What You Need to Know About Small Business Payroll Taxes and Reporting

When Indiana Department of Revenue (IDR) tells you money is owed, it would be natural to assume that you owe it. But did you know that it’s possible with the volume of payroll tax returns (WH-1’s) that state departments of revenue get, it’s not uncommon that mistakes may and can be made? Are you or your payroll provider keeping track of your small business taxes?

If the IDR believes there’s a missed payment or an incorrect amount paid, they will generate a Liability Notice with an estimated amount of employees’ payroll taxes due, plus interest, plus penalty. This estimation also happens with sales tax that retailers are subject to. Most employers, especially new small business owners, for fear of the government will just pay these notices without checking their records first. Don’t assume IDR is correct. And, just because IDR’s system shows no report for a specific month, that doesn’t necessarily mean one wasn’t submitted for your workplace either.

Recently, at The Payroll Department Inc., we had a new client who had outstanding liability amounts of less than $30 per month for the months of January, February and March of this year. When they came to us, we calculated the taxes due and prepared the tax forms for them. We submitted the total payment for the three months that amounted to less than $100. Four months later, IDR sent the taxpayers three individual Liability Notices with over $600 per month due. The client paid it because they thought IDR must be right, but they weren’t. Right now we are in the process of getting the client’s money back. It’s a long process, but it is part of the services we provide for our clients.

Payroll Tax Reporting Facts

Here are the facts, plain and simple:  If you underpay IDR the withholding tax due, you will receive a notice with the underpayment/penalty/interest amount due. If you over pay, you will NOT receive an automatic refund. In fact, even if you over pay, you may be penalized as well. You must bring it to their attention and then jump through the necessary hoops to get it back.

You can avoid all this by being proactive. Verify your amounts or contact your payroll services company like The Payroll Department Inc., and have them verify those payments. If you don’t and there is a mistake, IDR will estimate withholding taxes plus penalty, plus interest. This can add up to quite a bit of money, and unnecessary processes. To learn more about this, contact The Payroll Department.

Teresa Ray, owner, The Payroll Department

Posted in: Operating a Small Business, Payroll, Payroll Taxes, Rules, Regulations and Laws

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