Are you running a small or medium-sized business owner? You have to look at these common payroll and bookkeeping mistakes. If you give the gift card to your employee and count them as a cash payment. So Do you have an easy payoff system for your taxes when you overpaid your employee? Or treat vendor payments as payroll before you receive a Form W-9? If you don’t, then you are going to face some serious fines from the IRS. Now read this article to avoid payroll and Bookkeeping mistakes.
Table of Contents
Avoid these Common Payroll And Bookkeeping mistakes that small business owners tend to make.
1. Issue Form 1099 Failure
You have to remember that Form 1099 should be issued only to independent contractors. And also vendors who provide your business with over $600 in services. If you are Failing to do so, you could lead to steep penalties.
2. If classifying employees as Independent contractors
Your workers are generally either independent contractors or employees. Choosing the correct classification is crucial. Different forms are involved (1099 versus W-2), and some workers may be subject to tax withholding.
3. Neglecting Backup withholding for vendor payments
You know that very well if a company pays a vendor before obtaining Form W-9 (Request for Taxpayer Identification Number and Certification). It could be subject to a payment of 28 percent for backup withholding.
4. Think of Excluding Reimbursements for Expenses from Reportable wages
The correct exclusion of reimbursements for expenses depends upon an accountable plan where expenses are reimbursed. Only if there is a business connection, Other reimbursements must be included in taxable wages.
5. If you are doing it all alone
There is a problem with Small business owners. They always try to deal with payroll matters on their own. But it tends to experience more stress and may make costly errors.
6. If you are not depositing withheld Taxes in a timely manner
Withheld taxes should be deposited on a semi-weekly or monthly basis. However, some amounts require a deposit on the next business day. If you are Failing to deposit correctly. It can lead to late deposit fees, penalties, and also interest charges ranging from two to 15 percent.
7. Executive Income is not Included in Non-qualified Deferred Compensation
Here is the thing that may be Executive compensation is subject to an excise tax. You know that if this is neglected, there is a relief program. But only certain oversights are eligible.
8. Excluding Travel and Commuting from Employee Income
In many cases, commuting and travel expenses are not considered taxable income for an employee. But there are some unique cases. Travel expenses for short-term assignments that lengthen can be subject to income tax.
9. Wasting more time than you need to
If your bookkeeping system isn’t custom-made for your business, you’ll invest way more time doing the books than you should. Fortunately, this circumstance is easily avoided. Setting up a customized chart of accounts from the first day is key.
10. Guessing your way through the task
Business visionaries will in general theory their way through accounting when they aren’t completely certain what they’re doing. The issue is mystery mixes after some time, possibly leaving a year of books that you have to fix at assessment time.
A few Examples include:
- Not categorizing expenses correctly
- Overlooking tax deductions
- Missing filing deadlines because the books weren’t done on time
Conclusion
Hope, you understood how to avoid Bookkeeping mistakes so as from now you don’t have to face unnecessary penalties from the IRS. Hire a professional bookkeeping service to handle your business payroll tax concerns and also reporting. Because the bookkeeping services give you a tensionless accounting experience and also help you to grow your business.
If you want more discussion on this topic. And you have any other questions related to your accounting and payroll problem? Dial our toll-free number. To get instant support from our Certified Accountants anytime anywhere all over the USA. Also, read the concept of Virtual Bookkeeping to avoid Bookkeeping mistakes.
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