from other company funds. Many business owners often forget to set this cash aside and lack the funds to pay the IRS when the time comes. Outside payroll services handle the filing and money management for you, ensuring everything is filed properly and on time.

If you need payroll or accounting services, turn to Linda M. Shiraiwa, CPA, PS Inc. of Gig Harbor, WA. Her firm offers comprehensive accounting solutions and will ensure every aspect of your business is financially organized. Call (253) 858-6030 to schedule a consultation, and visit her website and Facebook to learn more.