Yearly changes to Payroll Taxes are hard to figure out and predict even for HR professionals and business owners. Meanwhile, staying compliant with payroll tax regulations, is the only reality that remains unchanged through the years.
Misfiling or inaccurate payroll tax deposits can end up terribly especially for small businesses. So to keep you ready to tackle payroll taxes every time the calendar changes to a new year, here are some of the things that you have to follow.
Deepen Your Understanding on Employer Taxes
Misfiling employer taxes in 2021 can be prevented with a deep understanding of upcoming changes. If you have been working with payroll taxes for a long time, then we’re sure you are already familiar to where they are going such as social security and Medicare programs.
Tax rates should be computed on their respected purpose. This means social security tax and Medical tax rate should be split into two even if they are itemized as one on your paycheck.
This is to pave way for any changes that may affect the entire payroll amount. It will make it easier for you and your employees to understand and identify what exactly caused the change. In this case, 2021 is showing that social security tax is set to remain the same while there are signs showing that the tax rate for Medicare can go lower.
Be Aware About Your Payroll Tax Dues
Back in 2018, over billions in additional taxes for returns are recorded to have been filed late. This is a serious amount especially for small businesses. Though this may have seen common in the past, it doesn’t mean that you should just let it continue in 2021.
This year is actually an opportunity to break the chain and practice change. All it takes is for you to make a more thorough look on your payroll tax deposit schedule.
From here, it should be a lot easier for you to look into your tax liabilities and set a regular schedule for your deposit. This significantly decreases your delinquency rate.
You can also help your employees better understand their tax withholdings. There are lots of online tax-withholding estimators available which can help identify the correct amount that they should withhold from their pay.
Know Whether Your Offered Benefits are Taxable
Offering new benefits this 2021 to your employees requires you to expand your research and knowledge whether they are taxable or not. You should also be well aware about the limitations for the benefits you are paying tax on.
There are several non-taxable benefits. These include accident and health benefits and Health savings accounts. Meanwhile, taxable fringe benefits include Health flexible spending account and transportation allowances.
Always highlight the importance of filing tax return in time because the minimum additional tax for failure to file has just increased by 100% of the amount of tax due.