The Truth About Payroll Tax Myths
April 18, 2019 by OSYB Staff

Barbara Weltman, guest blogger on Small Business Administration exposes the truth about myths on payroll taxes. The reveals of these common myths are below:
Myth: Switching employees over to independent contractors is an easy way to save on payroll taxes.
Truth: Though it is true that payroll taxes, along with insurance and benefits apply only for employees and not for independent contractors, reclassifying your employee is not a simple task. Make you sure you fully comprehend the classifications for an employee and what constitutes an independent contractor. Keep in mind that the IRS and other government agencies are looking out for such reclassifications to just save on payroll taxes.
Myth: All tax-free benefits are exempt from payroll taxes.
Truth: Employees do not have to pay income tax on what they receive, however, employers are still responsible for payroll taxes. An example would be the 401(k) contributions made by employees through
Myth: You can pay employment taxes with your quarterly
Truth: Generally, you must deposit federal income taxes withheld
Myth: Outsourcing to a payroll service provider relieves you of liability.
Truth: Some companies use an outside payroll service provider to handle the chores of computing payroll taxes, withholding them from employees’ paychecks, remitting payroll taxes to the government, and filing employment tax returns. Using an outside payroll service only relieves you of the tasks but does not relieve you of your tax obligations should your payroll service provider fail to meet the tax requirements.
Myth: Incorporating relieves you of liability for unpaid employment taxes.
Truth: An incorporated business or a formed limited liability company (LLC), does not provide complete personal liability protection. Person/persons responsible for withholding, accounting for, or depositing withheld employee taxes (their income tax withholding and their share of FICA) who willfully fail to do so, can be held personally liable for all of these taxes, plus interest. This is called a trust fund recovery penalty and it can be applied to business owners even if they have corporations or LLCs.
Be sure to understand federal and state tax law requirements. As with any financial consideration, please contact your personal financial professional
For details: 5 Myths About Payroll Taxes
Image Credit: Deposit Photos
Category: Small Business
Tags: small business