Taxes can be complex for individuals, and they get even more so when you’re running a business and paying employees. In that situation, the business is responsible for correctly withholding, reporting, and depositing federal income tax and contributions to social security and Medicare.
When you run a business, it’s important to find out what the IRS expects in terms of when you need to deposit payroll withholdings. That schedule will vary based on the nature and size of your business. If you fail to adhere to your designated timeline, the IRS will flag your account for investigation, and you may face penalties, fees, or prosecution.
It’s equally important to never use payroll withholdings for any business purpose. Even though your business is in possession of that money before you hand it off to the IRS, it is not yours to use. That may sound self-evident, but it can be tempting to use a financial resource you appear to have, particularly if you feel you need those funds immediately. No matter what, though, make sure you always deposit payroll withholdings without dipping into them!
If you feel out of your depth when it comes to keeping track of how much to withhold, when to deposit it, and how to keep in good standing with the IRS, contracting a third party to handle your payroll can be a great option. Known as Certified Professional Employer Organizations, these companies handle the tasks of taking withholdings and making deposits on your behalf. You typically pay them for this service, and you must register your partnership with them so the IRS knows that all money withheld from payroll will be paid by the CPEO, not by your business.
To find out more about payroll withholdings and what they mean for your business, call Taxation Solutions, Inc. today. We’re here to help business owners in San Antonio navigate the tax code and stay informed when it comes to tax-related payroll management.