Payroll Updates

As the end of the year approaches, it is important to update your payroll systems for new payroll requirements.

Beginning 2011:

• EFTPS Mandate

Virtually all businesses will have to switch to the Electronic Federal Tax Payment System (EFTPS) for all federal tax payments starting in 2011. The familiar paper voucher deposit system is going away for any company with quarterly employment tax liability of $2,500 or more. The IRS penalties for non-compliance are 10 percent for taxes paid by check.

Beginning 2012:

• Expanded 1099 Reporting

Under a mandate of the Health Care Reform and Small Jobs Act, businesses will be required to report all payments made in 2012 in excess of $600 for services or merchandise to the IRS on Form 1099. Under current law, businesses send Form 1099 for payments in excess of $600 for rent, interest, dividends and non-employee services when these payments are made to entities other than corporations. The reporting expansion now includes corporations and payments for services, including services performed on rental properties owned by an individual. The expanded reporting requirements begin with payments made in 2012.

In order to file the required Form 1099, a business would have a vendor complete Form W-9. Business owners may chose to gather need information and update accounting systems now in preparation of these changes.

• W-2 Reporting of Health Care Coverage Costs

The health care reform legislation requires employers to include the aggregate cost of employer sponsored health care coverage on employees’ W-2s for tax years starting on or after January 1, 2012. The original deadline was pushed back a year from 2011 to allow employers to make changes to their payroll systems and procedures to comply with this rule. A penalty will be imposed for non compliance beginning with 2012 W-2s. The amount reported is informational only and will not be includable in employee earnings.

If you have any questions about how your business needs to prepare for this, please feel free to e-mail Deborah Helton, CPA, or call her at (719) 579-9090.

The Wrong Way to Choose a Small Business Accountant

To the outside world, accountants can seem like a strange breed. Spending most of our days buried under forms, spreadsheets and receipts, we can help make or break your business – not to mention your payroll and Schedule C.

Choosing the right accountant for your small business isn’t always as easy as it should be. There are a lot of us out there, and the right professional for one company can be a poor fit for another. With that in mind, here are the three worst ways to choose a small business accountant:

Waiting until the last minute.

It’s amazing how many people will show up at an accountant’s office with a stack of receipts in late March or early April and hope to get some top-shelf tax advice. It’s not that we can’t or won’t help them, but they’re making it difficult for us to do our jobs properly.

A good CPA will take an in depth look through your company’s finances, finding out where it’s healthy and which areas could use some improvement. Based on that info, we can not only help you run your small business more smoothly, but also make sure you’re getting every tax credit and deduction that’s coming to you.

The less time we have to do this, however, the more likely we are to miss something that could help, so try to see an accountant before it becomes an urgent issue.

Picking the first name out of the phone book.

There are hundreds of accountants in your local directory for a reason – some are better than others, and most of us have certain specialties and areas of expertise where we can be particularly helpful. Trusting part of your financial future to the first person who answers their phone isn’t likely to help you find the professional you’re looking for.

A better strategy is to narrow it down to two or three candidates based on their respective backgrounds. Ideally, you’ll want an accountant who is familiar with the kind of work you do, and has been recommended by a couple of your more successful peers. But speaking of recommendations…

Following referrals blindly.

It’s great that you’re golfing buddy has a good accountant that he or she trusts, but does that mean you should use them, too? Unless you’re in the same business (and maybe not even then), the answer could be a strong “no”.

Why? Because, even though it’s a good sign that someone you know and trust is recommending them, you don’t know enough about their background and skills to tell whether they’re a good fit for your business.

So how should you find an accountant? Visiting sites like this one is a good first step. Take a look through some similar articles and notice which professionals have clients with businesses like yours. Once you’ve identified a few that look like a good fit, schedule a meeting and find out more.

It might be tempting to take one of the quick ways to find an accountant, but you’ll only be shorting your own business in the long run.

Feel free to contact me if you have any questions about BiggsKofford and if we could be the right firm to serve you and your business.