Most people aren't hesitating to follow their own dreams and open up their own small business in hopes of making it big. Over 99% of businesses in the U.S.A. are considered to be small businesses. If you're one of them, you'll know that following your dreams isn't necessarily the hard part. It's the paperwork and the process that really burdens you. Tax season is particularly stressful for small business owners, as they scramble to get all of their paperwork and documents in order before filing their taxes. If you need some help, there are plenty of business tax preparation services available. They'll help you organize your paperwork in the correct order. This piece focuses on the 3 types of payroll documents that will be needed during tax season. Get them ready!
Contracts for Each Employee to Determine Classification
Not all of your employees are equal. Depending on their roles and responsibilities and the type of work that they do for you, some employees are considered to be independent contractors rather than an employee. Payroll taxes and benefits for employees are much higher than those for independent contractors, so keep the contracts if you've hired any independent contractors. A business tax consultant will also look at the paperwork to determine whether any employees can be considered independent contractors instead. It'll help your small business save a lot of money.
Your only responsibility to independent contractors is to issue them a Form 1099-MISC if you paid them over $600 in the fiscal year. The document basically tells the IRS how much you paid the independent contractor during that year. If you hired independent contractors, you want to keep any contracts that specify their classification to avoid getting audited.
Payroll Records of Time Worked and Wages Paid
Basically, the IRS is concerned with whether the numbers you've reported add up, which is why they'll want to take a look at all of the documents and paperwork that you have proving that you paid your employees a certain wage. The total wage paid is considered to be an expense and will be subtracted from the total revenue when calculating the amount of profit that the business made each fiscal year. Keep payroll records of each employee to show the amount of hours that each employee worked, their hourly wage and the total amount paid to them each pay period. You'll also want to include whether any additional income, such as bonuses, were paid. The business tax preparation services will take a look at your documents to make sure that the numbers add up and that no errors were made.
While you only need to submit records pertaining to the fiscal year, you should really keep payroll records for two years. Documents that provide insight as to how the wage was calculated, such as the time cards and work and time schedules, will be inspected should your business be audited.
Documents Regarding Tax Account
To ensure that you're paying enough taxes and the right amount of taxes each year, you probably have a tax account. If you don't, your small business is basically caught up in a whirlwind of confusion and numbers. Send the business tax preparation services any documents you have in regards to activity in the tax account. This includes the total balance of the account each month, records of transactions that determine whether tax deposits were made on time, and more.
If you own a relatively complex small business, consider giving any business tax preparation services you hire full access to the tax accounts, as there are simply too many documents to sort through and print out.
Preparing for tax season can be tedious and a handful. You not only have to make sure that all of the numbers pertaining to the payroll add up, but you also need to have all of the documents ready for inspection should your business get audited. You also need to consider other aspects of the business, such as the amount of sales that were made, total revenue, losses, and more. It's a lot to handle if you're attempting to file the taxes yourself. Get professional assistance to ensure that everything is filed properly. This will help your business avoid the hassle of getting audited. Try visiting a site like http://www.cpa-winterhaven.com to get in touch with a firm that offers tax preparation services.