If you are a business owner, whether small or large, you need to be aware of the importance of paying your payroll taxes and filing your payroll tax reports. While you hear a lot in the news about people who don't file and/or don't pay their income taxes, you don't hear much about an equally common problem of businesses not paying their payroll taxes.
Some business owners mistakenly believe they can use the money they have taken out of employees paychecks to run their business. In the short run, that might look like a viable solution. In the long run, it is a recipe for disaster. Of all the types of unpaid taxes, the IRS pursues this type with the most persistence and offers the least amount of flexibility in repaying once you are behind.
It is important to remember that you have taken the Federal Withholding, Social Security and Medicare deductions from your employees' pay. This is money you are holding in Trust prior to payment to the IRS. You also have a portion of the FICA and Medicare due as the employer's portion of the total payroll taxes due. The seriousness of neglecting to pay these taxes to the IRS cannot be emphasized too heavily. Not paying these taxes is considered stealing, and the consequences are extremely serious.
If you do not pay these taxes on time, you incur penalties and interest. The same is true of not filing your 941 reports on time. The penalties for not filing your 941 reports on time vary beginning at 5% and increase each month by an additional 5% until they reach 25%. There is also a failure to pay penalty that starts at 0.5% and can also go up to 25%.
If you do not make your Federal Tax Deposits on time, you are penalized at 2-15%. These are just the penalties; you also will have to pay interest at the current interest rate. You also put yourself as owner, and anyone else who may be held responsible (including your bookkeeper if he or she can sign checks or is determined to have control over what bills are paid),at risk for the Civil Trust Fund Penalty or Trust Fund Recovery Penalty.
The Trust Fund Recovery Penalty is a penalty that can be assessed to an individual, even if your company is a Corporation. You as an individual are not protected by the company's corporate status from this penalty. The trust fund portion of the payroll taxes due (Federal Withholding, and FICA-the employee portion) can be assessed to you as an individual. What this means is that once this penalty is assessed, the IRS can come after your personal assets like bank accounts and personal property and/or file liens on your personal property, such as your home.
One additional piece of important information: Be sure when you are making payments on past due payroll taxes that you specify that you are paying the Trust Fund portion first otherwise the IRS will assume the payment goes to the non-Trust Fund portion. It is always in your best interest to pay off the Trust Fund portion first. The employer portion of the FICA cannot be assessed to the individual; it remains a debt of the company.
If you have found yourself in trouble with borrowing or paying your payroll taxes, resolve the problem immediately by contacting a reputable tax debt resolution firm.
Tuesday, August 5, 2008
Payroll Software - Salaries Made Simple
Are you an entrepreneur looking for a quick fix solution to managing your business payroll needs? At the same time, are you wary of adding on more accounting staff to a workforce that is already on the larger side?
Well, the good news is that your problem just came to an end!
Payroll software tools can be used to speed up the process of calculating pay accurately, and making payments on time. They save you the burden of understanding complex payroll legislation and payroll systems operation, and thereby reduce administrative costs. Do we see you smiling already? Keep that grin firmly in place.
Trouble free payroll processing is a critical need of any business. Payroll software completes payroll calculations within a fraction of the time it would take to do them manually. It is also very useful for generating reports at the year-end, since both pay-slips and annual reports are archived for retrieval at a later date. So, you can see that payroll software offers a fully automated system which does more than just calculate statutory deductions. It has some solid benefits that will make you want it for your business. Wondering what those could be?
Payroll software can integrate with time sheet systems that record employee attendance or time worked. This way, information about hours worked can be automatically transferred into the payroll system, once the worker logs on. Alternatively, you could feed the data manually into an electronic form. To derive maximum benefit, you can use it to put together data on attendance and hours worked. Doing so can provide you with many reports which will allow you to do an in-depth analysis of staff costs across departments, individual jobs, contracts or the business as a whole. Then there's the facility of "what-if" calculations. This helps in forecasting and planning staff costs and budgets - by entering hypothetical numbers, you can compare the exact total cost of an employee under different compensation scenarios. You can also maintain other employee data, such as records of annual leave, using payroll software.
So, is it right for you?
Every business will not need payroll software. For example, if the number of employees is small, manual payroll calculation can be simple and straightforward. Also, though payroll software saves a lot of time, it can be an expensive investment for a small company. Implementing payroll software usually requires an annual subscription, in addition to the initial purchase cost. The annual renewal is required in order to receive regular updates on taxation laws, National Insurance rates and changing legislation that affect payroll calculations.
Before taking a decision to implement payroll software in your organization, consider the available expertise within your business. For example, who handles payroll when the accountant is absent? It will be easier to train back-up personnel to operate the payroll software than have them carry out manual calculations.
Remember, you also need to ensure business continuity. Therefore, plan for support, data back-up and disaster recovery. In case of an emergency, you can always get back to manual processing, but be aware that usage of payroll software can make people overly computer-dependent. Therefore, insist on periodic refreshing of pen and paper skills.
Customized payroll software for small businesses can be. In order to meet the diversified needs of businesses have developed different kinds of payroll software; pick the one that suits you best.
Well, the good news is that your problem just came to an end!
Payroll software tools can be used to speed up the process of calculating pay accurately, and making payments on time. They save you the burden of understanding complex payroll legislation and payroll systems operation, and thereby reduce administrative costs. Do we see you smiling already? Keep that grin firmly in place.
Trouble free payroll processing is a critical need of any business. Payroll software completes payroll calculations within a fraction of the time it would take to do them manually. It is also very useful for generating reports at the year-end, since both pay-slips and annual reports are archived for retrieval at a later date. So, you can see that payroll software offers a fully automated system which does more than just calculate statutory deductions. It has some solid benefits that will make you want it for your business. Wondering what those could be?
Payroll software can integrate with time sheet systems that record employee attendance or time worked. This way, information about hours worked can be automatically transferred into the payroll system, once the worker logs on. Alternatively, you could feed the data manually into an electronic form. To derive maximum benefit, you can use it to put together data on attendance and hours worked. Doing so can provide you with many reports which will allow you to do an in-depth analysis of staff costs across departments, individual jobs, contracts or the business as a whole. Then there's the facility of "what-if" calculations. This helps in forecasting and planning staff costs and budgets - by entering hypothetical numbers, you can compare the exact total cost of an employee under different compensation scenarios. You can also maintain other employee data, such as records of annual leave, using payroll software.
So, is it right for you?
Every business will not need payroll software. For example, if the number of employees is small, manual payroll calculation can be simple and straightforward. Also, though payroll software saves a lot of time, it can be an expensive investment for a small company. Implementing payroll software usually requires an annual subscription, in addition to the initial purchase cost. The annual renewal is required in order to receive regular updates on taxation laws, National Insurance rates and changing legislation that affect payroll calculations.
Before taking a decision to implement payroll software in your organization, consider the available expertise within your business. For example, who handles payroll when the accountant is absent? It will be easier to train back-up personnel to operate the payroll software than have them carry out manual calculations.
Remember, you also need to ensure business continuity. Therefore, plan for support, data back-up and disaster recovery. In case of an emergency, you can always get back to manual processing, but be aware that usage of payroll software can make people overly computer-dependent. Therefore, insist on periodic refreshing of pen and paper skills.
Customized payroll software for small businesses can be. In order to meet the diversified needs of businesses have developed different kinds of payroll software; pick the one that suits you best.
Benefits of Outsourcing Payroll Against Payroll Software
The essentials element of payroll administration in the UK is to accurately calculate the income tax and national insurance contributions deducted from the employee each pay period, produce payslips for each employee and account to the tax office for the payroll deductions.
Running a payroll system is natural for medium and large companies who may employ specialist payroll staff to perform these functions. Many medium companies may still choose to outsource the payroll function leaving many of the technical issues that might be encountered to a specialist payroll service.
Small businesses may choose to outsource the payroll function because they are not familiar with the paye system although HMRC do run seminars to assist employers. The payroll system not only calculates the tax and national insurance deductions but also has to deal with tax code changes, new employees and changes to existing employees plus taxable benefits and allowances such as statutory payments for sickness and maternity leave, contracting out of the state pension scheme and student loans.
The main benefit of manually producing the employee payroll is the reduced cost although the time spent on the payroll function by the proprietor may be better spent running the business. The cost may not be the cheapest option if an employee is required to produce the payroll. Purchasing payroll software can save significant time and costs for the small business that chooses to prepare and control its own payroll function. Although time is more important as the payroll production cost is not usually a big issue.
Outsourcing payroll adds a small additional cost to running the business but would normally carry worthwhile benefits in reducing the time spent on the function and reduces the paye administrative burden.
Main benefits outsourcing the payroll function.
1. Frees up time in calculating the payroll deductions and dealing with different and sometimes complex employee circumstances.
2. Using a professional outsourcing service to advise on potential payroll problems and difficulties.
3. The cost of outsourcing payroll should be compared against the cost of employing specialist in house payroll staff.
4. Payroll services use payroll software and are more likely to produce accurate tax and national insurance deductions and pay records reducing the prospect of problems with the tax authorities.
5. Payroll administration such as preparing the tax deductions schedules, dealing with starters and leavers, year end certificates for employees and the employer annual returns are normally all automated as part of the payroll service
6. The outsourced service company should also be responsible for producing employee payslips, advising tax and deductions liability and in larger businesses also provide a payroll analysis for accounting purposes.
Alternatives to outsourcing payroll functions.
Finding a suitable outsourced payroll service is not difficult. Local telephone directories or searching the internet would produce many potential payroll service providers.
Many accountancy firms offer payroll services to their clients and although the prices may struggle to be competitive price is always negotiable. Using the business accountant for the payroll has advantages since a substantial cost area for most businesses is already known to the accountant since they prepare the numbers.
Choosing payroll software.
The major alternative to outsourcing the payroll is for the business to acquire and use payroll software.
Larger companies require payroll software that has incorporated within it all the potential pay scenarios and also be capable of dealing with high numbers of employees. Large comprehensive packages can be complex to operate and require specialist wages staff.
Small business may choose simpler less complex payroll software packages that meet the basic needs of the business. It is important the person running the payroll within the wages function understands the payroll essentials and legal payroll administration requirements.
The advantages of choosing payroll software is basically the cost should save the business money against outsourcing the payroll, should retain control over the function and liabilities and ideally should take no more time that supplying employee details and gross wages to the payroll service.
If the business chooses to adopt a payroll software package then the complexity of the package should be considered and also the attributes and capabilities of the chosen software to produce all the payroll requirements in relation to pay and wage deductions, paye administration and employee payslips.
Running a payroll system is natural for medium and large companies who may employ specialist payroll staff to perform these functions. Many medium companies may still choose to outsource the payroll function leaving many of the technical issues that might be encountered to a specialist payroll service.
Small businesses may choose to outsource the payroll function because they are not familiar with the paye system although HMRC do run seminars to assist employers. The payroll system not only calculates the tax and national insurance deductions but also has to deal with tax code changes, new employees and changes to existing employees plus taxable benefits and allowances such as statutory payments for sickness and maternity leave, contracting out of the state pension scheme and student loans.
The main benefit of manually producing the employee payroll is the reduced cost although the time spent on the payroll function by the proprietor may be better spent running the business. The cost may not be the cheapest option if an employee is required to produce the payroll. Purchasing payroll software can save significant time and costs for the small business that chooses to prepare and control its own payroll function. Although time is more important as the payroll production cost is not usually a big issue.
Outsourcing payroll adds a small additional cost to running the business but would normally carry worthwhile benefits in reducing the time spent on the function and reduces the paye administrative burden.
Main benefits outsourcing the payroll function.
1. Frees up time in calculating the payroll deductions and dealing with different and sometimes complex employee circumstances.
2. Using a professional outsourcing service to advise on potential payroll problems and difficulties.
3. The cost of outsourcing payroll should be compared against the cost of employing specialist in house payroll staff.
4. Payroll services use payroll software and are more likely to produce accurate tax and national insurance deductions and pay records reducing the prospect of problems with the tax authorities.
5. Payroll administration such as preparing the tax deductions schedules, dealing with starters and leavers, year end certificates for employees and the employer annual returns are normally all automated as part of the payroll service
6. The outsourced service company should also be responsible for producing employee payslips, advising tax and deductions liability and in larger businesses also provide a payroll analysis for accounting purposes.
Alternatives to outsourcing payroll functions.
Finding a suitable outsourced payroll service is not difficult. Local telephone directories or searching the internet would produce many potential payroll service providers.
Many accountancy firms offer payroll services to their clients and although the prices may struggle to be competitive price is always negotiable. Using the business accountant for the payroll has advantages since a substantial cost area for most businesses is already known to the accountant since they prepare the numbers.
Choosing payroll software.
The major alternative to outsourcing the payroll is for the business to acquire and use payroll software.
Larger companies require payroll software that has incorporated within it all the potential pay scenarios and also be capable of dealing with high numbers of employees. Large comprehensive packages can be complex to operate and require specialist wages staff.
Small business may choose simpler less complex payroll software packages that meet the basic needs of the business. It is important the person running the payroll within the wages function understands the payroll essentials and legal payroll administration requirements.
The advantages of choosing payroll software is basically the cost should save the business money against outsourcing the payroll, should retain control over the function and liabilities and ideally should take no more time that supplying employee details and gross wages to the payroll service.
If the business chooses to adopt a payroll software package then the complexity of the package should be considered and also the attributes and capabilities of the chosen software to produce all the payroll requirements in relation to pay and wage deductions, paye administration and employee payslips.
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