Owning a business is a wonderful thing. You've found your passion, you've pursued it, and now you are your own boss… as long as you pay your taxes and stay compliant with federal, state, city, and even county regulations.
The truth is that compliance is never-ending. But there are four federal departments that you do not want to make mad, otherwise, you risk losing your business, your financial freedom, and your reputation.
The goal of this article is not to scare you or keep you up at night, it's to inform you about the top compliance concerns you should have as a business owner and how to address them.
While it's important to be aware of compliance, we encourage business owners to consult tax, legal, and HR experts to guide and inform you, so you have time to run your business (and take a vacation).
In this article, we're going to explore the crucial compliance concerns that every business owner needs to know in order to stay on top of taxes, penalties, and fines, and gain peace of mind.
The IRS
As a business owner, you are required to pay several taxes, which vary by your entity type, industry, and size. One of the bigger concerns is payroll taxes on employee wages and salaries. This tax money goes towards their social security, Medicaid coverage, unemployment, and more.
Payroll tax penalties are the largest percentage of penalties that the IRS levies. You have to ensure that your payroll taxes are being paid on a routine, timely basis – otherwise, you're facing hefty fines at the end of the year.
How a Payroll Provider Helps
Payroll providers are responsible for making sure your payroll taxes are promptly paid on a federal and state level. This eliminates a business owner's risk of facing any penalties at year-end.
The Department of Labor
It's important to maintain a healthy fear of the IRS - and let's be honest, taxes are confusing. But if you upset the Department of Labor, you are either unaware of how to classify your employees, or you're intentionally doing something wrong as a business owner.
Let's look at the Department of Labor's two primary concerns.
Overtime
If your employees are working overtime, but you aren't tracking those hours or paying them for it, you are facing heavy fines from the DOL and the IRS.
Random DOL audits are extremely rare, but an upset and underpaid employee is not. If you're paying an employee 40 hours a week, but they're working 60 hours, they can hire an attorney or lawyer to pursue legal action.
With the Department of Labor, the burden of proof is not on the plaintiff, it's on the defendant. This means that you are presumed guilty until proven innocent. The DOL will file a class-action lawsuit, and other employees will be questioned for further evidence.
If you are found guilty, you are looking at paying back wages and punitive damages.
Misclassification
Misclassifying your employees means that you've classified a worker as an independent contractor (1099) when they're really full-time or part-time employees (W2).
An independent contractor does not receive social benefits such as unemployment, health benefits, social security, etc. So, some employers think that classifying a worker as an independent contractor will help them evade certain taxes and save them money.
If an employer has intentionally misclassified workers, they are facing paying back worker's comp premiums, health benefits, paid family leave, and potentially criminal penalties and time in prison.
How a Payroll Provider Helps
A great payroll provider is a guide for you, your team, and your business. Rich resources like blogs, downloads, and webinars will help you understand how to classify your employees correctly.
Payroll providers also offer time-tracking capabilities. This helps you accurately track your team's time and pay overtime for hourly workers.
USCIS
U.S. Citizenship and Immigration Services allows immigrants to legally work and live in the United States. They administer documents such as Permanent Resident Cards, Green Cards, and citizenship papers.
As an employer, there are two ways you risk non-compliance with the USCIS.
Incomplete or Missing I-9 Forms
Form I-9 is the Employment Eligibility Document, which confirms that your employees are legally authorized to work for you in the United States. This form must be filled out by the employee and the employer within the first day of being hired.
If you do not complete the I-9 form on time, you may receive a Notice of Inspection (NOI) from Immigration and Customs Enforcement (ICE) and face fees of up to $1,000 for not completing the I-9 forms poorly or not at all.
If the USCIS comes to your business, it is almost a guarantee that your business will be shut down immediately for hiring illegal workers.
E-Verify
E-Verify is a state-mandated program that verifies the information on the I-9 form and confirms your employee's identity. Some states require E-Verify if you have one employee, and other states, like Texas, do not require it at all.
How a Payroll Provider Helps
A payroll partner will provide access to tools that make compliance easier. For example, you can access E-Verify's portal through your payroll software, and electronic onboarding features ensure you collect and submit documents on time upon hiring a new employee.
OSHA
The Occupational Safety and Health Administration (OSHA) falls under the Department of Labor. OSHA is primarily a concern for larger employers with over 100 workers. They ensure that their safety standards are met and regulations are enforced to prevent workplace injuries, illnesses, and deaths.
For smaller businesses, OSHA is not a huge concern. However, they do have unlimited power, so it's never good to be on their bad side. Aside from physical ailments and injuries, OSHA also covers concerns such as sexual harassment claims and gender inequality.
How a Payroll Provider Helps
A full-service payroll provider will offer outsourced HR services, where you work with a Human Resources expert to ensure that you're staying compliant and avoiding OSHA penalties.
Additionally, many payroll providers offer a Learning Management System (LMS) with access to OSHA courses and certifications to keep your employees up-to-date and aware of potential hazards in the workplace.
It's important to remember that these requirements can differ by industry. If you own a CPA firm, you probably don't need to spend your nights worrying about OSHA. But for a construction company, it's much more relevant.
Compliance is a science; leave it to the experts.
Trust me, compliance is a science – and it's complicated. If you want to avoid mistakes on your tax returns, you hire an accountant. If you're seeking legal counsel, you hire a lawyer. And if you're worried about staying compliant with the IRS, DOL, USCIS, and OSHA, you should hire a payroll provider and potentially outsource your HR department.
As a business owner, it's important that you direct your energy into learning how to grow your company, increase revenue, and lead your team to success.
Working with a payroll provider ensures that you're compliant with the IRS, the DOL, USCIS, and OSHA, which frees you up to focus on doing what you do best as a business owner – and book a beach vacation.
If compliance is keeping you up at night, check out our article on outsourcing your HR department.
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