When hiring an outsource service please know and understand what they are doing “on your behalf” and the rules and laws of what should be done for YOUR business.
I’m getting on my soapbox for a little bit, but I think it’s important to share!
I don’t usually like to point fingers or say not to hire outsource services, but there are times when you see something wrong that you need to call it out for what it is. So, I’m going to share some of the things Carefree Bookkeeping has dealt with on behalf of their clients recently, and please remember, it is still your responsibility as the business owner to make sure you are in the guidelines of the laws of your state as they relate to your business.
Here are some things to keep in mind about your business before working with a 3rd party service…
(1) Sales Tax – Please know for sure if you do or do not need to collect sales tax for your business.
Some sales taxes laws are tricky. Here’s one scenario – if a light bulb is replaced by an electrical company it’s taxable, however if they are installing a fixture on a remodel or new construction property then that task is not taxable to the customer, instead, the contractor pays the taxes.
Additionally, sales tax is only paid on an item once. Example: if you buy a coffee cup for your morning coffee you, the user of the cup, will pay sales tax on that item. The retail store and manufacture of the cup does not get assessed any sales tax.
(2) Use Tax – Use Tax is something people forget to pay until the State auditor tells them to pay.
Use tax is when you buy something that should have been charged sales tax for the county and state that you live in but it wasn’t. You need to put the amount of the purchase on your sales/use tax return and pay the sales tax.
So, let’s say you purchased office supplies on Amazon and Amazon did not charge sales tax (Amazon has started collecting sales tax per the new law) you would put a copy of the invoice from Amazon in your sales tax folder and add this to your return. Some new small business has not started charging sales tax, yet. It is your responsibility to pay the sales tax.
(3) Reconciling and keeping good records – Part of keeping good records is reconciling the bank and credit card accounts.
If you are in an IRS audit, and you’re claiming you have a business, then you need to be working with some kind of accounting system. If you file as an S-Corp, reconciling your bank account(s) is one of the requirements.
(4) Payroll Companies – If you hire a payroll company, please double check and make sure you understand what they are doing and not doing, and check this annually!
There are different services in a payroll company and the payroll company can change your service without advising you, or advising you in an obvious communication. Some of these 3rd party payroll companies will only run the payroll, some will pay the tax liability, and some will file the payroll tax returns. You need to make certain what you think is getting done is actually included and getting done.
You, as a business owner, hires a payroll company to take care of all items that go along with payroll, but not all companies will do this — or do it properly. It’s your responsibility to verify what’s happening because at the end of the day, you’re responsible for anything that is or is not getting completed on your behalf.
You also need to double check the spelling of your employee names and their address. If the employee has moved, they will need to submit a new W-4 with the correct address. Please remember that the person you talk to at the payroll company is just a worker and the only training they have is what their supervisor has told them.
(5) Work Comp Insurance – Payroll Companies are now selling businesses a workers comp insurance policy because they will charge by the payroll period and you will not have an audit. BUT – You want the audit! The audit is to make sure you paid the correct amount for your insurance. When you have work comp through your payroll company they are self-auditing themselves and don’t understand what you or your employees do in your company.
Are you under the correct work comp code? When you get a work comp insurance policy the business owner and family is exempt from workers comp. You need to sign a piece of paper saying you want to be added to the work comp policy. Payroll companies charge work comp for everyone that gets a paycheck.
Payroll companies are just that… payroll companies, NOT insurance agents. You want an insurance agent that you can sit down with and talk through the policies with. You need to understand what is OR is not covered. The payroll company representatives do not have this level of knowledge nor will they take the time to go through those details with you.
You should get an independent audit. If you are enrolled in this service through a payroll company you may find out you are paying more then you should be. An independent insurance broker (like Girtz Insurance) can shop different companies and help you get proper coverage in place.
(6) Retirement Plans – Payroll Companies are now selling retirement plans, too.
The payroll company is only selling you on what they need to push for investments to meet their own sales quota. With a company retirement plan you have about 3 choices of retirement vehicles, however, when you go to a retirement broker you have 100’s of choices so you can maximum your retirement. When you work with a broker you can also pick companies and investments that mean something to you. You don’t have that option if you purchase these limited plans through your payroll company.
Let’s say you love animals! Through a broker, you could choose to invest in a company like Petco®. Then, when you shop at Petco®, you are actually investing in your own retirement. Again, a scenario like this can only be done with a trusted retirement broker.
Beware those add-on services from a 3rd party financial service that offers limited support or knowledge about that added solution.
Please contact me for any referrals on the services and scenarios I’ve outlined above.
These are things Carefree Bookkeeping helps with as part of the services we provide our clients. Some bookkeeping and accounting firms do not provide the level of service we do at Carefree Bookkeeping. We become your true business partner and help small business owners be the most successful they can be.