Accounting and Tax Tips and Information

written by Lauren Bakken, owner of Bakken CPA PC and co-author of the book, One-Income Household

Bakken CPA PC is dedicated to providing timely, professional, personalized service to businesses and individuals.

Tag Archives: small business

Why You Should Outsource Your Company’s Payroll

A common question accountants get is “am I handling my payroll correctly?” How can you be sure you are withholding the required amount? Are you paying your unemployment taxes? Are you filing payroll returns on time?

If you cannot answer these questions confidently, you may not be doing it right! Not paying the correct amounts at the right time can have some serious consequences, including fines and penalties.

An easy solution to these challenging questions is to outsource your payroll.

Some things the third party service providers do:

  • Prepare the paychecks for your employees
  • Prepare and File Forms 940 and 941 for your business
  • Make federal tax deposits and federal tax payments, and submit this information for the taxes reported on the Forms 940 and 941
  • Prepare Forms W-2 for your employees

There are many payroll companies out there, and you must be diligent in finding a reliable one. Simply hiring another company to do this work for you, does not make you exempt from being held responsible for any problems that may arise.

  • You, as the employer, are the one held liable for all taxes, penalties and interest due, even if it is due to the payroll provider filing something late on your behalf.
  • You should confirm the payroll service provider is using EFTPS (Electronic Federal Tax Payment System) so you can verify that payments are being made on your behalf, by logging into your account periodically.
  • Any notices regarding issues with your account from the IRS will be sent to you, the employer. The IRS suggests not changing your address of record to the payroll service provider because it will limit your ability to be informed of tax matters involving your business.

By choosing a reliable payroll service provider, you can streamline your business operations, save yourself time and be confident your payroll is properly managed. Contact your accountant to get a referral to a great payroll service provider today!

Tax Break on Employee Health Insurance Contributions

If you own a small business and offer your employees health insurance, you may be able to claim a credit on your tax return for it. The credit is based on a percentage of the amount of premiums that your business pays for employees to have health care coverage. And, of course, you must meet certain requirements to take advantage of this credit:

 

  • You must cover at least 50% of the cost of health care for some of your workers based on the single rate,
  • Your firm must have less than the equivalent of 25 full time employees to qualify as being a small business, and
  • You must pay your employees (individually) less than $50,000 a year.

 

This credit applies to both for profit and tax exempt employers, but the rates vary between the two types.

 

The amount of the credit can be up to 35 percent of the business’ health insurance premium costs in 2011 for taxable businesses and is up to 25 percent for tax exempt businesses.

 

This credit is set at these rates until January of 2014, at which time they will increase to 50% for taxable employers and 35% for tax exempt employers.

 

The credit amount is calculated on your Form 8941, Small Employer Health Insurance Premiums. If the credit ends up being more than your tax liability, you can chose to apply it to a previous tax return or a future tax return, and in certain circumstances you can even receive it as a refund!

 

To take advantage of this and many other credits offered to small businesses, it is best to consult a tax professional!