| Let's face it, taxes are complicated, especially if you | | | | and can cause businesses to fail if they cannot afford |
| own a small business. Read below about tax concerns | | | | to pay the fees. |
| to avoid some of the most common pitfalls | | | | Another common tax issue is misclassifying workers. |
| experienced by small business owners today. | | | | Workers are usually classified as either regular |
| As your business grows, you will probably need to hire | | | | employees or independent contractors. Business |
| employees. Some of the most common tax concerns | | | | owners have payroll tax withholding and reporting |
| involve employee tax issues. When you hire | | | | obligations for all of their employees; however, |
| employees, you have to file timely payroll tax returns | | | | business owners don't have to withhold or make |
| and make the required tax deposits. | | | | contributions for payroll taxes for true independent |
| Payroll taxes include three types of taxes: | | | | contractors. |
| - Income Tax-You must withhold the proper amount of | | | | Calling someone an independent contractor saves a lot |
| income tax from each employee's paycheck | | | | of time complying with IRS reporting requirements. It |
| throughout the year. | | | | also saves money-you don't have to make the |
| -Social Security and Medicare Tax or FICA-You must | | | | employer's share of the FICA contributions and you |
| withhold the employee's share of FICA taxes from | | | | won't have to pay unemployment compensation. It |
| each paycheck and you must match that amount. | | | | costs a business 20 percent to 40 percent more per |
| -Federal Unemployment Tax or FUTA-This tax goes | | | | worker to treat them as employees. While it may be |
| to the unemployment insurance system and is paid by | | | | tempting to use independent contractors rather than |
| the employer. The employee pays no part of FUTA. | | | | employees, the IRS is very aware of the benefits of |
| Always pay your payroll taxes in full and on time. If | | | | misclassifying an employee as an independent |
| you don't, the IRS adds interest and large penalties. | | | | contractor and will impose stiff penalties for those who |
| The interest and penalties can quickly grow if you don't | | | | break the rule. |
| pay them immediately. These fees can be enormous | | | | |