Payroll Tips

Pay your child instead of the IRS! Wages paid to your child under the age of 18 are exempt from payroll tax if you operate your business as a sole proprietorship. Any wages you pay will be deductible by your company and taxable to the family member. Your child's earnings will probably fall into a lower tax bracket than yours. If you pay less than the government specified annual amount, no tax is due. Compensation paid has to be reasonable for the services performed.

Wages paid will be deductible by your company and taxable to the family member. Your spouse's wages may qualify you for a child care credit if you pay child care and possibly qualify your spouse to participate in a section 125 Cafeteria (Health) plan.

This plan includes excellent benefits for you and especially for your employees. By making your employees' major medical, child care and unreimbursed medical expenses tax-free, your own payroll burden is greatly reduced. Don't miss this one! It's a great way to give your employees benefits, reduce your employee turnover and reduce payroll taxes and Worker's Compensation. Contact us for more information.

Word to the Wise: This is a tricky area with the possibility of serious penalties! The IRS is aware that employers prefer to treat workers as independent contractors to avoid paying fringe benefits and payroll taxes. If you're not absolutely sure how to treat a given worker, contact us and we will help you decide.

There is a 6.2% tax credit for new employees hired after February 3, 2010 and for payroll paid after March 19 2010 to December 31, 2010.  In order to qualify for the credit, the employee can’t be a relative and must not have worked more than 40 hours for any previous employer(s) in the 60 days prior to being hired. A qualifying employee needs a form W-11 which certifies that they have not worked in the last 60 days.

For tax years beginning January 1, 2011 employers need to report the amount of health insurance paid on behalf of their employees.  Health insurance remains non-taxable but is required to be disclosed on the employee's W-2 form.