Government compliance and tax reporting is something you may rarely think about. But, compliance for your small business is a function of year-round attention. Though you’re likely bogged down with tending to many daily tasks and problems, you’re only hurting yourself by putting compliance issues out of your mind until it’s too late.
Today’s compliance landscape gets more complex by the day. The number of compliance requirements continues to increase, enforcement is getting stricter and penalties for noncompliance are rising. If you are too busy to keep current, consider using an outside service provider. In addition to gaining greater peace of mind, staying compliant will save you money through the elimination of unnecessary penalty and interest charges.
How To Ensure Your Small Business’s Compliance
- First and foremost, you must address any compliance issues you currently face. They are far more prevalent than you might think, and if they’re present in your small business, you want to address them immediately to avoid any potential consequences.
- Make sure you meet deadlines. Without proper attention, it’s easy to miss filing and payment deadlines. Late penalties are completely avoidable. If need be, put a system in place to ensure that you, your compliance and tax reporting agent and any other applicable person are aware of all upcoming deadlines.
- Keep good records that accurately reflect all of your business transactions during the year, and monitor them on at least a monthly basis. Almost every transaction you have impacts your tax liability. Solid record keeping is essential.
- How do you pay employees and independent contractors? How do you report those payments? This is a common problem area for small businesses. You’re required to withhold federal income, Social Security, Medicare and unemployment taxes on money you pay to employees. This is not the case for independent contractors. Make sure you’re absolutely compliant in this area, as penalties may be substantial.
- Ensure that you have all requisite state and local business licenses. This shouldn’t be an issue, but it’s an obvious compliance area that must be addressed if it isn’t already.
The Impact Of Noncompliance
The consequences of failing to meet all government compliance requirements are varied, but there’s no question about the extent to which they hurt your small business. Even after working late nights all year, one mistake could be the difference between making a sizeable profit and losing money.
Government compliance is not why you got into business, but it certainly has an effect on your ability to make money. Ensure your ducks are in a row, or find help to get your small business on track.