A Different Perspective on Small Business Payroll Taxes

There is no question that running a small business today is tough. Every expense and additional small business taxes makes it harder to make a profit and stay in business.

But small business owners and entrepreneurs have one thing to be thankful for… most of them don’t have to pay luxury taxes. Now if you will stretch your imagination and consider Major League Baseball teams as businesses, I’d like to share a recent news bit.

MLB as a small business?

Until the loan is repaid to the Federal government, Indiana businesses are paying more and more in FUTA costs.ABC recently reported on an APNewsBreak saying the Dodgers took the lead for the first time since the luxury tax went into effect in 2003 owing $26,621,125 based on a $277.7 million payroll. Previously, the Yankees had always owed the largest amount of luxury tax (that sounds to me like a payroll tax) every year.

The tax is calculated on the average annual value of contracts for players including benefits for a 40-man roster.

The Dodgers pay the tax at 30% this year because the payroll exceeded the threshold for a second year and, get this, it will increase to 40% next year if they exceed it for a third year in a row!! How would you like to get that tax bill in your small business? Or expect a tax rate of 40% in any tax?

Apparently the Yankees didn’t like it either – they actually cut their payroll but are still over the threshold, paying a 50% tax rate.

Luxury taxes are paid to the commissioner’s office and are due by Jan. 21. The money is used to fund player’s benefits and MLB’s Industry Growth Fund.

Catch your breath small business owners

This information doesn’t undermine all the small business taxes and payroll taxes that stress entrepreneurs today, but it does allow for one little breath of relief because they don’t have that tax to pay, too. Another sigh of relief is heard from The Payroll Department clients at the end of the year, too.

Now, here at The Payroll Department, we know that accurate reporting and remittance of payroll taxes is critical. Every successful small business owner watches every dollar and penny and would never purposefully spend hard-earned revenues on fees, penalties and fines to the state or federal governments.

And that fact is why many of our clients tell us that using the services of The Payroll Department as a payroll provider has saved them from additional costs – and the worry about additional costs popping up. We like being known as a payroll stress reliever.

Our goal is to keep entrepreneurs and small business owners focused on the work of their workplace, not all the details surrounding payroll. We take that goal very seriously. Start your New Year off with a little payroll stress relief strategy – call Teresa Ray at 317-852-2568. Let The Payroll Department help.

-Elaine of The Payroll Department Blog Team

Posted in: Payroll, Payroll Processing, Payroll Taxes

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