| The typical American business comes in all types and | | | | to report wages, tips and other compensation paid, as |
| sizes. In fact, one might argue that there is no such | | | | well as Social Security, Medicare, and income taxes |
| thing as a “typical” American business. The | | | | collected. |
| business community in this country consists of | | | | Standard Mileage Rates Increased—Many |
| multinational corporations having tens of thousands of | | | | businesses pay a mileage allowance to their |
| employees, countless small sole proprietors with just a | | | | employees that reflects the allowable tax deductible |
| single employee and virtually everything else in | | | | mileage rate set forth by the IRS. The IRS has in the |
| between. One thing that almost all of them have in | | | | past adjusted the standard mileage rate during the |
| common is that they must deal with the responsibility | | | | year to reflect increases in the price of gasoline. For |
| of paying employees and complying with numerous | | | | example, From Jan. 1 to Aug. 31 of 2005, the standard |
| payroll related tax and regulatory obligations. This can | | | | mileage rate for business use of a car, van, pick-up or |
| be an especially burdensome task for small business | | | | panel truck was 40.5 cents a mile, compared to 37.5 |
| owners. Larger companies can afford to have full time | | | | cents a mile in 2004. Effective Sept. 1, the rate |
| staff dedicated to managing payroll issues as well as | | | | increased to 48.5 cents a mile. |
| keeping up to date with the frequently changing payroll | | | | How important is it for a business to stay up to date |
| laws. This is seldom the case for owners of much | | | | with payroll regulations? First, remember that there are |
| smaller companies. So exactly how does a small | | | | literally thousands of wage and payroll related |
| business owner go about maintaining compliance with | | | | regulations set forth by the Internal Revenue Service |
| the ever-changing state and federal wage and payroll | | | | alone. Then bear in mind that each state also has its |
| related regulations? The following paragraphs will | | | | own set of regulations for business owners to follow. |
| serve to illustrate the importance of keeping up to date | | | | Now consider that according to statistics form the IRS, |
| with these rules, as well as discuss the best methods | | | | more than 13,000 small businesses were audited in the |
| for businesses to go about remaining compliant. | | | | year 2004 (this figure does not include larger |
| Without a doubt one of the reasons that so many | | | | corporations with more than $10 million in assets) and |
| business owners have such a hard time dealing with | | | | that the IRS brought in more than $41 billion dollars in |
| payroll tax matters is because in addition to numerous | | | | total enforcement revenue during that same year (this |
| deadlines for filing, the rules of the game can change | | | | figure includes enforcement revenue from both payroll |
| often. Just a few examples of the changes to federal | | | | and non-payroll related sources). |
| payroll guidelines made in recent years include: | | | | One way to make sure that a business follows the |
| Electronic Filing Requirements— New regulations | | | | rules is to enlist the help of a professional who has |
| were recently released that require certain | | | | experience in dealing with payroll matters. Most often, |
| corporations to electronically file their payroll taxes. | | | | outside help will come in the form of either an |
| Beginning in 2007, the electronic filing requirement will | | | | accountant or a payroll service provider. Accountants |
| be expanded once again. | | | | will typically provide tax filing services and for a fee |
| New Form for Nearly 950,000 Small Businesses— | | | | may advise clients on payroll related matters, even if |
| Beginning in 2006, certain employment tax filers will file | | | | the accountant is not the person actually producing the |
| the new Form 944 (Employer’s Annual Federal | | | | paychecks. Some accountants will produce the |
| Tax Return) once a year rather than filing Form 941 | | | | paychecks for a client as well, though not all will do this. |
| (Employer’s Quarterly Federal Tax Return) four | | | | The other option is to utilize the services of a payroll |
| times a year. | | | | provider. A payroll company will typically handle all |
| Refund of Tax Penalties—Here is one that many | | | | aspects of payroll, from weekly paychecks to filing the |
| business owners should actually like! If your business | | | | correct tax documents on time, making tax deposits to |
| was assessed a penalty by the IRS for filing a late or | | | | the IRS and to the proper state regulatory body, |
| inaccurate tax form, and if this was your first infraction, | | | | providing year end W2 statements to all employees, |
| you could be entitled to a refund of that penalty if all of | | | | as well as direct depositing employee checks |
| your forms and deposits are timely and accurate for | | | | electronically. The cost of these services varies, but a |
| the next full year. | | | | typical rate might be in the range of $40 to $50 for |
| Revised Employers Quarterly Federal Tax Return | | | | each pay period for a small business with |
| Document 941— The Internal Revenue Service | | | | approximately 10-20 employees. The cost of payroll |
| unveiled a new version of the employment tax return | | | | services will typically go up by $1-$2 for each additional |
| Form 941. More than 23 million of these forms are filed | | | | employee. |
| annually by 6.6 million employers. The Form 941 is used | | | | |