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What you should not do with payroll tax

On: June 5, 2020

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If you are a business owner in California, then the payroll tax is probably a big part of your life. While every state is different, the payroll tax is a percentage of a person’s paycheck that is taken out to help fund other various programs and agencies in each state. Alongside state taxes, federal payroll taxes are taken out of each paycheck as well.  While it may seem like a nuisance, the payroll tax is very important and not properly reporting it or mishandling it can lead to serious consequences. Here is what you should not do with payroll tax. Make sure to always file on time Employers in California have a responsibility to report payroll taxes four times a year during the required quarterly period. The standard practice for most companies is that the employee’s required payroll taxes are automatically taken out by the employer, who then pays them to the correct agencies on their behalf. Companies are required to report their payroll taxes four times a year through an online system from the Employment Development Department (EDD).  All of the taxes that are paid are electronically delivered to them, who you will see a lot if you are an employer in California. Take out the correct payroll taxes Aside from specific instances, the majority of employers will have to take out the payroll taxes themselves and make sure they get paid. Any long term employees that aren’t being paid by a contract or freelance agreement will not be responsible for the payroll taxes unless an agreement is made. Not taking out the correct taxes can not only make your life a lot harder, but can get you into a lot of trouble if you are not careful. If they are not paid, then you and your business will most likely get fined or audited at some point and that can lead to even more fines or possibly getting your business shut down if you are not careful. When you are reporting the payroll tax, it is important to report all wages that are given out to employees. Wages are all compensation for an employee’s personal services, whether they are paid by payroll check, personal check, cash, noncash payments (i.e., meals and/or lodging), and tips. Keep good records Having a solid record-keeping system is one of the first things you should develop as a business. Not only do most California agencies make you have at least a couple of years of records on file for any matters, but having a system set up can help you a lot in the long run. Keeping track of all payroll related items such as time cards, records of payments/payroll records (payroll check, personal check, cash, cannabis, meals, and tips), and any other information that is necessary can come in handy in the case of an audit or some other financial matter. Not having good records can hurt you severely in the long run, but is a practice that you can start at any time and will help you, in the long run, no matter what. Always make sure to call Leading Tax Group and don’t attempt to do it yourself
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