A 4-step Guide To Calculate Payroll Taxes Correctly
1. Accuracy - saving you time and money
If you are a business owner and employer, then you are most likely aware of the importance of the payment of your payroll taxes. However, there are many business owners who are not aware of how necessary it is to utilise the correct method to calculate payroll taxes. In the event of an error, companies could be faced with costs running into thousands, if not millions, of dollars. The Internal Revenue Service, or IRS, is notoriously exacting with regard to the taxes paid over to them and consequently, is a stickler for accuracy and transparency. Accordingly, it is incumbent upon you to ensure that whatever means you utilise to calculate payroll taxes produces results that are accurate and true. There are several ways in which this can be done.
2. Man or machine? - you decide
Two of the most effective means a business owner has at his disposal to calculate payroll taxes are by making use of the services of an accountant, or by incorporating a software program into the business model. Either option is viable, but the most effective method will be determined by the size of the organisation. Larger organisations would invariably make use of both methods, as larger numbers of employees can increase the likelihood of errors being made. For smaller companies, either a software program or the use of an accountant will be suitable. However, in a small business consisting of a limited number of employees, the most efficient and cost-effective way to calculate payroll taxes would be by making use of a computer software program.
3. A well-oiled machine needs a little elbow grease
The ultimate decision as to which method is most suitable vests with the business owner. However, irrespective of which method is selected, you, as the business owner, will be required to lay some essential groundwork before you are in a position to actually calculate payroll taxes. Part of standard operating procedure involves the completion of a W-4 form by each employee prior to their commencing their employment. This form will denote certain critical data required by the company to calculate payroll taxes. For example, the marital status of an employee, or whether or not they have dependants, is relevant in terms of the amount of taxes you are required to deduct from their pay.
4. Paying your dues - the company commitment
Aside from the monies which are deducted from each employee's payroll, the company itself is also responsible for a portion of the payroll taxes. In other words, the employee's deductions only form part of what is owed to the IRS. The balance is paid by the company. It is of the utmost importance that this is borne in mind when you calculate payroll taxes, so that the company can allocate a portion of funds for this purpose. In this way, a company can ensure that they are prepared for the financial implications of the tax period and that their payroll taxes are well-covered.About the Author:
The guidelines above should give you a better understanding of what is involved for you when you calculate payroll taxes, and allow you to be better equipped for this aspect of your business.
Abhishek is a Tax Consultant and he has got some great tips on Filing And Understanding Taxes! Download his FREE 84 Pages Ebook, "Taxes Made Easy!" from his website http://www.Taxes-Guru.com/777/index.htm . Only limited Free Copies available.
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