Tired of throwing money away on cumbersome financial operations?
Overhead costs are the business owner’s natural enemy. No matter how much revenue your business generates, those extra expenses nibble away at your profits like mice in a bakery.
But here’s the thing most entrepreneurs don’t realize…
Employer tax compliance is the reason your overhead is so high. Payroll taxes, preparing W-2s, filing taxes & trying to stay abreast of new policies quickly become costly.
How costly?
Recent data from the Tax Foundation shows that total tax compliance costs are now over $536 Billion every year. That’s 1.77% of our GDP going towards tax-related paperwork!
Luckily, forward-thinking businesses have learned how to slash this cost. Simplifying your employer tax compliance is easier than most entrepreneurs think.
Let’s learn how
- Why Employer Tax Compliance Is So Costly
- Why Going Manual With Taxes Is Costing You
- Automated Employee Tax Compliance Cuts Costs
- 3 Ways To Minimize Costs On Financial Operations
Why Employer Tax Compliance Is So Costly
Employer tax compliance costs can destroy your bottom line if you let them. Staying compliant with payroll taxes goes way beyond simply writing Uncle Sam a check each quarter.
Withholding the right amount of taxes from each paycheck, filing W-2s and 1099s, meeting deadlines, and ensuring every figure you report is correct can create a huge headache.
Small businesses feel the sting of payroll tax compliance more than their enterprise counterparts. In fact, businesses with less than 50 employees face tax compliance costs that are 90% higher than larger organizations.
That means while large corporations may spend around $1000 per employee on staying compliant, small businesses shell out $1,900!
Pause for impact
Let’s pretend you have a small business with 30 employees. If you’re spending $1,900 per employee on payroll tax compliance, you’re looking at overhead costs of $57,000 just to pay the taxes you owe.
That is absurdly high, especially when you could be putting that money towards tools to help you grow your business or investing more in marketing and advertising.
Instead, forward-thinking companies are reducing cost by using budget friendly W-2 software that automates employer tax compliance for them.
Why Going Manual With Taxes Is Costing You
It makes sense. As a business owner, you wear many hats. The idea of investing in expensive payroll software just doesn’t make sense when you already spend money on an accountant.
But here’s the thing most bosses don’t realize…
Employer tax compliance gets expensive fast because of the unseen manual labor involved.
Just keeping up with calculating payroll taxes can take upwards of 3 hours a month for 50% of small businesses. 3 hours a month equals 36 hours a year. That’s one entire work week where you could be doing something else getting eaten by tax administration.
Not only do these manual processes take a lot of time, but they also can lead to simple but expensive mistakes.
The IRS reports that businesses are penalized 40% of the time for improper payroll filings. On average, those penalties equal $845 per incident.
Penalties can include:
- Under-withholding taxes from employees
- Not filing on time
- Missing deadlines
- Employee misclassification
- Mistakes on W-2 or 1099 tax forms
These simple bookkeeping mistakes are entirely avoidable by using a tool that takes human error out of the equation. Successful businesses that keep overhead low know this already.
Automated Employee Tax Compliance Cuts Costs
Automation and technology are the biggest reasons why modern businesses have employee tax compliance costs that are a fraction of what they used to be.
Why?
Tax automation software does all of the grunt work for you. It calculates your payroll taxes, creates the correct forms, and files them by deadlines. No more guessing. No more missed penalties for forgetting a tax form was due.
Modern tax software:
- Automatically calculates federal & state payroll taxes
- Generates accurate W-2s and 1099s
- E-files right with the IRS and state agencies
- Updates tax tables when regulation changes
- Alerts you of upcoming deadlines
Businesses that take advantage of automated tax software save countless hours on processing and eliminate the risk of costly filing errors. Simple.
And as you’ll learn below, it doesn’t have to cost you an arm and a leg either.
3 Ways To Minimize Costs On Financial Operations
It’s time to stop beating around the bush. You’re here to learn how to trim your expenses when it comes to employer tax compliance. Here are 3 strategies used by savvy small businesses to reduce financial overhead.
Get Set Up With Software From The Start
Don’t wait until tax season is upon you to think about tax compliance. By taking care of payroll and tax software setup when you hire your first employee you save time and money all year round.
Look for software that combines payroll processing and tax filing. These solutions require less data input because they don’t make you switch back and forth between systems.
Streamline Your Accounting Tools
Too many small businesses use multiple software solutions for payroll, taxes, bookkeeping, and reporting. Each software pays monthly fees and each timesheets needs to be transferred to another platform.
Instead, look for opportunities to streamline.
The less software you use and physical handing off of data, the less you’ll pay in overhead expenses. Streamlining your financial software suite is the easiest way to shave dollars off monthly expenses.
Know When Tax Laws Change
Tax codes change all the time. Whether it’s a new filing minimum, updated withholding percentages or revised reporting guidelines, there’s always something keeping accounting teams up at night.
Knowing about these changes as soon as possible is the best way to ensure employer tax compliance. Businesses that have lower overhead utilize software with automatic updates built in.
Hire a Part-Time Bookkeeper or Outsource
Does your business really need a full-time accountant? Chances are the answer is no. Most small businesses can outsource this work to a third-party bookkeeper.
Hiring a bookkeeper 1-2 days a month to catch up on admin work is a huge money saver over time. And when that bookkeeper has access to automated software, you’ll never have to worry about compliance again.
Wrapping Things Up
Throwing your hands up and accepting that payroll tax compliance costs what it costs is easy. But doing something about it will save you money.
Businesses that have cutting expenses on financial operations in common all employ these tactics:
- They automate as much as possible.
- They use software to streamline compliance.
- They stay on top of tax law changes.
- They avoid manual processes that lead to error.
Tax compliance costs aren’t going to disappear. But the price of non-compliance is far worse. Falling victim to IRS penalties, wasting valuable time, and missing out on growth due to lost productivity are 100% preventable.
Don’t be afraid to modernize your business’s approach to employer tax compliance.
