Small business owners are responsible for payroll taxes–plain and simple. These taxes pay for important programs like Medicare and Social Security. However, times are tough and costs have to be cut where they can be. Though the money goes to worthy causes, all of it doesn’t have to go to the government. To help you save some of your business’s profits, here are a few ways you can reduce payroll taxes.
Accountable Plans.
If you’re a benevolent employer and you like to reimburse your staff for their expenses, you can use an accountable plan to favorably impact your payroll taxes, just so long as the reimbursements are not taxable to employees, and the taxes are exempt from FUTA and FICA. The plan has to meet three requirements. First, the expenses have to be business related. Secondly, they have to be properly substantiated. This means accurate, and timely bookkeeping. Thirdly, your employees have to return any excess reimbursements on time.
Fringe Benefits.
Everybody wants a raise, but perhaps you should considering offering your employees some fringe benefits that are exempt from FUTA and FICA taxes for their hard work instead. Some benefits that are exempt are group term life insurance, moving expenses, retirement planning, and more. Consult with your accountants about possible benefits to offer.
Hire Independent Contractors.
Need more staff? Instead of hiring new full-time and part-time employees, consider hiring independent contractors. As a business owner, you’re liable for the share of payroll taxes on the salaries of employees, but not for independent contractors. Of course, some positions are more ideal for contractors than others. If the job doesn’t require a lot of management, nor benefits, then hiring independent contractors could be an option.
With these tips, you can reduce your payroll taxes, without having to reduce your payroll. You should also consider using online payroll services if you’re not already, instead of doing them manually. While this won’t reduce your payroll taxes directly, it’ll save you time, money and labor, thusly indirectly affecting your taxes. If you have any questions about trimming your payroll taxes down to size, feel free to ask in the comments. For more about this, go here.
