Although there are several benefits to working with a PEO, one of the most valuable benefits to business owners are the tax services. Tax services work in conjunction with the payroll processing that we spoke about in Week 1 of our “Top 5 most Valued Services”.
Correctly remitting and filing taxes can be a massive headache for business owners, and if done incorrectly can result in large penalties and fines. Not only does a business owner need to remit the correct payroll taxes, but they must also stay up to date with payments of these payroll taxes for federal, state, and local authorities. According to Accounting Today, 40% of small business owners say that bookkeeping and taxes are the worst part of owning a business. We can understand where these small business owners are coming from, since there is much more to filing taxes than you’d expect. Here are just a few tax items that cause small businesses issues:
· Federal Taxes: Did you know that 40% of small to mid-sized businesses incur IRS related penalties, with the average penalty being $845? Laws are always changing pertaining to federal taxes and how or when they must be reported. Employers pay/remittance schedules change based on what the IRS determines your total liability amount to be, only then do they assign you a frequency schedule. Without a dedicated individual managing this, business owners can be unaware of these changes… which can ultimately be costly!
· State Taxes: Small businesses spend an average of $7,000 per employee per year on Tax & Regulation Compliance, which can really affect their bottom line! State taxes, like federal taxes, can change. Without a true knowledge of these changes a business owner could be on the hook for late or missed tax payments. Additionally, every state has their own rules and regulations for taxes, so this means business owners are expected to be knowledgeable of all the tax codes in every state in which they have employees. If you are looking to grow your company and work in additional states, you must be aware of the rules and regulations of that state to ensure you are in compliance.
· Local Taxes: Local taxes can be just as much of a headache as federal and state taxes, and sometimes even more so. With over 4,964 jurisdictions in 17 different states imposing local income taxes, how can a small business owner stay up to date on all this information? When a business has employees in any state with local income taxes, they must not only be aware of the local taxes, but file and pay them properly as well. Any mistake could cost the business in fines and penalties.
· FUTA/SUTA Taxes: FUTA taxes are set at the federal level and the employer is expected to pay the given FUTA rate on an employee’s wages up to a certain amount. This is more straightforward than SUTA, which can be directly affected by your businesses’ employee historical turnover rate. If you have higher turnover with your employees, or you must lay off employees for an unforeseen reason, this could negatively impact your SUTA rate and significantly increase your costs of doing business.
· Year End W2’s and W3’s: Business Owners who distribute year end W2’s and W3’s knows how much of a headache this can be. Employers are frequently addressing employee questions, replacing lost or stolen forms, or correcting employee addresses. This takes up a lot of time for a small business owner who is trying to focus on growing their core business.
With everything mentioned above, it may seem like this information is meant to scare someone away from opening or growing their own business, but it’s not! With CornerstonePEO we will not only correctly remit taxes for our clients and employees, but we will also pay the taxes on your behalf on a timely schedule that is in accordance with all federal, state, and local laws. Here are just some of the ways we can help with your taxes:
· Federal Taxes: CornerstonePEO’s payroll software uses the information given when your employee onboards with us to make sure that our system correctly remits all the appropriate federal taxes from your employee’s paycheck. If there are any exemptions for any of these taxes, our system will recognize this when the employee onboards and enters their personal tax information. Once these taxes are correctly remitted, CornerstonePEO will pay these federal taxes accurately and on time.
· State Taxes: Like Federal Taxes, our payroll software is intuitive and will automatically use your employee’s personal information to correctly remit the proper state taxes for that employee. Not only will CornerstonePEO correctly remit these taxes, we will also pay the taxes on your behalf in states where this may be required.
· Local Taxes: Local taxes can be a very confusing topic for business owners, but at CornerstonePEO we are experts in this field and utilize our payroll technology to make sure that an employee is paying all the correct local taxes based upon where they live and/or work. We will, of course, pay these taxes on a timely schedule to ensure there are no outstanding balances for any of our clients or employees.
· FUTA/SUTA: We understand the impact an unemployment claim can have on your SUTA rates and we also understand that business owners might not have enough time to really look deep into each unemployment claim. CornerstonePEO has a team of experts in this field to help combat fraudulent unemployment claims further protecting your susceptible tax rates. In certain states clients who work with a PEO can use the PEO’s SUTA rate instead of their own. In many of these situations, CornerstonePEO has been able to combat fraudulent unemployment claims that would have negatively impacted our clients SUTA rates further adding a value add to our clientele.
· Year End W2’s and W3’s: Since a PEO agreement allows for a “co-employment” relationship with our clients and their employees, CornerstonePEO will distribute the year end W2’s and W3’s to your employees. Also, you will not have to worry about any more IRS audits or notices because those will be handled directly by CornerstonePEO. Let our experts do what they do best and allow you to get back to focusing on growing your core business!