Businesses ought to pat themselves on the back. In the fiscal year ending September 2013, the IRS handed down only 6.8 million payroll tax penalties, amounting to $4.5 billion dollars.
The incredible number of penalties and fines looks fairly good compared to the numbers from 2009, when the IRS came down on businesses to the tune of 7.9 million payroll tax penalties for a total of $7.1 billion.
While you could look at these statistics and conclude that improvement has been made overall, businesses doing less than $10 million annually have actually received a greater number of penalties in that time frame.
What’s The Deal With The Ridiculous Rate Of Payroll Tax Penalties?
Small businesses are unquestionably the biggest group affected by these penalties.
Bigger companies typically have greater resources to help them stay up to date on changing rules and requirements and to execute on these required tasks. You, on the other hand, simply don’t have enough time in a day or week to manage your payroll, taxes, cash flow, strategy and day-to-day operations – plus the scores of other needs that are too numerous to mention.
Moreover, a single tax fine from the IRS hurts you more than it would a corporation. And, it’s not uncommon to receive a fine because you didn’t have enough money to pay your payroll taxes in the first place.
Most payroll tax penalties are handed down because of their lateness. Compounding the problem is the significant interest you have to pay on the money you owe the IRS.
Perhaps you chose not to file because you knew you couldn’t afford to pay. Or maybe, as some owners do, you filed on time to avoid the filing penalty but didn’t make a payment. The more time that passes, the more the penalty and interest are going to impact your business.
According to industry data S:
Up to one third of small business owners paid a penalty last year
The average penalty was over $3,000
You Must Change, But How?
Most small business owners get help to prepare their corporate income tax returns, but support for running a business shouldn’t stop there. Payroll management is another area of your business in which professional assistance would greatly benefit you.
There are two major issues that come to mind:
You need help to perfectly and efficiently manage your cash and ensure that you’re able to pay what you owe
You must correctly and accurately manage your payroll so you know exactly what you have to pay
For most owners, the support of a small business consultant is imperative.
But, the majority of small business owners who do work with a tax professional only see him or her once a year, typically at tax time or when they have a question or need help.
There’s no way to ensure that you’ve managed your payroll properly and prevented the risk of a payroll tax penalty if you don’t have consistent, year-round support.
Protect your company and make sure that you’re not one of the business owners contributing to $4.5 billion dollars paid in payroll tax penalties.
Learn to take control of your small business and payroll management.