Making Those Payroll Taxes Less Burdensome Before the New Year

September 24, 2013 by

With the end of the year here, small businesses need to wrap up their year-end tax estimates. If this is a depressing thing to think about in the middle of the holidays try to focus on the savings possible when you plan your taxes well. Consider the savings potential in payroll taxes, for instance.

Those year-end bonuses

The holidays are bonus time – every employee expects a Christmas bonus or a year-end bonus. The bonuses that you pay aren’t just simple payments. These involve payroll tax withholding and employer matching. There may be Medicare taxes and FICA involved, too.

When payroll withholdings are accounted for, a bonus check for $1500 will only net an employee $1386. Employers often find this unattractive. The only way to avoid this is to work backwards from the net figure that you wish to see your employees receive. It would be a mistake to avoid going through payroll to sidestep this hassle, though. There could be penalties involved.

The fringe benefit packages

Publication No:15 of the IRS has information on pre-tax fringe benefits. You could consider replacing salary raises with fringe benefits. Offer health benefits, child care benefits and so on and you’ll save on your payroll taxes – compared to what you would pay if you compensated your employees in higher salaries instead.

Hiring a veteran before the year runs out

The IRS rewards businesses for hiring veterans of the armed forces. Hire one before the last day of the year and you become eligible for the Expanded Tax Credit. You can get up to $9600 in tax benefits for each veteran employed. Many factors determine how much credit you actually get. You get to claim the maximum if the veteran has been jobless for a long time (if you decide to employ him full-time and then pay him a full salary). It also depends on whether the veteran was disabled in the line of duty.

If you contribute to the state unemployment fund, you should ensure that you receive a statement about any rate changes there might be by January. If there’s anything like this you need to talk to your payroll provider about it to make sure that you pay no penalties for making incorrect tax payments.

Other things to remember

When you record your payroll expenses in your accounting software, you should ensure that the gross wages and the year-to-date wages match. Any paycheck withholdings need to be placed in a separate current liability account and your payroll taxes should be on a separate line. Many businesses neglect to check that their payroll report, their profit and loss statement and their balance sheet, display those payroll figures. The figures that you show against payroll expenses on your income tax return should be the exact amount that you declare on your W3.

Summary

Small businesses have a lot to complain about when it comes to their payroll taxes. There are plenty of ways to make things better though. Try these tips and you will probably find a way to make the tax bite a little less painful.

Choosing the right life insurance

March 30, 2013 by

Life insurance is important for all people to have. This is especially important if a person is the main income earner in the home. There are many different kinds of life insurance. Depending on the type of coverage that a person is looking for they can get term life insurance rates at a price that is affordable. Choosing the right life insurance will depend on a person’s needs and their overall health.
Term life insurance covers a person for a specified amount of time or a term. This term can be anywhere from five to twenty years. If a person dies during this time their loves ones will receive the payment. Coverage ranges from $25,000 to several hundred thousand dollars. The higher the payout the more the cost of the insurance is going to be. When the term ends a person may have to reapply for coverage. This may not be a problem for a healthy person. Those with a medical condition or a history of family illness may want to look into other types of life insurance.
Whole life insurance covers a person from the time they purchase the insurance until they time they die. At this point the family can collect the benefits. This policy also builds cash value that a person can borrow again while they are still alive. The policy is going to be more expensive then term life insurance. As long as the premium is paid this policy is not going to be canceled due to age or health conditions.
Many employers offer health insurance benefits. These policies are going to vary by company. In general these policies may only provide $30,000 in benefits. This may not be enough money to support a family. In addition to this coverage many people chose to carry private life insurance to make sure their families are protected and are able to pay their bills. Life insurance will also help cover funeral costs and other final expenses. There is a great video on the best life insurance companies that you can find here.