To run a successful business, you must file your quarterly payroll taxes with the Internal Revenue Service (IRS). Other than ensuring you file on time, you should make sure to keep a record of your quarterly returns and anything you send to the IRS. By following the right steps, you can avoid getting into tax trouble.
8 Best Practices for Preventing Payroll Tax Problems
Whether you are a new small business or a family-owned company, you will likely be required to file payroll tax forms each quarter. Fortunately, handling your payroll taxes isn’t difficult. You can stay on top of the process by writing down your filing dates in a calendar. Alternatively, you can download payroll software that can track and manage all of your payroll needs.
1. Always File Your Payroll Taxes on Time
“The one thing to always remember is you want to pay and file on time,” Janel Weinke, senior director of tax operations at Asure said in a recent Mission to Grow podcast on Tax Filing for Small Business Owners.
Most companies don’t deliberately try missing their tax filing and payment dates. Many small business owners are simply unaware of filing requirements. There are also more than 14,000 tax jurisdictions in the United States, so it is easy to lose track of local and state deadlines.
As a small business owner, you are expected to file Form 941 each quarter. The only exception is if you have $1,000 or less in annual tax liability. In that instance, you can file Form 944 once per year instead of Form 941.
With Form 941, you must file it on the last day of the month that follows the final day of the quarter. This means that Form 941 for the first quarter is due by April 30. The following list includes each quarter and the due date for Form 941.
January to March: April 30
April to June: July 31
July to September: October 31
October to December: January 31 of the following year
2. Don’t Stop Filing Quarterly Returns
As soon as you file Form 941 once, you will start having to file it every quarter. Even if your future payroll liability is low enough for Form 944, the IRS will still expect Form 941 because you have filed it in the past. If you don’t file this form, you will get a notice, penalty, and interest from the IRS.
3. Ask for an Abatement
If you forget to file on time, you don’t have to panic. You can request a one-time abatement from the IRS. To do this, you should send in a detailed letter that documents why you missed your payment or filing date. The IRS lets you request a reduction from penalties for failure to pay, failure to file, and failure to deposit.
4. Hire an Accountant or Payroll Expert
Instead of trying to do everything yourself, you should take some time to find a good accountant or a payroll software platform. The right platform can help you stay on top of your due dates. Periodically, you should also consult an accountant for advice on managing your cash flow, tracking your income, and monitoring your gross profits.
5. Keep Excellent Records
If you want to stay out of trouble with the IRS, it’s important to keep good records. When you send anything to the IRS, you should always use time and date tracking. You want to create an audit trail so that you can see when the IRS receives your letters and forms. Later on, you can use your tracking information if there is a dispute about whether the information was received or not
6. Always Respond to IRS Letters
Whether you forgot to file or simply paid the wrong amount, you should always respond to any IRS letters you receive. Often, the IRS will work with small business owners and provide a first-time abatement. If you don’t respond to the IRS, you can guarantee that the situation will end badly.
While many people are afraid to talk to the IRS, the IRS is staffed by incredibly helpful, friendly workers. If you think that a letter was sent to you by mistake, don’t be afraid to reach out to the IRS. They are there to help.
7. Fix Your Payroll Tax Mistakes
If you do make a mistake on Form 941, there is an easy way to fix it. Form 941-X allows you to remedy your mistakes, but it isn’t available digitally. Instead, you must send in a paper copy. This form is incredibly simple, so you don’t have to provide employee information. Instead, you just have to say that you informed your employee of the issue, and you paid the wrong amount in taxes. If you overpaid in taxes, you will eventually get a refund.
8. Take Care of Wage Garnishments
Sometimes, employees may get their wages garnished by the federal government, child support agencies, lawsuits, or state governments. When you receive a notification about a wage garnishment, you must notify the employee and immediately proceed to garnish their wages. If you are concerned about whether the garnishment is real or not, you can always call the phone number on the garnishment notification.
Stay Out of Tax Trouble With the IRS
If you do end up dealing with the IRS, the best decision is to be proactive. Turn in every form they request. The IRS is also readily available by phone to answer all of your questions, but you can generally expect a 45-minute wait.
By staying organized, you can make sure your payroll taxes are filed and paid on time. If you are struggling to handle your payroll taxes, we can help. Contact Asure Software today to talk to one of our experts.